Court File and Parties

COURT FILE NO.: CV-22-316

DATE: 2022-07-26

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: A&P Colallilo Investments Ltd., Applicant

AND:

Minhas Group Trading Inc., Respondent

BEFORE: Justice C. Boswell

COUNSEL: N. Maragna for the Applicant

K. Minhas for the Respondent

HEARD: July 26, 2022

ENDORSEMENT

[1] The applicant applies for an order enforcing the terms of Minutes of Settlement entered into between the parties on May 26, 2020. The Minutes resolved litigation between them arising from a commercial lease dispute. The applicant asks that the court declare that the respondent is in breach of the Minutes and order that the sum of $16,155.77, presently held in trust by the applicant’s counsel, be released to the applicant.

[2] For the brief reasons that follow, the application is granted.

The Facts

[3] The applicant was the landlord and the respondent was the tenant in relation to a lease over lands and premises known municipally as 31 Jevlan Drive, Unit 1, Vaughan, Ontario. The lease was dated January 1, 2018 and ran until December 31, 2020.

[4] On April 29, 2020 the respondent commenced a claim against the applicant for damages for alleged breaches of the lease by the applicant. The specifics of the claim are not germane to this application.

[5] The respondent’s claim was settled by Minutes entered into on May 26, 2020. The claim was dismissed on consent on May 29, 2020.

[6] The Minutes provide, amongst other things, as follows:

(a) The applicant agreed to a 50% rent reduction commencing in May 2020 until the respondent’s Covid-impacted earnings returned to at least 65% of their 2019 earnings, on a month-to-month comparison. In other words, for each month during the period May 1, 2020 to December 31, 2020 that the respondent’s income was less than 65% of its income for the same month in 2019, the rent would be reduced by half. Once earnings returned to at least 65% of 2019 levels, rent would be payable in full, at the rate of $16,155.77.

(b) The respondent was to provide the applicant with its monthly HST returns for 2020 within 3 days of filing them.

(c) The respondent’s last month’s rent deposit, in the amount of $16,155.77, would be applied to the November and December 2020 rent. That said, the respondent was to – and did – pay the equivalent of one month’s rent to the applicant’s lawyers to be held in trust pending any adjustments based on the monthly HST filings.

(d) Any default by the respondent of its obligations under the Minutes would result in the full rental amount becoming due and payable.

[7] The respondent provided its monthly HST returns to the applicant for each of May, June and July 2020, but has failed to provide them for any months between August 2020 and December 2020 despite repeated requests being made for them by the applicant.

The Parties’ Positions

[8] The applicant contends that the respondent has breached the Minutes – and in particular the obligation to provide monthly HST returns. Although the Minutes are not explicit, the applicant submits that they should reasonably be interpreted as requiring the respondent to file its monthly HST returns in a timely way, in addition to the requirement that copies of those returns be provided to the applicant within 3 days of filing.

[9] The applicant further submits that, as a result of its breach, the respondent ought to have paid $16,155.77 in monthly rent from August to December 2020. It paid only half that, such that there is an outstanding amount due of $40,389.43. In the result, the applicant says it is entitled to be paid the $16,155.77 presently held in trust by its counsel pursuant to the Minutes.

[10] The respondent did not file any evidence on the application. It came before the court originally on June 22, 2022. Mr. Minhas[^1] asked for an adjournment for the purpose of filing responding material. I granted him an adjournment to today’s date for that purpose. Today he filed a five paragraph statement of defence, but no affidavit evidence.

[11] The respondent’s position is that it is not in breach of the Minutes. It has not provided its HST returns for August to December 2020 because it has not filed those returns. The Minutes only require the returns to be provided within 3 days of filing.

[12] The respondent is prepared to fix a deadline for the returns to be filed.

Discussion

[13] The application – and the positions taken by the parties – require the court to interpret the Minutes of Settlement, which are in the nature of a commercial contract.

[14] In Ventas, Inc. et.al. v. Sunrise Senior Living Real Estate Investment Trust et. al., (2007), 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24, the Court of Appeal provided direction on how trial judges should approach the interpretation of commercial contracts. Specifically, a contract should be interpreted:

(i) as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(ii) by determining the intention of the parties in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended to say what they have said;

(iii) with regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and,

(iv) in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.

[15] Applying the principles from Ventas, I think it obvious that the parties expected that the respondent was going to file its HST returns in a timely way on a monthly basis. The core of the agreement is that the amount of rent payable (whether at full rate or half rate) was to be assessed each month. The assessment was dependent on the HST returns being filed. The agreement is premised on those returns being filed in a timely way and provided to the applicant in a timely way. The process agreed upon breaks down immediately if the HST returns are not filed.

[16] In my view, the failure to file the returns in a timely way and to deliver copies of those filings to the applicant, for the months of August to December 2020, was a breach of the Minutes. But it is not the only way in which the respondent has breached those Minutes.

[17] A trilogy of cases released by the Supreme Court in the last eight years has firmly established good faith contractual performance as an organizing principle of the common law of contracts. See Bhasin v. Hrynew, 2014 SCC 71; C.M. Callow Inc. v. Zollinger, 2020 SCC 45; and Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7.

[18] The organizing principle of good faith is not a free-standing rule. Rather, it manifests itself in a number of existing good faith doctrines. Those doctrines require different things at different times. But certain principles have emerged from the caselaw. The principle of good faith performance, for instance, requires that parties generally perform their contractual duties honestly and reasonably and not capriciously or arbitrarily. (Bhasin, para. 63).

[19] In my view, the attempt by the respondent to take the benefit of the Minutes without filing its HST returns and delivering copies of those filings to the applicant, is a breach of its obligation of good faith performance. It is a failure to perform its contractual obligations reasonably.

[20] Pursuant to para. 11 of the Minutes, as a result of the breach the full amount of the rent was due and payable for the months of August through December 2020. It was not paid.

[21] Pursuant to para. 4 of the Minutes, the applicant is entitled to access the $16,155.77 paid to its lawyer in trust to cover any warranted adjustments in the rent. Given that there is now more than $40,000 owing in outstanding rent, I find that the applicant is entitled to access those trust funds to offset the amount owing.

[22] In the result, I declare the respondent to be in breach of the Minutes. And I order that the applicant is entitled to receive the sum of $16,155.77 and any accrued interest, currently held in trust by Bianchi Presta LLP.

[23] The applicant has been successful on the application. It is, by convention, entitled to its costs on a partial indemnity scale. It seeks $3,710.69, all-inclusive. That figure is, in my view, eminently fair and reasonable. The respondent shall, in the result, pay costs to the applicant fixed at $3,710.69 within 30 days.

C. Boswell J.

Date: July 26, 2022

[^1]: The respondent is a corporation. Mr. Minhas did not seek or obtain leave of the court to represent the corporation. He ought to have done so, pursuant to Rule 15.01(2). Nevertheless, there was no objection to him making representations to the court. Moreover, the application is straightforward and the stakes modest by this court’s standards. His failure to seek leave will not be an impediment to the hearing and determination of the application today.