NEWMARKET COURT FILE NO.: CV-20-218-00
DATE: 20220922
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
G5 EVENTS INC. Plaintiff/Defendant by Counterclaim
– and –
2748355 CANADA INC. Defendant/Plaintiff by Counterclaim
Counsel:
Mauro Marchioni for the Plaintiff/Defendant by Counterclaim
Brendan Jones for the Defendant/Plaintiff by Counterclaim
HEARD: September 16, 2022
HEALEY J.
NATURE OF THE MOTION
[1] In keeping with the moving party’s materials, the capitalized terms in these Reasons have the meaning ascribed to them in a commercial lease signed by the parties.
[2] The defendant/plaintiff by counterclaim (hereafter “Landlord”) brings this motion for an order declaring that the commercial lease agreement between it and the plaintiff/defendant by counterclaim (hereafter “Tenant”) is terminated due to the Tenant’s failure to pay Rent. The Landlord also requests that a writ of possession issue, and that possession of the Premises be returned to the Landlord.
[3] This motion is brought within an action commenced by the Tenant for damages arising from the Landlord’s alleged breach of the Lease and breach of its duty of good faith in performance of its contractual obligations. In its essence, the Tenant’s statement of claim alleges that the Landlord did not disclose its plans to redevelop the shopping area in which the leased Premises are located before entering into a lease extension and amending agreement with the Tenant on March 21, 2018, and that the Landlord has since effectively abandoned its maintenance obligations as it proceeds with redevelopment. The redevelopment has involved the Landlord ending or not renewing other leases, essentially isolating the Tenant’s business, not maintaining the common areas, and according to the Tenant, blocking access to the Premises.
[4] In its Amended Statement of Defence and Counterclaim, the Landlord seeks payment of Rent arrears. At the time that that pleading was issued, the Landlord alleged that Rent arrears were $387,992.77.
POSITION OF THE PARTIES
Landlord
[5] The Landlord asserts that there is no legal reason for the Tenant to withhold Rent. The Tenant has advanced various excuses for non-payment, which have changed over time, none of which justify withholding Rent.
[6] The Tenant stop paying Rent in March 2020. Although the Landlord attempted to work cooperatively with the Tenant, the Tenant has continued to refuse to pay any Rent even after reopening its nightclub business.
[7] The Landlord asserts that the genesis of the Tenant’s claim was the fact that the parties failed to come to an agreement for the Landlord to buy out the Lease from the Tenant after the Tenant exercised its option to renew for a further five years. The Tenant exercised the option to renew after being fully apprised of the Landlord’s redevelopment plans, which were communicated in March 2017. Before the buyout negotiations ended, the Tenant had never raised maintenance issues.
[8] The Tenant is not entitled to an abatement or relief from forfeiture because it was aware of the redevelopment plans at the time that it exercised the renewal option, and does not meet the test for either form of relief.
[9] The Landlord states that the terms of the Lease entitle it to terminate the Lease and regain occupancy of the Premises.
Tenant
[10] The Tenant asks that the motion be dismissed and that the within action proceed to determine the Tenant’s entitlement to an abatement of rent. The Tenant also seeks, if necessary, relief from forfeiture.
[11] The Tenant states that its damages, together with an abatement of rent, will far exceed the amount of Rent owing. It seeks 100% abatement.
[12] The Tenant denies that its claim has anything to do with the inability of the parties to agree upon a buyout of the Lease. It is the Tenant’s position that the Landlord did not negotiate the extension agreement in good faith, nor did it intend to contract in an honest, forthright or reasonable manner at the time that a lease extension and amending agreement was signed. Specifically, it did not tell the Tenant that its intention was to terminate every lease at the Shopping Centre in order to facilitate its redevelopment plan in a cost-effective manner. It also became clear after the signing of the extension agreement that the Landlord had no intention of maintaining the Shopping Centre once the other tenants had left.
[13] The Tenant has provided photographs that it relies on to show the current state of the Shopping Centre, to demonstrate that the operation of its business is being impaired.
[14] As a result of these breaches, the Tenant says that it has been unable to operate its business and has experienced losses that exceed arrears of Rent.
THE ISSUES
[15] The issues to be determined are:
(a) Did the Tenant commit an Event of Default under the Lease?
(b) Has there been a constructive eviction?
(c) Is the Tenant entitled to an abatement in Rent?
(d) Is the Landlord entitled to terminate the Lease for non-payment of Rent?
(e) Is the Tenant entitled to relief from forfeiture?
[16] This ruling does not seek to either quantify the amount of the Rent arrears owed to the Landlord, or determine the Tenant’s damage claim. Any damages that flow from a termination of the Lease are to be dealt with in the action, as is any final calculation of Rent owing.
THE EVIDENCE
The Lease
[17] There is no dispute between the parties that they entered into a commercial lease agreement dated December 19, 2007. The Lease provides for an initial 10-year and 24-day term from May 8, 2008 to May 31, 2018, with a five-year option to extend the Term. The Lease was amended and extended by a tenant assistance agreement dated October 1, 2015, and a lease extension and amending agreement dated March 21, 2018 (collectively the “Lease”).
[18] Pursuant to the Lease, the Tenant leased the premises municipally known as unit 60-B (“Premises”) at The Interchange, 30 Interchange Way, Vaughan, Ontario (“Shopping Centre”). According to the evidence of the Tenant’s principal, Bart Kacki, although referred to in the Lease as a “Shopping Centre”, there were no major retail stores. Instead, the Shopping Centre originally contained a collection of entertainment locations including a theatre, minigolf, laser tag and numerous restaurants and bars. As is clear from the Schedule B to the Lease, patrons could enter each establishment from outside, from a central courtyard.
[19] The Tenant and its Subtenant, Lux Entertainment Inc., operate a nightclub at the Premises known as Luxy.
[20] Pursuant to sections 4.01, 4.02 and 4.10 under Article IV of the Lease, the Tenant covenanted to pay Rent, including Minimum Rent and Additional Rent when due, without demand and without deduction, abatement, set-off or compensation. Those subsections provide:
Section 4.01 Covenant to Pay
The Tenant covenants to pay Minimum Rent, and Additional Rent.
Section 4.02 Minimum Rent
(a) The Tenant will, throughout the Term, pay to the Landlord or to the Management Company as the Landlord directs, at its head office, or at any other place designated by the Landlord or the Management Company, as the case may be, in Canadian funds, without demand and without deduction, abatement, set off or compensation, as Minimum Rent:
Section 4.10 Additional Rent
Additional Rent, (a) is payable in Canadian funds without deduction, abatement, set off or compensation; (b) is payable (except when this Lease states that it is payable on demand) with the first monthly instalment of Minimum Rent after the Additional Rent begins to accrue; and (c) accrues daily.
[21] The failure to pay Rent or remedy the default within five (5) days after written notice is an Event of Default pursuant to subparagraph 16.01(a)(i) of the Lease, entitling the Landlord to terminate the Lease pursuant to paragraph 16.01(b) of the Lease.
Section 16.01 Right to Re-enter
(a) An "Event of Default" occurs when:
(i) the Tenant defaults in the payment of Rent or Sales Taxes and fails to remedy the default within five (5) days after written notice; …
(b) Notwithstanding any Applicable Laws, upon the occurrence of any Event of Default the full amount of the current month's and the next three (3) months' instalments of Minimum Rent, Sales Taxes and Additional Rent will become due and payable and, at the option of the Landlord, this Lease shall be terminated and the full amount of the Rent for that part of the Term that would have remained but for the termination of this Lease will become due and payable. If this Lease is so terminated, the Landlord, to the extent permitted by law, may immediately repossess the Premises and expel all Persons from the Premises and may remove all property from the Premises, sell or dispose of it as the Landlord considers appropriate, or store it at the cost of the Tenant, all without notice, without legal proceedings, and without liability for loss or damage and wholly without prejudice to the rights of the Landlord to recover (i) arrears of Rent or damages for any antecedent default by the Tenant of its obligations under this Lease, and (ii) damages for loss of Rent suffered by reason of this Lease having been prematurely terminated.
Landlord’s Redevelopment Plans
[22] The evidence of the Landlord is that it advised the Tenant of its plans for redevelopment of the Shopping Centre at a meeting on or about March 7, 2017. It is also the Landlord’s evidence that it is developing the area around the Shopping Centre in stages. In March 2017, the Landlord had not applied to the City of Vaughan to develop the land where the Premises is located.
[23] At the Tenant’s examination for discovery on July 28, 2021, Bart Kacki admitted that by early March, 2017 he knew that the Landlord had a plan to develop the Shopping Centre area. However, he said that he was unaware of the extent to which the proposed development would affect the Tenant’s business. It was his evidence that during the meeting on March 7, the Landlord’s representatives suggested that the Landlord may have different plans for the Shopping Centre but were tight-lipped about those plans. He denies, as alleged by the Landlord, that he was directed to look at the City of Vaughan’s website, where information about the proposed development was posted.
[24] Contrary to the evidence provided at his examination for discovery, Mr. Kacki’s affidavit sworn for this motion states that no time prior to signing the lease extension agreement in March 2018 did the Landlord advise that they were redeveloping the Shopping Centre.
[25] As of March 2017, the Tenant was in monetary default and had submitted an application for an extension of Rent assistance. At the meeting on March 7, the Landlord advised that in order to receive that further rent concession the Tenant would have to give up its option to renew as consideration. The reason for this, according to the Landlord’s evidence, was that during the early planning stages the Landlord wanted to have control of all of its property in the area, including the Premises, by May 2019.
[26] At the examination for discovery of the Landlord’s representative, Dev Hubraj, he gave evidence that the Landlord was only looking for control of leases at that time, but did not want to terminate the Lease. Mr. Hubraj’s evidence is that in 2017 the Landlord did not know when the redevelopment would take place, but anticipated that it would happen before the expiration of the Tenant’s option i.e. before 2023. He told the Tenant that redevelopment would likely impact the Premises, which is why the Landlord was asking for the option to be removed. It is his evidence that all of this was communicated to the Tenant at the meeting that occurred on March 7, 2017. Additionally, Mr. Hubraj’s evidence is that at that same meeting, Mr. Kacki said that he had been on the City’s website and was fully aware of the redevelopment plans.
[27] There are no contemporaneous notes or email messages confirming what information was conveyed at that meeting in March 2017.
Exercise of Option to Renew
[28] However, whatever information was conveyed resulted in an email dated March 10, 2017, sent by the Tenant’s representative, Bill Sinclair, to Mr. Hubraj. That email communicated that the Tenant was not pursuing the continuation of rental assistance “under the requested terms of forgoing the option to extend the lease to May 31, 2023”, and would voluntarily pay its accrued Rent arrears based on the amount properly due under the Lease. Most importantly, the email unambiguously communicated that that the Tenant wished to exercise its lease extension option. The email concludes “… Please accept this correspondence as our written request to extend the Term of the Lease for the one (1) five (5) year option period, extending the initial Term of the Lease from May 31, 2018 to May 31, 2023”.
[29] As pointed out by Mr. Marcioni during argument, the Rent payable in the first year of the renewal was approximately $5,000 more than what was being paid in the final year of the initial Term.
[30] Unexplainably, in his responding affidavit Mr. Kacki stated that it was not until the fall of 2017 that he began discussions with the Landlord “in respect of exercising the option available under the lease for a further five year term that would have taken it to May 2023”. This is patently false.
Lease Buyout Discussions
[31] The evidence establishes that by November 2017 the Landlord had approached the Tenant’s representative to discuss a buyout of the Lease. Bill Sinclair in turn got in touch with the Tenant’s accountant, Ted Cowdrey, to request that they meet to discuss the contents of a printed presentation that the Tenant would present to the Landlord. The parties subsequently met to discuss the Tenant’s proposal.
[32] On March 21, 2018, the parties signed the lease extension agreement.
[33] There is evidence contained in an email string from May, 2018 indicating that by that month, the prospect of the Landlord purchasing the Lease was no longer feasible, as by then its re-development plans had changed and did not include the Premises. In correspondence dated September 27, 2018, the Landlord confirmed its position, effectively terminating the Lease buyout discussions, by writing:
The Tenant has indicated that it believes the Landlord requires its premises for a future planned development. It seeks to monetize the Lease and has offered to surrender its Lease on a sliding scale starting at $3,900,000 more or less. To be clear, the Landlord has no current plans to alter the Interchange in a manner which would require possession of your premises before the end of the Lease term. To the contrary the Landlord is counting on the Tenant’s rental stream.
[34] The Tenant nonetheless continued to express interest in a buyout of the Lease. The Tenant retained counsel, Mr. Marchioni, who sent correspondence to the Landlord dated October 16, 2019, setting out the allegation that at the time of entering into the lease extension agreement the Landlord knew that its redevelopment plans would not allow the Tenant to continue operating the nightclub. The letter further alleges that the negotiation of the Lease extension agreement in March 2018 was not done in good faith. The letter also raises allegations of a decline in maintenance of the common areas, which is the first time that the Tenant raised maintenance issues, and alleged a failure to provide security for the Shopping Centre. Despite these allegations, Mr. Marchioni stated that it was the Tenant’s intention to honour its obligations under the Lease extension agreement while at the same time reserving its rights to claim damages. Finally, it invited a discussion about a buyout of the balance of the term of the Lease.
[35] According to the Landlord, the Tenant made no complaints about maintenance or security issues until after the Lease buyout discussions had terminated. At his examination for discovery, Mr. Kacki gave an undertaking to identify any written complaint from the Tenant to the Landlord about the Shopping Centre before mid-2018. To date, the Tenant has not produced any evidence of complaints before that date.
[36] The Tenant made Rent payments following the delivery of counsel’s letter, up to and including March 2020, notwithstanding the Tenant’s allegations against the Landlord and despite issuing its Statement of Claim. At March 2020, the Rent was $26,057.88 per month inclusive of HST, payable on the first day of each calendar month.
Commencement of Lawsuit
[37] The Tenant issued its Statement of Claim on January 17, 2020, seeking $5M from the Landlord for breach of contract and breach of its duty of good faith in performance of its contractual obligations for failing to continue to operate a “first class shopping centre”. The Claim alleges that the Landlord did not disclose its redevelopment plans before the execution of the lease extension. It alleges that these redevelopment plans involved closing down all commercial activity in the Shopping Centre other than the Tenant’s enterprise.
[38] The evidence arising from the Landlord’s examination for discovery is that no Shopping Centre leases were signed after November 2018.
Non-Payment of Rent
[39] In its reply and defence to counterclaim, the Tenant alleges that it stopped paying rent in April, 2020 because the Landlord had breached the Lease by effectively terminating every other existing lease in respect of the Shopping Centre, and was not offering any of the empty units for rent while moving forward with its redevelopment plans. Further, in his affidavit Mr. Kacki states that as a result of the Landlord’s failures and breaches of the Lease, he advised the Landlord that “if things didn’t change I would stop paying rent. As the situation did not change effective March 2020 I stopped paying rent”.
[40] The Landlord’s evidence is that the employees who are responsible for this tenancy have no recollection or record of Mr. Kacki ever making that statement.
[41] Mr. Kacki’s evidence about the reason he stopped paying rent is wholly contradicted by an email from his counsel dated March 18, 2020, sent the day after the Government of Ontario closed non-essential businesses due to Covid-19. In that email the Tenant advised through its counsel that it would not be able to pay the Rent until it was allowed to re-open for business. Nothing was mentioned about withholding Rent due to breaches of the Lease.
[42] During the first wave of the Covid-19 pandemic, the Landlord accommodated the Tenant by not taking any enforcement steps for eight months. During this time the Tenant paid no Rent.
[43] The Tenant has never provided proof to the Landlord that it applied for or was approved for Canada Emergency Rent Subsidy (“CERS”).
[44] The Landlord first delivered a Notice of Default to the Tenant on November 18, 2020, demanding payment of outstanding Rent. Mr. Marchioni reaffirmed the Tenant’s refusal to pay Rent.
[45] On March 17, 2021, correspondence was sent by the Landlord’s counsel, Mr. Jones, to Mr. Marchioni raising the issue of the Landlord’s right to terminate the Lease, and encouraging the Tenant to make arrangements to pay the Rent arrears if the Tenant wanted to keep the Lease alive. The Landlord offered to accommodate the Tenant in terms of timing of payments if the Tenant intended to bring the Lease into good standing. Alternatively, the Landlord proposed a voluntary surrender of the Lease.
[46] The Tenant rejected the Landlord’s proposal and continued to refuse to pay Rent, even after re-opening Luxy on July 30, 2021.
[47] The Landlord issued the Notice of Default on September 2, 2021. At that time arrears of Rent totaled $583,734.97 inclusive of HST.
[48] In response, the Tenant invited the Landlord to apply to court to terminate the Lease within the parameters of this action.
[49] According to the supplementary affidavit of John Minas, the Tenant’s arrears are $1,041,270.61 as of September 1, 2022. The Tenant has never disputed that it stopped paying rent after March 2020, and has provided no evidence that it made any partial payments since. At this stage the statement of account attached as Exhibit “A” to the Landlord’s supplementary affidavit appears to be the best evidence of the amount of Rent owing.
ANALYSIS
Did the Tenant commit an Event of Default under the Lease?
[50] An Event of Default has been triggered by the Tenant’s refusal to pay Rent for the past 29 months.
Has there been a Constructive Eviction by the Landlord?
[51] This was not an argument advanced by the Tenant in its factum, but arose from the Landlord’s reliance on Cherry Lane Shopping Centre Holdings Ltd. v Hudson’s Bay Company ULC, 2021 BCSC 1178. In particular, the Tenant points to the case of Malva Enterprises Inc. v. Frum Development Group, [1992] O.J. No. 2826 (O.N.C.J.), referenced at para. 47 of Cherry Lane, and the passage cited therein, from para. 9, that “the common law is unequivocal that the payment of rent is not suspended by breach of covenant on the part of the landlord unless such breach amounts to an eviction at law”. [Emphasis added]
[52] In order to prove constructive eviction, the Tenant must demonstrate that the breach is either "intentional or the probable consequence of intentional conduct, the consequences are foreseeable, the interference has the character of permanence and wrongfulness, and the degree of interference is so substantial or intolerable as to make it reasonable for the tenant to vacate" Arangio v. Patterson, [1993] O.J. No. 448 (Gen. Div.), at para. 23.
[53] Constructive eviction has been described as an extreme remedy: 2613787 Ontario Inc. v. Comlekcier et al., 2022 ONSC 659, at para. 37.
[54] This remedy is not available on the facts. The Tenant remains in possession of the Premises. There is no evidence that demonstrates that the Landlord has taken steps to evict the Tenant other than by bringing this motion before the court to seek an order for possession, rather than resorting to self-help. Further, as explained in the following section, there has been no breach of the Lease by the Landlord.
Is the Tenant Entitled to an Abatement of Rent?
[55] The Tenant has not claimed a Rent abatement in its pleadings but counsel argued the merits of such potential relief and accordingly, the court will determine the question.
[56] At subsections 4.02 and 4.10 of the Lease, the Tenant contracted out of any claim for abatement.
[57] The Tenant argues that it is entitled to an abatement of rent because the Landlord has breached the Lease and breached its duty of honest performance toward the Tenant.
[58] Even if the Landlord was in breach, the law is clear that the Tenant is not relieved of its obligation to pay the full amount of the Rent: Williams and Rhodes’ Canadian Law of Landlord and Tenant, 6th ed. (Toronto: Carswell, 1988), at para. 6:40; Canadian Pacific Hotels Corp. v. Van Raniga Jewelers and Designers Inc., 1995 CanLII 3241 (BC SC); Malva Enterprises; Cherry Lane.
[59] Further, s. 35 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7 (the “Act”) only permits set-off in limited circumstances which require identification of a debt in an ascertainable amount. This provision was referenced in Cooper et al. v. The Laundry Lounge, 2019 ONSC 3216, at para. 18; aff’d 2020 ONCA 166, wherein Schabas J. noted that there is no unilateral right to set-off and to withhold rent, and other requirements, such as formal notice using Form 2, must first be followed.
[60] However, the evidence on this motion permits a finding that there have been no breaches by the Landlord as alleged.
[61] The Tenant alleges that sections 2.02, 6.01, 9.01 and 9.02 have been breached, along with the promise of “quiet enjoyment”.
[62] Section 2.02, the first provision of the Lease alleged to have been breached, requires the Landlord and its representatives “in making a determination, designation, calculation, estimate, conversion, or allocation under the Lease”, to act reasonably and in good faith and in accordance with the applicable principles and standards of the person’s profession. This section does not assist in determining the issues in this case, nor did Mr. Marchioni explain how it applies to his client’s greivances.
[63] Article VI containing section 6.01 deals with control of the Shopping Centre by the Landlord. The Tenant believes that the manner in which the Landlord has carried out the redevelopment has somehow breached this provision.
[64] Article VI requires the Landlord to operate the Shopping Centre in a reputable manner having regard to size, age and location and character, and it ascribes rights to the Landlord to undertake various acts on the Premises. Those permitted acts, such as “diminish, expand, alter, relocate or rearrange the buildings, parking facilities and other parts of the Shopping Centre” are broad and expansive. More importantly, that Article provides that the Landlord has no liability for diminution or alteration of the Common Elements that occurs “as the result of the Landlord’s exercise of its rights under this Section 6.01 or elsewhere under this Lease and the Tenant will not be entitled to compensation or reduction or abatement of Rent, and no such diminution or alteration of the Common Elements shall be deemed to be a constructive or actual eviction of the Tenant or a default by the Landlord of any obligation for quiet enjoyment contained in this Lease or provided at law”. [emphasis added]
[65] The Landlord’s redevelopment has not yet included the Premises. Although the Tenant alleges that access to the Premises has been affected, its evidence, including the photographs, is not persuasive. The Tenant has also not denied the Landlord’s contention that it continues to operate. While the Common Elements have been altered, the Lease does not allow for an abatement in such circumstances.
[66] The Tenant’s argument with respect to sections 9.01 and 9.02 revolve around the use of the phrase “first class shopping centre” in those sections. The argument is that this phrase imparts an obligation on the Landlord to conform to that standard as described. I reject the argument. Subsections 9.01 and 9.02 refer strictly to Tenant obligations, and do not impart any obligations on the Landlord.
[67] The Tenant’s related argument is that it relied on verbal representations from the Landlord, before the Lease was signed, that it was operating a first class shopping centre. Likewise, this argument cannot succeed. The Lease contains an “entire agreement” clause in section 2.05 that forecloses such an argument.
[68] The argument that the Landlord has breached a covenant for quiet enjoyment requires reference to Article XVII, section 17.12. That section provides that “[i]f the Tenant performs its obligations under this Lease, it may hold and use the Premises without interference by the Landlord or any other Person claiming by, through or under the Landlord, subject however to the covenants, terms and conditions of this Lease.” As the Tenant has not paid Rent, it has not performed its obligations under the Lease. And again, there is insufficient evidence to prove that the Tenant is unable to operate its business.
[69] Then there is the allegation, at the centre of this case, that the Landlord breached its obligation to contract in good faith at the time that the extension agreement was signed. This is the alternative basis for arguing that this court should exercise its discretion to abate the rent to zero.
[70] The evidence on this motion does not permit such a conclusion.
[71] First, I have reason to find Mr. Kacki’s evidence to be unreliable. As pointed out earlier, his affidavit evidence conflicts either with his evidence from his examination for discovery, or from documentary evidence that I find to be more reliable. Accordingly, when he asserts that he had no information about the Landlord’s redevelopment plans at the time that he signed the extension agreement, I have reason to look carefully at the evidence to consider whether that assertion is credible.
[72] I find that Mr. Kacki’s evidence is not credible. The court must question why the Tenant would decide in March 2017 to withdraw its request for continued rent assistance, pay up all arrears, and sign on for a further five year term at an increased Rent. The obvious answer is that it thought that doing so would be to its benefit. Specifically, the Tenant was planning to monetize the Lease, gambling that it would not have to pay the Rent for much longer and that it would be paid out a handsome sum. Even if the plans presented to the Tenant at or before the meeting in March 2017 were different from how the Landlord eventually proceeded, there can be little doubt on the evidence that the Tenant had seen or been told something that made it believe that the Landlord might want to buy out its Lease in the coming months. However, the Landlord made no such representations or promises that it would do so, and when the Landlord ultimately decided that it did not need the Premises until 2023, the Tenant attempted to re-write history to allege that the Landlord had kept it in the dark about its plans.
[73] The Tenant’s is not a believable version of events. The Tenant made what turned out to be an unwise business decision, which it has visited on the Landlord by unreasonably withholding over $1M in rent. The Tenant has offered no alternative explanation for instructing Mr. Sinclair to exercise the option to extend so swiftly following the meeting on March 7, 2017.
[74] I find that none of the alleged breaches by the Landlord have been proven.
[75] The Tenant relies on Bosak et al. v. 3930441 Canada Inc. et al., 2014 ONSC 1138, to support its argument that it is entitled to an abatement. However, the abatement permitted by the court in Bosak was based on a determination, within the context of an injunction application, that the plaintiff was unable to operate a kitchen/restaurant/bar/ banquet hall because of site conditions that the Landlord had not rectified. In contrast, here there has been no finding of any breach by the Landlord.
Is the Landlord entitled to terminate the Lease for non-payment of Rent?
[76] The Landlord issued notices of default as required by the Lease, and the Tenant failed to rectify the default within five days. Section 16.01(b) permits the Landlord to exercise the option to terminate the Lease.
Is the Tenant entitled to relief from forfeiture?
[77] An order granting relief from forfeiture allows a tenant who has breached the lease to escape termination of the lease, even though the terms of the lease provided for termination upon the tenant's breach: Hudson's Bay Company ULC Compagnie de la Baie D'Hudson SRI v. Oxford Properties Retail Holdings II Inc., 2022 ONCA 585, at para. 34.
[78] While permitted by the Act, the remedy of relief against forfeiture is a purely discretionary remedy and granted sparingly: Saskatchewan River Bungalows Ltd. v Maritime Life Assurance Co, 1994 CanLII 100 (SCC), [1994] 2 S.C.R. 490 (SCC), at p. 504; Hudson’s Bay, at paras. 35-36.
[79] In determining whether to exercise its discretion to grant relief from forfeiture, the court must consider several factors: the conduct of the applicant, the gravity of the breach; and the disparity between the value of the property forfeited and the damage caused by the breach: Saskatchewan River Bungalows, at p. 504.
[80] For the reasons described above, the reasonable conduct requirement is not met in this case. In addition to the Tenant’s unmeritorious allegations, it acted unilaterally in withholding rent even after it re-opened the nightclub. There is no evidence that it sought government subsidies that may have been available to fund partial payment on the arrears, and it declined the Landlord’s invitation to work cooperatively to address the arrears. As pointed out in Hudson’s Bay, at para. 37, a tenant's deliberate refusal to pay its rent obligations may well preclude any relief from forfeiture.
[81] In contrast, the Landlord patiently waited for this motion to emerge from the court’s backlog even though it was filed in December 2021.
[82] The gravity of the breach is significant, with over $1M owing and the Tenant remaining in possession.
[83] The Tenant has given no reliable evidence of the value of the property to be forfeited other than a bald allegation that it spent $2M for improvements when the lease was entered into in 2008, without evidence of the depreciated value of the improvements, and without evidence of its anticipated losses over the eight months remaining in the Lease. The Tenant’s alleged losses, if any, are not able to be determined on the evidence filed by it on this motion. In contrast, the Landlord’s losses are the monthly Rents that will continue to mount.
[84] The Tenant has not persuaded this court that it should grant relief from forfeiture.
Is the Landlord entitled to Possession of the Premises?
[85] Section 16.01(b) permits the Landlord to immediately repossess the premises upon terminating the Lease.
[86] Although Mr. Marchioni requested that this court provide the Tenant with a reasonable time period to quit the premises, the terms of the Lease are clear and are not to be re-written by the court. Even if the Tenant had not agreed to such a term, the facts of this case would not compel this court to grant such an indulgence to the Tenant.
ORDER
[87] This court orders that the relief requested in paragraphs 1(a) and (b) of the Landlord’s notice of motion is granted. If the parties have any difficulty settling the terms of the formal order, I may be contacted through my judicial assistant for a brief teleconference.
COSTS
[88] The parties are urged to attempt to come to an agreement on costs of this motion. Failing agreement, they may make brief written submissions, limited to three pages in length, plus a costs outline and any offers to settle. The defendants are due by September 30, the plaintiff’s by October 7 and any reply by October 12.
[89] Cost submissions are to be filed with the court and uploaded to Caselines.
HEALEY J.
Released: September 22, 2022