ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
SOLID 78 INC.
John Sestito for the Applicant
Applicant
- and -
GOBIND MARG CHARITABLE TRUST ONTARIO, RAGHBIR SINGH CHAGGAR and GURMEET SINGH
Respondents
Jasdeep Singh Bal and Ranjit Singh Dhaliwal, for the Respondents
HEARD: January 24, 2022, by videoconference
REASONS FOR JUDGMENT
Fowler Byrne J.
1The Applicant Solid 78 Inc., (“Solid”) is the owner and landlord of a commercial property of which the Respondent, Gobind Marg Charitable Trust Ontario (“Gobind”), is the tenant. At that property, Gobind operates a Sikh temple, a community area, and a private school, for grades JK to 10.
2Solid seeks an order stating that the commercial tenancy has been terminated and that Gobind must deliver vacant possession no later than February 15, 2022.
I. Issues
3While there are a number of issues set out in the Notice of Application, the main issue before me is whether the commercial tenancy has been properly terminated and whether Gobind must provide vacant possession. To decide that issue, I must determine the following:
a) Is there a valid lease extension agreement?
b) If there was a lease extension agreement, what is the term?
c) If there is no lease extension, was Gobind a month-to-month tenant as of April 1, 2021, giving Solid the right to serve a Notice of Termination?
II. Facts
4Solid and Gobind first entered into a commercial tenancy arrangement by way of a written commercial lease agreement on July 6, 2009, for Unit 3 at 187 Deerhurst Drive in Brampton for a term expiring July 14, 2011. Shortly thereafter, Gobind decided to lease Unit 2 as well at that address, so the parties entered into an entirely new lease agreement dated December 18, 2009, which replaced the agreement executed in July 2009 (“the Base Lease”). The Base Lease was for Units 2 and 3 at 187 Deerhurst Drive in Brampton, Ontario and was for a four-year term ending on March 31, 2014. Harvinder Singh Dhiman and the Respondent, Gurmeet Singh, indemnified the Base Lease.
5The Base Lease provided Gobind with an option to renew. The applicable clause is as follows:
- Right of Renewal
Provided that the Tenant is not in default of any of the terms or provisions of this lease, and provided that the Tenant shall give six (6) months notice prior written notice, and upon giving six months prior written notice, the Tenant shall have the option to renew this lease for one (1) further term of one (1) YEAR, upon the same terms conditions of this lease, except as to any further option to renew; and the amount of rent payable during the renewal term shall be negotiated between the Landlord and Tenant; and failing an agreement, the rent shall be arbitrated in accordance with the Arbitration Act of Ontario and amendments thereto, based on market rents for similar premises in the area; but in no event shall the rental for the renewal term be less than the rental for the last year of the term being renewed.
6Over time, Gobind expanded its presence at 187 Deerhurst Drive. In 2013, Gobind also leased Unit 4 on month to month basis, until a Lease Extension Agreement & Amending Agreement, dated March 25, 2014, was signed (“2014 Extension Agreement”). The 2014 Extension Agreement extended the lease of units 2, 3, and 4 for two-year period ending on March 31, 2016. The terms of the Base Lease, except to the extend they were modified in the 2014 Extension Agreement, continued to apply and were in full force and effect.
7In or around April 2015, Gobind purchased a vacant piece of land with the intention of building a new home to its congregation and school.
8In the intervening time, Gobind decided to renew and rent an additional 5,333 square feet inside Unit 1 at 187 Deerhurst Drive, which was approximately two-thirds of that Unit. The parties signed a Lease Extension Agreement & Amending Agreement, dated January 22, 2016, for the entire area and extended the lease for a further three years, expiring on March 31, 2019 (“2016 Extension Agreement”). Again, the terms of the Base Lease continued to apply and were in full force and effect, except if they were modified in the 2016 Extension Agreement. As a result of this last expansion, Gobind currently leases almost the entire building at 187 Deerhurst Street in Brampton (“the Leased Premises”). The only other tenant in the building occupies the remaining one-third of Unit 1 and is on a month-to-month tenancy.
9In 2019, the parties signed a further Extension Agreement & Amending Agreement, dated July 22, 2019, which extended the lease of the Leased Premises for a further two years, to March 31, 2021 (“2019 Extension Agreement”). At this time, the Respondent Raghbir Singh Chaggar replaced Mr. Dhiman, who is not a party to this proceeding, as an indemnifier of the various lease agreements.
10In early 2019, the City of Brampton notified Solid, who in turn notified Gobind, that the Leased Premises were not suitable for a school and place of worship, and that those uses should stop or the tenants vacate. Accordingly, Gobind hired counsel to obtain a minor variance that would allow them to stay and utilize the Lease Premises as they wished. Given these circumstances, the parties included certain provisions in the 2019 Extension Agreement to address the situation. In particular, it stated:
The Term of the Lease is hereby extended for a period of Two (2) Years, (the “Extension Term”) from April 1, 2019 to March 31, 2021 with an option to renew this lease for (1) further term of (1) year, upon the same terms listed under original lease agreement under #5 Right to Renewal. The lease will be month to month until the pending Minor Variance Application #A19-045 with the City of Brampton is resolved. If the City of Brampton does not approve the application for Minor Variance, the tenant has no further obligation to continue with the lease.
11It took some time, including an appeal, but by 2020 Gobind advised that it was granted permission to occupy the premises as a place of worship and school until August 31, 2023. Gobind indicates that they spent in excess of $50,000 in legal fees to obtain this minor variance.
12The parties agree on a number of things. First, prior to August 2021, Solid has not taken the position that Gobind had committed an Act of Default as defined by the Base Lease, although there is evidence that Gobind was occasionally late with its rent payments. Second, at no time had Gobind ever given the six months written notice to Solid of its intention to renew the Base Lease or any of the extension agreements. When the lease was up for extension or termination, the parties would negotiate, and in at least 2019, the extension was only agreed to after the expiration of the lease but agreed to be effective as of the date the last tenancy period had expired. Solid states they did not agree with this practice and that it occurred only because Gobind would drag out negotiations and continually ask for changes to the terms.
13There is a provision of the Base Lease, which continued to be binding, that addressed overholding tenants:
- Overholding – No Tacit Renewal
If the Tenant remains in possession of the Leased Premises after the end of the Term without having signed a new Lease or an extension of Term agreement, there is no tacit renewal of this Lease or the Term, notwithstanding any statutory provisions or legal presumptions to the contract, and the Tenant will be deemed to be occupying the Leased Premises as a Tenant from month-to-month at a monthly Minimum Rent equal to twice the monthly amount of Minimum Rent payable during the last month of the Term, and otherwise, upon the same terms, covenants and conditions as are set forth in this Lease (including the payment of Percentage Rent and Additional Rent) so far as these are applicable to a monthly tenancy.
14During the periods when Gobind remained on the premises after the expiration of the term, Solid did not exercise its right to double rent. In cross-examination, the representative of Solid indicated that it did not treat Gobind as an overholding tenant after March 31, 2019, when the 2016 Lease Extension expired, or after March 31, 2021, when the 2019 Lease Extension expired. He assumed they would work something out and further extend the lease.
15Commencing January 2021, Solid reached out to Gobind to see if it wished to extend the tenancy and proposed a new rental rate. Solid had to follow up again on March 1, 2021, and March 13, 2021, to see if Gobind wanted to extend the lease. Having heard nothing further, on March 22, 2021, Solid prepared a draft extension agreement for one year and emailed it to Gobind to review. Solid asked that it be signed prior to April 2021.
16Solid followed up on a number of occasions, but nothing was finalized. Finally, in or around April 22, 2021, after the 2019 Lease Extension had expired, Gobind contacted Solid about an extension. An email sent by Mr. Rodriguez (of Solid) to Mr. Temple (of Gobind) on April 24, 2021, shows that Mr. Rodrigues was aware of Gobind’s intention to extend and, in fact, Gobind wanted to stay longer than one year. Solid was not willing to negotiate a new rate until Gobind confirmed the desired term extension.
17On May 12, 2021, Gobind emailed Solid and confirmed that they would like to extend the lease for just over two years, to August 31, 2023. They also proposed that the first year would be at the same rate as the previous year, and then increase the rent starting in the second year. In response, Orlando Rodrigues, on behalf of Solid, forwarded a Lease Extension Agreement and Amending Agreement, proposing a new term, from April 1, 2021, to August 31, 2023, at the rates discussed. Mr. Rodrigues made it clear that it was still subject to the approval of Miguel Petrucci, the president of Solid. He stated that if Gobind would approve the proposed terms, he would have as easier time having the terms accepted by Mr. Petrucci. Mr. Petrucci stated, at his cross-examination in preparation for this Application, that he would not have approved any renewal for more than one year. He stated:
- Q. […] My question to you is what in this Lease Extension Agreement and Amending Agreement of May 2021 was not agreeable or would not be agreeable to Solid 78.
And you said the first thing is the extension of two years and five months from April 1, 2021 to August 31, 2023?
A. I think that's what they were asking Orlando [Rodrigues] to do. That’s what they wanted to do. And I wanted to get the one year that they were entitled to by contract, yeah.
- Q. Now, with respect to the term only, if you agreed to a one-year lease, would you date it from April 1, 2021 for a period of one year?
A. Yes.
18Gobind maintains that it had a board meeting on or about May 22, 2021, wherein the board approved a draft extension that was sent to Solid, dated May 22, 2021. The two indemnifiers signed this extension agreement. It is conceded though, that Gobind never forwarded a copy of that signed extension agreement to Solid. Solid had no knowledge of this signed agreement until it was raised in the course of this litigation many months later.
19Having heard nothing further from Gobind, Solid followed up again on May 28, 2021. The parties finally had a meeting on or about June 3, 2021, at the Leased Premises. The parties agreed that Solid expressed its intention to sell the property, but Gobind indicated that it did not take it seriously, as Solid had been discussing selling the property on and off for years. Gobind states that they told Solid, verbally, of their intention to extend the lease, but that they wanted some rent relief due to COVID-19.
20Solid sent an email to Gobind the next day, confirming what was discussed the day before:
This is a follow up and answer to our discussion from yesterday at school gym [....]
It gave us all a better understanding of situation, this is our conclusion ...
1-We will put building for sale; we have no long term desire to keep ownership of building.
2-we understand importance of not reducing total space as your use is for different activities.
3-opposed to the increase of rent we like to offer a reduction of 25% on the rent only, present is 5.90+4.27 TM (total 10.17), will reduce to 4.42+4.27 TMI (total 8.52).
4-we will be month to month and we will review after 6 month.
5-if a very reasonable offer comes in on that period of time we will all possible to get 6 month closing.
I'm really glad to be able to do this and hope really helps your group move forward.
21Gobind responded to this email, thanking Solid for its support and requested a reduction in lease payments by 35%.
22The property was listed for sale approximately one week later and on June 21, 2021, Solid entered into an agreement of purchase and sale (“APS”) with a closing date of September 6, 2021. Solid continued to communicate with Gobind at least to June 23, 2021, about a possible lease rate reduction.
23On June 28, 2021, Solid advised Gobind of the APS and of the closing date. Solid asked if Gobind would vacate the property by the closing date. The parties agreed to meet on July 1, 2021, to discuss the next steps and the possibility of a rate reduction for the interim period. Solid indicated that it would be best for Gobind to have something before the new school year.
24Gobind and Solid met on July 1, 2021. At that time, Gobind inquired if the new purchaser would be interested in allowing Gobind to remain on the premises. Accordingly, on July 7, 2021, Solid provided to Gobind the contact information for the purchaser’s agent, so that Gobind could deal with the purchaser directly. This was repeated by way of an email on July 20, 2021.
25Meanwhile, Solid was moving forward with the closing. It requested records of the renovations made by Gobind including any outstanding building permits or inspections. They contacted Gobind about some items identified by a fire inspection report that had to be completed, which included removing the commercial cooking operations. Solid was clear that it had to be done by August 29, 2021. In this email, Solid also stated:
Please advise what your intentions are. If you are planning to stay on with new ownership then you will need to ensure item 1 is made compliant otherwise if you will be leaving I suggest you remove all cooking operations and currently installed fire protection and exhaust.
With item 2 if you have info from the fire safety plan which ones need to be serviced with a release latch please let me know. Item 3 Paul will inspect all exit doors to ensure they are operational.
26On August 11, 2021, Solid provided an estoppel certificate to Gobind to review and execute, which had been supplied by the purchaser in order to assist Gobind to remain on the premises after the sale. In the email to which the certificate was attached, Solid indicated “[i]t is something they need signed in order to start talking on possible extension as we discussed.” Gobind states that they were surprised by the Estoppel Certificate, especially as it did not acknowledge that they secured an extension to August 2023 and wrongly stated that Gobind’s lease was month-to-month. It also failed to acknowledge a right of first refusal, which Gobind claimed it had.
27On August 12, 2021, Gobind wrote to Solid indicating their dissatisfaction with the status of matters. Relevant portions of their email are as follows:
We congratulate you on your potential sale and would like to help while also keeping our interests in mind. We received an estoppel certificate and that has really made us uncomfortable. We have been negotiating a lease extension in good faith with you for months. We have never missed any rent payments and still have been paying you the full amount despite the requested reduction due to the Pandemic situation.
As a landlord you are aware of our uses and the massive capital improvements we have made to your property since our lease began. We were negotiating in good faith for the continued use of the space until August 31, 2023. Please reference your emails the latest of which was communicated to us on June 4, 2021. Further, in our face to face meeting at the gym we clearly said due to the school use and semester system we would need a minimum notice of one year so as to complete any current school year program and you said you understood this concern and requirement. We have no problem with you selling the building, as long as, you protect our interests. The current estoppel letter has some corrections needed. We would like to attach a current executed lease that reflects the discussed August 31, 2023 termination, our current deposit as well as, what personal property, trade fixtures and other belonging are ours and will be removed on our termination.
The school is a Ministry of Ontario accredited school and requires certain notices be given to students and parents. Our School term is published and we have over 200+ students enrolled for September 2021 (www.gsbrampton.com). We have 400+ congregants that rely on services at the Gurdwara for their religious and emotional needs. It is our absolute priority to safeguard the interest of the community we service at this location.
During this pandemic we have had further discussions of extending our lease. We requested a rent reduction, and you offered a 25% reduction. We hope you have clearly communicated with the potential buyers our discussions, needs and intent. In our communications you understood our needs and promised to help us and seemed happy to do so
Our ask is simple. Prior to any sale, please extend our lease until August 31, 2023 at the 25% rate reduction. Please acknowledge our deposit. Please enter an exhibit with our items (trade fixtures, computers, monitors, desks, chairs, etc) that belong to us and will be removed at the end of our lease.
28Solid indicates that following Gobind’s refusal to sign the estoppel certificate and given that there as no agreement to extend the lease, on August 12, 2021, a Notice of Termination was sent by registered mail to Gobind and its indemnifiers. It stated:
TAKE NOTICE that the Agreement to Lease dated December 18. 2009, for the above premises, made between you, as Tenant, and SOLID 78 INC. as Landlord (hereinafter referred to as the "Lease"), expired.
Subsequently you were to renew the said agreement to lease but you failed to do so and chose to remain an overholding tenant, pursuant to Paragraph 19 of the Lease.
As a result, you have been holding this property without any written lease, on a month-to-month basis, and the rent has been payable in advance on the 15th day or each month.
29The notice then demanded that Gobind vacate the premises on or before September 30, 2021, and that Gobind’s right to occupy the premises would be terminated on that date in accordance with their month-to-month tenancy. If Gobind failed to vacate, Solid will re-enter and retake the premises and will claim any resulting damages, costs, and interests as against Gobind and its indemnifiers.
30Further efforts to resolve the impasse failed. Gobind remains in the premises, and since August, has paid its monthly rent to a lawyer, to be held pending resolution. Litigation counsel have been retained. So far, the purchaser has agreed to extend the closing on a number of occasions. Currently, the purchase is scheduled to close on March 1, 2022. If vacant possession is not available by February 15, 2022, the purchaser has the option to extend the closing to March 29, 2022. If Solid cannot provide vacant possession by that date, the purchaser can either complete the purchase, subject to the existing tenancy, or terminate the agreement. If the purchaser terminates, the deposit plus interest, plus out of pocket costs, capped at $15,000 will be payable by Solid. Of greater concern is the lost opportunity to Solid. If the purchase is lost due to the improper overholding by Gobind and Solid is not able to resell the building at the same price, Solid will be looking to Gobind to make it whole. The sale price currently negotiated is a significant sum of money, the interest on the deposit is significant. If found liable the possible damages payable by Gobind and its indemnifiers could be debilitating.
III. Analysis
A. Was the Lease Extended?
31Gobind maintains that they have a valid lease extension agreement which is binding on Solid. Accordingly, Solid must honour the lease agreement or ensure that the purchaser does. Gobind maintains this position because,
(1) Gobind had the unilateral right to extend the lease, as per the paragraph 5 of the Base Lease;
(2) Solid waived the requirement of 6 months notice by virtue of their conduct over a number of lease extensions since 2009; and,
(3) the rate of rent did not need to be settled because the Base Lease allowed for further negotiation and then arbitration.
32There is no issue as to the validity of the Base Lease and subsequent extension agreements. Accordingly, the resolution of any of these issues must start with a review of the Base Lease and the subsequent extension agreements, taking in to account the principles of contract interpretation.
33In Shaun Development Inc. v. Shamsipour, 2018 ONSC 440, 94 R.P.R. (5th) 15, at para. 46, affirmed, 2018 ONCA 707, 94 R.P.R. (5th) 44, Justice Cavanagh set out recognized contract interpretation principles that have been developed in the context of contracts between commercial parties:
a) the court presumes that the parties have intended what they have said;
b) the court construes the contract 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;
c) the court may have regard to the objective evidence of the “factual matrix” or context underlying the negotiation of the contract, but not the subjective evidence of the intention of the parties;
d) the court should interpret a contract so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity;
e) extrinsic evidence may be resorted to in order to clear up an ambiguity; and
f) while the factual matrix can be used to clarify the intention of the parties, it cannot be used to contradict that intention or create an ambiguity where one did not previously exist.
34A review of the Base Lease and the 2019 Extension Agreement, together, shows clearly that Gobind has the right to an automatic one-year renewal if they are not in default and upon proper notice. The one-year renewal period is set out in both those these documents. Solid does not have to agree or consent to Gobind exercising that option – it is already an agreed upon term in both of these documents.
35It is also clear that the actual rent to be charged does not have to be settled for the option to be exercised and, in fact, allows for a period of negotiation and then arbitration. It is clear on the facts that this negotiation as to rental rate was ongoing from at least March 2021, before the expiry of the 2019 Lease Extension Agreement, until the summer of 2021, after its expiry.
36Solid argues that Gobind had not exercised its option to renew the lease because it did not provide the six months written notice as required in paragraph 5 of the Base Lease. Paragraph 18 of the Base Lease provides that any Notice is to be delivered to a certain municipal address. Both parties conceded that no such notice was given. Solid relies on these provisions as evidence that Gobind never notified Solid of its intention to exercise its option to renew and thus, the 2019 Extension Agreement has expired.
37Gobind argues that written notice is not required. The parties have extended on at least three separate occasions and no formal written notice was given six months prior to the expiration of the tenancy term then. In 2019, the parties continued to negotiate past the termination date of the last extension agreement and then reached an agreement. In 2021, although Solid tried to reach an agreement with Gobind prior to the termination of the tenancy, the parties continued to negotiate with respect to term and rent. It was not until Solid notified Gobind that the building had been sold and scheduled to close in short order, that Solid then insisted on strict compliance with paragraph 5 of the Base Lease.
38Solid points to paragraph 12(6) of the Base Lease which indicates that even if the Landlord waives its right to exercise its remedies under the Lease, it cannot be found to have waived any term in the agreement without it being done in writing. No written express waiver was ever provided.
39In this case, I find that Solid did waive strict compliance with the notice provisions of paragraph 5 of the Base Lease. Paragraph 12(6) of the Base Lease only addresses situations when the tenant has committed an Act of Default, as defined by the Base Lease, which Solid had not committed prior to August 2021.
40In addition, despite this provision, Solid continued to negotiate and follow up with Gobind both before and well after the expiration of the latest extension agreement. The facts show that Solid was aware of Gobind’s intention to renew, albeit for a longer term and for less rent, and Solid continued to engage in negotiations knowing this. As before, it was assumed that an agreement would be reached.
41In Doral Holdings Ltd. v. Bargain Books Ltd., 1994 CarswellOnt 2371 (Gen. Div.), at para. 6, Justice Sills indicated that in the absence of waiver of strict compliance with the method of exercising an option to renew, the option is lost if the tenant fails to exercise the option in accordance with the requirements so the option clause. In the case before him, the conduct of the landlord in its dealing with the tenant constituted a waiver of strict compliance with the method of exercise of option: See para. 10.
42The landlord, by its conduct, can waive its right to strict compliance with the exercise of a renewal option in a lease: L’Ouvrier Inc. v Leung, 2016 ONSC 6993, at para. 59. In particular, if negotiations of the renewal of the lease occurred after the expiry of the time for the exercise of the option, the landlord may be found to have waived its right to demand strict compliance: See Velouté Catering Inc. v Bernardo, 2016 ONSC 7281, at para. 28.
43Solid also argues that Gobind never exercised the option that was set out in the Base Lease. It argues that Gobind never wanted a year extension at the same rate – it wanted a longer term and a reduced rate.
44I disagree. Just because Gobind and Solid never reached an agreement with respect to a different term and rate, it does not nullify or otherwise eliminate Gobind’s option to renew for one year at a negotiated or arbitrated rate. There is nothing stopping Gobind from trying to obtain something other than what is in the 2019 Extension Agreement or Base Lease. They were successful in previous year in doing just that – they obtained an extension for a longer period than what is in the Base Lease in 2014, 2016, and 2019.
45No doubt, Solid was frustrated with Gobind’s refusal to agree to a reasonable rate and term. Nonetheless, Solid conducted itself as if Gobind had exercised its option to renew. Solid continued to collect its regular rent, not double rent as they would have been entitled to for an overholding tenant. Mr. Petrucci stated in his cross-examination, that he did not consider Gobind to be an overholding tenant, even after the extension agreements expired. Solid took no steps to terminate the tenancy after April 1, 2021, when the 2019 Lease Extension expired. It was not until they decided to sell, that they took the position that there was no one year renewal, but rather a month to month tenancy, that would allow them to terminate the tenancy with one month’s notice.
46Accordingly, I find that Gobind has exercised its option to renew in accordance with the Base Lease and the 2019 Extension Agreement. Solid had by its conduct, waived strict compliance with the notice provisions of paragraph 5 of the Base Lease. It was aware the Solid wanted to exercise its option then commenced its negotiations with respect to price and term, orally and in writing. Accordingly, since there was no Act of Default, and Solid had waived its requirement of prior written notice, Gobind had an automatic right to a further one year extension at a negotiated or arbitrated rate that could be no less than the rate of the previous year.
B. How Long was the Extension?
47Despite Gobind’s desire for a longer tenancy, no such right exists pursuant to the Base Lease and the 2019 Extension Lease. They had, and exercised, their option to renew for one year. If Gobind wanted a longer term or a reduced rental rate, Solid had to agree. There is no evidence that Solid ever agreed to a term longer or a reduced rate. While Solid did offer a rate reduction in its email of June 4, 2021, it was offered in exchange for Gobind’s agreement to vacate the property in a matter of months. Gobind never agreed to leave and requested a greater discount.
48It was also Solid’s understanding that Gobind was entitled to an extension of one year. In his cross-examination, Mr. Petrucci acknowledged Gobind’s option to renew for one year:
Q. So by early June you're still willing to enter into a lease extension, subject to an agreement on rental terms and the rate? Subject to the term of the lease and the rate?
A. We had to work it out, and I knew they were entitled to one more year, so I suppose yeah, if it was within the year, we only had to agree on the rates.
- Q. And you knew that they were entitled to one more year because of the previous lease extension of July 22, 2019 that gave them that option to renew, right?
A. Yeah, because it was on the contract yeah.
49Gobind argues that there is an ongoing lease to August 31, 2023, on two grounds. First, they argue that Solid offered to extend the term to August 31, 2023, in a lease extension agreement that was emailed to them and which offer they accepted. While this purported offer was only signed by the two indemnifiers, Gobind argues that these same two indemnifiers could have also signed on behalf of Gobind. They argue that the lack of a signature on the line available for Gobind is of no consequence. In the alternative, if the court does not find that there is a binding written agreement for an extension to August 31, 2023, Gobind relies on the equitable doctrine of part performance to find an oral agreement to extend the tenancy to August 31, 2023, that should then be enforced.
i. Written Agreement
50I do not find that there was a written agreement to extend the tenancy to August 31, 2023.
51The Statute of Frauds requires that all leases be in writing and signed by the party granting or surrendering the leasehold interest.
52In May 2021, Mr. Rodrigues forwarded a draft lease extension agreement to Gobind, that extended the tenancy to August 31, 2023. In the cover email, Mr. Rodrigues made it clear that it was subject to Mr. Petrucci’s approval. Accordingly, at most it was a conditional offer, and the condition was never waived.
53In addition, even if it was an offer, there is no evidence that it was accepted. It was only signed by the two indemnifiers and the signed document was never delivered to Solid. The lack of signature of the two main parties to the lease cannot be excused as a simple oversight.
54I also can see no exchange of emails that shows conclusively that Solid ever agreed to a term that expired on August 31, 2023.
ii. Oral Agreement
55To avoid the application of the Statute of Frauds, Gobind also argues the equitable doctrine of part performance. In particular, Gobind argues that there was an oral agreement for the lease to be extended to August 31, 2023, which must be enforced.
56I disagree. I find that the circumstances in which this equitable relief are warranted have not been made out in this case.
57The doctrine of part performance allows the court to apply an oral agreement in cases where it would be unconscionable to apply the Statute of Frauds to render a contract unenforceable: See Hill v Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 S.C.R. 69, at para. 10.
58The interaction between the Statute of Frauds and the doctrine of part performance was set out by the Court of Appeal for Ontario in Erie Sand and Gravel Ltd. v Seres’ Farms Ltd., 2009 ONCA 709, at par. 49. While this case deals with the sale of land, rather than the lease of land, its principles are equally applicable:
[49] The purpose of s.4 of the Statue of Frauds is to prevent fraudulent dealings in land based on perjured evidence. However, Equity will not allow the Statute of Frauds to be used as an "engine of fraud". It created the doctrine of part performance to prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy: see Hill v. Nova Scotia (Attorney General), 1997 CanLII 401 (SCC), [1997] 1 S.C.R. 69, [1997] S.C.J. No. 7, at para. 10. The requirements in s.4 of the Statute of Frauds must give way in the face of part performance because the acts of part performance fulfill the very purpose of the written document -- that is, they diminish the opportunity for fraudulent dealings with land based on perjured evidence.
59Gobind has the onus to show that equitable relief is warranted in these circumstances. In particular, it must show the following:
a) That one party to an otherwise unenforceable agreement stands by while the other party acts to its detriment by performance of its contractual obligations: Erie Sand at para. 64;
b) The actions of both the party who wishes to enforce the contract, and the actions of the party who “stands by” can be considered by the court: Erie Sand at para. 75, 78-79. Mountain v TD Canada Trust Company, 2012 ONCA 806, at 81; and
c) The actions of part performance must be unequivocally referrable in their own nature to some dealing with the property; the court should consider the relevant circumstances within which the actions took place, and consider the acts having regard to the way in which reasonable people carry on their affairs. A common-sense approach is appropriate: Erie Sand at para. 88, 94; Mountain at para. 82-88.
60A review of the actions of the parties, viewed through the relevant circumstances, show that Gobind did not rely to its detriment on the existence of a lease to August 2023, nor did Solid stand by and take advantage of them.
Actions Referral to Property
61I will start with the final requirement of this doctrine. Clearly, all actions taken by Solid and Gobind were with reference to the Leased Premises.
Nature of Contractual Obligations
62The contractual obligations, which Gobind states were binding, were far from settled. On June 9, 2021, Mr. Chaggar of Gobind, emailed Mr. Petrucci, asking for a reduction in rent, lower than what was in the extended lease proposal dated May 22, 2021. Also, on August 12, 2021, a lengthy email was sent from Gobind to Solid, which ended with:
Our ask is simple. Prior to any sale, please extend our lease until August 31, 2023 at the 25% rate reduction. Please acknowledge our deposit. Please enter an exhibit with our items (trade fixtures, computers, monitors, desks, chairs, etc) that belong to us and will be removed at the end of our lease.
Detrimental Reliance by Gobind
63It is also not clear what detriment Gobind suffered. They continued to pay their rent until August 2021, but they also continued to occupy the Leased Premises. Rent payments would be owing whether it had an extension or was a month-to-month tenant.
64Gobind did decide to start a new school year, which could result in a termination mid-school year. The evidence is clear though, that Gobind did so with the full knowledge that their tenancy was not settled. On June 28, 2021, when Solid notified Gobind that the building was sold, it stated “[a]s far as you perhaps is best to have do something before the new school year.” The August 12, 2021, email from Gobind showed that they knew that their proposed tenancy to August 2023 was not settled. Also, on August 12, 2021, Gobind was served with a Notice of Termination. In his cross-examination, the representative of Gobind admitted that there was never any representation made to him by the purchaser that they would accept their lease.
65Gobind did spend a significant amount of money to obtain a minor variance prior to 2020. When Gobind did so though, with the knowledge that their lease would expire on March 31, 2021, with an option to renew for only one additional year. Gobind did not obtain an extension with a termination date that coincided with the end of the school year. Nor did they obtain an extension for a further 2 or 3 years, to justify the minor variance expenses, or to allow them the time to complete their build. In fact, the 2019 Lease Extension Agreement allowed Gobind to be immediately released from the lease if their minor variance was denied.
66There is no evidence that Gobind expended any more funds on renovations or leasehold improvements in the belief that they would remain in the property for another 2.5 years, nor is there any evidence that they held off with the construction of their new premises.
Actions of Solid
67There is also no evidence that Solid “stood by” and took advantage of Gobind’s mistaken beliefs that the lease had been extended to August 2023. Solid never knew that Gobind signed the draft extension agreement in May 2021. Solid made it clear in its emails that the requested term was not approved until Mr. Petrucci said so. The negotiations around rent in the summer were for a reduction in rent. A reduction would be a detriment to Solid and a benefit to Gobind.
68In addition, from late June 2021, Solid conducted itself as if the sale of the building was imminent. Solid started sorting out outstanding building permits and inspections related to Gobind’s leasehold improvements. It tried to connect Gobind with the purchaser in order that they could deal directly with them in the hopes of staying in the premises. Solid served a Notice of Termination. This all occurred within five months of the end of the term in the 2019 Extension Agreement.
69Accordingly, I find that part performance has not been made out. Gobind has a further extension for one year only, on the same terms as the 2019 Extension Agreement, which will expire on March 31, 2022. There is no further right to renew after that date, and if the parties do not reach another written agreement, Gobind must vacant accordingly. The rate payable during this time will be the same as in the 2019 Extension Agreement, or subject to agreement or arbitration if either party elects to do so.
C. Was the Notice of Termination Valid?
70Given that I have not found that a month-to-month tenancy existed, this issue is moot.
IV. Conclusion
71The issue of the lease termination was urgent in nature and was the focus of counsel and of this court. Accordingly, submissions regarding the other items in the Notice of Application, namely rent and damages, were not addressed. Accordingly, if the parties are not able to settle those issues, I invite them to contact the trial coordinator to bring the application back at a later date. Given the time devoted to this matter, I shall remain seized of the Application and hear any further issues that may arise.
72Accordingly, and for the forgoing reasons, I declare that:
a) The tenancy of Gobind was extended for one year, pursuant to an option to renew, and shall end on March 31, 2022; and
b) Solid is entitled to vacant possession of the premises on March 31, 2022, in accordance with the provisions of the Base Lease, as modified by the 2019 Extension Agreement.
73I further order that:
a) Gobind shall deliver to Solid all keys to the Leased Premise no later than March 31, 2022.
b) If Gobind fails to give vacant possession by March 31, 2022, Solid shall be entitled to enter and take possession of the property with the assistance of the Sheriff of the Regional Municipality of Peel and/or police, or otherwise, and is permitted to change the locks on it;
c) The Sheriff and/or police shall evict the Respondent should the Respondent not deliver vacant possession by March 31, 2022;
d) The parties are encouraged to resolve the issues of costs themselves; if they are unable, Solid is to serve and file its written costs submissions, single sided and double spaced, limited to two pages, exclusive of its Bill of Costs, on or before February 11, 2022; Gobind shall serve and file any responding written submission, which must include a Bill of Costs, with the same size restrictions, on or before February 25, 2022; Solid may serve and file reply submissions, if it wishes, restricted to one page, on or before March 4, 2022;
e) The remainder of the issues set out in the Notice of Application are adjourned sine die, to be brought back before me, if necessary, with no less than 14 days notice, to be arranged with the trial coordinator.
Fowler Byrne J.
Released: January 28, 2022