One Clarendon Inc. v. Finlay, 2023 ONSC 1106

COURT FILE NO.: CV-22-680314

DATE: 20230103

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: One Clarendon Inc., Plaintiff, Defendant by Counterclaim

AND:

Kathleen Finlay and John Finlay also known as Richard Finlay and J.R. Finlay, Defendants, Plaintiffs by Counterclaim

BEFORE: W.D. Black J.

COUNSEL: Sanj Sood and Matthew Helfand, for the Plaintiff, Defendant by Counterclaim

John and Kathleen Finlay, representing themselves

HEARD: November 18, 2022

ENDORSEMENT

Overview

[1] This is further to my endorsement in this matter dated November 9, 2022 concerning the first attendance in this matter before me on October 26, 2022.

Events Since Last Attendance

[2] In keeping with that endorsement, the tenants had paid (on October 28, 2022), the portion of the month’s rent from that date to the return before me on November 18, 2022, being $4,006.00.

[3] The tenants, although they had not yet retained a lawyer, had delivered responding materials, which were extensive and well-written, including a factum, dealing with the issues before me.

[4] The tenants had also solved the previous issues with Zoom, such that I could see and hear them throughout the hearing of the motion.

The Remaining Issues

[5] As fairly presented by the landlord’s counsel, the relevant facts before me were essentially agreed, and the areas of contention clearly identified and articulated in argument.

[6] In their materials, the tenants confirmed their agreement and intention to pay all monthly rent, at the lease rate of $5,400.00 per month, between now and the return of this matter in May of 2023. I confirmed to the parties that that was appropriate, and that I would include it in my endorsement and my Order.

[7] The only issue before me, then, was the question of what more, if anything, the tenants should be obliged to pay between now and May of 2023, and specifically, whether or not they should be obliged to pay the outstanding arrears, currently $70,200.00, in whole or in part, and if so, how those funds should be directed and distributed, as between payments to the landlord, to a solicitor’s trust account, or into Court.

Landlord’s Position

[8] The landlord’s position is that the full amount of arrears must be paid.

[9] It argues that there is no contest about the monthly rent obligation under the lease, and that the law does not permit “self-help unilateral abatement” or “rent strike”.

[10] The reasons for this, it argues, are clear; to allow tenants to exercise unilateral withholding of rental payments based on their subjective perception of the extent to which the landlord is living up to its end of the bargain would lead to “chaos”.

[11] In recognition of this untenable scenario, the landlord notes, the law clearly does not countenance this kind of self-help. The landlord points, for example, to Copeland J.’s recent decision, in the Divisional Court, in Capreit Limited Partnership v. Margaret Veiga (2022 ONSC 958), relating to a landlord’s motion to quash a tenant’s appeal from a decision of the Landlord Tenant Board (“LTB”).

[12] In that case, among other issues, the tenant had unilaterally withheld rental payments since the onset of the pandemic in March of 2020. Of note, the tenant advised during the hearing of the motion that “she was willing and able to pay rent prospectively, but that she is not in a position to make any meaningful payment towards arrears”.

[13] Relative to that circumstance, and the tenant’s evidence that she had offered to pay “small amounts” to the landlord, Copeland J. wrote:

“I am satisfied that this appeal is an abuse of process. Ms. Veiga has not retained any part of the “small amounts” she had offered to pay the landlord in the past and has been living rent-free for over a year. A tenant’s obligation is to pay rent, every month, as it falls due. A tenant is not entitled to abate her own rent prior to a decision from the Board about her claim for abatement.”

[14] Similarly, in the case before me, while the tenants have asserted a claim for abatement in their counterclaim, that claim has not been adjudicated, and it is not open to the tenants to abate their own rent before the Court has decided on the merits of the claim and counterclaim.

[15] To similar effect, the landlord points to the decision of the Divisional Court in Wilkinson v. Sekeritsky (2020 ONSC 5048), in which Favreau J. notes and affirms the Courts’ consistent refusal to allow tenants to “game the system” by failing to pay rent prior to and throughout an appeal period. The landlord also relies on the earlier CPC endorsements by Myers J. in the case before me, in which His Honour made like observations.

[16] In my view, particularly having regard to the mischief that would ensue if tenants could unilaterally abate before alleged shortcomings of premises or landlords’ performance, the prohibition established by these authorities is sensible and unassailable.

Tenants’ Position

[17] The tenants’ position is that they believe that, by agreeing to pay rent going forward, they are in fact complying with Myers J.’s intent, and that there ought not to be any requirement for them to pay arrears unless and until all matters have been adjudicated.

[18] On the point about their interpretation of Myers J.’s endorsements, they argue that, by referring to the importance of dealing with “interim arrangements for rent”, Myers J. literally meant interim in the sense of “from now until the hearing”.

[19] I do not agree.

[20] If that interpretation were allowed to prevail, tenants would have an incentive to withhold rent, and to delay proceedings for as long as possible before any interim hearing, so as to maximize the period of rent-free accommodation (pending final adjudication).

[21] I find that the tenants’ obligation includes the requirement to pay the arrears. If the tenants succeed in their counterclaim, and are awarded an abatement, then some or all of what they will have paid in rent, including the arrears, will be owed back to them. However, unless and until the Court makes such an Order, the obligation to pay rent, in full, persists.

Potential Hardship Resulting from Payment Required

[22] The tenants alluded to the spectre that if they are required to pay the full amount of arrears as a lump sum, the result will be “disastrous” for them. I understand that to mean that the requirement to pay such a large sum all at once will difficult or impossible for them, and would mean that they will or may not have sufficient resources to defend the claim and advance their counterclaim.

[23] In that regard, I am mindful of the language of Interpretation Guideline 2 of the LTB, to which both parties pointed me, concerning “payment into the Board”, and discussing among other items the potential ability of a tenant who disputes his or her obligation to pay rental amounts, to instead pay all or part of the rent into the Board (i.e. rather than directly to the landlord) pending the Board’s decision on a pending application.

[24] The Guideline says that, in addition to the amounts then in dispute, it is generally appropriate to “require payment into the Board of the additional amount that will become owing during the delay, because otherwise the respondent’s right to dispute the application may be negatively affected”.

[25] I take the tenants’ position to be that, conversely, if they are obliged to pay the full amount of arrears (to the landlord, to a trust account, or to the court), their ability to mount and argue the dispute “may be negatively affected”.

[26] I note that there is no evidence before me of an inability on the part of the tenants to pay the amount of arrears.

[27] It is also undoubtedly the case that, by unilaterally withholding rent, and thereby causing the arrears to accumulate, the tenants have caused the very problem of which they now implicitly complain.

Payment in Instalments and Allocation of Same

[28] That said, with a view to facilitating the necessary payment of arrears together with the payment of rent going forward, I am prepared to allow the arrears to be paid in instalments.

[29] In terms of the recipients and allocation of payments, the landlord has made a “with prejudice” offer to the tenants dated September 28, 2022, in which they propose that 75% of the arrears be paid to the landlord, and 25% be paid to and held in trust by the law firm representing the landlord. The landlord maintains that it has a full defence to the counterclaim, and has provided evidence in support of its position. As such, it maintains that the proposed allocation of 75/25 is in fact conservative and overly generous to the tenants.

[30] I am not in a position to, nor should I at this stage, adjudicate the merits of the dispute over the abatement sought in the counterclaim. As such, in my view, for the time being, a 50/50 allocation is appropriate.

[31] In sum then, I order that:

(a) The tenants are to forthwith (commencing on November 18, when rent falls due), pay the full amount of monthly rent under the lease, being $5,400.00 per month from now until further adjudication by this Court (in or after May of 2023);

(b) With respect to the arrears, commencing on the next rental payment date, being December 18, 2022, the tenants are to pay to the landlord on the 18th of each month between December 18, 2022 and May 18, 2023, an amount equivalent to one-sixth of the arrears of $70,200.00, being a monthly amount of $11,700.00 (which, for greater clarity, shall be in addition to the regular monthly rental amount of $5,400.00 per month);

(c) Of those amounts, being $5,400.00 payable on November 18, 2022, and $17,100 per month ($5,400.00 plus $11,700.00) payable on the 18th of each month commencing December 18, 2022 up to and including May of 2023, 50% shall be paid to the landlord and 50% shall be paid to the landlord’s legal representative, Aird & Berlis LLP, to be held in an interest‑bearing trust account pending the Court’s ultimate determination of this matter.

Costs

[32] The landlord asked for the ability to make submissions as to costs.

[33] It is fair to say that the landlord has been the successful party in the matter before me.

[34] That said, the tenants are adamant that their counterclaim is meritorious, that the landlord has breached basic human access rights, and that their position will prevail once the evidence is heard.

[35] In the circumstances I order that costs are to be in the cause of the ultimate hearing in this case, save and accept that the landlord will be entitled to $7,500.00 in costs relative to the two attendances before me, as part of its costs award if it is successful in the cause, or as a credit against costs it would otherwise be obliged to pay if it is unsuccessful in the cause.

W.D Black J.

Date: January 3, 2023