Reasons for Decision

Introduction

This is an application by a commercial landlord, Java Investments Limited (referred to below as Java or the landlord), for a declaration that the lease it entered into on July 13, 2022 with its tenant, 1000225661 Ontario Inc. (referred to below as either Tkaronto or the tenant) in respect to premises at 1178A Kennedy Road, Scarborough (the leased premises) was lawfully terminated on August 15, 2024.

Java also seeks incidental relief to ensure Tkaronto and its agents do not re-enter the leased premises again, as they did immediately after the locks were changed on August 18, 2024. Indeed, Tkaronto continues its cannabis retail business from the leased premises to this day. The question is whether it is entitled to do so under the lease.

In order to re-possess its own premises, Java not only seeks to evict its tenant, Tkaronto, Java also seeks to set aside a “Notice of Immediate Closure”, referred to as a “barring order,” issued by the City of Toronto (the City) on April 29, 2024. This order purports to close the leased premises, authorize removal of any persons on the premises and bars entry to all entrances to the premises “until the final disposition of the charge”. The charge in question was laid against Java pursuant to section 13(1) of the Cannabis Control Act, 2017 (the CCA) for permitting the unlawful sale of cannabis from the leased premises. The barring order was made pursuant to sections 13 and 18 of the CCA. The application to set aside the barring order is made pursuant to section 18(4) of the CCA.

Background

Java says it leased the premises to Tkaronto in 2022 on two related understandings. First, it understood that Tkaronto intended to use the leased premises as an “indigenous cannabis dispensary”. Secondly, it understood, based on Tkaronto’s representation, that Tkaronto had a “legal right” to do so.

Tkaronto took possession of the premises and opened its cannabis retailing business in 2022, shortly after signing the lease.

On February 10, 2023, the City took the position that Tkaronto was not licensed pursuant to the CCA to sell cannabis from the leased premises and that Java was responsible to stop this breach of the CCA. The sale or distribution of cannabis in Ontario other than by an authorized cannabis retailer is prohibited under section 6 of the CCA.

The City’s letter noted that the City was aware of Tkaronto’s position “that it is a sovereign store, entitled to operate outside of the provincial cannabis laws because it is located on the traditional lands of the Mississaugas of the Credit First Nation.” However, the City letter went on to say that the traditional territory remains subject to all applicable provincial laws, including the CCA, and the City insisted provincial laws must be observed.

Java advised the City that it had been told by Tkaronto that it was entitled to sell cannabis because it was an Indigenous business operating on traditional Indigenous lands. Java suggested the City should deal directly with Tkaronto.

Java did not hear anything more from the City until May 2024.

On April 29, 2024, the City issued a “barring order” under the CCA. This closed the leased premises to everyone, including the landlord and tenant, until final disposition of the charge that was laid against Java for knowingly permitting the sale of cannabis from the leased premises without the necessary retail licence under the CCA.

The tenant, Tkaronto, was not charged but, like everyone else, it was subject to the barring order. The police seized Tkaronto’s cannabis inventory on April 29, 2024, and, pursuant to the barring order, changed the locks, thereby barring entry to both the landlord and the tenant.

Tkaronto ignored the barring order, re-entered the premises and continued to operate its business.

The landlord only became aware of the barring order in July 2024 when it learned of the charge laid against it and that a barring order had concurrently been issued in support of the charge.

Java was convicted of a provincial offence under s. 13(1) of the CCA (not under a City by-law) for knowingly permitting the unlawful sale of cannabis from the premises. Java paid $31,262.00 in fines and administrative fees on February 28, 2025. There was no appeal.

Although this meant that the charge has been finally disposed of, the City argues that the barring order is still in effect. The City maintains that the barring order should only be set aside on conditions which include the termination of the lease, removal of Tkaronto from the premises, and the posting of a $10,000.00 bond by Java.

On July 30, 2024, while the charge was still pending, Java notified Tkaronto that if it did not confirm immediately that it would not be opening its business again, Java would have to take further steps to ensure it did not open “until this matter is resolved”.

On July 31, 2024, Java served on Tkaronto a “Final Notice of Failure to Cure Default” advising that it was in default under the lease for failing to cure or remedy its defaults (namely, the unlawful sale of cannabis and failing to resolve the City’s charges against the landlord) and Java could terminate the lease without further notice.

Tkaronto continued its cannabis retailing business at the leased premises. Tkaronto continued to pay rent. Indeed, it has never defaulted in paying rent.

Tkaronto was either unable or made no effort to get the City to withdraw its charge against Java.

Tkaronto did, however, provide Java with a “Certificate of Business Registration” issued on January 1, 2024, by the Kenyen’keha:ha (Mohawk) nation and advised Java that it was operating within the territory governed by its constitution.

In a July 31, 2024 email, Java asked Tkaronto if the City had accepted this certificate in lieu of licensing. Java also asked Tkaronto about the status of the City’s pending charge against it, as landlord for breach of section 13(1) of the CCA. Java reiterated that the existence of the charge against it was a continuing breach of the lease by Tkaronto.

Tkaronto did not respond to these questions, but there is no doubt that the City, which continued to prosecute the charge against Java, did not accept that Tkaronto’s business was lawful.

Java terminated Tkaronto’s lease by notice dated August 15, 2024. The notice relied on Tkaronto’s continued unlawful sale and distribution of cannabis despite “numerous demands…[to] cease all illegal operations”. It also relied on Tkaronto’s failure “…to address, remedy or resolve the [City’s] charges against the landlord…which charges are a direct result of your activities.”

On August 18, 2024, Java posted termination and no-trespassing notices. Java changed the locks.

Tkaronto removed and replaced the new locks and refused to leave the leased premises. Tkaronto continues to operate its business at the leased premises.

Although Java has only been convicted of one charge to date, the City has reserved the right to lay further charges against Java if it permits Tkaronto to continue unlicensed cannabis sales from the leased premises. No further charges have been laid while Java has pursued this application.

The Lease

The July 13, 2022 lease is an “Agreement to Lease Commercial”, in long form 510 from the Ontario Real Estate Association, plus two schedules, A and B. While this agreement contemplated a subsequent, more comprehensive, lease document being prepared by the landlord, this did not happen. No draft lease was attached as Schedule C, although there is a reference to such a schedule in the lease.

Thus, when the tenant took possession, it did so pursuant to the terms of the July 13, 2022 agreement which will be referred to as the lease. Although the names of the parties to the lease are not legally precise in the document, it is clear (and no-one argued otherwise) that the landlord is the applicant, Java, and the tenant is the respondent numbered company.

The lease contains the following express terms:

a. Use: the Premises shall be used only for “The store will be operating an indigenous cannabis dispensary under the inherent, sovereign, and constitutional right as a First Nations Organization.” ( sic. para. 2);

b. The Tenant may erect signage… subject to municipal by-laws and government regulations…” (para. 12);

c. This Agreement, including any Schedule attached hereto, shall constitute the entire agreement between the Landlord and the Tenant. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.” (para. 18);

d. The Tenant may make any necessary minor internal improvements…in compliance with all applicable governmental bylaws and codes governing the use of the demised premises. (Schedule B, second last paragraph);

e. The Tenant may install…any signs or advertising material… All signs and location(s)… must conform to all municipal and local laws. (Schedule B, last paragraph).

Java’s amended Notice of Application seeks a declaration that the lease contains additional terms or implied terms to the effect that:

i. the tenant was “entitled to lawfully sell Cannabis from the premises based on its status as an indigenous business operating on indigenous lands”;

ii. if not, the tenant would “obtain the necessary license to sell cannabis before doing so”; and

iii. the tenant’s “sale of cannabis from the premises would not expose Java or [its principal] to criminal prosecution and fines.”

These terms are not expressly contained in the lease.

The evidence about applicable Indigenous laws

The tenant denies that the proposed implied terms are applicable. It argues that this lease is a “straight forward commercial tenancy”. It says it has not breached any term of the lease.

It notes that the only express terms which are relevant permit it to operate an Indigenous cannabis dispensary provided it complies with Indigenous laws. It says it does just that.

The tenant relies on a “Certificate of Business Registration” granted to the other respondent, Ken Hughes, by the Kanyen’kewa:ka (Mohawk) Nation for the period of January 1, 2024 to January 1, 2025. Mr. Hughes is a principal of the tenant.

The tenant also takes the position that it is authorized to operate by the Constitution of the Mississaugas of the Credit First Nation as well as the Six Nations Cannabis Commission.

No expert evidence was filed on the interpretation of these Indigenous laws or their relevance to the lease.

I note that one William Newbigging, who identified himself as having some affiliation to the Department of History at Laurentian University, filed an 11-paragraph affidavit setting out his opinions and purporting to answer the question of “whether there was evidence that Mississaugas of the Credit First Nation and Mohawks of Six Nation engaged in trade and commerce in the Greater Toronto area”.

This affidavit does not contain any admissible expert evidence. It was not argued that Mr. Newbigging should be qualified as an expert. Rules 39.01(7) and 53.03(2.1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, were not complied with. His opinions are inadmissible and irrelevant.

In any event, I do not have to decide whether the tenant complied with Indigenous laws because the landlord in his notices did not rely on a breach of the lease arising from an alleged failure to comply with Indigenous laws. Thus, I will not address the significance, if any, of the business certificate filed by the tenant or whether it complied with Indigenous laws governing distribution and retail of cannabis products.

The tenant also relied on the fact that it is operating on “traditional territory” in conjunction with the United Nations Declaration on the Rights of Indigenous Peoples ( UNDRIP ), which has been implemented in Canada by virtue of the United Nations Declaration on the Rights of Indigenous Peoples Act, S.C. 2021, c. 14 ( UNDRIP Act ) . I acknowledge that section 5 of the UNDRIP Act requires the federal Government to take all necessary measures to ensure the laws of Canada are consistent with UNDRIP and section 6 requires the relevant Minister to prepare and implement an action plan to achieve the objectives of UNDRIP. The UNDRIP and the UNDRIP Act , however, have no impact on the outcome of this application.

While the tenant may be operating on “traditional territory” and the Government of Ontario has acknowledged that the Mississaugas of the Credit First Nation have a land claim over the Rouge River Valley Tract, and assuming the leased premises are located in this area, this land claim has not yet been adjudicated. The tenant’s factum says that “negotiations are ongoing.”

The tenant did not commence a counterapplication in respect to the First Nation’s land claim. The tenant has not delivered any Notice of Constitutional Question in this application.

The current situation concerning the land claim is described in the City’s February 10, 2023 letter to Java as follows:

“The City acknowledges that the [leased premises] is on land that is part of the traditional territory of many nations including the Mississaugas of the New Credit. The City also acknowledges and is committed to advancing the process of reconciliation and building a positive relationship with Indigenous peoples.

However, the City also carries the responsibility of ensuring compliance with relevant laws. At present, the traditional territory at issue…remains subject to all applicable provincial laws, including the CCA , and the City must insist that those laws be observed.”

While the leased premises are located within an area subject to a land claim that may in future affect the jurisdiction of the Province of Ontario, I accept that the CCA , and indeed all provincial laws, apply to the parties in respect to the leased premises.

What do the express terms require?

The outcome of this application turns on the proper interpretation of the lease and whether it has been properly terminated.

The “use” clause does not directly specify the use to which the leased premises will be put. The phrase is: “The store will be operating an indigenous cannabis dispensary under the inherent, sovereign, and constitutional right as a First Nations Organization.” This phrase certainly implies that the leased premises will be used as a cannabis dispensary. Whether this is said to be an express or an implicit “use” clause, it can reasonably be understood that the tenant’s use will be the operation of a retail cannabis store.

On any reasonable interpretation, the “use” clause also implicitly represents and warrants (perhaps this is a condition rather than a warranty, although I need not decide this question) that the store will be operating “under the inherent, sovereign, and constitutional right as a First Nations Organization.”

I do not have to decide whether the tenant is in breach of this representation, warranty or condition because this was not alleged as a ground of default.

The lease expressly says that certain signage and improvements must conform to governmental “codes” or “regulations” or local laws, depending on the clause.

There is, however, no express clause requiring the tenant to comply in any other respects with provincial laws or to use best efforts to ensure the landlord is not subject to prosecution or fines. Thus, the landlord can only succeed in its application if there are implied terms which justify its purported termination of the lease.

There is an “entire agreement” clause which states that there is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein” (para. 18). This clause does not, however, purport to deny the existence of any terms which are implied by law based on obviousness or business efficacy.

When can terms be implied in a lease?

The tenant argues that extrinsic evidence is not admissible to support implication of the terms proposed by the landlord. The tenant relies on Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 , [2014] 2 S.C.R. 633, for the proposition, which I accept, that parol evidence cannot be relied upon to vary the express terms of a written agreement. The Court stated at para. 59:

The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing. To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties. The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party's ability to use fabricated or unreliable evidence to attack a written contract. [citations omitted]

Java, does not, however, seek to contradict or negate an express term in the lease.

I note first that the wording in the “use” clause does not expressly require the tenant to comply with provincial law. I note also that it does not expressly require the tenant to comply with Indigenous law, but I accept that it impliedly requires the tenant to comply with Indigenous law. But the fact that a tenant must comply with Indigenous law does not mean it is not also required to comply with provincial law.

The fact that Indigenous law is referenced (“the store will be operating an indigenous cannabis dispensary under the inherent, sovereign, and constitutional right as a First Nations Organization”) does not mean the parties thereby excluded the application of provincial laws. The tenant is really turning the issue on its head and asking the court to imply that this reference to Indigenous law necessarily excludes the operation of provincial laws. This is wrong in law for the following reasons.

First, the parties to a commercial lease cannot decide between themselves which laws they will respect and which they reject. The courts can make that kind of decision, for example, in determining if a federal law excludes a provincial law or, more pertinently, when and where self-governing, Indigenous laws are applicable rather than the laws of Canada.

Secondly, how a term in a commercial lease operates on private parties and when terms may be implied requires objective interpretation, in accordance with the standard principles of contractual (or lease) interpretation. The law in this regard is the law applied by the Superior Court of Justice of Ontario to commercial leases. This law can not be ousted by reference to Indigenous law in a “use” clause in a lease.

The relevant law on implying terms in this lease is set out in Energy Fundamentals Group Inc. v. Veresen Inc ., 2015 ONCA 514 , 388 D.L.R. (4 th ) 672, at para. 17 ; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd ., [1999] 1 S.C.R. 619; and Brymer v. Thompson (1915), 25 D.L.R. 831 (Ont. C.A.).

In Energy Fundamentals Group Inc ., the Court of Appeal, at para. 30, citing the Supreme Court of Canada in M.J.B. Enterprises Ltd ., confirmed that a contractual term (and the same is true for a term in a lease) may be implied “on the basis of the presumed intentions of the parties where necessary to give business efficacy to the contract or where it meets the ‘officious bystander test.’”

The latter branch of this test was summarized in Shirlaw v. Southern Foundaries (1926) Ltd ., [1939] 2 K.B. 206 at 227 (Eng. C.A) . The common dictum from Shirlaw is relied on at para. 31 of Energy Fundamentals Group :

“ Prima facie that which in any contract is left to be implied and need not be expressed is something so obvious that it goes without saying. Thus, if while the parties were making their bargain, an officious bystander were to suggest some express provision for it in their agreement, they would testily suppress him with a common: “Oh, of course.”

The tenant argues that the landlord has not passed this test because one must apply it having regard to a suitably officious Indigenous bystander. The tenant argues that an Indigenous, officious bystander would not accept that it was obvious that the lease would be subject to provincial laws or included an obligation to act in such a way that the landlord would not be penalized under provincial law for the conduct of the tenant.

I do not agree that there should be any difference in result depending on whether the officious bystander is Indigenous or not, at least when interpreting a commercial lease.

I do not accept that an Indigenous bystander would be any less likely to agree that these terms are so obvious that they went without saying. These terms are necessary to ensure that any landlord, including an Indigenous landlord, is treated fairly and justly. If such terms were not implied it would also make it less likely that other landlords would lease their premises to Indigenous businesses in similar circumstances.

While the lease does not expressly provide that the parties must comply with provincial laws, it is an obvious obligation that they must do so.

Furthermore, it is equally obvious that the tenant implicitly is not permitted to carry on its business in a manner which subjects the landlord to provincial enforcement measures. No reasonable person would interpret the lease to allow a tenant to carry on its business in a way that subjects the landlord to the serious risk of quasi-criminal prosecution throughout the term of the lease.

I accept that any “officious bystander,” if asked at the time the lease was signed, would have readily acknowledged that these requirements had to be and were terms of the lease.

Furthermore, for the same reasons, both these implied terms are obvious and necessary to give “business efficacy” to the lease.

Was proper notice given in terminating the lease?

I agree with the tenant that this lease is a “straight forward commercial tenancy.”

The tenant breached both the implied terms which I have recognized above. First, the tenant breached its obligation to sell cannabis from the leased premises in compliance with provincial law. Secondly, the tenant breached its obligation not to carry on its business in a manner which subjects the landlord to provincial enforcement measures.

The landlord gave written notice to the tenant on July 31, 2024, in a “Final Notice of Failure to Cure Default” advising that it was in default for failing to cure or remedy its defaults (the unlawful sale of cannabis and failing to resolve the City’s charges against the landlord) and that it could terminate the lease without further notice.

The tenant did not remedy its default. To the contrary, it denied that it has any such obligations and relied on its incorrect position that it did not have to comply with provincial law and that the landlord should solve its problems with the City on its own.

Java properly terminated Tkaronto’s lease by notice dated August 15, 2024, in accordance with section 19(2) of the Commercial Tenancies Act , R.S.O. 1990, c. L.7. The notice of termination relied on Tkaronto’s continued unlawful sale and distribution of cannabis despite “numerous demands…[to] cease all illegal operations”. It also relied on Tkaronto’s failure “…to address, remedy or resolve the [City’s] charges against the landlord…which charges are a direct result of your activities.”

On August 18, 2024, Java posted termination and no-trespassing notices, again in compliance with the Commercial Tenancies Act . Java validly changed the locks.

Tenant’s request for relief from forfeiture

In its factum the tenant asked for relief pursuant to section 20 of the Commercial Tenancies Act , but it did not explain how it might correct or cure its default or, if relief is granted, on what terms. Nor did it refer to any caselaw to support its request.

Relief from forfeiture might have been appropriate if the tenant had provided some assurances that it would use its best efforts to obtain a retail licence to sell cannabis pursuant to the CCA and that it would try to ensure the landlord would not be charged under section 13 of the CCA . It gave no such assurances.

In court, the tenant’s counsel suggested that the tenant was prepared to compensate the landlord for the fees, administrative costs and legal fees incurred in responding to the charge against it. This was not offered prior to the hearing. This offer is inadequate. It does not ensure compliance with the tenant’s obligations under the lease, and it does not say, in particular, say how the tenant would try to ensure the landlord would not be further embroiled in a legal dispute (with the City) which is not of its own making.

The request for relief from forfeiture is denied.

The Unbarring Order

On April 29, 2024, the City issued a “barring order” under the CCA . Java seeks an order “unbarring” the leased premises.

The City is prepared to consent to an unbarring order provided various conditions are imposed. To this end, the City requires that Tkaronto’s officers, directors, employees and agents be ejected as trespassers and an injunction be issued prohibiting them from re-entering the leased premises.

The City also requests a $10,000 bond from Java “to be held until the charges against Java are disposed of” and “until proof is provided to [the City] that Tkaronto and/or any other cannabis retailer not authorized to sell cannabis under the [ CCA ] is no longer in possession of the [leased premises] is no longer in possession of the [leased premises], such that the use of the [leased premises] is not in contravention of s. 13 of the [ CCA ].”

The City also seeks an order that Java “shall ensure that the [leased premises] shall not be used in any contravention of the [ CCA ].”

The trouble with the City’s demand that conditions should be imposed on Java if the barring order is to be vacated is that the barring order was granted pursuant to section 18(3) of the CCA which applies only until “final disposition” of the related charge. As noted above, the charge against Java has been finally dealt with by way of conviction and its payment of a fine. The heading above section 18 in the CCA , “Interim closure of premises,” is consistent with the express wording of the section, which only permits the barring of the leased premises while the charge is pending. That is why this section provides that an unbarring order may be made, subject to conditions, while the charges are pending.

The result is that the barring order is no longer valid, and it is set aside without condition.

The injunction request by Java

Java’s amended notice of application seeks an interlocutory injunction restraining Tkaronto, its officers, directors, employees and agents from re-entering the leased premises. Alternatively, it seeks a permanent injunction enjoining essentially the same people from having cannabis at or selling cannabis from the leased premises without a retail store authorization issued under the CCA .

This application has resulted in a final disposition of the issues. Consequently, an interlocutory injunction is not warranted: R. v. Fastfrate (1995), 24 O.R. (3d) 564 (C.A.); Attorney-General for Ontario v. Grabarchuk et al. (1976), 11 O.R. (2d) 607 (Div. Ct.), at paras. 27 , 30, 33 and 36.

The permanent injunction sought is warranted by virtue of the repeated re-entry onto the leased premises contrary to the barring order (at least for the period during which it was valid) and contrary to the notice from the landlord properly terminating the lease.

In a similar vein, the landlord also seeks approval from the court for its proposed termination of the utilities supplied to the leased premises. This does not require a court order. The lease has been validly terminated. The landlord, as owner of the formerly leased premises, may deal with the utilities as it sees fit. The lease has been properly terminated and the tenant therefore no longer has any interest in the premises.

Conclusion

The court therefore grants the applicant the following orders and declarations:

a. a declaration that the lease, while it was in force, contained implied terms that the parties must comply with provincial law and that the tenant was not permitted to carry on its business in a manner which subjected the landlord to provincial enforcement measures.

b. a declaration that the lease was terminated on August 15, 2024.

c. a permanent injunction enjoining Tkaronto, Kenneth Hughes, and their employees and agents, from having cannabis at or selling cannabis from the leased premises without a retail store authorization issued under the CCA .

d. An order ejecting Tkaronto’s officers, directors, employees, and agents from the leased premises.

e. An order granting the landlord possession of the leased premises.

f. An order setting aside and vacating the barring order dated April 29, 2024.

The applicant shall make its costs submissions in writing within ten days of the date of these reasons. The respondent shall have ten days to respond, also in writing. Written submissions shall not exceed three pages, double spaced and they are subject to the margins specified in the Rules of Civil Procedure, plus a bill of costs, plus any written offer to settle. There shall be no right of reply.

Justice C. Stevenson
Date: April 08, 2025