6971971 Canada Inc. et al. v. Messica, 2025 ONSC 604

COURT FILE NO.: CV-22-00690864-0000

DATE: 20250128

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: 6971971 Canada Inc., MD Majibur Rahman, and Farhana Urme Applicants

AND:

Eli Messica Respondent

BEFORE: Justice Chalmers

COUNSEL: O. Hoque, for the Applicants

P. Wadwa, for the Respondent

HEARD: November 22, 2024, by videoconference

ENDORSEMENT

Overview

1The Applicants, 6971971 Canada Inc. (697 Canada), MD Majibur Rahman (Rahman), and Farhana Urme (Urme) seek an order to remove a charge registered on title at the property known as 163 Hillsview Drive, Richmond Hill, Ontario (the Hillsview Property). The Respondent, Eli Messica (Messica) brings an application for an order directing Rahman and Urme to pay $145,205.00 for the repairs to the commercial property located 2460 St. Clair West, Toronto, Ontario (the Leased Premises).

2For the reasons set out below, I grant the relief sought by the Applicants and discharge the collateral on the Hillsview Property. I dismiss the application brought by the Respondent.

Factual Background

Assignment of Lease to 697 Canada

3Messica is the owner of the Leased Premises. The Leased Premises consist of a gas station, car wash and convenience store.

4Messica entered into a lease with 2417178 Ontario Inc. (241 Ontario), dated May 1, 2014 (the Lease). The term of the Lease commenced on January 1, 2014 and ended on December 31, 2018. There were three personal guarantors to the Lease.

5The terms of the Lease permitted the tenant to assign the Lease, subject to the consent of the landlord. The Lease provides that on an assignment, the guarantors would be released, and the assignee would allow the landlord to put a security of $100,000 on the assignee’s property.

4.1 The Tenant shall not assign this lease or sublet the whole or any part of the Premises unless he first obtains the consent of the Landlord in writing, which consent shall not unreasonably be withheld.

4.3 Any consent granted by the Landlord shall be conditional upon the assignee, sub-lessee or occupant executing a written agreement directly with the Landlord agreeing to be bound by all the terms of the lease as if the assignee, sub-lessee or occupant had originally executed this lease as tenant.

4.4 Once the Landlord approve(s) the assignment, then the guarantors will be released immediately, and the assignee will allow the landlord to put a security of One Hundred Thousand dollars $100,000 on the assignee’s property. This property must have equity in it.

6On September 22, 2015, Messica consented to the assignment of the Lease to 697 Canada. Messica executed the document entitled Landlord’s Consent to Assign Lease. The Consent to Assign Lease includes an indemnity agreement, which provides as follows:

Guarantor

In consideration of the Lessor granting this Lease to the Lessee and the sum of Two Dollars ($2.00) now paid by the Lessor to the Guarantors (receipt and sufficiency whereof are hereby acknowledged by the Guarantor(s)), the Guarantors do hereby covenant jointly and severally with the Lessor, as principal obliges and now as surety, that they will pay or cause to be paid to the Lessor or other proper payee thereof all rents and utility charges under the Lease and will observe and perform all covenants and agreements herein considered to be observed and performed by the Lessee.

Rahman and Urme executed the agreement as the new guarantors.

7After the Lease was assigned to 697 Canada, the parties agreed to amend the Lease. The parties entered into a Lease Amending Agreement dated October 15, 2015. Messica and 697 Canada agreed that paragraph 4.4 of the Lease is amended by replacing and substituting the three existing personal guarantors with Rahman as the new guarantor.

8As the new guarantor, Rahman was required to provide a security mortgage in the amount of $100,000 to Messica, by way of a mortgage registered against any property owned by him or 697 Canada. On October 2, 2019, Rahman executed a charge of mortgage in favour of Messica. The charge was registered on title to the Hillsview Property, securing the sum of $100,000.

Lease Renewal Agreement

9Following an arbitration in January 2019 to determine the market rent for the renewal term, 697 Canada exercised its right to renew the Lease for a term of 5 years. By Lease Renewal Agreement dated as of January 29, 2019, the Lease was renewed for the period from January 1, 2019 and expiring on December 31, 2023.

10The Lease Renewal Agreement provides that the collateral security provided by Rahman in the amount of $100,000 remains in place. The Lease Renewal Agreement also required 697 Canada to perform certain work at the Leased Premises. Clause 7 of the Lease Renewal Agreement provides as follows:

7. The Tenant agrees to commence within two weeks of execution of this Agreement and complete prior to October 30, 2019, the following repairs and replacements to the Demised Premises:

• paint the interior of the existing convenience store to Petro-Canada standards;

• upgrade the washrooms including painting and new hand dryers;

• renovate the current coffee area;

• purchase and replace the diesel dispenser;

• repair and resurface the retail lot and repair the cracked concrete;

• install LED lighting on the canopy;

• replace the downspout adjacent to the diesel dispenser.

11The parties agreed that the replacement of the diesel dispenser was an improvement and was captured by paragraph 8 of the Lease Renewal Agreement. As a result, Messica was to pay 697 Canada one half the cost of replacing the diesel dispenser by the end of November 2019.

Application under the Commercial Tenancies Act

12On September 3, 2019, 697 Canada entered into an agreement to assign the Lease to Mehulkumar Ghanshyambhai Thakkar (Mehulkumar), in trust for a corporation to be incorporated. The corporation became Moksha Enterprise Limited (Moksha).

13On October 6, 2019, there was a meeting between Rahman, Messica, and Mehulkumar. Messica highly recommended the assignee, Moksha to the gas station operator, Suncor. On October 10, 2019, Messica met with Rahman and complained that 697 Canada had not completed the work required under paragraph 7 of the Lease Renewal Agreement. On November 13, 2019, Messica’s lawyer advised 697 Canada’s lawyer that Messica would not consent to the assignment. In the letter, Messica’s lawyer asked that 697 Canada be reminded that “some of the repairs to the premises have still not been completed”.

14The Applicants brought an application under s. 23 of the Commercial Tenancies Act, R.S.O. 1990, c. L.7, for a determination as to whether Messica unreasonably withheld his consent to assign the Lease. On the application hearing, Messica argued, inter alia, that 697 Canada had not completed the work required under paragraph 7 of the Lease Renewal Agreement.

15By endorsement dated March 18, 2020, the application judge, Justice Perell, found that Messica’s refusal to consent to the assignment was unreasonable. Justice Perell noted that Messica’s concerns that the repairs required under paragraph 7 of the Lease Renewal Agreement, were not raised or pointed out until his responding affidavit in February 2020. Justice Perell also noted that “some of these concerns could be quickly remediated and others could be attended to in relatively short order”: 6971971 Canada Inc. v. Messica, 2020 ONSC 1642, at para 52.

16Following the Court’s decision, the parties settled the issue of damages arising out of Messica’s withholding of consent. In July 2020, the parties entered into a full and final release. The parties acknowledged that the release was only with respect to the damages arising out of the withholding of consent. Messica paid the costs ordered by the application judge.

Work Required under the Lease Renewal Agreement

17Rahman swore an affidavit on February 25, 2020 with respect to the Commercial Tenancies Act application. He deposed that all the work required under paragraph 7 of the Lease Renewal Agreement had been completed by October 31, 2019, with the exception of the installation of LED lighting on the canopy and the replacement of the diesel dispenser.

18Rahman retained Limitless Construction & Development (Limitless) to carry out the renovations and asphalt repairs that were required under paragraph 7 of the Lease Amending Agreement. The Limitless invoice #0301 provides that the drywall repairs, painting, repair of a toilet, and paving and asphalt repairs were completed for a cost of $22,543. The invoice was paid by Rahman on November 27, 2019. The Applicants produced photographs of the resurfacing and repair of the asphalt, and the interior of the convenience store.

19The Lease Renewal Agreement provides that the replacement of the diesel dispenser was to take place by the end of November 2019. On October 16, 2019, Rahman delivered to Messica a quote for procuring a used dispenser and replacing the existing diesel dispenser. The installation of a used dispenser was not permitted. On October 23, 2019, Rahman delivered a quote for a new diesel dispenser. Messica approved the cost of the new diesel dispenser. On November 3, 2019, Messica paid to 697 Canada $12,712.25, being one half of the cost to replace the diesel dispenser as required under the Lease Renewal Agreement.

20697 Canada finalized the order with Royal Petroleum Maintenance Ltd. for the new diesel dispenser on November 6, 2018. By e-mail sent April 7, 2020, counsel for Rahman advised counsel for Messica that the diesel dispenser had been installed. In his affidavit sworn on April 23, 2023, Messica confirmed that he “gave half money for the diesel dispensers to MD Majibur Rahman, as agreed, and MD Majibur Rahman got the diesel dispensers at the premises.”

21With respect to the LED light installation, Rahman deposed that the existing canopy was not suitable for LED lighting and had to be replaced with suitable equipment. He deposed that the work was completed on January 28, 2020.

22On March 27, 2020, the GTA territory manager of Suncor sent an e-mail to Messica stating that except for the painting, the work required under paragraph 7 of the Lease Amending Agreement had not been completed. The e-mail was forwarded to the lawyer for the Applicants. Messica obtained quotes to complete the work.

23The quote from 5 Star Home Renovation Inc. dated May 10, 2020, provides that the cost to demolish both washrooms and to install a new full washroom with vanity and toilet, flooring and wall tiles is $21,470, inclusive of H.S.T. The quote from HA/DASA dated July 14, 2020 provides that the cost for the asphalt removal and replacement is $79,100 inclusive of H.S.T. The quote from EVSTR T.H. Corp, dated June 16, 2020 provides that the cost to demolish the coffee area and install plumbing and electrical is $44,635.00, inclusive of H.S.T. Messica states that the total cost to complete the work is $145,205.

24Messica produced two undated letters from Moksha. In the first, Moksha acknowledges the receipt of $19,000 plus H.S.T. ($21,470) from Messica to update the washroom. The second letter states that 697 Canada gave possession of the premises to Moksha without carrying out or completing the repair of the premises as described in the Lease Renewal Agreement. There is no evidence that Moksha completed any of the work itself.

25The Applicants rely in part on the Acknowledgment and Indemnification dated April 14, 2020, in which Messica purportedly states that the assignor has complied with all of its obligations and that the Lease is assigned on an “as is” basis. The Acknowledgement and Indemnification is unsigned. The Applicants believe an executed version of the Acknowledgement and Indemnification is in the possession of Messica. However, there is no evidence before the court that Messica signed the Acknowledgement and Indemnification.

Assignment of Lease to Moksha

26On April 16, 2020, the parties entered into an Assignment of Lease and Landlord’s Acknowledgement. Pursuant to the Assignment of Lease, Rahman and Urme were replaced as guarantors by four individuals, Mehulkumar, Mayank Balvantray Thakkar (Mayank), Shail Harishbhai Thakkar (Shail) and Leena Thakkar (Leena). Moksha provided a new guarantee to Messica in the form of a charge registered on the residence at 74 Charcoal Drive, Toronto (the Charcoal Drive Property), securing the amount of $100,000. Moksha took over the Lease on April 17, 2020.

27Rahman did not seek a discharge of his guarantee at the time of the assignment of the Lease. On August 3, 2022, Rahman requested that the charge be removed from the Hillsview Property. Rahman required the discharge because of a refinancing. Messica refused to remove the charge. Rahman completed the refinancing transaction by holding in trust the sum of $100,000. This amount remains in his lawyer’s trust account.

28On November 15, 2022, the Applicants commenced this application for an order to remove the charge and release the $100,000. In the responding record dated March 31, 2024, Messica delivered a Notice of Application seeking damages from the Applicants in the amount of $145,205, to complete the work set out in paragraph 7 of the Lease Renewal Agreement. The Applicants argue that the demand for $145,205 is excessive and relates to upgrades and improvements to the Leased Premises. The Applicants also argue that Messica’s proposed claim for damages is statute-barred.

The Issues

29The following issues are determined on this application and counter-application:

a. Should the application and counter-application be converted to an action?

b. Is Rahman entitled to a discharge of the security in the amount of $100,000? and

c. Is Messica entitled to damages for the repairs to the Property?

Analysis

Issue # 1 – Should the Application and Cross-Application be converted to an action?

30Messica argues that the application and cross-application should be converted into an action. It is his position that there are material facts in dispute and issues of credibility that cannot be determined on a paper record. The Applicants state that the issue of the release of the guarantee is a distinct issue with no material facts in dispute. The Applicants also state that the cross-application is statute-barred and that there are no material facts in dispute with respect to the limitation issue.

31Rule 14.05 sets out the types of matters that can proceed by way of application. R. 14.05(d) provides that a proceeding may be brought by application where the relief claimed is the determination of rights that depend on the interpretation of a contract. R.14.05(i) provides that a matter may proceed by application in respect of any matter where it is unlikely that there will be any material facts in dispute requiring a trial.

32Rule 38.10 provides that on hearing the application, the judge may grant the relief sought, or dismiss the application in whole or in part. The judge may also order the whole application, or any issue to proceed to trial. The following factors are relevant in determining whether an application should proceed as an action:

a. whether there are material facts in dispute;

b. the presence of complex issues requiring expert evidence or weighing of evidence;

c. whether there is a need for the exchange of pleadings and for discoveries; and

d. the importance and impact of the application and of the relief sought: Fort William Indian Band v. Canada, 2005 CanLII 19819 (Ont. S.C.), at para. 5.

33The application judge is to consider whether, if the proceeding had been commenced as an action, and the moving party had brought a motion for summary judgment, would the court be satisfied that there is no genuine issue requiring a trial: Dell v. The Corporation of the Town of Niagara-on-the-Lake, et al., 2023 ONSC 1610, at para. 21.

34I am of the view that the application and cross-application may be determined on the paper record. The release of the guarantee is based on the interpretation of the Lease agreements. The cross-application may be determined on the basis that Messica’s claim for damages is statute-barred. Although there is a dispute between the parties with respect to whether the repairs were completed at the time of the assignment of the Lease, there are no material facts in dispute with respect to the limitation issue.

Issue # 2 – The Application - Is Rahman entitled to a discharge of the security in the amount of $100,000?

35Rahman provided the charge as guarantor pursuant to clause 4 of the Lease. Clause 4.4 provides that once the landlord approves the assignment of the Lease, the guarantors will be released immediately. The Lease Amending Agreement did not make any changes to this part of the Lease.

36Following the release of Justice Perell’s reasons on March 18, 2020, 697 Canada assigned the Lease to Moksha. Messica approved the assignment of the Lease by signing and executing the Assignment Agreement dated April 16, 2020. The Assignment Agreement provides that Rahman and Urme are replaced as guarantors by Mehulkumar, Maynak, Shail and Leena. The new tenant provided a charge on the Charcoal Drive Property securing the sum of $100,000 as a replacement guarantee.

37Messica does not have any entitlement to Rahman’s security unless there is a finding that the principal, 697 Canada is in default of the Lease. Messica argues that 697 Canada is in default of the obligation to perform the work set out in paragraph 7 of the Lease Renewal Agreement. The Applicants deny that the Lease or Lease Renewal Agreement were breached. The Applicants also state that Messica was aware of the default at the time the lease was assigned on April 16, 2020.

38The guarantee provides that Rahman and Urme are liable for “all rents and utility charges under the Lease.” There is no evidence that there is any default by 697 Canada with respect to the rents or utility charges.

39Messica argues that Rahman and Urme are not released as guarantors because the work set out in paragraph 7 of the Lease Renewal Agreement was not completed. Messica argues that it has a valid claim against the Applicants for the cost of completing this work.

40697 Canada takes the position that the work set out in the Lease Renewal Agreement was completed. Messica did not bring an action or application to determine whether 697 Canada is obligated to pay damages related to the work.

41I am of the view that Messica cannot hold the security indefinitely without bringing an action or application to determine if it is entitled to the payment that is secured by the charge. It was incumbent upon Messica to bring the claim within the two-year limitation period if it was his position that the Applicants failed to complete the work required in paragraph 7 of the Lease Renewal Agreement. For the reasons set out below, I am of the view that there can be no liability on 697 Canada for the payment of the work because of the expiry of the limitation period. If the principal cannot be liable to Messica, there is no obligation on the guarantors.

42I am satisfied on the plain wording of the Lease that the guarantors, Rahman and Urme were released at the time the assignment of the Lease was approved by Messica. Pursuant to the Assignment Agreement, Messica had new guarantors and a new charge in the amount of $100,000. I find that there is no basis for Messica to refuse to release Rahman and Urme from their personal guarantee and to remove the charge provided by Rahman. I allow the application.

Issue #3 - The Cross-Application - Is Messica entitled to damages to complete the work set out in paragraph 7 of the Lease Renewal Agreement?

43Messica argues that 697 Canada failed to complete the work required under paragraph 7 of the Lease Renewal Agreement by October 30, 2019. Messica claims that he is entitled to payment for the cost to complete the work. He also claims that he is not required to discharge the security provided by Rahman, before the work is completed.

44Paragraph 7 of the Lease Renewal Agreement provides that 697 Canada was required to complete the following work: paint the interior of the existing convenience store, upgrade the washrooms, renovate the coffee areas, replace the diesel dispenser, repair and resurface the retail lot, and repair the cracked concrete and install LED lighting to the canopy. Messica alleges that none of the work was completed at the time the Lease was assigned to 697 Canada in April 2020.

45Messica provided notice of its cross-application on March 31, 2024; almost four years following the assignment of the Lease to Moksha. The Applicants argue that Messica’s claim for damages for the cost to complete the work is barred by the limitation period. Section 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

46There is no issue of discoverability. Messica concedes that he knew the work had not been completed in the fall of 2019. On November 19, 2019, Messica’s lawyer wrote to 697 Canada’s lawyer to remind them that the work had not been completed. The issue of whether the work had been completed was argued at the time of the Commercial Tenancies Act application in March 2020. In the Notice of Cross-Application, Messica states that the work was not completed at the time the Lease was assigned on April 16, 2020.

47Messica argues that the applicable limitation period is the period of ten years as set out in sections 23(1) and 43(1) of the Real Property Limitations Act, R.S.O. 1990. c. L.15 (RPLA).

48Messica relies on The Equitable Trust Co. v. Marsig, 2012 ONCA 235, 109 O.R. (3d) 561. In that case, the appellant signed a guarantee that was included within a registered mortgage document. The mortgage went into default and the mortgagee exercised its power of sale. There was a deficiency and the mortgagee brought action against the guarantor. The guarantor brought a motion for summary judgment arguing that the action was statute-barred because it was brought more than two years after the date of default. The court stated that a guarantee given in conjunction with a mortgage transaction affects real property law rights and as a result, the ten-year limitation period set out in the RPLA applies: Equitable Trust, at para. 28.

49Messica also relies on 1250140 Ontario Inc. v. Bader, 2022 ONCA 197. In 2008, Ms. Bader granted a 7th ranking mortgage on her home as security for a loan. She defaulted on the loan in the same year. The property was sold, but the proceeds of the sale were not sufficient to satisfy the debt. She acknowledged the debt in 2010. The action was brought in 2019. Ms. Bader argued that the RPLA did not apply because the property had been sold. The Court of Appeal held that the RPLA governs actions when land is the security for the impugned debt. If the land is merely incidental to an action based in negligence, breach of contract, breach of fiduciary duty or some other basis of liability, the RPLA does not apply: Bader, at para. 16. Ms. Bader’s debt was secured by a mortgage on the property and therefore the ten-year limitation period applied.

50It is my view that Equitable Trust and Bader are distinguishable on the facts. In both cases, the guarantee was contained in a mortgage. The RPLA provides that the 10-year limitation period applies with respect to an action upon a covenant contained in an indenture of mortgage or any other instrument to repay the whole or part of any money secured by a mortgage. Here, Messica is seeking damages for breach of the obligations set out in the Lease Renewal Agreement. This is a contract claim and not an action affecting real property, or that relates to an interest in land. As a result, the RPLA has no application: Bader, at para. 16 (see also: Zabanah v. Capital Direct Lending Corp., 2014 ONCA 872, 123 O.R. (3d) 350, leave to appeal refused, [2015] S.C.C.A. No. 36, at para. 17).

51I conclude that repair and restoration claims related to obligations set out in a lease, such as those in this case, are subject to the two-year limitation period under s. 4 of the Limitations Act. Here, Messica discovered the claim by April 16, 2020 at the latest. This was the date that the Lease was assigned to Moksha. The two-year limitation period began to run at this time. The cross-application was commenced almost 4 years later.

52It is my view that the two-year limitation period bars Messica’s claim for the cost of the repairs and renovations set out in paragraph 7 of the Lease Renewal Agreement. If 697 Canada left the Leased Premises in a state of disarray that required repairs or renovations, the two-year limitation period to repair the damage has also expired.

53The only claim Messica asserts over the $100,000 charge on Rahman’s property is for the cost to complete the renovations set out in paragraph 7 of the Lease Renewal Agreement. Messica cannot pursue an action against 697 Canada for the cost of the repairs because of the expiry of the two-year limitation period. Rahman will not be liable to Messica for any damages and therefore there is no basis for Rahman to be subject to the guarantee.

54Messica states that the Applicants acted in bad faith in bringing the application to release the security on the eve of the expiry of the limitation period. I am of the view that this argument has no merit. The Applicants caused the application to be issued on November 15, 2022. Messica did not provide Notice of the Cross-Application until March 31, 2024. There was nothing preventing Messica from bringing the application or an action within 2 years of learning that the repairs and renovations set out in paragraph 7 of the Lease Renewal Agreement had not been completed.

55I find that Messica’s claim for the repairs/renovations required under the Lease Amending Agreement is barred by operation of the basic two-year limitation period set out in Section 4 of the Limitations Act.

Disposition

56For the reasons set out above, I make the following order:

a. I allow the application and order that Rahman is discharged from the security of $100,000; and

b. I am satisfied that Messica’s claim for damages for the cost of completing the work under paragraph 7 of the Lease Renewal Agreement is barred by the two-year limitation period. I dismiss the counter-application.

57The Applicants are successful on the application and cross-application and are presumptively entitled to their costs. The Applicants submitted a bill of costs dated November 22, 2024 in which they seek their partial indemnity costs in the amount of $21,961.55 for counsel fee, inclusive of H.S.T., plus $494.00 for disbursements. Messica submitted a bill of costs on November 22, 2024, which provides that if successful on the application and cross-application, he would have sought partial indemnity costs of $6,915.760 inclusive of counsel fee and H.S.T., plus $393.00 in disbursements.

58If the parties are unable to agree on costs, the Applicants may deliver written cost submissions of no more than 3 typed pages within 15 days of the date of this endorsement. Messica may deliver his written costs submissions of no more than 3 type-written pages within 15 days of receiving the Applicants’ cost submissions.

Chalmers J.