SUPERIOR COURT OF JUSTICE - ONTARIO
RE: 1000069368 ONTARIO INC. Applicant/Respondent
AND:
2700688 ONTARIO INC. Respondent/Applicant
BEFORE: Schabas J.
COUNSEL: John Mather and Max Libman, for 1000069368 Ontario Inc. Raghav Vig, for 2700688 Ontario Inc.
HEARD: March 10, 2026
Reasons for Judgment
Introduction
1This matter involves two applications arising from a commercial tenancy lease.
2The first application, brought by 1000069368 Ontario Inc. (“10000” or the “applicant”), is to recognize and enforce a lease entered into in June 2022, commencing June 1, 2022, for the rental of a unit in a commercial property located at 200 Hymus Road in Scarborough.1 The applicant leased the property from Misco Holdings Inc. (“Misco”), which owned the property in 2022. 10000 intended to operate an indoor recreational facility offering indoor basketball and pickle ball. Misco represented that the property was zoned to permit this use and the Lease required that the property be used as a recreational facility.
3The second application is brought by the current legal owner of the property, 2700688 (“2700” or the “respondent”). 2700 seeks, among other things, a declaration that the proposed use of the property by 10000 contravenes City of Toronto Zoning By-law No. 569-2013 (the “Zoning By-law”). 2700 also requests injunctive relief pursuant to, among other legislation, ss. 380 of the City of Toronto Act, 2006, S.O. 2006, c. 11 (“COTA”), restraining the applicant from operating an indoor recreational sports facility there.
410000 paid $410,838.10 in deposits for its rental of the property. The Lease requires the owner to complete a series of renovations before 10000 occupies the unit and begins paying rent. The renovations include installing lighting and fixtures, building new washrooms, and grinding and leveling floors for the basketball and pickle ball courts. In early 2023, 10000 agreed to share costs of upgrades to the building’s HVAC system, and paid Misco $387,444.50 as its share of that cost.
5The renovations were delayed. In May 2022, with Misco’s consent, 10000 delivered equipment it intended to use at the facility, such as bleachers and basketball nets (the “equipment”), to the property, where it was to be stored while the renovations were completed.
6Misco’s representative, who dealt with the applicant from October 2021 through June 2024, was Armand Astanni. However, unknown to the applicant, Astanni’s real name was Arash Missaghi. Missaghi was shot and killed in June 2024. Troy Wilson (“Wilson”) then took over dealing with the applicant on Misco’s behalf. Misco's corporate documents name Wilson as President, Secretary, Treasurer and sole Director of the company.
72700 acquired the property in April 2025. According to the parcel register, the purchase price was $2, but 2700 granted a $2,250,000 charge to Misco. There is evidence that Misco is a shareholder of 2700. Further, Wilson advised 100000 that a 50% interest in the property would continue to be held by Misco or by another company controlled by Missaghi’s widow. After the sale, Wilson continued to communicate with 10000 on behalf of the owners or, as he put it, the “ownership group.”
8In June 2025, Wilson advised 10000 that he had learned that 10000's unit was not zoned for use as a recreational facility. This was a surprise to both parties.
910000 immediately submitted a Zoning Applicable Law Certificate application to the City of Toronto (the “City”) for an assessment of the zoning status of 200 Hymus Road. Wilson consented to this application and reimbursed 10000 for the application fee.
10While that application was pending, on July 1 and 2, 2025, 2700 locked 10000 out of its unit and moved 10000's equipment to an unknown location without 10000's consent. However, on July 4, 2025, Wilson emailed 10000 to say that if the City approved the use, which he thought “very likely”, then “the ownership group would be very happy to have you as a tenant.” Wilson also said that if the proposed use is not legal, he would instruct Misco to return the deposits and the funds advanced for HVAC upgrades.
11The City confirmed in an Examiner’s Notice dated July 22, 2025, that the unit is not currently zoned for use as a recreational facility. However, the City stated that the applicant could apply to amend or vary the Zoning By-law to permit the use.
12On August 5, 2025, after receiving the Examiner’s Notice, 10000 took the position that 2700, as the owner, should submit and pay for the application to amend the Zoning By-law and that, if it failed to do so, 10000 would commence the application and recover the costs from 2700.
13On August 29, 2025, 10000 commenced this application, and 2700’s application followed in October 2025. To date, neither party has pursued a rezoning application as, I was told, there was agreement to have these court applications resolved first, as they were expected to be heard quickly in the fall of 2025. Unfortunately, that did not occur, and the applications were finally heard on March 10, 2026.
Issues
14The applications raise the following issues:
(a) Does the Lease bind 2700?
(b) Is the Lease frustrated due to the existing Zoning By-law?
(c) What relief should be granted?
The Lease is binding on 2700
15There is no doubt that the Lease is binding on 2700 as the new owner of 200 Hymus Road, which is a commercial property. The Lease states that the parties’ successors and assigns are bound by it. This accords with the Commercial Tenancies Act, R.S.O. 1990, c. L.7, which states in s. 8 that the obligations of a lessor vest in any person to whom a lease is conveyed.
16The Lease does not need to be registered on title. To avoid being bound by the Lease, the new owner must show that it lacked notice of it: Sandhu v. Paterson and 89 Auto Sales v. Sandhu, 2016 ONSC 1748 at paras. 37 – 43. Tzimas J. summarized the law this way at para. 43:
In sum, a bona fide purchaser for value without actual knowledge of a prior agreement will be protected if the lease is not registered as required. However, the same purchaser with actual knowledge of the prior agreement will not be protected. That purchaser will also not be protected if he or she is wilfully blind to avoid actual knowledge of a particular interest. In addition, knowledge in the hands of a purchaser’s agent, such as a real estate agent and/or his or her lawyer will be deemed to be knowledge of the purchaser.
17Assuming it was a bona fide purchaser for value even though it only paid $2, there is no tenable evidence that 2700 was unaware of the Lease. To the contrary, Wilson continued to communicate with the applicant on behalf of the “ownership group” following the sale of the property, an ownership group that continues to include Misco. In my view, Wilson’s knowledge must also be deemed to be knowledge of 2700 as well.
18Accordingly, 2700 is bound by the terms of the Lease.
Is the Lease frustrated by the Zoning By-law?
192700 submits that it should not have to comply with its obligations under the Lease. It states that it should not be required to complete renovations and repairs and grant possession to the applicant when doing so will lead to the applicant carrying on an unlawful use. The respondent, in effect, says the Lease has been frustrated.
20I do not agree with the respondent’s position. At this time, there is no breach of the Zoning By-law. The uncontradicted evidence is that the respondent represented that the property could be used for recreational purposes, and the Lease provides that this is the only purpose for which it will be used. The City has said that an application to amend the Zoning By-law can be made.
212700 has appended reports from two planners to its deponent’s affidavit. They opine that obtaining a zoning amendment to permit a recreational use will be “challenging”, “difficult”, and that the “probability of success for the application would be low.” However, neither report is properly before me. The evidence is hearsay, as the respondent did not file affidavits from the planners, who also did not comply with Rule 53.
22The purported evidence of the planners conflicts with Wilson’s view, expressed to 10000 in an email on July 4, 2025, that approval of 10000’s use was “very likely.” Although that opinion was made in the context of the application made in June 2025, 2700 was also aware of another tenant at the same location which was openly operating a recreational business without any apparent objection from the City: 12814307 Canada Inc. v. 2700688 Ontario Inc. et al., 2025 ONSC 4951.
23In any event, 10000 has not commenced operating its recreational business and therefore there is no breach of the Zoning By-law. As was the case in Regional Municipality of Halton v. Canadian National Railway Company, 2022 ONSC 4644 (“Halton”) at para. 21, there are no “breaches taking place on the ground right now.” It is open to both parties to seek an amendment to the Zoning By-law to permit the use contracted for in 2022; indeed, arguably it is the respondent’s obligation to do so having misrepresented the current situation and having signed a contract that specified that use only, which would have induced the applicant to enter into the Lease and provide a significant deposit. These circumstances, among others, distinguish this case from 1307347 Ontario Inc. v. 1243058 Ontario Inc., 2001 CarswellOnt 16, [2001] O.J. No. 31 (SCJ) at para. 27, cited by counsel for the respondent.
What relief should be ordered?
24The applicant seeks a declaration that the Lease is valid, binding and enforceable against 2700. I see no reason why such a declaration cannot issue at this time and the Lease be enforced. The parties entered into a Lease, deposits were paid and work has begun to prepare the premises for the use specified in the Lease. Although at the present time the applicant cannot commence its operations due to the current zoning of the property, there is no evidence before me that work done in anticipation of the proposed use is illegal or that the Lease is void for “illegality”: see, e.g., Agasi v. Wai, 2000 CarswellOnt 2903 (SCJ) at paras. 27 and following.
25It follows that the injunctive relief sought by the respondent is premature and should be dismissed. Quite simply, 10000 is not using the facility illegally and there is nothing to be restrained at this time. Indeed, until the respondent completes the required renovation work, the applicant cannot use the facility.
26Applying the test for a statutory injunction under s. 280 of the COTA, the respondent has not established “a clear breach of the by-law”: Allied Properties v 1064249 Ontario Inc., 2016 ONSC 6665 at paras. 4 – 5. This pre-requisite has not been met.
27Nor has the respondent met the test for a quia timet injunction. A breach of the Zoning By-law is not imminent, nor is it threatened: City of Waterloo v. Persons Unknown, 2025 ONSC 1572, para. 37. The applicant has corresponded with the City and obtained confirmation that the current zoning does not permit the intended use. It wants to make a rezoning application.
28For a quia timet injunction to be ordered, “there must be a high degree of probability that the harm will in fact occur” or, put another way, that the threat has “crystallized”: Operation Dismantle Inc. v. R., [1985] S.C.R. 441, quoting Sharpe, Injunctions and Specific Performance (1983) at p. 31; Muslim Association of Canada v. Attorney General of Canada, 2022 ONSC 7284 at paras. 50 - 58. At this stage, there is no basis for the respondent to fear that it will face prosecution or other harm as the premises are not in a state to be used illegally, nor has the applicant’s conduct suggested it will operate illegally when the premises are ready. While I appreciate that it is “one of the primary functions of injunctive relief to prevent damage before it occurs”, there is no continuing, or imminent breach here: 1307347 Ontario Inc. at para. 14.
29Similarly, I see no point in issuing a declaration, as sought by the respondent, that the intended use of the property contravenes the Zoning By-law. This is not disputed today but may change in the future if the Zoning By-law is amended.
30As I have found that the Lease is binding on the respondent, it follows that the respondent is obliged to continue with the renovations that the landlord agreed to complete as specified in the Lease. This work is to be completed without further delay.
31The applicant is also entitled to the return of its equipment and to have access to the property. Although counsel for the respondent asserted in argument that storing the equipment at the property was a breach of the Zoning By-law, I have no evidence to support that claim. Equipment had been stored there for a long period of time, without objection by Misco, and was only removed when the respondent locked the applicant out of the property. Since then, I am advised by 2700’s counsel that the respondent has entered into short term rental arrangements with others who have been occupying the unit. If this is so, this may be in breach of the Lease and may interfere with the renovations and any access sought by the applicant.
32I realize this result means that the respondent may be put to unnecessary cost, if it renovates for the applicant’s use, but then fails to get a Zoning By-law amendment. However, that is its obligation under the Lease. It was not open to the respondent to lock out the applicant and remove its equipment. Wilson’s July 4, 2025 email contemplated getting the zoning changed, failing which the applicant would be reimbursed, which may ultimately be what happens. But the applicant is entitled to have the amendment pursued in the meantime, unless the parties can work out a resolution.
Conclusion
33Accordingly, I grant the relief sought by the applicant as requested, as follows:
(a) A declaration shall issue that the Lease is valid, binding and enforceable as against 2700;
(b) A declaration shall issue that, pursuant to the Lease, 10000 currently has a leasehold interest in the unit and is entitled to enter and occupy the unit;
(c) A declaration shall issue that 2700 is obligated pursuant to the Lease to complete the landlord work in the Lease on an expedited basis;
(d) A declaration that all rent payments owed by 10000 to 2700 pursuant to the Lease are abated until 2700 completes the landlord work contemplated in the Lease;
(e) A declaration shall issue that the equipment remains the lawful property of 10000;
(f) An order shall issue that 2700 must return possession of the unit to 10000 immediately;
(g) An order shall issue that 2700 complete the landlord work contemplated by the Lease on an expedited basis; and
(h) An order shall issue that 2700 Ontario Inc. return the equipment to the unit.
34The relief sought in the respondent’s application is dismissed.
35Should the parties be unable to agree on costs, the applicant shall provide me with written submissions not exceeding 3 pages, double-spaced, not including attachments, within 21 days of the release of these Reasons. The respondent shall provide submissions similarly limited in length within 14 days of receiving the applicant’s submissions.
Paul B. Schabas J.
Date: March 16, 2026