In the recent Court of Appeal decision of 8573123 Canada Inc. (Elias Restaurant) v. Keele Sheppard Plaza Inc., 2021 ONCA 371, the Court of Appeal upheld a Superior Court ruling made against a commercial landlord which made note of anti-black racism against the tenant and granted relief from forfeiture based on principles rooted in equity, sparing the tenant from eviction. See our blog regarding the original ruling.
In this case the landlord of a commercial plaza unit, sought to evict a husband-and-wife team of restauranteur tenants who ran an African/Black/Caribbean restaurant, catering service and bar. The Landlord’s position was that the tenant had failed to give proper notice with respect to their option to renew and was subsisting in the unit as an overholding tenant.
The tenant brought an application before the court for relief from forfeiture and sought the courts assistance in exercising it’s right to continue occupying the space.
The tenant took over the lease of a 1500 sq ft unit, through an assignment in 2013 and never missed any of the base or additional rent payments. The tenant also spent $150,000 in leasehold improvements to the premises when it took over. The tenant took over the lease on July 30, 2013, and the term ran to July 31, 2017. There were two options to renew for additional five-year periods. The lease required the tenant to provide written notice of the exercise of the option to renew to be given by registered mail at least six months prior to the expiry of the lease (by January 31, 2017). The landlord kept the tenant as an overholding tenant from August 2, 2017, to May 28, 2020, when the landlord terminated the lease.
There was conflicting evidence between the parties as to the tenant’s efforts to provide such notice. While the landlord took the position that the tenant failed to provide such notice. The tenant tendered evidence showing their efforts to contact the landlord and confusion around the address which the notice was to be sent to.
The landlord tendered evidence that it wished to replace the tenant with a more “suitable” business, submitting the Tenant was “unattractive” and their business did not attract “family-oriented customers”. The Superior Court Judge’s ruling noted that the Tenant was a family business.
The Superior Court Judge found that the Tenant’s efforts to contact the Landlord were “studiously avoided” and as such he ruled that the Tenant had satisfied the notice requirement to exercise their renewal options. Further, the ruling acknowledged that the Tenant was not in breach of the lease, never missed a payment, made substantial investments to the property and at all times acted in good faith. It was noted that the Landlord did not show any financial loss, and most notably the Superior Court Judge held that the Landlord and its agents described the Tenants in their evidence as “a caricature of racially derogatory themes” and in so finding concluded that the Landlord’s motivation to replace the Tenant was motivated by racism. The Judge decided that these facts were relevant to weighing the prejudice to the Tenant, irrespective of whether the racism was conscious or unconscious on the part of the Landlord.
The Landlord appealed the ruling on the basis that the Superior Court Judge failed to take into account some of the factual evidence tendered by the Landlord including evidence of one of the Landlord’s employees contradicting the Tenant’s evidence.
The Court of Appeal held that this was a factual issue and the Landlord had not demonstrated a palpable and overriding error in the application’s assessment of the evidence. It was open to the Superior Court judge to accept the Tenant’s evidence over the Landlords. The Landlord also appealed based on the observations of anti-black racism made by the Superior Court Judge. The Court of Appeal rejected this aspect of the appeal and cited the Superior Court Judge’s ruling that “the societal realities pertaining to Black businesspeople like the Tenants must be factored into the exercise of the Court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.” The Court of Appeal refused to interfere with the exercise of the Superior Court’s discretion in granting equitable relief to the Tenant and dismissed the appeal.
The Superior Court ruling and it’s endorsement by the Court of Appeal marks a watershed in the commercial and civil litigation context regarding judicial recognition of unconscious biases which work against business owners from diverse backgrounds.
Do you need assistance with a commercial lease dispute that you are involved in? Whether in a shopping mall, industrial or commercial plaza, condominium, or other type of commercial lease unit, the lawyers at Gilbertson Davis have experience with commercial lease disputes, including mediations, private arbitrations, and judicial applications. Call us for a consultation.
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