



COURT OF APPEAL FOR ONTARIO

CITATION: Dragona Carpet Supplies Ltd. v. Earl ONeil
    Electric Supply Limited, 2016 ONCA 783

DATE: 20161026

DOCKET: C61719

Gillese, Pepall and Roberts JJ.A.

BETWEEN

Dragona Carpet Supplies Ltd.

Applicant

(Respondent in appeal)

and

Earl ONeil Electric Supply Limited
,
    1309485 Ontario Inc.,
Lloyd Newton, Jeffrey Newton and Brenda Berger

Respondents

(Appellant)

William V. Reid, for the appellant

Reeva Finkel, for the respondent

Heard: October 21, 2016

On appeal from the order of Justice Kenneth G. Hood of the
    Superior Court of Justice, dated January 5, 2016, with reasons reported at 2016
    ONSC 162.

ENDORSEMENT

[1]

The appellant appeals from the application judges order, granting the
    respondent relief from forfeiture of its commercial sublease with the
    appellant.  The appellant also seeks to file fresh evidence on appeal.

[2]

The appellant is the tenant under a head lease of commercial premises at
    85 Progress Avenue in Toronto, a portion of which it sublet to the respondent
    pursuant to a sublease dated August 3, 2010. The term of the respondents sublease
    ends in June 2018. Although served with the application, the landlords under
    the head lease have taken no position in these proceedings.

[3]

The appellant served two notices of termination of the sublease for
    alleged breaches, other than non-payment of rent, dated respectively September
    23 and November 25, 2015. There was no dispute that the respondent was current
    in its rent payments to the appellant.

[4]

The appellants first notice of termination alleged that the respondent
    was in breach of the sublease because its principals and employees had been
    charged with criminal activity and the police had executed a search warrant as
    part of an investigation into stolen hardwood flooring products, creating a
    nuisance; and because the respondent had stored numerous used vehicles at the
    premises. Contrary to the head lease, which allowed ten days to remedy any
    breach, and contrary to s. 19(2) of the
Commercial Tenancies Act
,
    R.S.O. 1990, c. L.7, which gives a reasonable time to remedy any breach, other
    than non-payment of rent, the notice gave no time to remedy the alleged breaches.

[5]

The second notice alleged that the respondent had breached art. 12.07(e)
    of the head lease by allowing Dragona Flooring (a company owned by the sons of
    the respondents owners) to store hardwood flooring in the respondents subleased
    space. Dragona Flooring maintained premises at 12 Progress Avenue and required
    storage space at 85 Progress Avenue. This notice gave the respondent ten days
    to remedy the breach. Further, it alleged that the respondent had breached art.
    6.01 of the head lease by acquiescing to this use, which the appellant
    maintained was criminal activity.

[6]

The respondent brought an application for a declaration that the
    sublease was in good standing and the notices of termination were invalid; in
    the alternative, the respondent sought relief from forfeiture of the sublease.

[7]

The application judge held that the appellants first notice of
    termination was invalid. The appellant had failed to give notice to the
    respondent to remedy the alleged breaches. Moreover, the alleged criminal
    activity related to Dragona Flooring, whose principals and employees were
    charged, and not to the respondent, its principals or employees, who were not
    charged, and the respondent and Dragona Flooring were independent companies.

[8]

With respect to the second notice, the application judge held that the
    appellant had not demonstrated that any criminal activity had taken place or
    that the respondent had allowed or acquiesced in any criminal activity. He agreed
    that the respondent had breached art. 12.07(e) of the head lease by allowing
    Dragona Flooring to store hardwood flooring on the premises. However, pursuant
    to s. 20(1) of the
Commercial Tenancies Act
and s. 98 of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43, he granted the respondent relief
    from forfeiture of the sublease, summarizing his reasons at para. 22, as
    follows:

Accordingly, I find that there was no breach of Art. 6.01 of
    the head lease regarding criminal activity. As to Art. 12.07(e) of the head
    lease, there was a breach of the head lease. However, considering all of the
    circumstances, the conduct of DC [the respondent], the gravity of the breach
    and the disparity between the damage caused by the breach, which is none, and
    the forfeiture of five years remaining on the lease, I grant relief from
    forfeiture.

[9]

The appellant submits that this appeal turns on the question of whether
    the application judge erred in finding that there was no criminal activity taking
    place at the subleased premises. Specifically, the appellant submits that the application
    judge erred in finding that the respondent did not store or permit Dragona
    Flooring to store stolen hardwood flooring at 85 Progress Avenue. The appellant
    submits that the application judge erred in failing to consider all of the
    evidence and also relies on the proposed fresh evidence as proof of these
    allegations.

[10]

For the reasons that follow, we see no basis to interfere with the
    application judges order.

[11]

First, we would not allow the appellants motion to admit fresh
    evidence.  The proposed evidence does not constitute an acknowledgement by the
    respondent that criminal activity was occurring, adds nothing to the positions of
    the parties considered by the application judge, and does not otherwise support
    the appellants submissions. In our view, the proposed evidence, if admitted,
    would not have affected the outcome of the application.

[12]

With respect to the appeal, we see no error of law or palpable or
    overriding error that would allow appellate interference with the application
    judges findings that no criminal activity was taking place at the premises and
    that the respondent had allowed or acquiesced in it.

[13]

The appellant submits that there was clear evidence that the stolen
    hardwood flooring products were being stored at 85 Progress Avenue. Among other
    things, the appellant refers to the investigation carried out by the Toronto
    Police Services, and the results of the various searches conducted by them at
    12 and 85 Progress Avenue. The appellant submits that the application erred in
    concluding that no stolen flooring was found at 85 Progress Avenue when, in
    fact, the Toronto Police Services had found the flooring at these premises as a
    result of its search on August 18, 2015.

[14]

We disagree.

[15]

At para. 11 of his reasons, the application judge directly referenced
    the admissible evidence of the police investigation into the stolen hardwood
    flooring products as follows:

In the summer of 2015, the Toronto Police Services were
    conducting an investigation into stolen hardwood flooring products. Eventually,
    their investigation led the police to search DFs warehouse at 12 Progress
    Avenue and DCs warehouse at the Premises pursuant to search warrants. Nothing
    was removed from the Premises by the police. No stolen products were found at
    the Premises by the police, although some paperwork was found at the Premises
    which suggested that stolen products may have been there at some point prior to
    the search.

[16]

We see no basis for interfering with the application judges findings that
    were based on the admissible evidence before him. No affidavit or other sworn evidence
    from the American victims of the flooring theft, nor from the police, was filed
    in response to the application. The only affidavit evidence before the
    application judge was as follows: on behalf of the respondent, from Nizar
    Hamam, the president of the respondent, and Hassan Saad, an employee of Dragona
    Flooring; and on behalf of the appellant, from Greg Curran, the chief financial
    officer of the appellant.

[17]

With respect to the contents of affidavits for use on applications, r.
    39.01(5) of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194, only
    permits statements of a deponents information and belief with respect to facts
    that are not contentious, and only if the source of the information and the
    fact of the belief are specified in the affidavit. The allegations concerning
    criminal activity at the premises were highly contentious: in his affidavit,
    Nizar Hamam denied that there was stolen unfinished hardwood flooring on the
    subleased premises. However, the assertions set out in the appellants
    affidavit evidence on these serious, contentious issues at the heart of the
    dispute are largely based on double and triple hearsay from persons who did not
    file affidavits on the application. Indeed, some of those persons were not even
    identified.

[18]

This case involved competing inferences that could have been made from
    the admissible evidence in the record. While another judge might have drawn the
    inferences urged by the appellant, the application judges findings were available
    to him on the record before him. This included the evidence of Nizar Hamam that
    the application judge preferred to the appellants evidence. He was entitled to
    do so.

[19]

The appellant made other submissions in relation to art. 6.01 of the
    head lease. However, on the hearing of the appeal, the appellant fairly
    concedes that if we uphold the application judges finding that there was no
    criminal activity on the premises, this ground of appeal also fails.

[20]

Lastly, any issues regarding the relief from forfeiture are met by the
    fact that the application judge exercised his discretion in making this order
    under s. 20(1) of the
Commercial Tenancies Act
and s. 98 of the
Courts
    of Justice Act
.  Both of those provisions allowed the application judge a
    wide discretion to relieve against forfeitures on such terms as he considered
    just. We see no basis for interfering with the application judges exercise of
    his discretion in this case.

Disposition

[21]

For these reasons, the motion to admit fresh evidence and the appeal are
    dismissed. Costs to the respondent fixed in the amount of $26,000, all
    inclusive.

S.E.
    Pepall J.A.

E.E. Gillese J.A.

L.B. Roberts J.A.


