



COURT OF APPEAL FOR ONTARIO

CITATION: Martin v. Mailhot, 2020 ONCA 480

DATE: 20200724

DOCKET: C67228

Tulloch,
Huscroft and Harvison Young JJ.A.

BETWEEN

Caroline
Martin and Joey Moskwa

Applicants (Respondents)

and

Danielle
Mailhot

Respondent (Appellant)

Benoit Richer, for the appellant

Patrick R. Simon, for the respondents

Heard: in writing

On appeal from judgment of Justice
Robert Pelletier of the Superior Court of Justice, dated June 20, 2019.

Tulloch
J.A.:

I.

BACKGROUND

[1]

On August 2, 2017, the respondents (tenants)
entered into a commercial lease agreement with the appellant (landlord) for the
purpose of operating a barber shop and tattoo parlour. The lease stipulated
that the monthly rent was comprised of a minimum rent of $2,600 and an
additional rent based on the respondents share of taxes, insurance, and
operating costs. The lease also contained a clause requiring the respondents to
maintain comprehensive general liability insurance and direct-damage insurance,
and to provide copies of all policies or certificates of insurance and
renewals to the appellant.

[2]

On September 4, 2017, the appellant sent an email
to the respondents, outlining the rent to be paid for September. The amount due
was $3,275, plus an unconfirmed amount for water (later determined to be $68.43),
for a total of $3,343.43. The appellant also noted in the email that she
intended to reimburse the respondents $50 for parking for September.

[3]

On September 19, 2017, legal counsel for the
appellant served notice on the respondents that they were in breach of the
lease for, among other things, failing to pay the required rent for the month
of September, and failing to provide the landlord copies of all policies or
certificates of insurance required by s. 4(n) of the Lease. The notice advised
that the lease would be terminated in the event that the various breaches were
not remedied. The notice did not include a demand for monetary compensation.

[4]

On September 27, 2017, the respondents paid
$3,300 to the appellant.

[5]

On October 3, 2017, the appellant served the
respondents with a notice of termination as a result of their failure to
provide copies of all policies and certificates of insurance. The appellant
subsequently re-entered the premises.

[6]

On October 23, 2017, the respondents brought an
application for a declaration that the appellant had breached the lease through
wrongful termination and illegal re-entry.

[7]

The application judge granted the application,
finding that the notice of breach was deficient as it was not in compliance
with s. 19(2) of the
Commercial Tenancies Act
, R.S.O. 1990, c. L.7,
which requires that a notice of re-entry include a demand for monetary
compensation. He found that the failure of the appellant to stipulate a precise
monetary remedy to any alleged breach [was] fatal to the notice. He also found
that [r]ent was paid. The appellants re-entry had thus been unlawful.

II.

Issues on appeal

[8]

The appellant raises two issues on appeal:

(1)

Whether the application judge erred by requiring
the appellant to provide a demand for monetary compensation in her notice to
the respondents; and

(2)

Whether the application judge erred by failing
to find that the respondents had not paid rent and, consequently, that the
appellant was justified in terminating the lease.

III.

ANALYSIS

(1)

Did the application judge err by requiring the appellant to provide
a demand for monetary compensation?

[9]

Section 19(2) of the
Commercial Tenancies Act
provides that:

A right of re-entry or forfeiture under any
proviso or stipulation in a lease for a breach of any covenant or condition in
the lease, other than a proviso in respect of the payment of rent, is not
enforceable by action, entry, or otherwise, unless the lessor serves on the
lessee a notice specifying the particular breach complained of, and, if the
breach is capable of remedy, requiring the lessee to remedy the breach,
and,
in any case, requiring the lessee to make compensation in money for the breach
,
and the lessee fails within a reasonable time thereafter to remedy the breach,
if it is capable of remedy, and to make reasonable compensation in money to the
satisfaction of the lessor for the breach. [Emphasis added.]

[10]

The purpose of the notice requirement in s.
19(2) is to warn the tenant that its leasehold interest is at risk and to give
the tenant an opportunity to preserve that interest by remedying the breaches
complained of and, where necessary, by compensating the landlord:
780046
Ontario Inc. v. Columbus Medical Arts Building Inc.
(1994), 20 O.R. (3d)
457 (C.A.), at p. 464. Courts have insisted on strict compliance with this
requirement:
Columbus
, at p. 464;
Jay-Pee Drycleaners Inc. v. 2321324
Ontario Inc.
, 2017 ONCA 798, at para. 19.

[11]

The issue in this appeal is the precise nature
of the requirement for compensation in money as outlined in s. 19(2).

[12]

This issue was addressed by this court in
Chick
N Treats Inc. v. Woodside Square Ltd.
(1990), 38 O.A.C. 138 (C.A.). In
that case, the tenant breached the lease by failing to maintain accurate
monthly statements of gross revenue and make them available to the landlord. On
appeal, the tenant argued that the landlords notice of breach was invalid as
it had not included a demand for monetary compensation. The court rejected this
argument at paras. 6 to 8 of its reasons:

In our opinion, the additional requirement
that the lessee make compensation for the breach
cannot be mandatory
,
because the resulting obligation on the lessee to make reasonable compensation
to the satisfaction of the lessor would be nonsense in situations, such as this
in the case on appeal, where the breach is not quantifiable.
We believe that
it is a requirement of the notice if the landlord requires compensation in
addition to remedying the breach, but it is one that can be waived.



It appears to us that in a situation where
the breach is capable of remedy and the landlord has suffered damage which is
compensable [in] money, then the landlord must assert both remedies in his notice
if he intends to insist on satisfaction with respect to both, failing which, he
will exercise his right of re-entry or forfeiture
.
[Emphasis added.]

[13]

A demand for monetary compensation is never
required for valid notice under s. 19(2). Rather, the requirement may be waived
at the discretion of the landlord. A demand for monetary compensation is only necessary
where, as a result of the breach, the landlord has suffered damages compensable
in money and intends to insist on recovery, failing which, they will exercise
their right of re-entry or forfeiture. In other words, where a landlord has
suffered damages compensable in money and they fail to include a demand for
monetary compensation in their notice of breach, they will be barred from
relying on a tenants failure to compensate them for those damages as a
justification for re-entry or forfeiture. In this way, a tenant will only be
required to provide monetary compensation to preserve their leasehold interest
where it is deemed necessary by the landlord in the notice of breach.

[14]

In this case, the appellant argues that,
pursuant to the decision in
Chick N Treats
, and contrary to the
findings of the application judge, the September 19, 2017 notice was valid, as
she was entitled to waive the requirement in s. 19(2) for a demand for monetary
compensation.

[15]

I agree. The September 19, 2017 notice warned
the respondents that their leasehold interest was at risk. It specified the
breaches complained of and requested that they be remedied. It was within the
purview of the appellant to decide to waive the requirement for a demand for
monetary compensation. Her decision to refrain from including such a demand did
not invalidate the notice. It merely foreclosed the option of insisting on
recovery for any damages that flowed from the breach as a necessary condition
for the preservation of the respondents leasehold interest. The notice was
valid and the application judge erred in finding otherwise.

(2)

Did the application judge err by failing to find that the
respondents had not paid rent and, if so, was the appellant justified in
terminating the lease?

[16]

As I would allow the appeal on the first ground,
there is no need to address this issue.

IV.

disposition

[17]

In all the circumstances, I would allow the
appeal and order that the notice was compliant with s. 19(2) of the
Commercial
Tenancies Act
.

[18]

With respect to the issue of costs, if the
parties are unable to agree, the parties are to submit brief written
submissions, not to exceed three pages in length, within 15 days of the release
of these reasons.

Released: M.T. July 24, 2020



M.
Tulloch J.A.

I
agree. Grant Huscroft J.A.

I
agree. A. Harvison Young J.A.


