



COURT OF APPEAL FOR
    ONTARIO

CITATION: Lakehead Roofing & Metal Cladding Ltd. v.
    1304808 Ontario Inc., 2018 ONCA 129

DATE: 20180212

DOCKET: C63156

Feldman, MacPherson and Huscroft JJ.A.

BETWEEN

Lakehead Roofing & Metal Cladding Ltd.

Applicant (Appellant)

and

1304808 Ontario Inc.

Respondent (Respondent)

Donald B. Shanks and Rosa Carlino, for the appellant

Roderick W. Johansen, for the respondent

Heard: November 8, 2017

On appeal from the order of Justice W. Danial Newton of
    the Superior Court of Justice, dated April 21, 2016.

Feldman J.A.:

A.

Introduction

[1]

The appellant was a commercial tenant in Thunder Bay, Ontario. The
    respondent was the landlord.

[2]

The tenant sought a declaration under the
Commercial Tenancies Act
,
    R.S.O. 1990, c. L.7 (the 
Act
), that: (i) the landlord had wrongfully
    and illegally distrained assets and equipment of the tenant after terminating
    the tenancy by changing the locks; or (ii) the distraint was excessive.

[3]

The tenants position was that its application could be granted based on
    the application record. The landlords position was that a trial was required
    to resolve one or more of the factual issues.

[4]

The application judge found that: (i) terminating the lease was neither
    the intent of the landlord nor the effect of changing the locks, and therefore
    the lease was not terminated before the distraint; and (ii) a trial was
    necessary to determine whether the distraint was excessive, including the
    amount of any rent that remained owing, and the value of the distrained
    equipment. He also found that proof of any tenants damages also required a
    trial.

[5]

The appellant submits that the application judge erred in concluding that:
    (i) the landlords notices and actions did not have the effect in law of
    terminating the lease before the distraint; and (ii) a trial was needed to find
    excessive distraint, when the values attributed to the distrained equipment by
    both parties exceeded the rent that remained owing.

[6]

In my view, the application judge was entitled to make the findings he
    did on the record before him. I would therefore dismiss the appeal.

B.

Facts

[7]

The application judge referred to the affidavit evidence filed on behalf
    of each party. Mr. Perrier is a director of the landlord corporation and a 20%
    shareholder of the tenant corporation. He is also a partner in Perhol
    Construction, another tenant occupying the same premises as the appellant
    tenant. He deposed that the relationship between the landlord and the tenant
    having deteriorated, the landlord delivered a notice to the tenant on January
    29, 2016, terminating the tenancy effective February 29, 2016.

[8]

Mr. Brescia, president of the tenant, deposed that there was no written
    lease agreement, that the landlord would invoice the tenant at the end of the
    month for rent and utilities, that invoices were not delivered on regular,
    specific dates, and that payment was not required until 30 or 60 days following
    receipt of an invoice.

[9]

On February 10, the landlord sent the tenant a notice advising that it
    was proceeding to change the locks on the premises for the security of all
    tenants, as the property manager had been informed that the gate to all
    premises had been left open and another tenant had property missing. The notice
    provided that tenants would have full access from 7 a.m. to 5 p.m. during the
    week, and could gain access on evenings and weekends on 24 hours notice.

[10]

On
    February 12, Mr. Perrier delivered a statement that set out rent and utilities
    owing by the tenant up to the end of February in the amount of $66,291.70,
    together with a distraint notice that gave the tenant five days to pay before
    the landlord would appraise and sell its equipment. Mr. Brescia stated that
    there were no arrears of rent as of February 12, and that he had not received
    the invoices referred to in the statement. Nevertheless, the tenant paid the
    amount of $59,951.98, representing rent and utilities up to February 10.

[11]

The
    February 12 distraint notice also informed the tenant that the landlord had
    changed the locks to protect the goods and chattels, but that the lease was not
    being terminated until February 29, and that the tenant could request access to
    occupy and use the premises and redeem the goods and chattels upon payment of
    the rent arrears. Mr. Perrier deposed that because Perhol Construction had
    complained that Lakehead personnel had left the gate to their shared premises
    unlocked, it was for security reasons that he changed the locks, but not to terminate
    the lease.

[12]

Mr.
    Brescia stated in his affidavit that following the changing of the locks on
    February 10, he requested access to the leased premises to remove chattels but
    was refused. He again requested access on February 12, by email. It was then that
    he received the response advising that the chattels had been distrained for
    non-payment of rent. His affidavit also stated that Lakehead employees reported
    that they were harassed by the landlords officials and were directed as to
    what they were permitted to remove from the premises.

[13]

The
    application judge identified three issues to be addressed: (i) whether there were
    arrears of rent; (ii) whether the tenancy had been terminated at the time of
    the distraint, in which case, the distraint was unlawful; and (iii) if the
    tenancy had not been terminated at the time of the distraint, whether the distraint
    was nevertheless excessive.

[14]

On
    issue (i), the application judge found that on the face of the record, it
    appeared there was some rent in arrears, but the amount could not be determined
    without further evidence.

[15]

On
    issue (ii), after reciting the facts set out above, the application judge
    referred to the decision of Lederman J. in
Falwyn Investors Group Ltd. v.
    GPM Real Property (6) Ltd.
(1998), 22 R.P.R. (3d) 1 (Ont. Ct. Gen. Div.),
    affd [2000] O.J. No. 2877 (C.A.), where he quoted from the decision of Holland
    J. in
Commercial Credit Corp. v. Harry D. Shields Ltd.
(1980), 29 O.R.
    (2d) 106 (H.C.), affd (1981), 32 O.R. (2d) 703 (C.A.). Those cases stand for the
    following propositions:

·

A landlord may effect re-entry by changing the locks on the
    tenants premises.

·

However, the mere act of changing the locks is not determinative
    of whether the lease has been forfeited.

·

To effect a forfeiture, the landlord must deprive the tenant of
    possession.

[16]

In
Commercial Credit
, as in this case, the distraint notice indicated
    that the locks were changed for security purposes, but that the tenant could
    arrange for access by contacting the landlord. Applying that case, the application
    judge concluded that the changing of the locks did not deprive the tenant of
    possession of the premises because, in accordance with the distraint notice,
    the tenant could have full access from 7 a.m. to 5 p.m. on weekdays and after
    hours on 24 hours notice. Therefore the tenancy had not been terminated at the
    time of the distraint.

[17]

On
    the third issue, the application judge found that the amount of arrears of rent,
    if there were any remaining, could not be determined on the record before him. Because
    neither side had provided particularized estimates of the value of the tenants
    equipment being held, the application judge found that further evidence was
    needed to determine the extent, if any, of excessive distraint. He therefore
    ordered a trial to determine whether there had been excessive distraint, and if
    so, the amount of damages, if any, suffered by the tenant as a result.

C.

Issues

[18]

This
    appeal raises two issues. First, did the application judge err in law and
    misapprehend the evidence in his statement and application of the test for
    determining whether, by changing the locks, the landlord had actually terminated
    the lease before distraining, thereby making the distraint illegal? Second, did
    the application judge make a palpable and overriding error of fact by
    concluding that there was insufficient evidence before the court to find that
    the distraint was excessive, when both parties estimated the value of the
    distrained assets to be in excess of the amount of rent owing?

D.

Analysis

(1)

Issue One  did the landlords actions effectively terminate the lease?

[19]

The
    appellant tenant agrees that by changing the locks on commercial premises, the
    landlord does not automatically terminate a lease. It submits, relying on
Rays
    Outfitters v. Lixo Investments
, 2014 ONSC 3884, at para.15, that the test
    is whether the intended and actual effect of changing the locks was to exclude
    the tenant from the premises, thereby terminating the lease.

[20]

It
    argues that in his reasons, the application judge looked only at the written
    notice, which said that access would be given to the tenant on request, and did
    not consider or give effect to evidence that in fact the landlord denied access
    to the tenant on a number of occasions.

[21]

I
    do not accept this submission. The record before the application judge
    consisted of an affidavit from each side, attaching emails and lawyers
    letters. The complaints of access denial problems can be viewed as minimal,
    sporadic and ad hoc. It can be inferred from Mr. Brescias affidavit, that
    while the matter did not go smoothly, the tenant was not excluded from the
    premises over the month-long notice period. While it is true that the application
    judge did not address the alleged access denial specifically, it can be
    inferred that he did not consider it significant enough to have the effect in
    law of terminating the lease, when the clear intent of the landlord from the
    notices it sent and the distraint was for the lease to remain in place until
    February 29, and the tenant was on the premises during that period.

[22]

In
    my view, the application judge made a reasonable finding based on the record
    and with a full appreciation of the legal test. I would not interfere with his
    decision.

(2)

Issue Two  did the trial judge err by ordering a trial of the issues
    surrounding excessive distraint and damages?

[23]

The
    appellant points to the fact that in his affidavit, Mr. Brescia estimates the
    value of the equipment and chattels being held for distress at over $250,000, while
    the list from the landlord of a portion of the chattels being held provides a value
    of $177,892. The appellant argues that both values significantly exceed the
    amount of rent the landlord claims remains outstanding, resulting in excessive distraint.
    In his affidavit, Mr. Perrier counters that the $177,892 value represents
    chattels that the landlord has agreed to release, and therefore Mr. Brescia is
    overstating the value of the goods in dispute.

[24]

The
    application judge found the record unclear on the issue of the amount of rent
    in arrears, or even whether there was any rent in arrears. He also was well
    aware of the estimated values ascribed by the parties to the equipment and
    chattels but because they were merely estimates, he was not prepared to make
    findings without proper evidence of value. He concluded that proof of damages
    by the tenant also required a trial.

[25]

This
    matter was brought before the court as an application for a declaration under
    the
Act
. Section 66(1) of the
Act
provides for a summary
    determination of such disputes. It provides:

66.
(1)
Where goods or chattels are distrained by a landlord for arrears of rent and
    the tenant disputes the right of the landlord to distrain in respect of the
    whole or any part of the goods or chattels, or disputes the amount claimed by
    the landlord, or the tenant claims to set off against the rent a debt that the
    landlord disputes, the landlord or the tenant may apply to a judge to determine
    the matters so in dispute, and the judge may hear and determine them in a
    summary way, and may make such order in the premises as he or she considers
    just.

[26]

In
    my view, the application judge cannot be faulted for his disposition. He was
    able to make a determination on the record before him in a summary way on the
    first issue, whether the landlord had terminated the lease by changing the
    locks. However, the parties did not present sufficient evidence for him to
    determine the amount of rent that remained outstanding, if any, the value of
    the goods and equipment that had been distrained, and any damages suffered by the
    tenant if the distraint was excessive.

E.

Conclusion

[27]

I
    would dismiss the appeal with costs fixed at $10,000 inclusive of disbursements
    and HST.

Released: K.F. February 12, 2018

K.
    Feldman J.A.

I
    agree. J.C. MacPherson J.A.

I
    agree. Grant Huscroft J.A.


