



COURT OF APPEAL FOR ONTARIO

CITATION:
Tabriz Persian Cuisine Inc. v. Highrise Property Group Inc.,
    2022 ONCA 272

DATE: 20220404

DOCKET: C69604

Feldman, MacPherson and Lauwers
    JJ.A.

BETWEEN

Tabriz Persian Cuisine Inc.

Plaintiff (Appellant)

and

Highrise Property Group Inc.

Defendant (Respondent)

Esmaeil Mehrabi, for the appellant

Angela Assuras, for the respondent

Heard: February 25, 2022 by video conference

On appeal from the judgment of Justice Jasmine
    T. Akbarali of the Superior Court of Justice, dated June 16, 2021, with reasons
    at 2021 ONSC 4065.

MacPherson J.A.:


A.

Introduction

[1]

This appeal centers on the reasonableness of a
    landlords refusal to consent to a tenants lease assignment. On three
    occasions, the appellant tried to assign its lease. On three occasions, the
    respondent refused. It offered differing reasons for doing so, but each refusal
    insisted that the respondent would not consider the assignment unless the
    appellant removed a patio it had built on the condominiums property.

[2]

The appellant brought an action for damages
    after the third refusal. After a trial, Akbarali J. found that the appellant
    had not shown that the respondent acted unreasonably. For these reasons, I find
    that she did not err in doing so. The appellant attempts to extricate questions
    of law from a finding of fact. The fundamental question is whether a reasonable
    person could have withheld consent. The appellants refusal to rectify its
    breach of the lease meets the reasonable person standard and is not overwhelmed
    by the respondents request that the appellant abandon a parallel lawsuit.

B.

FACTS

(1)

The Parties and Events

[3]

The appellant, Tabriz Persian Cuisine Inc.,
    owned a Persian restaurant in premises leased from the respondent Highrise
    Property Group Inc. In 2018, the appellant decided to sell its business. Doing
    so required the respondent to consent to the assignment of its lease with the appellant.
    Section 10.01 of the lease prohibited the respondent from unreasonably
    withholding or delaying its consent. The section went on to specify that it would
    not be unreasonable for the respondent to consider the proposed transfers
    conformity with the lease, the assignees business fundamentals, and the
    availability of other premises.

[4]

Three times, the appellant found a buyer and
    sought the respondents consent. Three times, the respondent refused to
    consider the assignment unless the appellant met a series of conditions. Though
    the conditions changed through the offers, the respondent consistently asked
    that the appellant remove a patio it had built as an addition to its
    restaurant.

[5]

The patio was a source of significant friction
    between the parties. Prior tenants had used the area in front of the premises
    for outdoor dining. The appellant added a wooden structure to correct what it
    saw as a grading problem. The respondent subsequently asked the appellant to
    remove the patio as it did not comply with the lease. The appellant resisted on
    the basis that it had obtained the consent of the respondents agent before
    installing the patio. The patio and the alleged representation are at the heart
    of a separate action brought by the appellant.

[6]

In its third refusal to consent to the
    assignment, the respondent requested that the appellant remove the patio and
    that it discontinue the parallel litigation.

(2)

The Trial Judges Decision

[7]

The trial judge concluded that the appellant had
    failed to show that the respondents refusal to consent to the lease was
    unreasonable. Despite the respondents various other grounds for refusing to
    consent to the assignment, the trial judge found that the patio was its primary
    reason for refusal.

[8]

The trial judge noted that the appellant had
    built the patio outside the leased premises without the respondents consent.
    The appellant understood that the patio did not conform with the lease, as
    shown through its various unfulfilled promises to remove the deck/patio. The
    trial judge reasoned [i]t is not reasonable to expect the [respondent] to
    consent to an assignment of lease in circumstances that are going to perpetuate
    the patio problem that has plagued the parties for years. The respondent was
    merely insisting that the appellant restore the leased premises before it left.

[9]

However, the respondents insistence that the
    appellant discontinue its parallel lawsuit was not reasonable. The trial judge
    found that this condition was the respondents attempt to use its greater
    bargaining power to secure a dismissal of the action in which the plaintiff may
    be asserting legitimate rights [and] is not connected to the request to assign
    the lease. Nevertheless, this collateral purpose did not render the
    respondents refusal unreasonable, viewed holistically: Put another way, a
    reasonable basis to refuse consent saves a co-existing tainted purpose.

[10]

Finally, the trial judge found in
obiter
that the appellant had not sufficiently proved its damages.

C.

ISSUES

[11]

The appellant raises three issues on the appeal:

1.

Did the trial judge err by finding that the
    respondent did not impose a pre-condition to considering the appellants
    assignment request?

2.

Did the trial judge err by finding that the
    respondents refusal to consent to the assignment was reasonable?

3.

Did the trial judge err by finding that the
    reasonable purpose saved the       collateral purpose?

D.

ANALYSIS

Preliminary issue - Standard of Review

[12]

I disagree with the appellants argument that
    the lease is a standard form contract that should be reviewed for correctness.
    Whether a landlords refusal to consent to a lease assignment is reasonable is
    essentially a question of fact that must be determined on the circumstances of
    the particular case, including the commercial realities of the market place and
    the economic impact of the assignment on the landlord:
1455202 Ontario
    Inc. v. Welbow Holdings Ltd.
(2003), 33 B.L.R. (3d) 163 (Ont. S.C.), at
    para. 9(6). The trial judges decision is, accordingly, entitled to deference
    absent palpable and overriding error:
Housen v. Nikolaisen
, 2002 SCC
    33.

(1)

The Pre-Condition Issue

[13]

The appellant contends that the respondent acted
    unreasonably by refusing to even consider the lease assignment before its
    conditions were met. In its email concerning the third offer, the respondents
    agent wrote you have to remove your patio complete to the ground and make good
    all damages to the wall and floor
before
he considers your
    Assignment of Lease(emphasis in original). The appellant relies on para. 50 of
Royal Bank of Canada v. Oxford Medical Inc.,
2019 ONSC 1020, for the
    principle that a landlord has an obligation to consider requests for a
    proposed assignment.

[14]

This reliance is misplaced. McEwen J.s
    assertion in
Royal Bank
cites
St. Jane Plaza Ltd. v. Sunoco
    Inc.
(1992), 24 R.P.R. (2d) 161 (Ont. C.J. (Gen. Div.)). There, the
    plaintiff attempted to terminate the lease on the basis that Sunoco had
    assigned its lease without consent. In fact, Sunoco had requested the
    plaintiffs consent on three occasions and the plaintiff had simply ignored
    them: at p. 5. For the next 14 years, the plaintiff accepted Sunocos rent
    cheques until it sought to terminate the lease in search of higher rent: at p.
    7.

[15]

Borins J. concluded that the plaintiff had
    unreasonably withheld its consent because it failed to offer any grounds for
    its refusal: at p. 10. Therefore, a landlords refusal to consider an offer is
    not unreasonable in itself. Rather, it is unreasonable because the court is
    unable to appreciate the reasons motivating the refusal:
Welbow
, at
    para. 9(2). A landlords silence is tantamount to an unreasonable refusal. As Morden
    J.A. said at para. 36 of
1497777 Ontario Inc. v. Leons Furniture Ltd.
(2003), 176 O.A.C. 380 (C.A.), the essential reasoning underlying Borins J.s
    conclusion in
St. Jane
is founded on the fact that the tenant had
    sought the landlords consent to the assignment of the lease and that the
    landlord had unreasonably refused to give it.

[16]

Consequently, I do not agree that the landlord
    was unreasonable in placing preconditions before considering the assignment.
    The correspondence between the parties highlights the basis of the landlords
    refusal in palpable detail and allowed the trial judge to find that the patio
    was the only default that really mattered. The question is, and remains,
    whether the landlords refusal was reasonable. It makes no difference at which
    stage of its consideration the landlord makes its decision.

(2)

The Refusal Issue

[17]

The appellant submits that the respondents
    reasons for withholding consent were unreasonable because they were not
    contemplated by the lease. The lease required the appellant to obtain the
    respondents consent before assignment which consent may not be unreasonably
    withheld or delayed. The lease further provided that it will not be
    unreasonable for the respondent to consider:

a.      Whether the
    transfer is contrary to any covenants or restrictions granted by the landlord
    to other existing or prospective tenants or occupants of the building;

b.      Whether in
    the landlords opinion the financial background, business history and
    capability of the transferee are satisfactory; and

c.      Whether the
    landlord will have in the next ensuing three-month period other premises
    elsewhere in the building which might be suitable for the needs of the
    transferee.

[18]

The appellant claims that the trial judge erred
    by considering reasons extraneous to the three outlined above. Indeed, it
    argues that its default under the lease was irrelevant since there was no term
    stating that the respondent could refuse consent because the appellant was in
    breach of the lease. It did not raise this argument at trial: see trial judges
    reasons, at para. 61.

[19]

I disagree with the appellants submission for
    two reasons. First, the exclusivity of the above grounds is not supported by
    the language of the lease. The landlords obligation to withhold consent on
    reasonable grounds is unqualified: which consent may not be unreasonably
    withheld or delayed. The three provisions are included in a distinct sentence
    that states it will not be considered unreasonable for the Landlord to take
    into account the following factors. In my view, this language is expansive,
    not exclusive. It clarifies conditions that may be unreasonable without
    limiting the generality of the first clause: see
Lehndorff Canadian Pension
    Properties Ltd. v. Davis Management Ltd.
(1989), 59 D.L.R. (4th) 1 (B.C.
    C.A.), at p. 10.

[20]

Second, the appellants argument goes against
    the tenor of the governing case law. In
Welbow
, Cullity J. described
    the relevant principles, at para. 9:

1. The burden is on the tenant to satisfy the
    court that the refusal to consent was unreasonable. In deciding whether the
    burden has been discharged, the question is not whether the court would have
    reached the same conclusion as the landlord or even whether a reasonable person
    might have given consent; it is whether a reasonable person could have withheld
    consent.

2. In determining the reasonableness of a
    refusal to consent, it is the information available to - and the reasons given
    by - the landlord at the time of the refusal - and not any additional, or
    different, facts or reasons provided subsequently to the court - that is
    material. Further, it is not necessary for the landlord to prove that the
    conclusions which led it to refuse consent were justified, if they were
    conclusions that might have been reached by a reasonable person in the
    circumstances.

3. The question must be considered in the
    light of the existing provisions of the lease that define and delimit the
    subject matter of the assignment as well as the right of the tenant to assign
    and that of the landlord to withhold consent. The landlord is not entitled to
    require amendments to the terms of lease that will provide it with more
    advantageous terms, but, as a general rule, it may reasonably withhold consent
    if the assignment will diminish the value of its rights under it, or of its
    reversion. A refusal will, however, be unreasonable if it was designed to
    achieve a collateral purpose, or benefit to the landlord, that was wholly
    unconnected with the bargain between the landlord and the tenant reflected in
    the terms of the lease.



6. The question of reasonableness is
    essentially one of fact that must be determined on the circumstances of the
    particular case, including the commercial realities of the marketplace and the
    economic impact of an assignment on the Landlord. Decisions in other cases that
    consent was reasonably, or unreasonably, withheld are not precedents that will
    dictate the result in the case before the court. [Citations omitted.]

This court confirmed this as the
    applicable test in
Tradedge Inc. (Shoeless Joes) v. Tri-Novo Group Inc.
,
    2007 ONCA 562, at para. 2.

[21]

Cullity J.s decision relies on the Ontario High
    Courts decision in
Federal Business Development
    Bank v. Starr
(1986), 28 D.L.R. (4th) 582, where
    Donnelly J. said, at p. 590, that the assignment test is moving towards a
    more liberal approach, close to the reasonable man standard, [which] is to
    consider the surrounding circumstances, the commercial realities of the market
    place and the economic impact of an assignment on the landlord. This court
    endorsed Donnelly J.s approach: see (1988), 52 D.L.R. (4th) 767.

[22]

The appellant attempts to distinguish this case
    from
Starr
on the
    basis that the tenant in
Starr
was required to be in compliance with the terms of the lease as a
    precondition to assignment. However, Donnelly J. considered the covenant to
    repair as one factor, not as the foundation of his analysis. He concluded, at
    p. 591, the landlord suffers substantial economic loss if the property is not
    repaired. This detriment is legitimately recognized as a reasonable objection
    to the assignment.

[23]

In my view, the analysis in
Starr
is apposite. The appellants
    refusal to remove the patio has imposed economic loss on the respondent. The
    appellant acknowledged that the patio was contrary to the lease through its
    many unfulfilled promises to remove it. However, the appellants assurances
    that the third purchaser could use the patio shows that it never intended to
    rectify its breach. As the trial judge found, the respondents refusal was
    motivated by a desire to avoid perpetuat[ing] the patio problem.

[24]

I agree. The respondents insistence that the
    appellant rectify its breach falls squarely within the wider field of reasonableness
    identified in
Welbow
and
Starr
. The
    respondents desire to compel the appellant to restore the integrity of the
    leased premises is entirely consistent with the parties bargain as expressed
    by the lease. In any event, reasonableness is a question of fact, dependent on
    the surrounding circumstances, the commercial realities of the marketplace, and
    the economic impact of the assignment on the respondent. I see no basis to
    disturb the trial judges analysis and conclusion on this issue.

(3)

The Reasonable Purpose Versus the Collateral Purpose
    Issue

[25]

The trial judge found that the respondents
    second basis for refusing to consent to the assignment was not reasonable. She
    held that, in requiring that the appellant discontinue its other lawsuit, the respondent
    was trying to use its greater bargaining power to secure a dismissal of the
    action in which the plaintiff may be asserting legitimate rights.
    Consequently, this condition was an unreasonable collateral purpose because it
    was not connected to the request to assign the lease. Nevertheless, the trial
    judge found that the respondents first basis to refuse assignment was
    sufficient to meet the reasonableness test: Put another way, a reasonable
    basis to refuse consent saves a co-existing tainted purpose.

[26]

The appellant argues that the trial judge erred
    in her analysis because the collateral purpose was grounded in and synonymous
    with the reasonable condition. It relies on
No. 1 West India Quay (Residential)
    Ltd. v. East Tower Apartments Ltd.
, [2018] EWCA Civ 250, to submit that
    the collateral purpose infects the reasonable condition because the overarching
    reason for refusal was a collateral benefit: the discontinuation of the
    parallel lawsuit. The respondent disagrees with this submission on the basis
    that the collateral purpose and the reasonable condition are independent of
    each other.

[27]

I do not agree entirely with either partys
    submission.

[28]

I agree with the appellant that there is a
    linkage between the respondents reasonable condition (remove the patio) and
    the improper collateral purpose (discontinue the parallel lawsuit). However, I
    do not think that the collateral purpose infects the reasonable condition.
    The respondents principal focus throughout its dispute with the appellant was
    the removal of the improper patio. It said this every time the appellant found
    a proposed buyer and sought the respondents consent to assign its lease. The
    respondent had every right to seek the removal of the patio as a condition of
    agreeing to the assignment of the lease to a potential buyer. As the trial
    judge said:

In this case, there is sufficient basis on
    which a reasonable person could have withheld consent  the failure to remove
    the patio. Moreover, this is not a case where the defendant refused consent based
    only on an improper consideration. The failure to remove the patio was, in
    fact, one of the reasons the defendant withheld consent.

[29]

However, in a passage relied on by the
    respondent, the trial judge went on to say, seemingly in a conclusory way: Put
    another way, a reasonable basis to refuse consent saves a co-existing tainted
    purpose.

[30]

In my view, this is too broad a proposition. I
    think that when two or more refusal factors are in play, it is necessary to
    consider the origins and weights of the competing factors. In effect, the trial
    judge did this in her reasons, comprehensively and well. Accordingly, I would
    uphold her decision. Viewed in its entirety, a reasonable person could have
    withheld consent on the basis that the appellant had not properly restored the
    property to the condition required by the lease, as it had promised to do.

E.

disposition

[31]

I would dismiss the appeal. The respondent is
    entitled to its costs of the appeal fixed at $7,500 inclusive of disbursements
    and HST.

Released: April 4, 2022 K.F.

J.C.
    MacPherson J.A.

I
    agree. K. Feldman J.A.

I
    agree. P. Lauwers J.A.


