2017 QCCA 937, 2017 QCCA 937

Michael Rossy Ltd. c. 9190-9309 Québec inc. 2017 QCCA 937 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No: 500-09-026790-170 (500-17-098036-174) MINUTES OF THE HEARING DATE: June 8, 2017 THE HONOURABLE MARK SCHRAGER, J.A. APPLICANT COUNSEL MICHAEL ROSSY LTD. Mtre YVES ROBILLARD (Miller Thomson SENCRL / LLP) RESPONDENT COUNSEL 9190-9309 QUÉBEC INC. M tre marc perron (LPLV avocats, s.e.n.c.) DESCRIPTION: Application for leave to appeal from a judgment rendered in the course of the proceeding on April 25, 2017 by the Honourable Johanne Mainville of the Superior Court, District of Montreal Clerk: Adam Scott Courtroom: RC.18

HEARING Continuation of the hearing of June 6, 2017. 9:36 Commencement of the hearing. BY THE JUDGE: Jugdment – see page 3. Conclusion of the hearing. (

s) Adam Scott Clerk BY THE JUDGE JUDGMENT [ 1 ] Applicant seeks leave to appeal the judgment of the Superior Court, District of Montreal (the Honourable Johanne Mainville), rendered from the bench on April 25, 2017. [ 2 ] The judgment consists of an interlocutory injunction enjoining Applicant to occupy and use for the purposes of carrying on its business a certain retail store leased from Respondent in the latter’s shopping center, in Victoriaville. [ 3 ] Applicant also seeks a stay of the interlocutory injunction pending appeal pursuant to

Article 514 C.C.P. [ 4 ] Basically, the issues raised pertain to the obligation of a commercial tenant to remain in occupation of premises and to operate its business therein notwithstanding the absence of a contractual obligation, expressed or implied, to such effect. Is there a basis for such obligation in

Article 1856 C.C.Q. which prohibits the parties from changing the “form or destination” of the leased premises? [ 5 ] Given the interest of the question and that the judgment requires Applicant to keep the store in operation despite the uncontradicted evidence that such operations are conducted at a loss, I consider that the conditions of

Article 31 C.C.P. are met and so I will grant leave to appeal. [ 6 ] In order to grant the stay order, I must be convinced that the judgment suffers from an apparent weakness resulting in the risk of serious prejudice for the parties seeking the stay. If required, the balance of inconvenience should be examined to determine which party is most negatively affected by the proposed stay. [1] [ 7 ] A brief review of the facts is required.

Respondent and Applicant are in their respective positions landlord and tenant in virtue of a two page letter of intent signed in 2008 and the occupation thereafter by Applicant of the premises in question in consideration of the payment of rent. [ 8 ] The premises consist of 26,254 ft 2 (after measurement). The letter of intent stipulates 25,000 ft 2 . The total leasable area of the shopping center is 375,788 ft 2 so that Applicant’s store represents 7.5% (or 6.6% on the basis of the lower figure in the letter of intent). In terms of size, Applicant appears somewhere in the middle of the range.

There are tenants in 1,000 ft 2 stores but the obvious anchors, Canadian Tire and the Metro supermarket occupy 96,694 ft 2 and 44,266 ft 2 respectively. There is already one vacant store in the shopping center representing approximately 5% of the total square footage. [ 9 ] The two-page letter of intent comprises the basic business terms only. The initial 10-year term expires in August 2018. The document contains no positive obligation to occupy and continuously use the premises.

Moreover, there is no stipulation of the type of use to be made therein, it being perhaps an underlying presumption that the premises would be one of the stores in Applicant’s retail chain. [ 10 ] Interestingly, there is a provision for reduction of rent should either Canadian Tire or Metro “vacate or cease to operate their store” and this until “a new anchor tenant replaces either one of these Tenant”(sic). [ 11 ] The uncontradicted evidence filed by Applicant indicates that the store is a losing proposition and more specifically for the twelve-month period ending January 2017, Applicant lost $233,241 from such operation.

This is why it proposes to close the store while

continuing to pay the rent. [ 12 ] The judge found the existence of an apparent right of Respondent to oblige Applicant to continue operating the store despite the absence of any such contractual obligation stating the following: [14] … s’appuyant sur l’article 1856 C.C.Q. les tribunaux ont reconnu à maintes reprises que « l’inoccupation prolongée d’un espace peut constituer un changement de destination ».

The judge cites no case law in support of such general assertion and the examination of the reported cases indicates that most, if not all the factual circumstances examined included a lease where the obligation to continue operations was at the very least implied, if not explicitly provided. [2] In the few cases where vacating premises was held to be a change of destination, the tenant in question was major or anchor, [3] often a supermarket. [ 13 ] The clause quoted above (in addition to the size of the respective premises) indicates that it is the Metro supermarket and the Canadian Tire stores which were considered by the parties as the anchor tenants of the shopping center. [ 14 ] The foregoing brief survey leads me to conclude that there is not, as the judge found, such broad based acceptance in the decided cases of the proposition that vacating premises in and of itself constitutes a change in the destination of such premises and thus, a breach of

Article 1856 C.C.Q. (or its predecessor in the Civil Code of Lower Canada –

Article 1618 CCLC ). Professor Jobin distinguishes the obligation to use premises from their form or destination. [4] [ 15 ] In view of the foregoing, I consider the judge’s assessment of the existence of a clear right giving rise to an injunction, to be flawed. [ 16 ] It could be said in this case that given the obligation of Applicant under the letter of intent to pay a percentage of gross sales as additional rent, there is an obligation, implicit in the letter of intent, for Applicant to continue to operate its store in the leased premises.

This is not mentioned by the judge and could be the basis of the recognition of a right albeit that as mentioned below the volume of sales generated in the premises has been too low to trigger the payment of percentage rent. [ 17 ] Thus, I would conclude not that the right was inexistent but it is, at best, weak. [ 18 ] As such, the prejudice potentially suffered by the parties by the granting or refusal of the injunction and the balance of inconvenience requires examination. [ 19 ] Considering the prejudice, the judge stated: [17] Dans sa déclaration assermentée du 10 avril 2017, qui n’a pas été contredite, M.

Bergeron dresse une liste des conséquences prévisibles pour 9190 advenant le départ de Rossy du centre commercial, à savoir :

a) que Rossy occupe une superficie significative et joue un rôle important dans l’image du Centre commercial;

b) que la configuration de la devanture du local et sa superficie rendent le local très difficile à louer;

c) qu’elle ne connaît aucun locataire potentiel disposé à louer cet espace qui nécessitera de nombreuses démarches afin de le relouer; et

d) qu’un délai minimal d’une année sera nécessaire pour ce faire. [ 20 ] The assertions of the Respondent’s representative are vague and in essence opinions based on conjecture. Only the square footage and stature of Applicant are objective but these considerations do not favour Respondent – i.e. the 7% of total square footage occupied by Applicant was not considered by the parties to make Applicant an “anchor tenant” given the clause in the letter of intent cited above.

Also, the threshold of gross sales to trigger the obligation to pay percentage rent has not been met so there is no loss suffered by Respondent on that account and Applicant intends to continue to pay rent. [ 21 ] Applicant’s prejudice is clearly established on the other hand.

It has lost approximately a quarter of a million dollars from the operation of the store in the twelve-month period ending in January 2017. [ 22 ] By the same reasoning, the balance of inconvenience favours Applicant’s situation. [ 23 ] Based on the foregoing and at this early stage of the appeal, I consider that the judgment suffers from an apparent weakness and that Applicant suffers a prejudice of being obliged to continue to operate a losing proposition. Accordingly, I will stay the interlocutory injunction pending appeal.

FOR ALL OF THE ABOVE REASONS, THE UNDERSIGNED: [ 24 ] GRANTS the motion for leave to appeal and GRANTS leave to appeal the judgment of the Superior Court. [ 25 ] STAYS the judgment and order of interlocutory injunction until disposition of the appeal hearing or further order of the bench of this Court seized of the matter; [ 26 ] FIXES the hearing for September 15, 2017, in salle Lamer for a period of 1 h 30 (45 minutes each). [ 27 ] ORDERS that the appeal will proceed by way of memorandum, 20 pages for Appellant to be filed on or before July 7, 2017 and 20 pages for Respondent to be filed on or before August 4, 2017. [ 28 ] COSTS to follow.

MARK SCHRAGER, J.A.