2013 QCCQ 15864, 2013 QCCQ 15864

135967 Canada inc. c. Chabad Lubavitch Youth Organization-Division Chabad 2013 QCCQ 15864 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL No: 500-32-131541-114 DATE: December 23, 2013 ______________________________________________________________________ BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ 135967 CANADA INC. 3495 Avenue de Vendôme, Montreal, Quebec, H4A 3M6 v.

CHABAD LUBAVITCH YOUTH ORGANIZATION-DIVISION CHABAD 6687 Transe Island, Montreal, Quebec, H3W 3B8 ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] The Plaintiff, 135957 Canada Inc. (“Archilab”), lessor of premises known as 5690 Monkland, sues its former tenant, Chabad Lubavitch Youth Organization, (“Chabad”), a charity, for a balance of $ 294.18 that Archilab paid to Hydro Solution for the rental of a water heater installed in the premises. [ 2 ] Archilab also sues personally the representatives of Chabad, Rabbi Yisroel Bernath, who is in charge of the NDG branch of the organisation and Mr Eliyaho Gabay, the person responsible for administrative matters for the organization at the head-office level. [ 3 ] Archilab takes the position that Chabad must assume these arrears as part of the operating expenses, according to the lease (P-1). [ 4 ] Chabad pleads that it does not have this responsibility under the lease.

FACTS [ 5 ] The premises were leased to Chabad for a term of one year beginning November 1, 2010. [ 6 ] Hydro Solution's bill is addressed to Moshe Peled and dated November 3, 2011. Mr Peled is the principal of Archilab. He received the bill after Chabad had informed him that it would not be exercising its right to renew the lease and after the expiry of the term of the lease. [ 7 ] Chabad’s representatives testified that they had no knowledge of the fact that the water heater was leased from Hydro Solutions.

When Chabad took possession pursuant to its lease, it assumed responsibility for the electricity, provided by Hydro Québec. The statements of account (D-6) show that the organization receives the Hydro Quebec bill at its address on Trans Island. The statements produced from August through November 2011 show that the bills were paid. [ 8 ] When Mr Peled received the bill from Hydro Solutions, he communicated with Rabbi Bernath. Mr Peled testifies that Rabbi Bernath assured him it would be paid.

The Rabbi told the court, however, that he is not involved in financial matters of Chabad, that he simply referred the matter to the accountant, Mr Gaby, without making any commitment to Mr Peled about payment. [ 9 ] Mr Peled looked into the matter and eventually adopted the position that the amount was not payable by Chabad. [ 10 ] A rather singular fact about the case is that the premises were leased, a year earlier to a friend of, and collaborator with Chabad, Ms Germaine Cohen.

Her lease (P-6) for a one-year term from November 1, 2009, is identical to the one signed in 2010 between Chabad and Archilab, except that the tenant is described as follows: Ms Germaine Cohen, residing on [address]

and currently operating under the name of: Chabad Community Service Hereinafter referred to as the “TENANT” [ 11 ] The description is completed with the following text defining her role and responsibility: Ms. Germaine Cohen (the Tenant) will be personally responsible for the performance of all obligations and guarantee all payments of the Tenant under this Lease. [ 12 ] Rabbi Bernath and Mr Gabay were somewhat mystified to learn, apparently for the first time at the hearing, of the written lease with Ms Cohen.

Mr Gabay had never given her the right to use the Chabad name in her dealings and was unaware that she had leased the space in 2009 under a name using the word “Chabad”. [ 13 ] Under the heading describing the premises, Ms Cohen's lease mentions that the premises are leased: to the Tenant and the Tenant hereby accept [sic] from the Landlord those certain premises bearing civic number […] , in Montreal, Quebec, with front terrace space, to operate business as a “Spiritual Centre […] [ 14 ] While the expression spiritual centre would not be entirely inaccurate as a description of Chabad, as there is a religious devotion at the centre of its activities, the more proper description appears in the lease eventually entered into with the organization: “to operate business as a “Chabad Lubavitch Youth Organization, Division Chabad NDG”. [ 15 ] Rabbi Bernath explained that, prior to entering into its own lease with Archilab, the organisation had been using various premises on an ad hoc basis for its functions. [ 16 ] Ms Cohen operates a catering business, renting the space above the premises in question here, and provided services to Chabad for some of its functions.

She made the premises (that Chabad later rented in its own right) available for its functions a few times a week. [ 17 ] It was she who got Chabad interested in leasing the space on a full-time basis. [ 18 ] She did not give them any information about the water heater. [ 19 ] Mr Peled is aware that Hydro-Québec used to rent water heaters under the name Hydro Solutions but that the business was, at one point, spun-off to operate as a separate business entity. When that occurred, the billing was no longer included in the Hydro-Québec bill.

Mr Peled thinks of the Hydro Solution account as being a utility, perhaps because of the fact that the rental of hot water tanks was, formerly, part of the service that Hydro Québec offered. [ 20 ] It is interesting to note that the statement of account which Archilab acquitted, somewhat reluctantly after receiving a letter of demand, included a current charge of $ 18.88 plus taxes, for the two-month period of August 27, 2011 to October 26, 2011. It also included $ 272.67, the balance owing on September 2, 2011. This amount is equal to approximately 14 two-month periods, or 28 months.

That would indicate that the Hydro Solutions bill had been neglected since before the lease with Ms Cohen. It is possible, then that Ms Cohen, when she took over the premises, was equally unaware that the water heater was rented and that the issue was not discussed with the lessor. [ 21 ] The letter of demand (P-6 en liasse), is addressed to 135957 Canada Inc. c/o Mr Peled, while the bill refers to him personally. In neither document is there any reference to Ms Cohen, Chabad nor to the previous tenant. ANALYSIS [ 22 ] The lease sets out several clauses that have a bearing on the issue.

Mr Peled told the Court that he considers the lease as a "net-net" lease. The rental is not expressed as a net-net amount; nor is it expressly a gross rent. The clause reads as follows:

Section II. RENTAL 2.01 As rental for the Premises, the Tenant covenants and agrees to pay the Landlord a global sum of Twenty Four Thousand Dollars ($24,000.00), plus all applicable sales taxes. Said global sum includes business tax levied on the Property.

Said global sum shall be payable as follows, namely:- For the period of twelve months of this Lease, by twelve (12) equal monthly instalments of TWO THOUSAND DOLLARS ($2,000.00) (Consisting of rent and business tax levied) Plus all applicable sales taxes, each of the twelve sums paid in advance, upon the first day of each month, the first of which to become due and exigible upon signing this contract. [ 23 ] There is a specific tax clause in

Section III making it quite clear that the tenant is responsible for any water tax, new tax or

any tax that the lessor might become liable to pay if the mode of collecting taxes changes. [ 24 ] As far as operating expenses are concerned, the only item mentioned is snow removal:

SECTION IV OPERATING EXPENSES 4.01 The Tenant agrees to take care of her own snow removal, including in the back stairway and parking area at her own expenses and negotiate her own contract. [ 25 ] A specific obligation about changes to the ventilation system is included under a more general clause:

SECTION V. USE OF PREMISES 5.01 The Tenant shall use the Premises identified as […] , in Montreal, together with the storage area on the back (under the balcony), and one exterior parking space for the purpose of operating a Youth Organization Center. No cooking or deep frying is permitted in this space. It is of the essence of the present Lease that if any changes are required for the ventilation system in the normal operation of the business, it shall be at the Tenant’s exclusive costs. [ 26 ] It is also worth quoting in extenso the clause by which specific services are assigned to the tenant:

SECTION VII. SERVICES 7.01 (

a) Cleaning: The Tenant shall keep at the Tenant’s own cost and expenses, the Premises cleaned during the term of the Lease in accordance with normal standards. (

b) Heating: The Tenant shall keep at the Tenant’s own cost and expenses, the premises heated adequately during the winter months when heat may be required. (

c) Utilities: The Tenant shall be responsible at the Tenant’s own cost and expenses for electricity and all other utilities consumed within the Premises, according to the Tenant’s meter. (

d) Lighting: Tenant shall be responsible at the Tenant’s own cost and expenses for the replacement of lamps, bulbs, starters and ballasts. [ 27 ] On a reading of the lease, then, it cannot be said that the lease, as a rule, puts all operational costs on the tenant. Rather, the lease enumerates the costs and expenses that the tenant is to assume. The lease was drafted by the lessor, as a standard-form contract, and the clauses were not negotiated. Given the method of drafting adopted, that of mentioning specifically the items to be paid by the tenant, it follows that other expenses of operating the premises are assumed by the lessor. [ 28 ] Looking specifically at utilities, item 7.01 (

c) above, do the words “electricity and other utilities consumed within the premises” include the rental of the water heater? [ 29 ] In the Court’s view they do not.

A prospective tenant viewing the premises would consider the water heater to be a piece of equipment provided, as part of the premises, by the lessor. [ 30 ] Unless the parties stipulated that the capital and maintenance cost of the equipment was to accrue to the tenant, it would be fair for the tenant to assume that it was part of the premises leased to him, as part of the global rent, as is the case with other equipment and fixtures, such as lights, the heating system and the like. [ 31 ] When the lease departs from this assumption, it does so expressly, such as the requirement in (

d) that the tenant pay for lamps, bulbs, starters and ballasts, and the specific stipulation about changes to the ventilation system. [ 32 ] In the heating clause, (b), the cost of heating as a utility is placed on the tenant, but not the capital cost and maintenance of the heating equipment. [ 33 ] If an expense is not mentioned, it is assumed by the lessor. When it is assumed by the tenant, it is mentioned. This is not a net-net lease; it is a lease that assigns all taxes and only certain costs to the tenant in addition to the global rent.

The Hydro Solutions expense is not part of what the lease lists as utilities, it is a piece of equipment that is part of the leased premises as seen and accepted “in their present condition” pursuant to clause 2.05. [ 34 ] In finding for the Defendant, the Court wishes to add that this question of the Hydro Solutions costs was not specifically addressed by the parties at the time the lease was agreed to. It fell through the cracks, so to speak.

It is understandable that a conflict arose and that both parties thought that the lease supported their respective positions. [ 35 ] The directing mind of Archilab, Mr Peled, brought the matter to the Small-Claims Division in good faith. Each party, despite the obvious difference of opinion, showed respect for the other and for the Court. There will therefore be no award as to costs, as the Court is confident that the parties will show magnanimity in any future dealings they may have one with the other.

FOR THESE REASONS, THE COURT: DISMISSES the action of 135967 Canada Inc.; WITHOUT COSTS. __________________________________ DAVID L. CAMERON, J.C.Q. Date of hearing: December 9, 2013