2011 QCCQ 8188, 2011 QCCQ 8188

Falkam Realties Inc. c. 9020-6806 Québec inc. 2011 QCCQ 8188 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-22-172968-102 DATE: July 15, 2011 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ FALKAM REALTIES INC.

Plaintiff vs. 9020-6806 QUEBEC INC. -and- 9146-4933 QUEBEC INC. -and- SAID BENSISSAID Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ PARTIES AND PROCEEDINGS [ 1 ] In proceedings issued July 27, 2010 The Plaintiff, Falkam Realties Inc., the lessor, sought the resiliation of a lease and sublease and condemnation to payment of arrears of base rent as increased by the Consumer Price Index (“CPI”) and of additional rent resulting from increases to city taxes.

The allegations, which relate to the period from July 1, 2007 to June 30, 2010 compute the total base rent and additional rent as 238,357.06 and admit payments totalling $215,294.57 for a net amount due of $23,062.49. [ 2 ] A claim for six months of accelerated rent as a penalty upon resiliation adds another $33,727 for a total of $56,959.75. [ 3 ] The monetary claim is made solidarily with respect to the lessee, 9020-6806 Quebec Inc. ("9020”), and the sublesee 9146- 4933 Quebec Inc. (“9146”) [ 4 ] The Plaintiff amended its proceedings, at trial, to add as an additional solidary Defendant Said Bensissaid, one of the principals of 9146, alleging a suretyship.

The amended proceeding also increased the monetary claim for the balance of base rent and additional rent to $62,698.14 by reworking the calculations to include accruals and payments from July 1, 2005.

The total monetary claim, inclusive of the penalty on resiliation was over $96,000. [ 5 ] The Defendants initially objected to the amendments, which would have led to the transfer of the case to the superior Court, on the grounds that the additional amounts claimed are clearly prescribed. [ 6 ] These procedural and jurisdictional complications were avoided by the Plaintiff’s removal of the claim for resiliation and the penalty, resulting in a total claim of $62,698.14.

A further amendment was made January 17, 2011 based on the computation of a balance of $64,850.60 plus $170.18 relation to a cost incurred for moving an electrical switch from the basement to the kitchen area. [ 7 ] The question of prescription, having a factual component and involving

interpretation of the lease, was best dealt with on the merits than on the contestation of a motion to amend. [ 8 ] Finally, the additional Defendant accepted to proceed on the amended action, waiving the benefit of time to contest that would otherwise have applied. Mr Bensissaid was present at the trial and testified in the Defendants’ case. [ 9 ] In addition to the defence of prescription raised for the amounts added by amendment, the Defendants, on the basis of their

calculations of the PCI and of the tenant’s proportionate share of city taxes, claimed overpayments totalling $9,199.92 for the initial period, and, under reserve of their defence of prescription, a total of $40,710.38 taking into account the period beginning July 1, 2005. [ 10 ] The cross-demand also seeks confirmation of an alleged right of access to the basement area of the building where the tenant’s air-conditioning equipment is installed. This relates to a difficulty of access that arose during an incident when the lessor changed the locks. ISSUES [ 11 ] The Court must answer the following questions: 1.

What is the correct application of the lease to establish amounts payable by the lessee because of property taxes? 2. What is the correct application of CPI to increase the Minimum Annual Rental? 3. Are the amounts that accrued prior to July 27, 2007, or some part thereof prescribed, or have such amounts been acquitted by imputations of payment? 4. What are the amounts still owing? 5. Is Mr Bensissaid responsible as a surety? 6. Finally, what are the rights of the lessee with respect to access to the basement area where the air-conditioning equipment is located?

FACTUAL ANALYSIS The lease and the sublease [ 12 ] The premises, on the ground floor except for a small office in a basement area, are part of a mixed retail and residential building fronting on Notre-Dame Street in old Montreal. [ 13 ] The tenant 9020, the principal of which was Javaher Samani Alawijeh, signed a new lease (P-1) with Falkam on January 23, 2003, with effect from an earlier date, as the term of the lease is July 31, 2002 to August 1, 2002.

The restaurant operated by Mrs Alawijeh was already in the premises for some time under a previous lease. [ 14 ] In 2004, the restaurant business was continued by 9146, a company of which Mrs Alawijeh’s daughter Azadeh Assadollahi is the shareholder and director. Her husband, the Defendant Said Bensissaid was, at the time, and still is involved, providing administrative assistance. The letter-type agreement of sublease, (P-2, and also attached to P-1, as produced) mentions at paragraph 14 that: 14. Landlord’s consent is expressly conditional upon the acceptance of Mr.

Said Bensissaid undertaking to be personally responsible without any benefit of waiver for unpaid rent while the sub-tenant occupies the space.

This obligation terminates when the sub-tenant vacates the space. [ 15 ] The copy of this document produced as P-2 does not contain Mr Bensissaid’s signature, Mrs Assadollahi having signed on the signature line intended for the representative of 9146-4933 Quebec Inc. but the copy attached to P-1 produced at the hearing bears his signature after an added text which reads: READ AND ACCEPTED, Montreal, this 26 day of October, 2004 SAID BENSISSAID Per: ____________________ [Mr Bensissaid’s signature appears on the signature line] [ 16 ] Mr Bensissaid also signed an addendum to the agreement dated August 26, 2008 (also annexed as part of P-1), which he negotiated on behalf of 9146-4933 Quebec Inc. for an indemnity in case of early termination of the sublease because of a sale of the building that Falkam was contemplating.

The clause reads: In consideration for the early termination of the Lease, the Lessee will receive payment of $125,000.00 (excluding G.S.T. and Q.S.T.) and the Sub-Lessee will have past rental arrears prior to January 1, 2008 up to the maximum amount of $25,000.00 abated and terminated. [ 17 ] As it turned out, the sale and the termination did not take place. [ 18 ] The sublease contains a clause by which the sublessee assumes, in favour of the lessor, all the obligations of the lease during the term of the sublease. The lessor remains fully responsible for the obligations of the lease.

The modalities of the lease [ 19 ] The lease is a 33-page standard-form shopping-centre lease with several schedules. All pages, all corrections and some

crossed-out texts are initialled by both parties. [ 20 ] The essential commercial terms of the lease are set out in a beginning

section called “PREAMBLE-BASIC LEASE PROVISIONS”, continuing sections numbered I to XIII. [ 21 ] In

section V, the base rent, called a “minimum rent” is a rate of $22.41 per square foot in years one to two and $ 25.67 in years three to ten. [ 22 ] Additional increases based on the CPI are foreseen: It is agreed and understood that the Minimum Annual Rental shall be increased yearly by the percentage amount that corresponds to the increase in the C.P.I. commencing ONLY from year three (3) to year ten (ten). It is agreed and understood that “Percentage Rent" is not applicable in the Lease and consequently, wherever the expression "Percentage Rent" appears in the Lease, it shall be deemed to have been deleted. [ 23 ] The modalities relating to taxes are found in a

section concerning operating expenses as follows:

SECTION VI – OPERATING EXPENSES The tenant shall pay its share of the yearly percentage increase in taxes, heating and insurance expense with the base year being 2002 . The tenant's base year 2002 shall be:

A) Taxes shall be based on $4.00 per square foot for the base year 2002 and adjusted every year.

B) Insurance shall be based on $0.10 per square foot for the base year 2002 and adjusted every year.

C) Heating shall be based on $2.00 per square foot for the base year 2002 and adjusted every year.

D) For greater clarity, the parties herein specify that the amounts mentioned in subparagraphs A, B, C, are already included in the rental amounts for the years 1 and 2 of the lease and the total amount of rent being $4015.00 [underlining and italics in original] [ 24 ] In the body of the lease at page 8, in

ARTICLE V – OPERATING EXPENSES, one reads: […] V.2 Taxes The Tenant covenants and agrees to pay to the Landlord its Proportionate Share of yearly increase in Taxes and the Surtax, subject in the case of the Surtax to

Article VI.5 of the Lease. The Tenant covenants and agrees to pay to the Landlord, or as the Landlord may direct, it's Proportionate Share of Taxes. The Landlord may estimate (and from time to time re-estimate) the amount of Tenant's Proportionate Share of Taxes in respect of a Lease Year, and the Tenant shall pay to the landlord, on account of its Proportionate Share of Taxes for such Lease Year, the amount as so estimated (or re-estimated) by Landlord in equal consecutive monthly instalments which shall be due and payable on the first day of each month. The amount stated in

Section VI of the

Preamble as the initial Proportionate Share of Taxes is Landlord's estimate of the amount payable by the Tenant pursuant to this

Article in respect of the first Lease Year, but may be changed by the Landlord in accordance with the provisions of this Article. Within a reasonable period following the end of each Lease Year, the Landlord shall give written notice to the Tenant of the actual amount of its Proportionate Share of Taxes for such Lease Year are less than the actual amount thereof as so notified to it, the deficiency shall be payable by the Tenant with the next monthly instalment of Minimum Rent.

If the amounts previously paid by the Tenant on account of its Proportionate Share of Taxes for such Lease Year exceed the actual amount thereof as so notified to the Tenant by the Landlord, the Landlord shall, at its option, reimburse the amount of such excess to the Tenant or credit the amount thereof to the payment of Minimum Rent or Additional Rent coming due hereunder. […] VI.5 Surtax VI.5.1 In lieu of charging Tenant a Proportionate Share of the Surtax as part of Operating Expenses, the Landlord may, at its option, charge the Tenant in any year a share of the Surtax which the Landlord, acting reasonably, allocates to the Leased Premises.

VI.5.2 Regardless of whether the Surtax is charged pursuant to

Article VI.5.1 or as part of Operating Expenses, at the Landlord's option the Tenant will either pay its share of the Surtax in the manner described in

Article V.2 or by the date or dates the Landlord must pay the Surtax to the taxing authority. [ 25 ] The term "Proportionate Share" is defined in the

definitions

section of the lease as follows: I.1

Definitions When used in this Lease or in any

schedule attached to this Lease, the following words or expressions have the meanings hereinafter set forth, unless the context requires otherwise: […] I.1.25 “Proportionate Share” means a fraction, which has as its numerator, the Gross Leasable Area of the Leased Premises, and as its denominator, the Gross Leasable Area of the Shopping Centre.

The parties’ application of the agreement [ 26 ] The Court heard the testimony of Falkam's president Ami Kaminski. Parts of this testimony, where the witness spoke of the context in which the agreement was drafted and in which he essentially gave his

interpretation of the agreement, were heard under reserve of an objection based on

article 2863 C.C.Q. [ 27 ] The negotiations took place in the context of a change to the way in which taxes are assessed on non-residential properties in the city of Montreal. Until 2002, there was a business surtax imposed on the owner in addition to the ordinary property tax and a business tax assessed against the tenant, based on the rental value. [ 28 ] In Montreal's 2003 budget, the business tax payable by tenants was abolished and the city brought in a new tax rate applicable to non-residential buildings in order to make up the lost revenue.

The city continued to charge tenants directly for what was essentially a water tax until the end of fiscal 2007. [ 29 ] The law [1] permitted landlords, in cases where an existing lease did not provide for it, to transfer the increased tax burden back to the tenant as additional rent. [ 30 ] In our case, at the time the lease was signed, January 23, 2003, the new law applied, but the parties did not know exactly what the financial implications would be.

Mr Kaminski explains that the way they dealt with the uncertainty was to arbitrarily agree on a base rate as the tenant's contribution to all taxes imposed on the landlord in 2002, the "base year", and, to maintain the same proportion between the total taxes assumed by the lessor and the

part changed to the tenant by increasing the $4.00 rate by the rate of increase to the total tax bills including property tax and school tax. [ 31 ] Mr Kaminski's

interpretation of the agreement, as implied in his testimony, is reflected in the manner in which Falkam calculates the total amount of additional rent based on

section VI

A) of the

preamble. For any given year, Falkam simply multiplies $4 times 2,150 sq.ft. = $8,600 x the percentage increase of the total taxes on the whole building as compared to the “base year” 2002. In 2008, for example, the taxes on the building are $48,289, representing a 112% increase over the figure for 2002, $22,767.

The base rate, $8,600 multiplied by the 112% increase equals $9,632, to which GST and PST are added for a claim of $10,872.20. [ 32 ] These calculations are detailed in exhibit P-4 (amended), with supporting tax invoices from Ville de Montréal and Conseil Scolaire de l'île de Montréal. [ 33 ] The rate of $4.00, as being included in the "rental amounts for year 1 and 2 of the lease" [2] in the minimum annual rent, is treated as a pre-established contractually-binding amount, so that the only “adjustment” applied is the increase to the taxes imposed on the building as a whole as a percentage of the total taxes that existed in 2002. [ 34 ] The Defendants propose a totally different calculation.

The calculation starts with the taxes actually imposed with respect to the non-residential areas of the building in a given year, irrespective of the increase with reference to 2002. The total is then pro-rated over the number of square feet occupied by the tenant as a proportion of the overall commercial part of the building, 16.38%. [ 35 ] In 2008, for example, the Defendants take $43,861 (D-1) for property taxes of which $29,202 relates to the non-residential portion. 16,38% of this, is $4,783.

Another calculation is done treating, generously, 65% of the school taxes as relating to the non- residential portions. 16.38% of this is taken as the Defendants’ portion of the school taxes. This amount, $1,204, is then added to the property tax amount to arrive at a total of $5,987, a significantly lower amount than the amount calculated by the Plaintiff, $9,632. [ 36 ] By this method, the Defendants figure a total for 2008-2010 of $16,795 while the Plaintiff arrives at $36, 258 for the three- year period.

Amounts paid [ 37 ] Plaintiff’s exhibit P-5 lists the payments received in the period to which the action initially related, from July 1, 2007. There are payments of $5,524 [3] in fairly regular intervals, approximately monthly, and, in some months an additional payment of $1,000. [ 38 ] As of January 28, 2008, the monthly amount increases to $5,662.21. From September 2008, the monthly payment increases to $5,812$. From June 16, 2008 there are also fairly regular payments of $800 or $500 each month until November.

Throughout 2009, the pattern changes, with payments in even numbers such as $500, $1500, $1800, $3000, rather than the exact payment of $5,812. [ 39 ] On February 1, 2009, there is a payment of $2,812 when added to other recent payments, this totals $5,812. From December 2009, the payments for more exact sums are made, usually $5,812 and $2,640 each month. The same pattern occurs in April 2009.

Imputation of monthly payments and C.P.I. increases. [ 40 ] As to imputation, the intention appears, in the case of payment such as $5,524 to be to pay the exact amount of the monthly rent on account of the minimal annual rental, but there are also amounts that are just round numbers. [ 41 ] Mr Kaminski testified that he delivered a letter dated December 5, 2006 (P-7) computing the adjustments required because of the CPI increases. [ 42 ] He also states that he spoke on many occasions to Mrs Assadollahi concerning the arrears.

He tolerated late payments and payments for less than the full amount of the rent from time to time. [ 43 ] Mr Bensissaid states that his understanding was that amounts he was remitting for the tenant paid the base rent plus GST and

QST, and that the other, less precise amounts were on account of taxes. Round numbers were given because he did not have a disclosure from the lessor of exact amounts. [ 44 ] There are no invoices or statements of account in evidence. [ 45 ] The addendum signed August 26, 2008 (P-6) shows that the parties contemplate up to $25,000 of arrears being compensated as an indemnity.

It was not necessarily clear at the time what amount of arrears existed, nor what the dates of origin of the amounts comprising the debt would have been. [ 46 ] In P-7, Mr Kaminski writes to the tenant concerning rental increases pursuant to the C.P.I. index.

He informs the tenant of the escalations for each year, from 2004 to 2006, claiming an "unpaid" adjustment for each year, totalling $4,595.65, tax included. [ 47 ] By asserting an unpaid adjustment for each year, the lessor does not show an imputation of payments received to the oldest debts first; implicitly, he treats them as payments of the base rent accruing monthly, with an unpaid “adjustment” being stated annually for that year.

Imputation of tax payments [ 48 ] There is no documentary basis for an imputation of the payments toward the tax obligation against the oldest debts first or for any other manner of imputation, because the lessor never disclosed his claim as a precise number.

The tenant was paying amounts, considering they were roughly adequate to acquit the tax obligation from time to time, but, prior to the imputation implicit in the Plaintiff's allegations in the proceedings, there was no express imputation of the amounts to arrears as such. [ 49 ] There is a dispute about the manner in which the taxes obligation should be calculated, and neither party clearly indicated, to the other, the applicable amount. [ 50 ] When the action is initially instituted on July 17, 2010, the tenant has been paying amounts that match exactly, the monthly payment defined in the

preamble,

section V – Minimum Rent, plus GST/QST. [ 51 ] When the monthly amount increases because of the C.P.I. increases, the tenant doesn't increase the monthly payments immediately, for example the statement, "P-5 amendée" [4] shows an increase on August 1, 2007, from $5,521.31 to $5,662.21 but the tenant's payments increase from $5,524 to $5,662.21 only in January 2008. [ 52 ] This failure to follow the rent increase punctually causes arrears to be generated. The same pattern existed in December 2006, when the landlord wrote P-7, accruing an "unpaid adjustment" for each of the three previous lease years.

Access to the basement [ 53 ] After the institution of proceedings, the lessor changed the lock to the basement area where the switch for the exhaust system for the lessee’s kitchen and the compressors for the air-cooling system are located. [ 54 ] Prior to the change of locks, the lessee had an unfettered access to these areas.

Access was needed to the switch on a daily basis and to the compressors from time to time in the summer months when they were prone to breakdowns. [ 55 ] The change of locks provoked a crisis, which led to a motion in practice Court for a safeguard order. [ 56 ] The lessor moved the switch to the kitchen area resolving that part of the problem.

The cost, $170.18 is included in the amended claim. [ 57 ] Access to the basement to service the air-conditioning equipment has not been an issue since the safeguard order was granted, ordering the lessor to give access to the basement only as needed. [ 58 ] Mr Kaminski operates his business in the same building and can be contacted by phone. [ 59 ] In the circumstances where access to the basement was an accessory to the lease, and this access has been substituted, for the purposes of the switch, by relocating it, the cost should accrue to the lessor, and this part of the claim is therefore unfounded.

ANALYSIS 1. City Taxes [ 60 ]

Section VI A and D of the

preamble establishes the principle that, in the first two years of the lease, the operating expenses, including taxes, are already built into the rent of $4,015, i.e. the minimum yearly rent, expressed as a monthly amount in

section V.

The amount that can be charged as Operating Expenses is only the yearly percentage increase in taxes, because a base amount is already part of the yearly minimum rent. [ 61 ] To compute the increase, " taxes shall be based on $4.00 per square foot for the base year 2002 and adjusted every year." [ 62 ] The lessor’s method of adjustment deals only with the increase, making a simple calculation of the total tax charged on the building on a given year, deriving a percentage increase over the total tax bill for 2002, and applying this percentage to the amount equal to $4.00 multiplied by the number of square feet ($4.00 x 2,150 = $8,600).

Thus, the increases apply proportionately to the lessee’s

premises. [ 63 ] The rates of increase relate not only mathematically, but factually to the increases in overall taxes on the building but the base amount is an arbitrary number stipulated by the parties as applicable in 2002, and already included in the rent. [ 64 ] The Defendant’s approach, entirely different, is to analyse the tax bills with a view to computing the amount of tax associated with the commercial spaces and to apply these amounts proportionately to the tenant’s space, irrespective of the $4.00 base rate. [ 65 ] The Defendants are not calculating a percentage increase; they are dissecting the tax bill to apportion an amount to their floor space.

But, the city attributes a percentage of the tax to each rental unit, in the case of 410 St-Jacques, 25.688%, based on the actual rental value of the space as a function of the whole, not according to a proportion of the total area. The Defendants set aside this approach and apply the contractual notion of proportionate share, based on the ratio of their space to the total space, irrespective of proportionate value. [ 66 ] The difficulty of

interpretation in the present case results, at least in part, from the text in V.2 (p.8) relating to the estimate of proportional share and the correction of the estimate. The Defendants assert that if those clauses are read together with the

preamble, then the arbitrary $4.00 should be recalculated in light of the actual assessment from year to year. [ 67 ] The city’s current mode of taxation now includes the equivalent revenue from the business tax that used to be charged directly to the tenant, based on rental value. The city's assessment of the tenant’s proportionate share would not be based of a ratio of square footage, it would depend on the relative value of the tenant’s space to the entire commercial space.

In other words, it would be an apportionment based on the relative rental values of the various spaces, rather than their relative sizes. [ 68 ] The Defendants treat the $4.00 per square foot rate as an estimate, which ought to be re-determined based on analysis of the tax bills, based on values, rather than as an agreed-upon amount. [ 69 ] But, in the calculation of their proportionate share, they do not use the city's allocation of the total relating to their space, (25.688% in 2008) referred to as the "pourcentages constitutifs" in exhibit D-2, the value attributable to their space, preferring an allocation based on the number of square feet, which is much lower: 16.38%. [ 70 ] The Defendant’s approach is to ignore the agreed upon $4.00 rate applied by square foot, preferring the city's assessment while adhering to the apportionment by square footage of its share, ignoring the city's value-based apportionment. [ 71 ] The Plaintiff’s approach, on the other hand, adheres to the stipulation of the

preamble. [ 72 ] The Defendants argue that the definition of "Proportionate Share" and the method of calculation expressed permit revising the $4.00 rate as something that is only established provisionally. [ 73 ] As drafted, "Taxes shall be based on $4.00 per square foot" , the $4.00 base rate is not an estimate, it is an agreed-upon amount serving as a base rate from the application of the "yearly percentage increase". [ 74 ] The option is given to the landlord in

Article V to estimate and re-estimate the Tenant's proportionate share of taxes in advance, subject to change if the actual taxes assessed and paid are more or less. Given the

preamble, however, this does not permit setting aside the initial $4.00 rate. [ 75 ] The landlord's notion of an adjustment – a single calculation of the escalation of the tax bill year-to-year – is a simple and reasonable application of the

preamble. The tenant's approach, to apply the city's assessment in part, but not completely, falling back on the lease when convenient, is not a correct application of the lease. [ 76 ] This case is different, on the facts, from the case of Lavigueur c. Gauthier & Germain inc. [5] [ 77 ] In that case, a manuscript modification to the standard form, by the addition of the word « estimé » , implied that the stipulated amount was only an estimate that could be corrected in light of the real amounts, as the tenant had insisted, during the negotiations, hence the manuscript change. [ 78 ] Our facts are the opposite: the language of the

preamble, "shall be based", specific to this lease, is imperative and not an estimate. The adjustment is of an increase in expense, if any, above that amount in the subsequent years. [ 79 ] The Court concludes, therefore, that the landlord's application of the lease with respect to taxes is correct. 2. The C.P.I. increases [ 80 ] The Defendants accept, subject to its other defences, the Plaintiff's calculation of the C.P.I. increases as set out in P-3, except for the period January 1, 2005 to June 30, 2005, a difference of $801.32.

Given the Court's conclusions on prescription, it is not necessary to resolve that issue. 3. Imputation and prescription [ 81 ] On the key issue of prescription, the imputation of payments received is the determining factor. Depending on which obligations under the lease were paid, and which were unpaid, amounts will either be prescribed or still owing, depending on their date of accrual in relation to the interruption of prescription. The critical date is July 17, 2010, the date of institution of the action.

Amounts that have accrued prior to July 17, 2007 and that are still unpaid on the date of institution of the action are prescribed, unless prescription has been otherwise interrupted.

[ 82 ] The action, as initially taken, simply ignores the situation prior to July 1, 2007. From that date, it computes all base rent, C.P.I. increases and additional rent based on increases in city taxes. From the total it subtracts the payment received since July 1, 2007, leaving a balance claimed. [ 83 ] The Plaintiff treated whatever had accrued prior to that date as not being part of the claim. [ 84 ] The amendment made to add prior claims is dated January 8, 2011.

This is an interval of more than three years. [ 85 ] The provisions of the Civil Code of Quebec dealing with imputation that are relevant to our analysis are: 1569. When making payment, a debtor who owes several debts has the right to impute payment to the debt he intends to pay. He may not, however, without the consent of the creditor, impute payment to a debt not yet due in preference to a debt which has become due, unless it was agreed that payment may be made by anticipation. […] 1572. In the absence of imputation by the parties, payment is imputed first to the debt that is due.

Where several debts are due, payment is imputed to the debt which the debtor has the greatest interest in paying. Where the debtor has the same interest in paying several debts, payment is imputed to the debt that became due first; if all of the debts became due at the same time, however, payment is imputed proportionately. Payments of monthly rents [ 86 ] By making payments of specific monthly amounts, such as $5,524 or $5,812, it is obvious that the tenant intended to pay the monthly amount toward the minimum annual rental on a current basis.

The landlord had the same intention as to imputation, as appears from the letter (P-7) speaking of an "unpaid adjustments". [ 87 ] There may well have been arrears prior to July 27, 2007, but the monthly payments do not appear to be imputed by either party to these arrears; they are treated as current payments. [ 88 ] Neither party treated the payments as being on a current account basis, so that the payments do not go against a running balance such that each payment is an admission of indebtedness interrupting prescription on the whole debt. [ 89 ] Therefore, the monthly rent and unpaid adjustments that are in arrears as of July 27, 2007, are prescribed.

The landlord is left with the claim made in the action as instituted originally except for the amounts that accrued between June 1, 2007 and three years before the institution of the action. Payments of additional rent due because of property taxes [ 90 ] Additional rent with respect to tax increases also depends upon the parties' intention with respect to imputation. Mr Bensissaid, who assisted the tenant with administration, asserted in his testimony that it was only in 2007 that discussions were initiated by Mr Kaminski concerning taxes.

Mr Bensissaid testified that it was only in 2006 that the changes in the tax system occurred resulting in a higher tax for the lessor. [ 91 ] Mr Bensissaid's understanding of these changes is only partly correct, but the Court does not doubt the sincerity of his belief. [ 92 ] It is true that a tax was still levied on tenants up to 2007.

The statements of account submitted by the Defendants with their letter of February 7, 2011, shows payment of a "tax locative" on account with Bio Train in fiscal 2005, 2006 and 2007. [ 93 ] This was a remaining tax, sometimes referred to as a water tax, that the city continued to collect up until 2007.

But the landlord's claim is for the increases due to the abolition of the surtax beginning in 2003. [ 94 ] Mr Bensissaid's testimony makes it clear that, when he was confronted with Mr Kaminski's assertion, prior to the signing of P-6, on August 26, 2008, that additional rent due to tax increases was owed, he disputed that assertion and asked for copies of bills. [ 95 ] In accepting the early-termination agreement, he was settling the issue of a contemplated forced vacation by a payments of an indemnity including an abatement of arrears "up to the maximum amount of $25,000" , but he did not necessarily agree that such an amount was owed, having not received the back-up documentation he had requested. [ 96 ] In cross-examination concerning the payment of even amounts such as $1,000 appearing on the statement (P-5) beginning June 30, 2007, he asserts that these payments are on account of taxes relative to the period when they were made. [ 97 ] It was his belief that in the earlier period, he did not owe additional rent with respect to taxes because he was paying the city directly. [ 98 ] On the whole, the Court finds that it is more probable that the payments made by the tenant appearing on P-5 from July 26 were on account of current accruals of the tax obligation, not on account of arrears, because the tenant recognised a current liability, but not a past liability. [ 99 ] The manner in which the landlord made its allegations in the original introductory motion is consistent with that imputation

as well. [ 100 ] Certainly, the notions of the "consent of the creditor" and the "imputation of the parties" in articles 1569 and 1572 are reflected in the state of mind of the creditor when it cast its original introductory motion.

While the Court permitted the amendments rather than dealing with prescription as a preliminary motion, the Plaintiff did not justify a mistake of fact that would permit the withdrawal of an admission, it was more like a change of mind or a rethinking of the situation that led to the amendments. [ 101 ] The Plaintiff mentioned clause XIV.4 of the lease entitled "Application of Monies" as giving the Landlord the discretion to apply payments received to debts other than as indicated by the Tenant.

But it is too late to use this discretion: the Plaintiff made his bed, so to speak in framing the action according to the imputation inherent in the initial version of the action. [ 102 ] Therefore, the Court concludes that unpaid amounts owing prior to July 27 th are prescribed. 4. The amounts owing [ 103 ] What are the amounts accruing after June 26, 2007? [ 104 ] The total amount accruing according to the Plaintiff's calculations up to June 30, 2010, is $239,785.96 [ 105 ] Amounts paid post June 26, 2007, up to June 30, 2010, total $208,770.57 leaving a balance as of that date of $31,015.39. 5.

Mr Bensissaid's responsible as a surety [ 106 ] The signature of Said Bensissaid on the sublease as mentioned above in paragraphs 14 and 15 establishes his solidary liability as surety. 6. Access to the basement area [ 107 ] The facts at trial do not call for a solution different than that imposed on the judgment granting a safeguard order of September 27, 2010, except that the placement of the switch now obviates the lessee's need to have access on a daily basis, so long as that switch is maintained by the lessor.

FOR THESE REASONS, THE COURT: CONDEMNS the Defendants to pay, to the Plaintiff the sum of $31,015.39, together with interest at the legal rate of 5% per annum and the additional indemnity provided at

article 1619 of the Civil Code of Quebec , calculated from the date of service of the Introductory Motion; With costs; GRANTS, in part the Cross-demand by making final, with modifications, the safeguard order issued September 27, 2010; ORDERS the Plaintiff to allow 9146-4933 Quebec Inc. to enter the basement area when necessary for the purpose of access to its refrigeration equipment and Hydro-Quebec meters; ORDERS the Plaintiff to maintain, in the premises of 9146-4933 Quebec Inc., a switch to activate the latter's ventilation system; ORDERS the provisional execution of these final orders, notwithstanding appeal; Without costs. __________________________________ DAVID L.

CAMERON, J.C.Q. Mtre Martin Courville DE CHANTAL D'AMOUR FORTIER Attorneys for the Plaintiff Mtre Liviu Kaufman BLAKES, CASSELS & GRAYDON LLP Attorneys for the Defendants Date of hearing: January 12, 2011