2020 QCCQ 1785, 2020 QCCQ 1785

2545-4935 Québec inc. c. 9338-2653 Québec inc. 2020 QCCQ 1785 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTRÉAL TOWN OF MONTRÉAL No: 500-22-243954-172 DATE: May 11, 2020 ______________________________________________________________________ BY THE HONOURABLE MAGALI LEWIS, J.C.Q. ______________________________________________________________________ 2545-4935 QUEBEC INC.

Plaintiff v. 9338-2653 QUEBEC INC. and MICHAEL GAD Defendants ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] 2545-4935 Québec Inc. (the Landlord) claims $71,894.84 in unpaid rent for the months of December 2017 through May 2019 [1] , from its tenant 9338-2653 Québec Inc. (Tekka Grill) and Michael Gad jointly for the portion of Tekka Grill’s obligations that he guaranteed. [ 2 ] In contestation of the claim the Defendants argue that the 2017 major sewer backup that destroyed the Landlord’s Mall where Tekka Grill’s Premises were located, all of its equipment, inventory and rental improvements, constituted a case of force majeure that released the parties of their respective obligations, and induced the automatic termination of the Lease that bound them. [ 3 ] Consequently, Tekka Grill claims $11,525.68 from the Landlord as reimbursement of the security deposit of $8,135.68 it paid as provided by the Lease, and $3,389.90 as partial reimbursement of the rent paid for the month of May, that is the portion of the rent paid for the period after May 5, 2017, when the sewer backup destroyed its business. [ 4 ] In support of its claim for reimbursement of its deposit, although not alleging that the Lease is a contract of adhesion, Tekka Grill contends that the clause that provides that it is not exempt from paying rent when the destruction of the Premises by force majeure prevents it from operating its business is abusive, because contrary to the good faith that should govern the execution of the contract (art. 1375 CCQ). [ 5 ] Finally, Tekka Grill argues that the parties agreed that the Lease was cancelled with the total destruction of the Mall, and that the Landlord should not be entitled to renege on their understanding in an attempt to extract more money from it than originally agreed upon. [ 6 ] Arguing that the Landlord acted in bad faith in instituting its claim before the Civil Chamber of the Court rather than the Small Claims Division, the Defendants also claim reimbursement of their legal fees and $5,000.00 in moral damages.

QUESTIONS AT ISSUE [ 7 ] In order to decide the present case, the Court will answer the following questions:

a) Was the May 5, 2017, sewer backup in the Mall a case of force majeure?

b) What does the Lease provide in case of destruction of the Mall?

c) Was Tekka Grill’s Lease cancelled and if so, when?

d) Was the filing of the claim before the Civil Chamber of the Court abusive? THE CONTEXT [ 8 ] The Landlord owns a shopping mall in the Pierrefonds-Roxboro borough (the Mall) located at the corner of Pierrefonds and Saint-Jean boulevards. Between March 2016 and May 5, 2017, there were 3 restaurants in the Mall (including that of Tekka Grill), 8 small stores and a Mourolatos grocery store.

[ 9 ] Mourolatos was the heart of the Mall. It never reopened after the extensive damage the sewer backup of the spring 2017 caused to its premises. [ 10 ] Michael Dennis is the property manager of the Landlord and the only witness that testified in support of the claim. At all times relevant to the claim he is in charge of maintaining the Mall, leasing its premises and handling all issues.

It is not in dispute that he acts as authorized representative of the Landlord and that—except for Landlord’s attorney who sent 2 notices relating to the steps it took to address the situation—he is the only person with whom the Defendants actively exchanged, verbally and in writing, regarding the impact of the situation on the parties’ business relation. [ 11 ] On March 29, 2016, Tekka Grill, through its authorized representative Michael Gad, enters into a commercial lease agreement with the Landlord (the Lease) to rent a space in the Mall already set up to operate a restaurant (the Premises). Mr.

Gad does not make any changes to the Premises, using the furniture, equipment and decoration left behind by the former tenant before starting to operate Tekka Grill. [ 12 ] Although the Lease is for a 3-year term ending on May 31, 2019, it provides that Tekka Grill has access to the Premises rent free between April 1 and May 31, 2016, except for the payment of the electricity bill as of the date of occupancy. [2] [ 13 ] The minimum rent provided for in the Lease is $30,385.44 per annum or $2,532.12 per month [3] .

Tekka Grill must also pay $8,135.78 (the equivalent of 3 months’ rent) as security to ensure the completion of the Lease [4] . The clause relating to the security deposit reads in part as follows: If the tenant does not complete the lease for any reason what so ever these monies will be confiscated by the landlord as monies due to non completion of the lease. [5] [ 14 ] The clause relating to insurance provides that: (

e) In the event of damage or destruction to the Leasehold Improvements in the Leased Premises covered by insurance pursuant to subclause (a)(i), the Tenant shall use the proceeds of such insurance for the purpose of repairing or restoring such Leasehold Improvements. In the event of damage to or destruction of the Building entitling the Landlord to terminate the Lease pursuant to

section 10.01(

b) or 10.02, then if the Leased Premises have also been damaged or destroyed and the Lease is terminated, the Tenant shall forthwith pay to the Landlord all of its insurance proceeds relating to the Leasehold Improvements in the Leased Premises and if the Leased Premises have not been damaged or destroyed, the Tenant shall upon demand deliver to the Landlord in accordance with the provisions of this Lease the Leasehold Improvements and the Leased Premises. [6] [ 15 ] In regards to the destruction of the building, the Lease provides the following:

Section 10.01 Damage to the Premises Subject to

section 10.03, if the Premises are damaged the Landlord will repair or reconstruct the Premises promptly , to the extent of the Landlord’s work. If part or all the Premises is not usable because of the damage, Minimum Rent (but not Additional Rent or Percentage Rent) will abate in the proportion that the GLA or the part of the Premises that is not usable is, to the GLA of the whole of the Premises, from the date of the damage until the earlier of, (

i) the date when the whole of the Premises is usable again or, (ii) thirty (30) days after substantial completion of the Landlord’s Work. When the Landlord notifies the Tenant that it has completed enough of the Landlord’s Work to enable the Tenant to start the Tenant’s Work the Tenant will complete the Tenant’s Work and reopen the whole of the Premises for business as soon as possible but in any case within thirty (30) days after the Landlord’s notice . […]

Section 10.02 Damage to or Expropriation of the Development (

a) Despite anything else in the Lease, if: (

i) more than thirty-five (35%) of the GLA of the Shopping Center is damaged or expropriated, whether or not the Premises are damaged or expropriated; or (ii) more than thirty-five (35%) of the floor of the Common Elements (excluding the area of Parking Facilities) or more than twenty percent (20%) of the area of the Parking Facilities is damaged or expropriated, whether or not the Premises are expropriated, the Landlord may, by written notice to the Tenant within ninety (90) days after the damage or expropriation, terminate this Lease, effective thirty (30) days after the notice, and all Rent will abate as of the effective date of the termination.

The Tenant will have no claim, action, right of action or any other demand against the Landlord as a result of or arising from any such early termination of this Lease. (

b) If the Development is damaged or expropriated to the extent described in

Section 10.02 (

a) and the Landlord does not terminate this Lease, the Landlord will promptly rebuild or repair the Shopping Center to the extent of its obligations under its leases for Rentable Premises but the Landlord may use plans and specifications and working drawings that are different in content from those used in the original construction of the Development or any part of it and the rebuilt or repaired Development may be different in configuration, size or design from the Development before the damage or expropriation. (Except for the titles of the sections, underlines added) [ 16 ]

Section 15.08 of the Lease relating to “Force majeure” reads as follows: Despite the rest of the Lease, if the Landlord or the Tenant is, in good faith, delayed or prevented from doing anything required by this Lease, because of a strike; labour trouble; inability to get materials or services; power failure; restrictive governmental laws or

regulations; riots; insurrection; sabotage; rebellion, war; act of God ; or any other similar reason, that is not the fault of the party delayed , the doing of the thing is excused or the period of the delay and the party delayed will do what was delayed or prevented within the appropriate period after the delay.

The preceding sentence does not excuse the Tenant from payment of Rent or the Landlord from payment of amounts that it is required to pay, in the amounts and at the times specified in the Lease. (Underlines added) [ 17 ] The Lease also includes a 2-page Appendix entitled “Suretyship Agreement” that Michael Gad signed personally in order to, amongst other things, waive all benefits of discussion and division regarding a maximum of 3 months’ rent. [ 18 ] After its signature and in partial execution of the Lease, Tekka Grill forwards a check in the amount of $8,135.87 dated March 31, 2016, to the Landlord to pay the security deposit. [ 19 ] In its Original Application as well its Amended Originating Application , the Landlord states that following the signature of the Lease it disbursed over $100,000 to renovate Tekka Grill’s premises.

Michael Dennis declared, however, at the hearing that “little or no modification was made when Tekka Grill initially took the place.” Considering Mr. Gad’s testimony on the matter, the Court concludes that the Landlord made no modifications to the Premises prior to delivering it to Tekka Grill and that the statement to the contrary in the Applications is false.

No explanation was given as to why it was made. [ 20 ] Spring 2017 was the scene of severed floods in Québec, from which the Pierrefonds-Roxboro borough did not escape. [ 21 ] Water from the Rivière des Prairies started flooding streets and homes in the borough early May 2017, but did not reach the Mall located at approximately 2 km from the river. However, on May 5, 2017, the Mall’s sewer backed up, flooding the entire area of the Mall up to 3 feet high, including Tekka Grill’s Premises. [7] [ 22 ] For days on end none of the tenants of the Mall could access their business.

As Michael Dennis puts it, “it was impossible to conduct any kind of business” in the Mall. [ 23 ] On May 19, 2017, the Landlord sent a notice to its tenants informing them that the Mall could not be occupied for safety and health reasons, including the presence of mould due to the sewer backup, and that it abated the rent as of May 6, 2017, until the premises would be fit for resumption of occupancy. [8] [ 24 ] In the weeks that followed, Tekka Grill’s Premises is completely emptied of its content and stripped, i.e. walls, floor and wiring. [9] According to the Landlord’s May 19, 2017, notice, it stored Tekka Grill’s belongings into a container provided by its insurer. [10] The letter does not specify who moved what and when from Tekka Grill’s Premises and no evidence was presented in that regard. [ 25 ] Considering the extent of the flood, the Court questions whether anything could be salvaged from Tekka Grill’s business; certainly not the food, chairs, curtains, tables and refrigerators.

According to Mr. Gad’s uncontradicted testimony, the business was a total loss, right down to the television which had mould in the wires. [ 26 ] The evidence is silent as to whether and when the Premises were rebuilt and handed over to Tekka Grill for it to complete the leasehold improvement, and the Mall accessible to clients for the restaurant to be in a position to resume its activities. It is also silent on the issue of whether the tenant was asked to remove its equipment from the Landlord’s insurer’s container, and whether it did so. [ 27 ] According to Mr.

Gad, he and the other tenants of the Landlord attend a meeting held by Mr. Dennis before the end of May 2017, at the occasion of which Mr. Dennis advises them that they are “not allowed to leave.” [ 28 ] In a letter dated June 29, 2017, the Landlord indicates that the reconstruction of Tekka Grill’s Premises should be completed by July 15, 2017. [11] The letter reads in part as follows: Since your property was moved out of the Premises after the sewer backup, it has been stored in a container furnished by your landlord’s insurer and located in the parking area of the Shopping Center.

The lease for that container will terminate on July 15, 2017, and it is currently expected that your Premises will be ready to receive your property before or at that date.

You will then be required to move your property back into the Premises. [ 29 ] A week later, on July 6, 2017, the Landlord’s attorney informs Tekka Grill in writing that the reconstruction of its Premises will not be completed until August 11, 2017, and that the rental of the container in which its property is being stored at the expense of the Landlord’s insurer is extended to August 15, 2017. [12] The letter does not specify the cause of the delay in the reconstruction of the Premises and whether it is related to the rehabilitation of the sewers. [ 30 ] Although nothing in that letter suggests that the delay for the reconstruction is in any way due to Tekka Grill, Mr.

Dennis contends otherwise at the hearing. He does not explain how, if the Court should give credence to his words (which it does not) Tekka Grill could delay for 5 weeks the rebuilding of its small Premises when the work the Landlord has to do is minimal: put back the floor, walls, ceilings and bathroom. [ 31 ] As it turns out, on or around July 12, 2017, the Landlord is in full-blown negotiations with a potential tenant interested in renting the space Tekka Grill occupied until the Mall was flooded. [13] Mr. Dennis did not indicate when those negotiations started before July 12, 2017. [ 32 ] According to Mr.

Dennis, the negotiations are not conclusive because—although he did not specify the figures that were put forward during the discussions—the amount the potential tenant offers to pay for rent is “ridiculous.” It is relevant to note that Tekka Grill’s monthly rent was around $2,500 and that the rent of the tenant that occupies the Premises since May 2019 is, according to Mr. Dennis’ testimony, $2,000.

[ 33 ] A message from Mr. Dennis to Tekka Grill sent July 13, 2017—that is while the Landlord is discussing with a potential new tenant interested in renting the Premises—, seem to indicate that the parties have an understanding that Tekka Grill’s Lease is cancelled and that the restaurant will not resume its activities. Yet, and it is not clear why, Mr. Dennis asks Tekka Grill to send a written request to terminate the Lease, after which he would see what he can do. One can speculate as to whether this request was made for insurance purposes.

The letter reads as follows: We have now stopped the renovations in your space to make it a restaurant. We are now in the process of making it a 4 white walls, as a vacant space of rent. Can you please send me an email asking to terminate our lease . When I receive it, I will negotiate the best deal possible for you. I realize this process has been very difficult for you and your family and I will do the best I can for you.

Please call me if you want to discuss. [14] (Underline added) [ 34 ] On July 14, 2017, the Ministère de la sécurité publique writes to Tekka Grill that its request for financial assistance regarding the damage to its Premises is declined because damages caused by sewer backup is insurable. [15] [ 35 ] On Monday, July 17, 2017, Michael Dennis writes to Tekka Grill that since it did not follow up to his last email—the July 13, 2017, one which does not indicate nor a deadline to response, nor that responding within the deadline is a condition to anything—he “assumes” that Tekka Grill will be continuing with the Lease.

He continues by saying that the Premises will be finished within the week and that a person named Andre needs its lighting plan as soon as possible. [16] [ 36 ] On July 20, 2017, Tekka Grill writes to the Landlord to reiterate that it is forced out of business by the situation: as we discussed Monday [July 17, 2017] after receiving your email as you know that I was forced out of business because of the sewer backup from the city and the shopping centre so as discussed I agree to give you one month out of my deposit (2 month) and I take the credit amount of may and the other month , waiting for your reply. [17] (sic) (Underline added) [ 37 ] In the reply he sends the same day to Tekka Grill, Mr.

Dennis indicates that the Landlord could reconsider the cancellation of the Lease. The message reads as follows: I discussed, with the owner, he has expenses to remove all the hood fans and exhaust, and close the roof if you leave so he would prefer you stay . The contractors will be giving you your keys in the next couple of days and the rent will start soon after that. We do not have a tenant to replace you and we will not be collecting rent if you leave. [18] (Underline added) [ 38 ] The content of Mr.

Dennis’ message is at least partially false because at that point the Landlord is still negotiating with a serious potential tenant. Also, Mr. Dennis did not specify if and when the keys to the Premises were given to Tekka Grill, and the evidence is to the effect that the Premises were not rebuilt before some time in October or November 2017. [ 39 ] At hearing, Mr.

Dennis does not explain how or why he writes on July 20, 2017, that the Landlord will be giving the keys to Tekka Grill “in the next couple of days,” when: - On July 6, 2017, the Landlord informed the tenant that the Premises would not be rebuilt before August 11, 2017, that is 3 weeks after July 20, 2017; and - The Landlord is still negotiating with the potential new tenant for the Premises and will be doing so until after July 24, 2017. [19] [ 40 ] On August 9, 2017, Tekka Grill’s attorney sends a draft lease cancellation agreement to Mr.

Gad asking him to review the document and complete the amount with respect the partial rent refund mentioned by Mr. Dennis. [20] [ 41 ] On August 10, 2017, the attorney for Tekka Grill sends the Lease Cancellation Agreement to the Landlord indicating that Mr.

Gad is available to sign it the next day and asking if any changes are required. [21] [ 42 ] The document provides, amongst other things, that Lease is terminate as of August 11, 2017, that the Landlord keeps the security deposit of $8,135.78 as compensation for the termination, and waives his right to any rent as of May 10, 2017. [22] [ 43 ] The evidence is silent as to why the drafted agreement defers from the agreement the parties made on July 20, 2017, regarding the partial refund of the security deposit and the date from which the tenant is entitled to a rental credit for the month of May. [ 44 ] On August 15, 2017, the Landlord’s representative confirms that he will submit the document to his superior. [23]

[ 45 ] The Landlord files the following message it received from Tekka Grill: Hello Mike, I would like to inform you that I am forced right now to go out of business because of the flood (act of good) and the sewer backup that hit the shopping centre and my business as well in may 2017, and as a result, for the last three month I was seeking compensations from the government and from my insurance but unfortunately the result was as follows 1. I received a document from the government that my file was refused and I am not eligible to take any compensation from the government. 2.

The maximum amount that I am eligible to get from the insurance company is not enough to buy my equipment and make the tenants improvements in the place … 3. there is no warranty that this is not gonna happen again next year or the year after and i will lose my business again… [24] For the above mentioned reason I am force to be out of business and cancel the lease with you. Thanks in advance Michael Gad [25] (sic) [ 46 ] The date of the email does not appear on the version filed.

Since Tekka Grill had already emailed the information to the Landlord (although not as detailed), it is not clear why this email was sent and, in light of the evidence as to the chronology of events, the Court cannot exclude that it was sent on or around July 20, 2017. [ 47 ] On August 17, 2017, Mr.

Dennis first writes to Tekka Grill that the Landlord does not agree to cancel the lease, and a few minutes later to ask what financial assistance it would need to reopen the restaurant. [26] If Tekka Grill followed up to that email, its reply was not filed. [ 48 ] On September 18, 2017, Tekka Grill’s attorney follows up with the Landlord regarding the signature of the Lease cancellation agreement. He writes: I am following up to our last exchange as my clients confirms that the Landlord has not signed our termination agreement yet.

We have heard that the mayor wants to lease the premises as a temporary office for his team during the elections, We want to make sure that the lease is officially cancelled before this happens, Thank you for finalizing this matter. [27] [ 49 ] The evidence is silent as to the exchanges which followed this letter until September 27, 2017. If the Landlord’s representative (either its attorneys or Mr.

Dennis) had sent a letter indicating that there was never an agreement as to the cancellation of the Lease, it would have been filed. [ 50 ] On or around September 27, 2017, Tekka Grill sends a formal notice to the Landlord in which it indicates that: 1. Michael Dennis had offered to cancel the lease upon Tekka Grill forfeiting the security deposit; 2. Although the offer was accepted, Mr. Dennis refused to sign the cancellation agreement; 3.

Tekka Grill therefore revokes all previous agreements or offers; wants to terminate the Lease as of the notice of evacuation dated May 19, 2017; claims reimbursement of the security deposit of $8,135.78 because the lease was cancelled as a result of force majeure; $3,389.90 representing the rent paid after May 5, 2017; and $465.65 representing the fee it paid for a lawyer to prepare the cancellation agreement as per Landlord’s representation, which it refused to sign. [28] [ 51 ] Since the parties could not agree on the terms of the cancellation of the Lease, the Landlord instituted the present claim. [ 52 ] Landlord claims it spent $25,000.00 renovating—one should understand “reconstructing”—Tekka Grill’s Premises.

In support of that contention, Landlord files invoices from several renovation companies: ➢ Reliance invoices for a total of $794,292.65 relating to work performed between May 23 and October 20, 2017: the invoices do not detail the work done and for which part of the Mall; ➢ Mecanique Ron Tookey Inc.’s invoice in the amount of $681.90 to disconnect the plumbing in Tekka Grill’s Premises in May 2017; ➢ Intérieur A.S.M. Interiors Inc.’s invoice in the amount of $1,713.96 for demolishing and rebuilding “Egyptian Restaurant” on July 13 and 14, 2017; ➢ Double E.

Électrique Inc.’s invoices, one in the amount of $646.27 for installing switches on July 19, 2017, in the Premises and one in the amount of $1,684 plus taxes ($1,936.18) for installing new lights on July 21, 2017. [29] [ 53 ] Again Mr. Dennis does not explain how an invoice indicates that the Premises were rebuilt on July 13 and 14, 2017 (Intérieur

ASM invoice), yet he files in support of the claim invoices that indicate that the work continued until after October 20, 2017 (Reliance invoices). [ 54 ] According to the chronology of events, the work relating to the last 3 invoices was carried out while the Landlord was negotiating with the serious potential new tenant interested in renting the Premises. [ 55 ] Although no documentation relating to the Landlord’s insurance claim in regards to the destruction of its Mall has been filed, it is reasonable to believe that the amounts mentioned above, in addition to being part of the reconstruction work the Landlord has to assume under the Lease, were reimbursed by the insurer. [ 56 ] Furthermore, the above-mentioned invoices total $4,978.31, not $25,000 as claimed by the Landlord; another inaccuracy. [ 57 ] In support of its Originating Application , the Landlord filed a quote dated December 19, 2017, from Climatisation Nexair that indicates that the removal of the hoods and fans in the Premises would cost $6,676.04.

The allegation was withdrawn from the Amended Originating Application , yet the quote was kept in the exhibits. The evidence is, however, silent as to whether the work was done since the date of the quote and how much it cost. [ 58 ] Again, it appears that the information in the Originating Application was incorrect, not only because the Landlord did not prove that he did get the hoods and fans removed from the Premises any time before or after the introduction of its claim, but most importantly because:

a) It is not clear that the hoods and fans had not been removed with the demolition of the Premises in an effort to decontaminate the space after the sewer backup; [30] and

b) The hoods and fans were leasehold improvements or trade fixtures that Tekka Grill had to leave at the termination of the Lease, as provided by

section 8.01 (

e) cited above, [31] but also by

section 9.06 that reads as follows:

Section 9.06 Removal and Restoration by the Tenant All Premises Work (including any Tenant’s Work) done by the Tenant, or by the Landlord or others for the Tenant (but not the Tenant’s trade fixtures) is the property of the Landlord on affixation or installation, without compensation to the Tenant. The Tenant will not remove any Premises Work (including any Tenant’s Work) or trade fixtures from the Premises at any time… (b)… The Tenant’s trade fixtures do not include, (

i) heating, ventilation and air-conditioning systems, facilities, and equipment in or serving the Premises; … (iii) light fixtures … (vi) anything that would not normally be considered a trade fixture, all of which are considered as leasehold improvement. [ 59 ] According to the Landlord all its effort to find a tenant to replace Tekka Grill before May 31, 2019, were unsuccessful. It did not file any documentation to support this contention.

It also did not bring or submit any of the documentation that was requested by subpoena to establish that it did in fact advertise the Premises for rent as of July 2017, and whether it refused potential tenants, this, in contravention of its obligations to minimize its damages. [ 60 ] The Landlord alleges that its insurer paid an indemnity in regards to the loss of Tekka Grill’s rent for the months of October and November 2017. Again, it did not file any supporting documentation and did not establish when the reconstruction of the Mall and the Premises were completed. [ 61 ] Questioned on the matter, Mr.

Dennis could not confirm when exactly the insurer stopped paying the indemnity for loss of rental income related to the Premises. [ 62 ] The evidence is contradictory or deficient in explaining how Mr.

Dennis could write to Tekka Grill that the reconstruction of the Premises would be completed before the end of July 2017 when Landlord’s attorney had indicated that it would be completed by August 11, 2017, yet the insurance would have paid the indemnity for loss of rental income related to the Premises until the month of November 2017. [ 63 ] The fact that the rent replacement allowance was paid until November 2017 suggests that the Premises were not rebuilt before then.

The evidence is silent as to what caused the 6 months delay of reconstruction, but the delay, however, serves to establish that the damages to the Premises and the Mall were indeed extensive. [ 64 ] Alleging that Tekka Grill’s Lease was not cancelled, the Landlord claims reimbursement of the unpaid rent from December 2017 until May 2019, a total of $80,027.62, minus the amount of the security deposit of $8,135.78 paid by Tekka Grill.

In its Amended Originating Application dated October 17, 2019, the Landlord thus claims $71,603.66, and asks that Michael Gad, who co-signed the lease as guarantor, be solidarily liable with Tekka Grill to pay $12,635.94 of that amount, the equivalent of 3 months’ rent. [ 65 ] In support of their contestation Defendants argue that the Lease was automatically cancelled on May 5, 2017, because the sewer backup completely destroyed Tekka Grill’s Premises in particular, but also the entire Mall. [ 66 ] On the grounds that the clause which provides otherwise in the Lease is abusive within the meaning art. 1375 CCQ, they claim that in consideration of the automatic cancellation Tekka Grill is entitled to reimbursement of the security deposit it paid to the Landlord.

They also claim partial reimbursement of the rent paid for the month of May 2017, after the 5 th as per the Lease. [ 67 ] Subsidiarily, Defendants claim that the Landlord had accepted the cancellation of the Lease on July 13, 2017. [ 68 ] Finally, the Defendants blame the Landlord for having filed its claim with the Civil Chamber of the Québec Court rather than with its Small Claims Division. They contend that the Landlord added $10,000 in moral damages to its $15,100 claim for material

damages in order to induce Tekka Grill to settle the case rather than paying a lawyer to defend itself from the claim. [ 69 ] The amount for material damages included the rent for the month of October and November 2017, which the Landlord indicated as being $8,423.96 (par. 18), plus the amount it alleges it would pay to have the hoods and fans that were in the Premises removed, $6,676.04, plus taxes (par. 20). [ 70 ] Landlord completely abandoned that claim in its Amended Originating Application . ANALYSIS [ 71 ] Anyone who wants to assert a right shall prove the facts that sustain his claim.

Safe exception, clear and convincing evidence that makes the existence of a fact more probable than its nonexistence is sufficient [32] to satisfy the test of balance of probabilities. [33]

a) Was the May 5, 2017, sewer backup in the Mall a case of force majeure? [ 72 ] The Pierrefonds-Roxboro borough was the scene of extensive flooding in the spring of 2017.

No evidence was presented to explain why the flooding in the streets of the municipality caused the Mall’s sewer to back up, whether it was for lack of maintenance from the Landlord, for having failed to adopt preventive measures to avoid the overflow, or just because the sewer was not conceived to contain a flood as important as the spring 2017 one. [ 73 ] Yet, Tekka Grill takes the position that the flooding of its Premises was a case of force majeure (“superior force”) that entitles it to automatic resiliation of the Lease. [ 74 ] As for the Landlord, it takes the position that the sewer backup is not a force majeure. [ 75 ] Force majeure is defined at art. 1470 CCQ as follows: 1470 . […] Superior force is an unforeseeable and irresistible event, including external causes with the same characteristics. (Underline added) [ 76 ] Whoever invokes force majeure as a means of defence in order to be relieved of its obligations has the burden of establishing that the event which it invokes—in the present case the sewer backup that destroyed the Premises—constitutes a force majeure. [34] [ 77 ] When presented with the question of whether a flood constitutes a force majeure, our Court concluded that taking into account our climate and the fact that rare climatic phenomenon are not unpredictable, [35] torrential rain or sudden increase of water caused by continuous rains are predictable, and can occur without such situations being considered a case of force majeure. [36] [ 78 ] In the absence of evidence to this effect, the Court cannot conclude that the sewer backup that occurred at the Mall on May 5, 2017, was the result of a force majeure. [ 79 ] Art. 1465 CCQ creates a presumption of fault when damage results from the autonomous fact of the property—in the present case, failure of the Mall’s sewer system. [ 80 ] Since the Landlord took the position that the sewer backup was not a case of force majeure, it should have presented positive and specific evidence to establish the absence of a fault [37] to be exonerated from its obligations to deliver the Premises in a good state of repair in all respects, and provide peaceable enjoyment of the property throughout the term of the Lease (art. 1854 CCQ). [ 81 ] Defendants, however, are not claiming damages from the Landlord on the ground that it failed to take all available measures to prevent the sewer backup, but rather automatic or consensual resiliation of the Lease.

b) What does the Lease provide in case of destruction of the Mall? [ 82 ] The Lease provides that if the Premises are destroyed due to a case of force majeure Tekka Grill is not exempt for paying the rent during the time that it does not have access to its Premises (clause 15.08).

Because the Court concluded that the sewer backup that destroyed the Mall in the spring of 2017 is not a case a force majeure, this clause of the Lease does not apply here. [ 83 ] Consequently, the Court does not have to decide whether the clause is abusive because contrary to the Landlord’s obligation to act in good faith in the execution of the contract as per art. 1375 CCQ [38] , as the Defendants so alleged. [ 84 ] The law provides that when a lessor cannot provide the rented premises to a tenant because it has been destroyed or damaged, the lessee may ask for the resiliation of the contract or reduction of his own correlative obligations (art. 1590 CCQ). [ 85 ] This provision of the law applies when the parties have not provided for anything in their contract in the event of destruction of the property object of the contract. [ 86 ] The Lease provides at its

section 10.03 that: 1. When the Premises are damaged, the Landlord has to repair them promptly , [39] within which time Tekka Grill is exempted from paying rent; 2. The Landlord must notify its tenant when the rebuilding of the Premises is completed.

[ 87 ] The evidence did not establish if and when the Landlord gave notice to Tekka Grill that the Premises were ready for it to finalize its installations, i.e. rebuild the leasehold improvements and resume its business activities promptly.

If one had been sent, surely it would have been filed. [ 88 ] The evidence was also silent as to when the reconstruction of the Premises was completed, and for good cause: the Landlord informed Tekka Grill as of July 13, 2017, that it had stopped rebuilding the Premises to allow the operation of a restaurant and it was negotiating until after July 24, 2017, with a potential new tenant for the Premises. [ 89 ] As per the invoices filed, the reconstruction was not completed until some time after October 20, 2017, instead of before the end of July as per Mr.

Dennis or August 11, 2017, as per Landlord’s attorney’s letter, without explanation. [ 90 ] Although

section 10.02 of the Lease provides that in the instance that 35% of the Mall is destroyed the Landlord must rebuild it promptly, [40] no evidence has been provided to establish that the reconstruction period respected the Landlord’s obligation under the Lease.

c) Was Tekka Grill’s Lease cancelled and if so, when? [ 91 ] It follows from the evidence that the parties had come to an understanding that the Lease was cancelled as early as July 12, 2027, and that prior to that date and until after July 24, 2017, the Landlord was exploring other avenues with potential tenants. [ 92 ] Michael Gad emigrated with his family in 2012 from Egypt, where he had been working in the restaurant managing business. When he arrived in Québec, he worked 4 years in catering prior to investing all of his savings in Tekka Grill. He lost everything with the sewer backup in the Mall.

He was devastated in the spring 2017 and still was when the case was heard. [ 93 ] The Court is not sure what to make of Mr. Dennis’ declaration that Mr. Gad was not going to the Mall every day after the flood, seemingly implying that he should have been and that that would have changed something. The reality of the matter is that until the water rescinded from the Mall, no one had access to it, not him, not the tenants. Mr.

Gad’s presence could not have changed the fact that his business was completely destroyed by sewer waters. [ 94 ] After the water rescinded (either naturally or by drainage), the Mall had to be destroyed, decontaminated and rebuilt. Mr. Gad had no say into the work that was done at that step of the reconstruction. [ 95 ] Mr. Dennis was supervising the reconstruction of the Mall.

Inexplicably, he came to trial empty-handed, not knowing when the demolition started, when the rebuilding of Tekka Grill started, not indicating when the work was completed, and not knowing for sure when the insurance stopped paying the indemnity for Tekka Grill’s lost rent. [ 96 ] He claims that Tekka Grill’s Premises were not completely destroyed.

The pictures filed at trial leave no doubt that if it was not destroyed by the sewer waters, the building was completely unfit to be used as a restaurant because of it and ultimately was completely destroyed by the Landlord to be decontaminated and rebuilt. [ 97 ] According to Mr. Dennis’ reading of the July 6, 2017, letter from the Landlord’s attorneys, Mr. Gad is “holding up the project.” Yet, that is not what the letter says, but rather that the completion of the project is delayed. Mr. Dennis is careful not to state the real reason why. [ 98 ] He contends that he never discussed any specifics with Mr.

Gad or his attorney regarding the cancellation of the Lease and that he is “sure that [he] did not come to an agreement because it would have come from the Landlord.” One would be entitled to question what meaning to give to that last statement considering that Mr. Dennis is the authorized representative of the Landlord. [ 99 ] Mr. Dennis does not explain how it is that an attorney sends him a draft of a cancellation agreement.

As far as he is concerned he “never really discussed those options with Maître Poulin,” “it was always with the tenant.” In other words, specifics were discussed. [ 100 ] Notwithstanding that he wrote to Mr. Gad on July 13, 2017, that the rebuilding of his space as a restaurant was halted, and on July 20, 2017 that the rebuilding would be completed within a couple of days, Mr.

Dennis contends without supporting evidence that on August 17, 2017, “the Premises was being rebuilt specifically for Tekka Grill, so there was no turning back.” He did not address the question of why the Landlord would be reconstructing the Premises for Tekka Grill on August 17, 2017, when he was sent a Lease Cancellation Agreement for signature and confirmed on August 15 that it would be considered. [ 101 ] He also did not address the fact that on July 20, 2017, he wrote to Tekka Grill that the Premises would be ready before the end of July, yet the Premises were not delivered on August 15, 2017, as per Landlord’s attorney’s letter of July 6, 2017, nor (as per evidence revealed) until after October 20 th or November 2017. [ 102 ] Tekka Grill did not receive a notice after the July 6, 2017, advising it that the reconstruction of its Premises would be yet again delayed.

It also did not receive a notice advising it that the reconstruction was terminated. This is congruent with Tekka Grill’s contention that its Lease had been terminated (unilaterally by the Landlord or by consensual agreement), and explains why the issue of whether the 6-months delay for rebuilding the Premises respected the Landlord’s obligation to proceed “promptly” as per

section 10.03 of the Lease, was not brought up. [ 103 ] It appears from the written exchanges between the parties that not only there was an understanding that Tekka Grill’s Lease was cancelled, but that the Landlord would abate the rent paid for the period during the month of May 2017 where the Premises were not usable, and that it would repay the equivalent of one month’s rent to the tenant out of the security deposit. [ 104 ] The Landlord has not repaid to Tekka Grill the amount equivalent to over-paid rent for the month of May, is not offering to credit that amount from its claim and offered no justification for not offering to comply with the terms of the Lease.

[ 105 ] The Civil Code of Québec provides at art. 1394 that “[s] ilence does not imply acceptance of an offer, unless the contrary results from the will of the parties, the law or special circumstances, such as usage or a prior business relationship.” [ 106 ] Consequently and in light of the evidence, the Court concludes that when Mr. Dennis writes to Mr. Gad on Monday, July 17, 2017, that he interprets the fact he has not yet responded to his Thursday, July 13, 2017, email as “silence” meaning that Tekka Grill will resume its operations, he is just trying to put pressure on him to get him to state that it will.

Indeed he knew by then that the tenant did not have the financial means to complete the leasehold improvements necessary to reopen. [ 107 ] As soon as he receives Mr. Dennis’ July 17, 2017, email, Mr. Gad calls him. He confirms in writing on July 20, 2017, the content of their discussion, that is that he accepts Mr. Dennis’ offer to reimburse one month’s rent out of the security deposit and the rent paid for the period after May 5, 2017. Since Mr. Dennis did not reply to that email (no reply having been filed), the Court concludes that Mr.

Gad’s message is consistent with their discussion. [ 108 ] The Court concludes from what follows that Tekka Grill’s Lease was cancelled on or before July 11, 2017, as per the provisions of art. 1439 CCQ [41] : ➢ On July 12, 2017, the Landlord was in serious negotiations with a potential new tenant that wanted to operate the Premises; ➢ Mr.

Dennis confirmed to Tekka Grill that the Landlord had stopped renovating the Premises to make it a restaurant; ➢ The Landlord did not notify Tekka Grill that the reconstruction of its Premises was completed in order for the tenant to proceed with the leasehold improvements; ➢ When Mr.

Dennis suggested in his July 17, 2017, email that Tekka Grill “agreed” by its silence to resume its operations, he was well aware that it did not have the financial means to do so; ➢ He displayed selective memory when he claimed that he did not remember what was discussed in connection with the termination of Tekka Grill’s Lease, and went so far as to deny any exchange with Maitre Poulin on the specifics of the cancellation, when clearly the matter was discussed and documents to that effect were exchanged between the parties; ➢ Finally, the Court finds ridiculous Mr.

Dennis’ contention that when exchanging with Mr.

Gad on the conditions of cancellation of the Lease he was not talking on the behalf of the Landlord, when clearly that was the case. [ 109 ] Because, however, on September 27, 2017, Tekka Grill voided the agreement with the Landlord in regards to the partial reimbursement of the security deposit, the clause regarding the confiscation of same as liquidated damages due to non-completion of the Lease applies. [42] [ 110 ] The Lease provides that the Landlord must reimburse to the lessee an amount corresponding to the portion of the rent paid starting from the day the Premises could not be used because it was damaged.

Accordingly, the Landlord has to reimburse $3,389.90, that is, the portion of the rent for the month of May 2017 paid for the period during which the Premises were not usable.

d) Was the filing of the claim before the Civil Chamber of the Court abusive? [ 111 ] It is not necessary to elaborate much to answer the question by the negative. [ 112 ] The Landlord’s original claim for damages was for $15,100, an amount above the jurisdictional monetary limit of the Small Claims Division of the Court. [ 113 ] In addition, its Originating Application filed on December 17, 2017, the Landlord reserved the right to claim the rent payable for all the months the Premises would be vacant before the date scheduled for the end of the Lease.

Since the Lease was scheduled to terminate on May 31, 2019, the exact amount of the claim would only be known on the first of the following dates: the date on which Landlord would find a tenant for the Premises before the end of Tekka Grill’s Lease, or May 31, 2019. [ 114 ] Defendants’ cross-claim regarding abuse of process is therefore dismissed. Legal costs [ 115 ] Legal costs are owed to the party that is successful unless the court decides otherwise (art. 340 CPC).

Since each party wins its claim in part, the Court could conclude that each party pays its own legal costs. [ 116 ] In the present case, the Court, however, condemns the Landlord to the legal costs for having based its claim on the false pretense that discussions regarding the cancellation of the Lease never took place, for having failed to credit the amount equivalent for the rent paid after May 5, 2017, to Tekka Grill, and for having presented evidence that, to say the least, lacked transparency.

WHEREFORE, THE COURT: [ 117 ] REJECTS the claim in part; [ 118 ] CONFIRMS that 2545-4935 Québec Inc. can keep the amount of the security deposit it had received from 9338-2653 Québec Inc. as provided by the Lease; [ 119 ] GRANTS Defendants cross-claim in part; [ 120 ] CONDEMNS 2545-4935 Québec Inc. to pay $3,389.90 to 9338-2653 Québec Inc., plus interest and the additional indemnity provided for by art. 1619 CCQ as of September 27, 2017;

[ 121 ] THE WHOLE with costs again 2545-4935 Québec Inc. __________________________________ MAGALI LEWIS , J.C.Q. Me Michael Shacter Kaufman Attorneys Plaintiff’s attorneys Me Ali Sbai Arruda Teixeira inc. Defendant’s attorneys Dates of hearing: October 30 and 31, 2019