101223080 SASKATCHEWAN LTD. APPLICANT - v. –, 2023 SKKB 274

KING’S BENCH FOR SASKATCHEWAN Citation: 2023 SKKB 274 Date: 2023 12 18 Docket: KBG-SA-01186-2023 Judicial Centre: Saskatoon BETWEEN: 101223080 SASKATCHEWAN LTD. APPLICANT - and – JMT TOMAS HOLDINGS LTD. RESPONDENT Counsel: Samuel W. Edmondson for the applicant Jean-Pierre C. Seguin for the respondent ___________________________________________________________________________ JUDGMENT SCHERMAN J.

December 18, 2023 ___________________________________________________________________________ Introduction [ 1 ] On September 1, 2023, JMT Tomas Holdings Ltd. [JMT] gave a notice of default to its tenant, 101223080 Saskatchewan Ltd. [101] in circumstances where it said 101 was some $58,994 in arrears on the payment of its rent. 101 had operated a restaurant in the leased premises (#300 - 415 Circle Drive East, Saskatoon) under the name Asian Buffet since 2013. On September 22, 2023, JMT gave notice of termination of the lease and re-entered possession of the premises.

JMT had over the two preceding years given various notices of default in payment, in particular in relation to additional rent for occupancy costs. [ 2 ] Concurrent with posting its notice of termination, JMT seized assets of 101 pursuant to a registered security interest it held over such assets to secure the payment of the rental arrears and costs of enforcement. [ 3 ] On October 6, 2023, 101 obtained from the Court, on a without notice application, an interim order providing that until agreement between the parties or further order of the Court: a.

JMT was enjoined from disposing of the assets it had seized; and b. 101 was granted immediate possession of the leased premises subject to the terms of the lease but with rent, taxes and occupancy costs reduced by a sum prorated for the period September 22, 2023 to the date upon which 101 takes possession of the premises. [ 4 ] The matter is back before the Court pursuant to an originating application wherein 101 seeks orders:

a. granting it relief from the forfeiture of its lease and exclusive possession of the leased premises subject to the terms of the lease; b. enjoining JMT from disposing of the assets seized and staying the rights of JMT to enforce its purported security; c. declaring the purported termination of the lease as being of no force or effect, without prejudice to 101 commencing an action for damages for unlawful termination of the lease; d. in the alternative, declaring the purported seizure of assets by JMT to be of no force and effect, without prejudice to 101 commencing an action for damages for unlawful seizure; and e. costs to be assessed on a solicitor-client basis. [ 5 ] Subsequent to the interim order, 101 has paid, on a without prejudice basis, all of the unpaid rent claimed by JMT.

JMT acknowledges that: a. 101 has done what it was required to do pursuant to the interim order; b. all payment obligations under the lease are now current, including payment of the November 2023 rent; c. nonetheless it maintains its termination of the lease was proper and 101 should not be granted relief from forfeiture; and d. subject to payment of the costs of seizure, the assets seized by it can be returned to 101. [ 6 ] 101 says the JMT was not entitled to terminate the lease, but if it was: a. 101 should be granted relief from forfeiture; b. the seizure of its assets was unlawful and since any rent owing has been paid, there is no debt left to secure and thus the assets should be returned to it; and c. the costs of seizure that JMT claims are excessive and should not be allowed.

The Issues to be Determined [ 7 ] The issues to be determined are as follows: a. Was JMT entitled to terminate the lease? b. If yes, should 101 be granted relief from forfeiture? c. Did JMT have a valid registered security interest in the moveable property of 101 and was it entitled to seize the property it did as security for unpaid rent due to it? d. If the seizures were proper, is JMT entitled to continue to hold the assets as security for the costs of retaking possession and seizure of the assets? e. What is JMT’s entitlement, if any, to the costs of seizure secured by the assets? a.

Was JMT entitled to terminate the lease? [ 8 ] Section 9(1) of The Landlord and Tenant Act , RSS 1978, c L-6 [ LTA ], provides as follows: Right of re-entry on non-payment of rent 9

(1) In every lease, whether verbal or in writing and whenever made, unless it is otherwise agreed, there shall be deemed to be included an agreement that if the rent reserved, or any part thereof, remains unpaid for two calendar months after any of the days on which the same ought to have been paid, although no formal demand thereof has been made, or if default is made in the performance of any covenant or agreement on the part of the lessee, whether express or implied, and the default is continued for two calendar months, the landlord may at any time thereafter reenter into and upon the demised premises, or any part thereof in the name of the whole, and again have, repossess and enjoy the premises as of his former estate. [ 9 ] The affidavits filed satisfy me that there was significant history of rental arrears on the part of 101.

Specific issues arose from time to time with respect to delays in payment of the base monthly rent, but these specific issues were resolved in due course by payment, albeit often in some arrears. The September 1, 2023 notice of default largely related to the landlord’s position that additional rental payable in respect of occupancy costs, going back to 2020, were unpaid. [ 10 ] From December 2019 forward, payment of the arrears being sought by JMT were never satisfied in full. See in this respect the affidavit of Amanda Holeha sworn November 10, 2023, including: a.

Exhibit O, a December 10, 2019 letter from ICR Commercial Real Estate [ICR] advising 101 they had assumed the property management for JMT of the property leased to 101 and that they would be managing all of the tenant occupancy details; b. Exhibit E, a notice of default dated April 22, 2020, claiming a default of $16,937.81 in payment of rent;

c. Exhibit C, a notice of default dated September 18, 2020, claiming a default of $13,968.49 in payment of rent; d. Exhibit J, a letter of March 3, 2021, advising of a then default of $26,313.02 in payment of rent; e. Exhibit M, an April 24, 2023 letter providing an occupancy costs reconciliation for the year 2022 and claiming an adjustment due of $13,538.15 for 2022 occupancy costs; f.

Exhibit N, a September 1, 2023 letter regarding default in payment of rent owing of $58,994.04 with a supporting ledger of ICR going back to December 2019 when ICR took on the responsibility of the management of the leased premises for JMT. This ledger records all charges booked and payments made. [ 11 ] At all times from October 2020 forward this ledger showed there was rent due and owing.

The arrears claimed rose to $58,994.04 as of August 31, 2023. [ 12 ] 101’s position is that the balances claimed due and owing by JMT for occupancy costs cannot be properly treated as due and owing and thus are not valid grounds for termination because the 2021 through 2023 adjustments to occupancy costs were made without following the process for settling occupancy costs mandated by the lease. 101 has provided no evidence nor argument to the effect that the mathematics in the ledger are wrong or that payments made were not properly recorded.

Its position is simply that the process for settling occupancy costs mandated by the lease were not followed and thus any claim for unpaid occupancy costs being in arrears is invalid. [ 13 ] Paragraph 4 of the lease provides the tenant will pay to the landlord as additional rent its proportionate share of the building’s occupancy costs.

What are “occupancy costs” is fully defined in paragraph 4. [ 14 ] Regarding “the process” relied upon by 101, paragraph 4 says the following: 4. … The Tenant hereby agrees to pay to the Landlord on the first day of each and every month during the Term hereof, the monthly sum estimated by the Landlord from time to time by way of advances to be credited on account of the Tenant's proportionate share of the estimated annual Occupancy Costs as hereinbefore defined, and such advances will be adjusted as between the Landlord and the Tenant within sixty (60) days after each adjustment date and after the termination date of the Term hereof.

The amount to be initially paid by the Tenant as aforesaid shall be set out in

Schedule 1,

Part VI (b), all per month. The Landlord agrees to furnish to the Tenant, upon reasonable request therefor, a reasonably detailed statement of the actual annual Occupancy Costs and evidence of the accuracy of such statements. [Emphasis added] [ 15 ] By the language of the lease, the occupancy costs obligation starts with the landlord’s estimate. Since “adjustment dates” are not specified, logic suggests that an adjustment date can be any date in respect of which the landlord advises the tenant of the adjustments it is making.

In all cases, from and after ICR became the property manager, adjustments for each of 2020 through 2022 were made following the year end. JMT, through ICR, informed 101 what those adjustments were. [ 16 ] I find that ICR provided, as contemplated by the lease, “reasonably detailed statements of the actual annual occupancy costs” to 101. See, for example, the following: a. Exhibit M to the October 5, 2023 affidavit of Manh Chau, being an occupancy costs reconciliation of ICR for the calendar year 2021, advising that $4,630.11 was then owing in respect thereof; b.

Exhibit E to the affidavit of Manh Chau, being an occupancy costs reconciliation of ICR for the calendar year 2022, advising that $13,538.15 was then owing in respect thereof; c. Exhibit K to the affidavit of Manh Chau, which is a lease specific ledger prepared by ICR, which contains a full accounting of all charges to and payments made by 101 in respect of the lease from when it became the property manager. [ 17 ] I find no merit to the arguments made that the process mandated by the lease to make occupancy costs adjustments was not followed.

Paragraph 4 of the lease expressly contemplates the tenant paying the additional rent in respect of occupancy costs based upon the landlord’s estimate with those occupancy costs being adjusted retroactively as the actual costs became known.

I also find ICR provided 101 with “reasonably detailed statements of the actual annual occupancy costs”. [ 18 ] If and to the extent that 101 may have wanted evidence of the accuracy of occupancy costs adjustments, it had the right to request evidence of the actual costs paid. 101 provided no evidence of requests for such evidence being made prior to the September 1, 2023 notice of default. Further, there is no evidence provided by 101 to support its position that the lease required 101 to agree to the adjustments to occupancy costs. [ 19 ] In Mr.

Chau’s affidavit, sworn October 5, 2023, he states in paragraphs 16 and 17 as follows: 16. On August 28, 2023 Ms. Holeha e-mailed me, alleging that the Applicant owed the Respondent $58,994.04 in arrears. A true copy of that correspondence, and the exhibits thereto, is attached as Exhibit “H”. 17. There were several issues with the ledgers provided by Ms. Holeha as attachments to her August 28, 2023 email, namely: (

a) I had delivered post-dated cheques to ICR Commercial for payment of the sum owing on for August 2023 rent, taxes and occupancy costs, which was not reflected as having been paid in the ledgers.

(

b) Neither the Landlord nor its property manager has provided evidence substantiating the occupancy costs adjustments for 2021 or 2022. At best, the Landlord, through its property manager, broke the additional occupancy costs amount down as set out in a letter sent to the Applicant in April 2023, but other than property taxes does not provide evidence of any sort that the Landlord has incurred additional expenses in any area. A copy of the said letter is attached as Exhibit “I”. (

c) The ledgers provided by Ms. Holeha (the enclosures to Exhibit “H”) also includes a $10,000.00 charge on September 16, 2020 purporting to be for setting up a security deposit, which is not a charge authorized or agreed to by the Applicant. I am advised by my solicitor, and believe to be true, that on October 4, 2023 the Landlord’s counsel advised that this charge was simply the way that the Landlord’s property manager recorded the deposit from 2013, as it was not the property manager at the time that the Lease was entered into and deposit paid. (

d) Occupancy costs recorded in the ledger for January 2023 through August 2023 is identified as $7,231.88, notwithstanding that occupancy costs (inclusive of tax) of that sum were not agreed to by the Applicant, and the agreed occupancy costs were $6,437.81 (inclusive of tax) per month and had been for many years. It was only in correspondence from Ms.

Holeha on September 20, 2023 (referenced below as Exhibit “M”) that the Applicant was made aware of a letter dated January 26, 2023 purporting to retroactively change the occupancy costs payable. [ 20 ] He essentially takes the position that there is no obligation to pay occupancy costs rent until 101 agrees what the occupancy costs to be charged are. That is not what the lease provides. It requires the tenant to pay occupancy costs as estimated by the landlord and periodically adjusted with “reasonably detailed statements of the actual annual occupancy costs”.

The tenant is entitled to request evidence supporting the actual costs, but such a request for evidence does not suspend the current obligation to pay the occupancy costs claimed based upon the landlord’s estimates and adjustments. [ 21 ] Exhibits E and M to his affidavit clearly establish he was provided occupancy costs reconciliations for those years and advised of the arrears owing as a result. These reconciliations met the lease requirement of being “reasonably detailed statements of the actual annual occupancy costs”.

He provides no evidence that any requests for evidence verifying the occupancy costs claimed were made in respect of any of the years 2021 through 2022. The 2023 occupancy costs obligation was necessarily based on the landlord’s estimates and subsequent reconciliations. [ 22 ] Exhibit H to Mr. Chau’s affidavit evidences that on August 28, 2023, ICR sent to 101 an email and the ledger for the lease current to August 1, 2023, which detailed the unpaid charges owing. On September 20, 2023, Amanda Holeha sent an email to Mr.

Chau detailing the occupancy costs outstanding from 2020 forward and acknowledging payments made for the August and September 2023 base rent, reducing the balance owing to $40,441.85. See Exhibit M to the Manh Chau affidavit sworn October 5, 2023.

In this email she provided details of the occupancy costs charged for 2020 through 2023, payments made thereon and the balances outstanding, stating why the landlord took the position that the April 2023 rent remained unpaid (that the sum of $10,000 was a lease mandated deposit) and that the total outstanding balance (after the payment of the August and September base rent) was $40,441.85. She expressly stated that if the outstanding balance was not paid by the end of the day the landlord would be exercising its rights. [ 23 ] Mr.

Chau responded to the first paragraph of the above email on September 21, 2023 (see Exhibit

N) with the following statement in bold text: … Not hearing back from us immediately doesn't warrant your crude and outrageous behavior towards us. As was mentioned in our e-mail, post dated cheques were written up to December 2023. We obviously need time to verify with bookkeeping to make sure they have not already been cashed, time to cancel them, and then re-issue cheques to you. All of this can't happen at the snap of your fingers. Professional courtesy towards your customers apparently isn't a part of your language or culture at ICR. I will be reporting you to your superiors.

Please provide me with names and contact information so that I may arrange a time to discuss this abhorrent conduct towards us. Furthermore, the day you sent over your personnel to make threats to seize my assets the months in question were already deposited by your company. [ 24 ] Mr. Chau’s response was addressing the issue of missing cheques for the August and September rent (which had been dealt with by that point) and ignored the longstanding issue of non-payment of occupancy costs rent arrears.

There is no evidence that 101 asked for evidence of the accuracy of the occupancy costs information contained in the occupancy costs reconciliations provided; although after the lease was terminated, he argued he had been asking for same. [ 25 ] The balance outstanding was not paid and on September 22, 2023, JMT gave notice of termination of the lease and re-entered possession of the premises. [ 26 ] While 101 is of the view that there were circumstances that made it unreasonable for JMT to proceed as it did, including his apparent view of a process under which he had to agree on occupancy costs, I do not accept this as correct. [ 27 ] I find that there were significant arrears in the rent due and payable by 101 and that such default had continued for in excess of two years.

Some significant portion of the balance of some $44,000 in rent outstanding was in arrears more than two calendar months when on September 22, 2023 JMT gave notice of termination of the lease and re-entered possession of the premises. While 101 is of the view that there were circumstances that made it unreasonable for JMT to proceed as it did, including that it was requesting evidence respecting occupancy costs, the issue is whether JMT was legally entitled to terminate the lease.

The requirements of s. 9 of the LTA , that there be two months in arrears of rent before the landlord is entitled to terminate the lease and re-enter the premises existed. JMT was entitled to terminate the lease as it did. b. Should 101 be granted relief from forfeiture? [ 28 ]

Section 10 of the LTA provides, inter alia , as follows in respect of relief from forfeiture:

Relief against forfeiture 10(3) Where a lessor is proceeding by action or otherwise to enforce a right of re-entry or forfeiture, whether for non-payment of rentor for other cause, the lessee may in the lessor’s action, if any, or if there is no such action pending, then in an action brought by himself,or upon

summary application to a judge of the Court of Queen’s Bench, apply to the court or judge for relief.

(4) The court or judge may grant relief to the lessee who applies under subsection (3) and on such terms as to payment of rent, costs,expenses, damages, compensation, penalty or otherwise, including the granting of an injunction to restrain any like breach in the future,as it or he deems just having regard to the proceedings and conduct of the parties under the foregoing provisions of this

section and to allthe other circumstances. … When proceedings may be stayed

(6) Where action is brought to enforce a right of re-entry or forfeiture for nonpayment of rent and the lessee, at any time beforejudgment, pays into court all the rent in arrear and the costs of the action, the proceedings in the action shall be forever stayed. Position of lessee

(7) Where relief is granted under this

section the lessee shall hold and enjoy the demised premises according to the lease thereof madewithout any new lease. [29] JMT had, with its September 1, 2023 notice of default, served the notice required by s. 10(2), specifying thebreach complained of and requiring 101 to remedy the breach. [30] In Restaurant Sahib Jee Inc. v Prairie Oasis Travel Plaza Inc., 2021 SKQB 88, Layh J. stated as follows: ISSUE [3] The issue the court must resolve is whether the equitable principles of law that animate relief from forfeiture lie in the Tenant’sfavour.

ANALYSIS Forfeiture – Statutory Relief Based on Equitable Principles [4] As Justice Mills stated in Kenmore Land Co. v Jim & Jaklen Holdings Ltd., 2012 SKQB 28, 390 Sask R 108, relief againstforfeiture is statutory, but based on equitable considerations. Furthermore, as Justice Mills found, I, too, find helpful the statement inSaskatchewan River Bungalows Ltd. v Maritime Life Assurance Co., (SCC), [1994] 2 SCR 490 (WL).

Although thatdecision involved relief from forfeiture under an insurance policy, the statement at para. 32 informs the court of the equitableconsiderations appropriately applied to a request from relief from forfeiture under a lease: 32 The power to grant relief against forfeiture is an equitable remedy and is purely discretionary.

The factors to be considered by theCourt in the exercise of its discretion are the conduct of the applicant, the gravity of the breaches, and the disparity between the value ofthe property forfeited and the damage caused by the breach [Citations omitted]. [5] Relief from forfeiture is discretionary and discretion is sensitive to the circumstances and facts that come before the court. With thisgeneral principle in mind, the court must look to the following circumstances to determine whether equity lies with the Tenant in itsquest for relief from forfeiture.

In this application, I have found the following circumstances determinative of the matter: 1. The legitimacy of the Landlord’s termination of the lease; 2. The gravity of the alleged breach; 3. Timeliness of the Tenant’s conduct to seek relief from forfeiture; 4. The absence of an intervening tenant; and 5. Personal circumstances. [31] Counsel for 101 and JMT agree that the law summarized by Layh J. is applicable to 101’s application for relieffrom forfeiture. I have already found that the landlord’s termination of the lease was legitimate.

Counsel for JMT agrees that theconditions of a timely application by the tenant, 101, to seek relief from forfeiture and the absence of an intervening tenant are satisfied.Thus, whether or not relief from forfeiture should be granted falls to be decided on the equitable considerations surrounding the gravityof 101’s breach and the personal circumstances of the parties, weighed in balance with the above-noted matters. The Gravity of 101’s Breach [32] I find that 101’s breach was significant.

The obligation to pay the rent called for by the lease on a timely basis isamong the most fundamental obligations of a lessee. Without rent being paid on a timely basis the economic justification for and abilityof individuals or corporations to invest in property to rent collapses.

Section 9 of the LTA reiterates the common law concept that failureto pay rent when due is a fundamental breach of the lease; but imposes a statutory condition limiting landlords’ rights to terminate leases

for failure to pay rent to situations where the default has continued for two months. [ 33 ] In this case there has been default in respect of significant amounts of the tenant’s obligation to pay its occupancy costs obligations going back more than two years. The position taken by 101 that it had to agree on the amount of adjustments to occupancy costs is without merit. The occupancy costs are clearly defined in the lease and the landlord was entitled to be paid the full amount of those costs.

The tenant’s only right regarding occupancy costs was to be informed what the amounts were and, if it questioned the amounts, to request evidence to support the charges. There is no evidence that 101 ever made such a request prior to the September 1, 2023 notice of default.

Even if such requests were made, the tenant’s obligation was to pay the additional rent for occupancy costs based on the landlord’s estimates and reconciliation statements unless and until the request and evidence process would have demonstrated a lesser obligation. [ 34 ] I assess the gravity of the breach by 101 to be high level by reason of the facts that: a. the breaches were longstanding and in respect of significant amounts; and b. if 101 genuinely doubted the landlord’s claimed occupancy costs, it was incumbent upon it to follow the straightforward process of asking the landlord for evidence or proof that it actually incurred the occupancy costs claimed, which it did not do. [ 35 ] I am satisfied, on the balance of probabilities, that the purported disagreement of 101 in respect of the validity of the occupancy costs being charged, was more likely a delaying tactic rather than genuine disagreement.

If the amounts were truly disputed, 101 had a remedy – make a clear demand for the supporting documentation and enforce the contractual obligation JMT had to provide same. Its failure to do so is significant.

The Personal Circumstances [ 36 ] The personal circumstances to be considered must necessarily be the personal circumstances of both the landlord and the tenant. 101 advances the following circumstances as appropriate for consideration in the discretionary decision I must make regarding relief from forfetiture: a. 101 has been a tenant of the subject premises since 2013; b. the lease was renewed by agreement in February 2023 by JMT notwithstanding there were then arrears; c. since the interim order, 101 has paid the entirety of the arrears claimed by JMT even though it continues to dispute the accuracy of the claimed arrears in respect of occupancy costs and says the $10,000, which JMT maintains is a contractual deposit, should have been applied to the April 2023 base rent; d. 101 says it has expended some $700,000 in lease improvements, the benefits of which it will lose if relief from forfeiture is not granted; e. it will lose the opportunity to earn the profits it might otherwise earn during the remainder of its five-year term under the February 2023 renewal of the lease; f. the negative impact on its employees whose jobs will end if the lease is not continued; g. it suffered a loss of some $21,000 in spoiled inventory during the landlord’s re-entry of the premises; and h. the losses to it as a tenant will be grossly disproportionate to any loss or impact on the landlord. [ 37 ] JMT says the following circumstances should be considered in deciding whether or not to grant relief from forfeiture: a. equitable relief is only available to claimants who come to the Court seeking that relief with clean hands.

JMT says the history of 101’s past defaults in respect of payment of rent and newly discovered additional breaches of the lease should lead to the conclusion that 101 is not before the Court with clean hands; b. there is a significant and extended history of delays and defaults in rental payments in addition to 101’s failure or refusal to pay the occupancy costs additional rent and 101 has been a difficult tenant to deal with.

It terminated the lease only after repeated and significant defaults by 101 and even then gave 101 a clear and ample notice of its intention to terminate the lease; c. subsequent to re-entry into the premises, JMT discovered that 101 had been subletting a portion of the premises to Phanesse Beauty Co. without approval of such subletting by JMT. This subletting was a breach of the tenant’s covenants under the lease.

Pursuant to s. 10(9) of the LTA , relief from forfeiture is not available for breach of a condition against subletting without the landlord’s approval. d. in addition, it has been learned that 101 had failed to maintain certain insurance coverage that it was obliged under the terms of the lease to have in place; e. while 101 did initially expend monies in leasehold improvements, it enjoyed the use of and depreciated such improvements over the course of its initial 10-year lease. There was a fire in the premises in 2018 causing significant damage to the interior of the building and the leasehold improvements done.

The approximate $700,000 cost of the restoration of the premises was paid for by JMT’s insurance; and f. the consequences of termination of the lease complained of by 101 could have been totally avoided by 101 having not

defaulted in its rental obligations and dealing with the JMT as landlord in good faith. My analysis of the request for relief from forfeiture [ 38 ] Relief from forfeiture is a discretionary decision by a judge applying equitable considerations.

The various impacts that 101 identifies could clearly have been avoided by 101 simply performing its obligations under the lease in accordance with the terms of the lease and dealing with the landlord and its representatives in a reasonable manner. [ 39 ] In my opinion, but for the following factors, the balance of the gravity of the breaches and the circumstances of the parties weigh in favour of denying relief from forfeiture.

That additional factor is the issue of how and to what extent granting relief from forfeiture prejudices JMT. [ 40 ] Counsel for JMT acknowledged during submissions that, subject to 101 not defaulting in payment of its rent, JMT would have been content to have 101 continue as a tenant of the premises because in the current market the prospects to promptly replace 101 as a tenant at a similar rent are by no means certain and that JMT may well suffer a significant short to medium term loss by having terminated the lease.

The fact that JMT renewed the lease in 2023, notwithstanding its troubled relationship with 101, is entirely consistent with this analysis. [ 41 ] On the issue of the prejudice JMT will suffer by granting relief from forfeiture I conclude that it will suffer no prejudice. My reasons for this conclusion are the following: a. if I grant relief from forfeiture JMT has a contractual right under the lease extension agreement of February 2, 2023 to payment of both base rent and additional rent in respect of occupancy costs consistent with my

interpretation of the lease for a period of five years; b. the lease extension agreement provides for increases in the base rent as of May 1, 2024 and May 1, 2026; c. the alternative for JMT is to have for some unknown period a vacant and unrented property with uncertain prospects regarding if, when and for what it can rent the property to other tenants; d. a cost/benefit analysis for JMT appears to support the conclusion that the best business decision is to continue with the lease as it exists; e. 101 has already brought current all rent obligations claimed by JMT to the end of November and presumably now for December as well; f. given my decision that JMT was entitled to terminate the contract, 101 should clearly understand that if it does not pay its base rent and occupancy costs obligations consistent with my

interpretation of the contract, the clear probability is that JMT would move once again to terminate the lease; and g. JMT has a deposit of $10,000 against future rent obligations, a guarantee from a principal of 101, the right to distrain for rent, and the security interest it holds in restaurant equipment of 101.

These factors provide significant security or payment. [ 42 ] When I factor in the lack of or limited prejudice to JMT by granting relief from forfeiture (indeed the potential financial benefit to JMT that will flow from granting 101 relief from forfeiture), along with the weight of the other considerations, I have concluded that on balance the equitable considerations favour granting relief from forfeiture.

Accordingly, I make the discretionary decision to grant 101 relief from forfeiture. [ 43 ] I grant 101 relief from forfeiture of its lease from JMT on the express condition that 101 shall, during the balance of the term of that lease, strictly comply with its obligations thereunder. c. Did JMT have a valid registered security interest in the moveable property of 101 and was it entitled to seize the property it did as security for unpaid rent due to it? d.

If the seizures were proper, is JMT entitled to continue to hold the assets as security for the costs of retaking possession and seizure of the assets? [ 44 ] There is no question but that JMT has a security interest in the moveable property of 101. See clause 11 of the lease. It was entitled to seize the property it did as security for the unpaid rent due to it.

That unpaid rent has now been paid, but the security interest remains in place as security for future indebtedness. [ 45 ] I find the seizure of the property in question have been in accordance with the purpose of the security interest granted; i.e., to secure the payment of rent due under the lease.

Rents were due and unpaid and thus the landlord was entitled to access the remedy of seizure pursuant to its security interests therein. [ 46 ] The rental arrears have now been paid and thus 101 is entitled to the release from seizure of all such items subject to the issues of: a. whether 101 is entitled to such release without payment of the costs JMT incurred in respect of the seizure thereof; and b. what is the proper costs of such seizure? [ 47 ] Counsel for 101 takes the position that: a. the notice pursuant to s. 59(6) of The Personal Property Security Act, 1993 , SS 1993, c P-6.2 [ PPSA ], served by the

landlord of its intention to dispose of the collateral seized, found at Exhibit T to the October 5, 2022 affidavit of Mr.

Chau, does not comply with the s. 59(7) requirement to specify the amount required to satisfy the obligation secured, and this deficiency is sufficient to stay the enforcement efforts of the landlord until such time as it has given proper notice (see paragraphs 72 and 73 of the brief of law of 101); and b. in any event since the landlord’s seizure was pursuant to its security interest arising under paragraph 11 of the lease, the landlord should not be permitted to enforce its security because: i. the amounts owing were unclear; ii. the amounts claimed by the landlord have been paid in full and the landlord has not itemized the amount it claims to be entitled to pursuant to s. 62 (b)(ii) of the PPSA ; and iii. the sum of $44,441.85 claimed owing by the landlord is predominantly for amounts that are not rent and, therefore, not secured by paragraph 11 of the lease (see paragraph 74 of the brief of law) [ 48 ] The affidavit evidence filed does not provide the evidentiary basis with respect to registration of the JMT security interest with the PPSA ; however, the brief of law filed by counsel for 101 does not dispute such registration and acknowledges notices served pursuant to s. 59(9) and s. 61(1) of the PPSA .

Both counsel advised the Court that they wish to have a decision on the validity of JMT’s position that it is entitled to maintain seizure until the costs of such seizure are paid and do not wish to come back to court again on this issue. e.

What is JMT’s entitlement, if any, to the costs of seizure secured by the assets? [ 49 ] Given counsel’s desire that I decide the issue notwithstanding the lack of comprehensive factual evidence and in-depth legal submissions by counsel, I am prepared to decide the essential issue, which is whether the costs of seizure, are included in the obligation secured. [ 50 ] As already stated, paragraph 11 of the lease creates a valid security interest. The sum of $44,441.85 is comprised of the landlord’s claim of non-payment of the April 2023 base rent plus what was owing in respect of occupancy costs from 2020 forward.

The lease clearly identifies the obligation in respect of occupancy costs as being additional rent. I find it was a secured debt owing and the fact that 101 has paid the full amount claimed in respect of rental arrears does not abrogate JMT’s rights to recover the seizure costs. [ 51 ] At common law a creditor enforcing a security interest in chattels to satisfy a debt was also entitled to recover the costs of enforcing the security from the chattels seized. This right now also exists on a statutory basis by virtue of s. 62(1) of the PPSA , which provides as follows: 62

(1) At any time before the secured party or a receiver has disposed of the collateral or contracted for disposition pursuant to

section 58 or 59 or before the secured party is deemed to have irrevocably elected to retain the collateral pursuant to

section 61: (

a) a person who is entitled to receive a notice of disposition pursuant to subsection 59(6) or (10) may, unless that person otherwise agrees in writing after default, redeem the collateral by: (

i) tendering fulfilment of the obligations secured by the collateral; and (ii) paying a sum equal to the reasonable expenses of seizing, repossessing, holding, repairing, processing and preparing the collateral for disposition, if those expenses have actually been incurred by the secured party, and any other reasonable expenses incurred by the secured party in enforcing the security agreement; and (

b) the debtor, other than a guarantor or indemnitor, may, unless the debtor has otherwise agreed in writing after default, reinstate the security agreement by: (

i) paying the sums actually in arrears, exclusive of the operation of an acceleration clause in the security agreement; (ii) curing any other default by reason of which the secured party intends to dispose of the collateral; and (iii) paying a sum equal to the reasonable expenses of seizing, repossessing, holding, repairing, processing and preparing the collateral for disposition, if those expenses have actually been incurred by the secured party, and any other reasonable expenses incurred by the secured party in enforcing the security agreement. [ 52 ] Section 62(1)(

b) is the applicable provision given that 101 has paid the sum actually in arrears but has not satisfied the s. 62(1)(b)(iii) element of paying the reasonable expenses of the seizure and enforcing the security agreement. I find that in the circumstances of this case any failure on the part of JMT to comply with technical requirements of the PPSA notices given does not eliminate JMT’s rights to hold the seized assets as security for the reasonable costs of enforcement of its security interests. No authority was submitted by counsel for 101 in support of their submissions in this respect.

Given the clear notices by JMT as to what the amount of the default was and the position taken by 101 that nothing was owed or in arrears, I find any failure in the PPSA notices to specify the amount required to satisfy the obligation secured to be, at best, a technical breach that does not support 101’s position.

The September 22, 2023 notice of termination expressly put 101 on notice that JMT would be seeking to recover “All costs incurred by the Landlord as a result of any and all breaches of the Lease, including, without limitation, legal and other expenses incurred in respect of the termination of the Lease.”

[ 53 ] For these reasons I find the assets seized remain as security for JMT’s reasonable costs of seizure. The only evidence I have of such costs are the invoices relating to distraint and seizure found at Exhibit R of the October 5, 2023 affidavit of Mr. Chau, which total $5,301.24. I further find that those reasonable costs of seizure are the costs which 101 must pay to JMT in order for it to have the assets seized released from seizure. Costs [ 54 ] Both parties have sought solicitor-client costs. Solicitor-client costs are not appropriate in proceedings of this nature.

While I granted 101 relief from forfeiture, JMT was entitled to terminate the lease; in my assessment 101 should not be entitled to an award of costs for obtaining this equitable relief. Its default created the necessity for it to seek relief from forfeiture. I am of the view that JMT suffered a legal wrong at the instance of 101 and notwithstanding granting relief from forfeiture to 101, the fault lay entirely with 101. Accordingly, I find that JMT shall be entitled to tax the party-party costs of the proceedings against 101 on the basis of Column 2 of the Tariff of Costs.

Conclusion [ 55 ] To summarize, for the reasons set forth above I find and order as follows: a. JMT was entitled to terminate the lease; b. I grant 101 relief from forfeiture of the lease; c. JMT is entitled to continue its seizure of assets of 101 until 101 pays to JMT the reasonable costs relating to the termination of the lease and of seizure, which costs I find to be a total of $5,301.24; and d. 101 is not entitled to any costs of the proceedings.

JMT shall be entitled to tax the costs of the proceedings against 101 on the basis of Column 2 of the tariff under The King’s Bench Rules . ______________________________J. B. SCHERMAN