Napanee restauranteur awarded damages after unlawful lease termination

The prominent building at 834 Palace Road in Napanee, which was formerly a Wild Wing franchise location, can be seen by traffic on nearby Highway 401 and is part of the “Palace Village” area. Photo via Google Maps Street View in 2021.

A dispute between a commercial tenant and a Napanee landlord before the Ontario Superior Court of Justice has concluded, with the tenant, J K Eats & Pub Inc., being awarded damages after the landlord, Metamore Inc., was found to have unlawfully terminated the lease.

Justice Kerry Lee McVey heard the case by video conference on Friday, Feb. 9, 2024. Jeyakumar Subramaniam, the sole shareholder, director, and officer of the Applicants, J K Eats & Pub Inc., was in the process of opening a restaurant in one of the units of the lowrise shopping plaza owned by the Respondents, Metamore, located at 824 Palace Road in Napanee.

During the course of usual construction and development of the premises for an eatery to be opened, a dispute arose between the parties in September 2023, which caused the Respondents to lock the Applicants out of the premises, according to court documents. The Applicants were seeking reinstatement of their tenancy on the basis that the Respondent did not comply with section 19(2) of the Commercial Tenancies Act (CTA), rendering the Respondent’s termination of the lease unlawful. In the alternative, the Applicants seek relief from forfeiture pursuant to section 20(1) of the CTA

Section 19(2) of the CTA states:

A right of re-entry or forfeiture under any proviso or stipulation in a lease for a breach of any covenant or condition in the lease, other than a proviso in respect of the payment of rent, is not enforceable by action, entry, or otherwise, unless the lessor serves on the lessee a notice specifying the particular breach complained of, and, if the breach is capable of remedy, requiring the lessee to remedy the breach, and, in any case, requiring the lessee to make compensation in money for the breach, and the lessee fails within a reasonable time thereafter to remedy the breach, if it is capable of remedy, and to make reasonable compensation in money to the satisfaction of the lessor for the breach.  

The details

Reportedly, the Applicants planned to open the restaurant on September 2, 2023. In the early morning hours of September 2, 2023, technicians were on-site finishing the installation of a point-of-sale system. The Applicants’ head cook was also on-site supposedly making final preparations for the food service. Mr. Subramaniam was not present.

During this time, on the premises, an employee of Metamore, Wade Ennis, who lived above the soon-to-be restaurant, called the Applicants to advise that a “drunken disturbance” had woken him up. According to court documents, Ennis called Subramaniam at approximately 2:30 a.m. on Saturday, Sept. 2, 2023, to make the complaint. Ennis then hung up before Subramaniam could reply.

Upon awakening that morning, Subramaniam saw that at 3:22 a.m. he had been included in a MMS (text) group message with Ennis, and Jason Coughlin, a director of Metamore Inc. In the group message, it was suggested that the restaurant had “broken many parts of its lease” and noted that no one could be on site legally until “a meeting has been held between JR, Jason Coughlin and Wade Ennis.”

The messages go on to note that “drunk, stoned staff have kept us up. We will meet with you Tuesday. Until then no one is to be on the premises or the OPP will be called.”

According to Justice McVey, Ennis did not articulate which covenant of the lease the Applicants had purportedly breached.

The court documents outlined the conversations between the parties:

Subramaniam responded at 7:38 a.m. apologizing and agreeing to the meeting, noting that he had workers scheduled to be on site that day, and he was concerned for his food products already inside the restaurant.

Ennis replied, saying he could grab his foodstuffs, but maintained that the individual who was drunk the night before was not welcomed at the premises.

Further messages outlined the workers’ timelines (on Subramaniam’s end), and threats to call OPP if he didn’t comply to demands, from Ennis.

Later that day, Subramaniam’s son, who is more fluent in English, began communicating on his father’s behalf, issuing an apology, and noting that “we are taking serious measures to deal with the offending person to ensure a situation like this does not occur again.” He also asked for an earlier meeting date, or for the ability to allow a small crew to continue to work toward opening the restaurant on their timeline.

No response to this request was granted.

At 4:30 p.m. that same day, the power went out at the premises. According to court documents, Subramaniam and his son went outside where Ennis and Coughlin were present. Subramaniam’s son, Piranavan, reportedly pleaded with Ennis and Coughlin to turn the power back on to avoid spoiling the refrigerated and frozen food inventory. Ennis advised them that he would turn the power back on if they left the premises. 

The pair complied and stayed away for the rest of the weekend.

On Monday, Subramaniam followed up with Ennis and Coughlin about their upcoming meeting, and was told he would be advised before noon the following day as to the timing of the meeting.

Sporadic messaging took place over the day, ending with the meeting being pushed to the following Monday, with Coughlin stating “Because of the breach of multiple covenants of the lease and the amendment [sic] we are left with a choice to either terminate the lease or proceed with a new agreement.”

When Subramaniam arrived at the premises on Thursday, Sept. 7, 2023, to check on his inventory ahead of the rescheduled meeting, he found a chain on the door preventing entry. No notice of default or termination was posted on the premises, according to court documents.

Later that evening Subramaniam cut the chain, while in the company of a friend, and entered his restaurant. At 9:10 p.m., Coughlin, Ennis, and an unknown male and female entered the premises and told Subramaniam that he had to leave, to which Subramaniam responded that the lease was still valid. In the court documents, Subramaniam alleges that Coughlin began pushing him and that Ennis “threw a case of beer on the ground.” A photo of the smashed beer bottles was appended as an exhibit to Subramaniam’s affidavit. 

Ennis called the police. When officers arrived on scene, Subramaniam spoke with them and advised them that he would leave the premises by 11 p.m.

The next morning, when Subramaniam arrived at his restaurant, the locks had been changed and, for the first time, a notice of default and a notice of termination were posted on the front and side doors.

Court documents detailed the notices:

The notice of termination was dated September 8, 2023. The notice of default was dated September 5, 2023, despite never having been provided prior to September 8, 2023. The notice of default alleged the following breaches of the lease:

  1. That the Tenant operated the Premises past the permitted hours of operation;
  2. That the Tenant failed to follow the laws and guidelines for licensed establishments namely serving and permitting consumption of alcohol outside of legal licensed hours, permitting overserving and public intoxication among other items; 
  3. That the Tenant operated the premises to be a nuisance to other occupants and residents.

The notice of default concluded with the following paragraph:

TAKE NOTICE any further default or conduct similar to the above will result in immediate termination of the Lease by way of changing of the locks without any further notice. No further indulgence shall be granted. [emphasis added by the court]

After reading the posted notices, the Applicants filed a police report and subsequently retained a lawyer.

The findings

Justice McVey noted there were very few details provided for what actually occurred in the early morning hours of September 2, 2023.

“The sum total of the evidence on this point is the hearsay evidence of Mr. Coughlin about Mr. Ennis’ conclusions. This is problematic. One would reasonably think that if a commercial landlord wished to terminate a five-year lease in its infancy due to a problematic incident amounting to a foundational breach of the lease, that details of the incident would be provided to the Applicants, and certainly to the Court in the context of litigation. On the evidentiary record before me, I have insufficient evidence to even find that the Applicants breached the lease,” she detailed.

“The Respondent failed to comply with s. 19(2) of the CTA. Therefore, its termination of the lease was unlawful.”

The Justice’s findings included deliberation on Relief from Forfeiture.

Relief from forfeiture pursuant to section 20 of the CTA is an equitable remedy that serves as a shield to protect a tenant, in appropriate circumstances, from termination of a lease in the face of a proven violation.

“Given my finding that the termination of the lease by the Respondent was unlawful, the Applicants need not avail themselves of relief from forfeiture,” she stated.

“Though this remedy is granted sparingly, extending it to the Applicants is appropriate for [many] reasons. First, this was not a wilful or intentional breach. There is no indication that Mr. Subramaniam was aware of what was transpiring at the Premises in the early morning hours of September 2, 2023. Nor is there any indication that he condoned the conduct after-the-fact. Rather, Mr. Subramaniam immediately apologized in the morning and stressed that he would deal with the offending employee. Second, the breach was not related to the operation of the Applicants’ restaurant per se. The breach was not driven by the type of business conducted by the Applicants such that concerns of reoccurrence arise. There is no basis to believe that a similar incident will occur again, given that the alleged incident was caused by a rogue employee who no longer works for the Applicants.”

The Justice detailed five more reasons she would extend relief from forfeiture to the Applicants, which can be read in the court documents here.

In conclusion, Justice McVey stated that the Applicants are “entitled to (a) a declaration that the lease remains in full force and effect; and (b) an order requiring the Respondent to restore all goods and chattels situated in the premises, and an order preventing any sale, disposition, disposal or distress from being made.”

The Applicants were also awarded “immediate and unfettered” access to the premises, and as part of the purchase agreement, the Applicants were allowed three months of free rent which were then taken up by the court proceedings. The Respondent is now responsible for crediting the Applicants for two months of rent. 

“For the avoidance of doubt, no further rent will be due under the lease until two months after the delivery of these reasons, at which time the Applicants’ rent payment obligations shall resume in accordance with the lease. In the meantime, the Respondent is to pay the Applicants damages in the amount of $10,735 (two months’ rent at $4,750 per month plus HST),” Justice McVey outlined.

For reasons including the Applicants’ inability to open their restaurant on their original schedule, the Justice awarded “further damages in the equivalent of two months’ worth of rent to account for the time it may take to rehire staff, purchase inventory, and ready the premises for opening.”

According to LinkedIn, Metamore Inc. is owned and operated by Shawn Beattie out of Napanee.

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