An interesting new ruling (in commercial tenancy setting) on the right of re-entry during the eviction moratorium and equitable relief: 8443220 Canada Inc. v. V.G.R Investments Ltd., 2021 ONSC 8258 (CanLII), <https://canlii.ca/t/jlc8n>.
The tenant received a subsidy under CERS ("Canada Emergency Rent Subsidy"), but did not pay full rent. The landlord resorted to self-help by utilizing a bailiff to re-enter the premises, despite the fact that "Sections 79 - 85 of the CTA ostensibly prohibit commercial landlords from locking out their tenants who are in receipt of CERS benefits for non-payment of rent during the pandemic moratorium".
The landlord tried ex turpi causa argument (claiming that the tenant did not come to the court with “clean hands”, a precondition for equitable relief) on the grounds that the tenant was not paying full rent despite being a recipient of CERS, but this argument failed and the court granted the tenant a mandatory interlocutory injunction.
The ruling provides a brief overview (in COVID-19 context) of an application of the three-part test for granting an interlocutory injunction, i.e. the well-known “R.J.R. MacDonald test” from RJR-MacDonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 SCR 311, <https://canlii.ca/t/1frtw>, which was mentioned previously in this blog (e.g. here):
1) serious issue to be tried;
2) irreparable harm; and
3) balance of convenience.
On ex turpi causa (under the first part of the RJR test):
"[16] 844 points to the clear words of the statute and regulation to state that VGR was not entitled to re-enter its premises. It adds that VGR does not deny that the facts of this case fall under the CTA provisions set out above, other than in regard to its arguments of non-payment and that 844 is wrongly obtaining CERS funds. Those facts alone, 844 argues, raise a strong prima facie case in its favour.
[17] VGR responds that both the CTA and the regulation assume that full payment of rent is made under the CERS. Further it argues that the common law principle of ex turpi causa prevents 844 from obtaining equitable relief from this court when it is misleading the Canadian government about its use of CERS funds. It also states that rent was not paid at all in July 2021.
[18] While VGR has a point in that the forms signed by 844 imply that full rent payment will be made by commercial tenants receiving CERS funds, the terms of the CTA and O.Reg 763/20 do not explicitly set out that requirement.
[19] In Livent Inc. (Special Receiver and Manager of) v. Deloitte & Touche, 2016 ONCA 11, Blair J.A., writing for the Ontario Court of Appeal stated, the term, ex turpi causa non oritur action means "from a dishonourable cause an action does not arise". Blair J.A. referred to :
The statement of Lord Mansfield in Holman v. Johnson (1775), 98 E.R. 1120, at p. 1121, [which] has often been cited as authoritative:
No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiff's own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the Court says he has no right to be assisted. It is upon that ground the Court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff.
[20] Strictly speaking, the doctrine is a defence to a claim by a malefactor, one which seeks to prevent them from profiting from their misconduct. The doctrine is rarely used in Canada, and only in narrow circumstances. As Blair J.A. summarized after reviewing the two key Supreme Court of Canada cases on the doctrine:
The application of the ex turpi causa doctrine has therefore been strictly limited in Canada. It will apply only where allowing a plaintiff's claim would introduce inconsistency into the fabric of the law - by "giving with one hand what it takes away with the other": per McLachlin J. in Hall, 1993 CanLII 141 (SCC), [1993] 2 S.C.R. 159, at p. 178, quoted with approval by Rothstein J. in Zastowny, 2008 SCC 4 (CanLII), [2008] 1 S.C.R. 27, at para. 22.
[21] Here there is, at the very least, a real ambiguity regarding the obligations of a tenant receiving benefits under CERS, that is whether it is prohibited from receiving further benefits when it is unable to pay its full rent. I have been pointed to no authority in that regard.
[22] I also point out that it is not the Canadian Revenue Agency, which is raising this argument, it is the landlord, VGR. To the best of my knowledge, CRA still considers 844 to be eligible for the CERS programme. It has not appointed VGR to act as its agent in enforcing the programme.
[23] I add that when one looks to improper conduct, and the doctrine of ex turpi causa, that VGR’s own conduct violates the clear terms of the CTA. It knew that a moratorium on re-entry was in place, yet it chose to exercise a dubious right of re-entry. It can only be assumed that it felt that the evicted tenant, 844, would not fight back. Or as, the cliché has it, it is better to ask forgiveness than permission. If VGR felt that it had a right to re-entry based upon the arguments it raises in this motion, it could have brought an application to this court, seeking that relief. Instead it resorted to self-help. Having done so, it hardly lies in its mouth to complain about 844’s conduct regarding CERS."
On the RJR test:
1)
Strong Prima Facie Case
"[12] The test for the granting of an interlocutory injunction is the well known “R.J.R. MacDonald test”: 1) serious issue to be tried; 2) irreparable harm; and 3) balance of convenience: R.J.R Macdonald Inc. v. Canada (Attorney General), 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311, at para. 43. Since the moving party is seeking a mandatory injunction, the first arm of the test is a strong prima facie case rather than a serious issue: Blue Health Consultants v. Blue Health Services Inc. 2021 ONSC 2841 (“Blue Health”), at para. 39 citing R. v. Canadian Broadcasting Corp., 2018 SCC 5, [2018] 1 S.C.R. 196, at para. 15.
[...]
[15] As set out above, O.Reg 763/20 under the CTA provides that the non-enforcement period under s. 79 runs from December 17, 2020 to April 22, 2022.
[16] 844 points to the clear words of the statute and regulation to state that VGR was not entitled to re-enter its premises. It adds that VGR does not deny that the facts of this case fall under the CTA provisions set out above, other than in regard to its arguments of non-payment and that 844 is wrongly obtaining CERS funds. Those facts alone, 844 argues, raise a strong prima facie case in its favour."
Read above on the ex turpi causa argument.
2)
Irreparable Harm
"[24] There is little argument against the notion that 844 would suffer irreparable harm if the requested injunction is not granted. It would be out of business. By way of example, Pattillo J. found a similar result to amount to irreparable harm in Blue Health, above.
3)
Balance of Convenience
"[25] 844 argues that the balance of convenience favours it. First, it argues that it is the victim of its landlord’s improper behaviour in locking it out of the premises. Second, it refers to its irreparable harm argument. Third, it points to the terms to which it is willing to agree, which would substantially close the gap on any unpaid rent, to the benefit of the landlord.
[26] VGR argues that it is the aggrieved party who has been losing unpaid rent each month. If 844 intended to repay outstanding rent, it would have done so already as the issue has been on the table for over a year. It should not have to forebear any more of its tenant’s conduct. It asserts as well that at one point 844 chained some furniture to the front door, violating fire safety rules. But it did not say that that was a long-standing problem.
[27] The CTA pandemic amendments cited above were put into place to protect commercial tenants from the type of unilateral conduct to which VGR resorted during the pandemic. Without being allowed back into the premises, 844 will lose its business. But it is willing to pay an amount far greater than its rent each month to help make up for rental shortfalls.
[28] VGR has offered no evidence that it had re-let the premises since it re-entered them. If 844 were to pay the rent, including payments towards arrears, that it offers, the interests of the landlord, VGR would be substantially met without having to attempt to re-let the premises."
To read the ruling in full:
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