Hakim Optical Laboratory Ltd. v. Phillips
[2005] O.J. No. 5636 | Ontario Superior Court of Justice — Motions Court (J.B. McMahon J.)
One missed month’s rent in five years. The landlord terminated the lease and took possession. We obtained interim relief from forfeiture three business days later — with re-entry restored at 9:00 a.m. the next morning.
The Commercial Problem
Our client, Hakim Optical Laboratory Ltd., had operated a viable retail-optical business at premises on Yonge Street in Toronto under a commercial lease for at least five years. Rent had been paid on time, every month, for that entire period. As of November 30, 2005, there were no outstanding rent arrears.
The December 1, 2005 rent did not reach the landlord. Our client’s solicitor was preparing a certified cheque to cover the arrears. On December 17, 2005 — before the certified cheque was delivered — the landlord terminated the lease and took possession of the premises by way of formal notice.
The relationship between landlord and tenant was already adversarial. Earlier litigation had produced a Master’s summary judgment in our client’s favour (June 2005, Master MacLeod), striking out the landlord’s statement of defence and counterclaim. The landlord had since alleged that summary judgment had been obtained on fraudulent affidavits and was preparing a motion to set it aside on January 20, 2006. The landlord was also asserting additional alleged breaches of the lease — damage to a wall from removal of a sign, failure to provide twelve post-dated cheques.
For a commercial tenant in this position, the immediate problem is concrete: a viable retail business has been physically locked out of the premises that house its fixtures, signage, and customer-facing operation. Every day of continued possession by the landlord makes the discretionary remedy of relief from forfeiture harder to obtain — the “status quo” tilts further away with each passing day. The longer the landlord holds possession, the more equitable considerations a court will require to undo the termination. Speed was decisive.
Strategic Decisions
Decision 1: Move within three business days, not within the regular timeline
The conventional response to a wrongful termination is to commence an action and bring an application for relief from forfeiture within the regular procedural timetable. That can take 30 to 60 days to reach a motions judge. We did the opposite. The landlord took possession on December 17, 2005. We were before Justice McMahon by December 20, 2005 — three business days later.
The reasoning: relief from forfeiture is a discretionary equitable remedy. Discretion is shaped by the “status quo.” Every day the landlord holds possession, the status quo of the premises shifts further from our client’s control. By moving immediately, we kept the status quo close to its pre-termination state. Justice McMahon was being asked to undo a three-day-old termination, not a thirty-day-old fait accompli. That is a materially easier discretionary call.
Decision 2: Concede the rights question, anchor the motion on equity
The defensive instinct is to argue that the landlord’s termination was procedurally improper or substantively wrong. The temptation is to claim the certified cheque was “in the mail” or that the landlord acted prematurely. We did not take that route.
We accepted, on the record, that the landlord had acted within its rights to terminate the lease for non-payment of December rent. Justice McMahon adopted that framing in para. 4: “The respondent acted within its rights to terminate the lease.” What we anchored on was the equitable discretion: relief from forfeiture turns on the gravity of the breach, the conduct of the tenant, the viability of the business, and the proportionality of forfeiture. Our case had a single decisive fact — one missed payment in 60 months — that made the equitable analysis nearly automatic. By conceding the rights question and focusing on equity, we framed the only contested issue narrowly and on facts the landlord could not dispute.
Decision 3: Do not engage the fraudulent-misrepresentation allegation on this motion
The landlord had alleged that our client obtained the earlier Master’s summary judgment on fraudulent affidavits, and was bringing a motion to set that order aside on January 20, 2006. The temptation is to defend the integrity of the prior order on the relief-from-forfeiture motion — to refute the fraud allegation in advance and prevent it from contaminating the judge’s view of our client’s character.
We did not engage. The fraud allegation was for a different motion, before a different judge, on a different day. Justice McMahon expressly recognized this and declined to rule on it (para. 13): “I am not prepared to rule on this issue of fraud on this date as the matter will be fully canvassed on January 20, 2006.” By keeping the motion narrow, we limited the discretionary inquiry to the missed payment and the viability of the business — not to credibility findings on a parallel dispute that another judge would adjudicate later.
Outcome
Justice McMahon granted interim relief from forfeiture the same day, on the following conditions:
- Certified cheque for the December rent delivered that day to the landlord’s counsel;
- Twelve post-dated cheques delivered by December 29, 2005;
- Receipt of the cheques without prejudice to the landlord’s rights;
- Right to re-enter the premises at 4822 Yonge Street at 9:00 a.m. on December 21, 2005 — the next morning;
- Matter adjourned to February 28, 2006 to be revisited;
- Costs reserved for written submissions.
Three business days from termination to a re-entry order. Approximately four days of business interruption.
The relief was interim, not permanent. The fraud allegation against our client was preserved for the January 20, 2006 hearing and the broader merits remained to be addressed at the February 28, 2006 return. But the interim relief preserved the operational continuity of the retail business: customer-facing premises restored within four days, fixtures and signage retained, business open in time for the post-Christmas trading week. If we had moved on the regular timeline (30–60 days), the business would have been physically closed for one to two months — with the practical loss in customer attrition, fixture relocation, and revenue exceeding the rent-arrears controversy by an order of magnitude. Speed converted a discretionary remedy that becomes harder by the day into a same-day order.
Editor’s note: Supplementary reasons for judgment were released April 3, 2006 ([2006] O.J. No. 1386). Those supplementary reasons are outside the scope of this page, which describes only the December 2005 interim endorsement.
Three Takeaways for Commercial Tenants Facing Lease Termination
1. Move for relief from forfeiture within days, not weeks. Discretion in equity is shaped by the status quo. Every day the landlord holds possession shifts the status quo further from the tenant. A three-business-day motion is a different motion than a thirty-day motion before the same judge applying the same legal standard. The fixtures, signage, and customer-facing presence at the premises matter to the equitable calculus — and they degrade with time.
2. Concede the rights question and anchor the motion on equity. Arguing the landlord was procedurally wrong forces a defensive posture and pulls the motion onto contested terrain. Conceding that the landlord acted within its rights to terminate, and pivoting to the equitable factors the court must weigh on the discretionary remedy, makes the contested issue narrow and the facts decisive. A clean rent-payment history is decisive in a way that contested termination procedure rarely is.
3. Keep parallel disputes on parallel tracks. When the landlord’s position on relief from forfeiture includes a serious independent allegation (here: alleged fraudulent misrepresentation in obtaining a prior order), do not engage that allegation on this motion. Let the court see the parallel claim as a separate matter for a separate day. This keeps the discretionary inquiry narrow and the credibility analysis clean. If the parallel claim ultimately succeeds against your client, that is a separate problem for a separate day.
Has your commercial landlord terminated the lease and taken possession?
Relief from forfeiture is the discretionary equitable remedy that allows a court to undo a lease termination. It is most powerful when sought immediately — the day after termination is materially better than the day after that. The decisive factors are the gravity of the breach, the tenant’s conduct, the viability of the business, and the proportionality of forfeiture relative to the breach.
We recommend a 60-minute legal posture assessment within 48 hours of termination. We will review the lease, the alleged breach, the equitable factors that bear on relief, and the realistic timeline to re-entry. This is a litigation-focused diagnostic, not a sales meeting.
Legal Foundation
This case engaged the following framework:
- Commercial Tenancies Act, R.S.O. 1990, c. L.7, s. 20 — statutory relief from forfeiture
- Courts of Justice Act, R.S.O. 1990, c. C.43, s. 98 — equitable jurisdiction to grant relief from penalties and forfeitures
- The court’s general equitable jurisdiction to grant relief from forfeiture in commercial lease cases — discretionary factors include the gravity of the breach, conduct of the tenant, viability of the business, and proportionality of forfeiture
- Court file: 05-CV-302590 PD2 (Ontario Superior Court of Justice — Motions Court) — endorsement of Justice J.B. McMahon released December 23, 2005 (heard and orally decided December 20, 2005)
- Supplementary reasons released April 3, 2006 ([2006] O.J. No. 1386) — not addressed on this page
This case is publicly reported (144 A.C.W.S. (3d) 1101). Both parties are named in the public record. This page describes only the December 2005 interim relief endorsement — the parallel fraudulent-misrepresentation motion (scheduled for January 20, 2006) and the supplementary reasons (April 2006) are outside the scope of this page. This page summarizes our work for informational purposes only and does not constitute legal advice. Each relief-from-forfeiture motion turns on the specific lease, the nature of the breach, the tenant’s conduct, and the surrounding equitable considerations. To discuss a specific matter, please contact us.
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