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LEASE - Contract of lease - Commercial - Interpretation - Obligations of lessee

Friday, July 07, 2017 @ 11:05 AM  

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Motion by Michael Rossy Ltd. (Rossy) for leave to appeal the judgment which granted 9190-9309 Québec inc.’s (9190) motion for an interlocutory injunction and enjoined Rossy to occupy and use for the purposes of carrying on its business a retail store leased from 9190 in the latter’s shopping center. Rossy also sought a stay of the interlocutory injunction pending appeal. In 2008, 9190 and Rossy signed a two-page letter of intent which led to the occupation by Rossy of the premises. The letter of intent comprised the basic business terms only and contained no positive obligation to occupy and continuously use the premises. The initial 10-year term expired in August 2018. Rossy lost $233,241 for the 12-month period ending in January 2017 and thus proposed to close the store while continuing to pay the rent. The judge found the existence of an apparent right of 9190 to oblige Rossy to continue operating the store despite the absence of any such contractual obligation.

HELD: Motion for leave to appeal granted; motion for stay of the judgment pending appeal granted. There was not, as the judge found, a broad-based acceptance in the decided cases of the proposition that vacating premises in and of itself constituted a change in the destination of such premises and thus, a breach of art. 1856 C.C.Q. The judge’s assessment of the existence of a clear right giving rise to an injunction was flawed. It could be said in this case that given the obligation of Rossy under the letter of intent to pay a percentage of gross sales as additional rent, there was an obligation, implicit in the letter of intent, for Rossy to continue to operate its store in the leased premises. The right was, at best, weak. The assertions of 9190’s representative were vague and in essence opinions based on conjecture. Only the square footage and stature of Rossy were objective, but these considerations did not favour 9190. The threshold of gross sales to trigger the obligation to pay percentage rent had not been met, therefore there was no loss suffered by 9190 on that account and Rossy intended to continue to pay rent. Rossy’s prejudice was clearly established. It had lost approximately a quarter of a million dollars from the operation of the store in the 12-month period ending in January 2017. The balance of inconvenience favoured Rossy’s situation. Given the interest of the question and that the judgment required Rossy to keep the store in operation despite the uncontradicted evidence that such operations were conducted at a loss, the conditions of art. 31 C.C.P. were met.

Michael Rossy Ltd. c. 9190-9309 Québec inc., [2017] Q.J. No. 7805, Quebec Court of Appeal, The Honourable Mark Schrager J.A., June 8, 2017. Digest No. TLD-July32017009