Executive Summary: Key Legal and Evidentiary Issues

• The Notice of Default failed to specify which insurance terms were unmet, rendering it non-compliant with section 19(2) of the Commercial Tenancies Act.

• There was no evidence that the landlord provided prior written notice or communicated specific deficiencies in the tenant’s second insurance certificate.

• The landlord delayed over six months before issuing the Notice of Default and provided no explanation for the delay.

• Assertions of "many notices" regarding insurance compliance were unsubstantiated and found to be untrue.

• The tenant faced irreparable harm if evicted, including market loss, loss of goodwill, and reputational damage.

• The court granted an interlocutory injunction, conditional on the landlord issuing a compliant notice and the tenant having 20 days to rectify any proven deficiencies.

Facts of the case

This dispute involves a commercial lease agreement between NP Health Clinic Inc. (the tenant) and 2456192 Ontario Inc. (the landlord). The lease was entered into in April 2023 for a term from July 1, 2023, to June 30, 2026, with a renewal option. In February 2024, the tenant submitted a liability insurance certificate covering only Commercial General Liability (CGL). The landlord’s insurance broker advised that the policy was insufficient as it lacked “all risk” coverage including fire, flood, earthquake, equipment breakdown, and business interruption, as required under clause 8.01 of the lease.

Subsequently, the tenant submitted a second insurance certificate on the same date, now showing coverage for contents, earthquake, flood, business interruption, and equipment breakdown. However, the landlord provided no evidence that this second certificate was reviewed by his broker, nor that its adequacy was ever discussed with the tenant. There was also no further communication about insurance until September 25, 2024.

On that date, the landlord served a Notice of Default, citing non-payment of full utility charges and non-compliance with insurance obligations. The notice failed to specify which insurance terms were allegedly missing and misleadingly claimed the tenant had received "many notices" to revise their policy. The judge found no evidence to support these claims and ruled that the notice did not meet the statutory requirements under section 19(2) of the Commercial Tenancies Act, which mandates that a default notice specify the precise breach and provide an opportunity to remedy it.

Procedural background and later developments

After receiving the Notice of Default, the tenant brought an urgent, without-notice motion for an interlocutory injunction on October 2, 2024, which the court granted for 10 days. The parties later consented to extend the injunction for 90 days, during which the landlord did not raise any concerns about insurance coverage. On January 14, 2025, the tenant filed a formal Notice of Application, primarily disputing rent and square footage calculations but also alleging the landlord acted in bad faith concerning the Notice of Default.

On January 29, 2025, the landlord’s counsel sent an email warning that the tenant had 48 hours to rectify the alleged default. The email referred back to the September 25, 2024, notice but again lacked specific information about any insurance deficiencies. Counsel described it as a “courtesy notice,” not a new default notice. The tenant requested particulars on January 30, 2025, but received no substantive response.

The tenant then engaged with insurance brokers to identify any missing coverage. On March 19, 2025, the tenant provided a new insurance certificate dated March 17, 2025, covering the period January 31, 2025, to January 31, 2026. The landlord’s broker again found the policy unsatisfactory. However, these findings were never communicated to the tenant except when served as part of a Supplementary Motion Record filed March 21, 2025, just 10 days before the hearing.

Court’s analysis and outcome

Justice Charney applied the three-part test for an interlocutory injunction from RJR-MacDonald Inc. v. Canada (Attorney General):

1. Serious issue to be tried:
The court found that there was indeed a serious issue about whether the landlord’s September 25, 2024, Notice of Default complied with s. 19(2) of the Commercial Tenancies Act. Although the main relief sought in the Notice of Application was related to rent and square footage, the insurance issue raised in the pleadings—specifically, the inadequacy of the notice—was deemed sufficient to satisfy the “serious issue” threshold.

2. Irreparable harm:
The court accepted that eviction would cause irreparable harm to the tenant, who operated a medical clinic serving the community. Relocating would result in loss of goodwill, patient relationships, and business interruption.

3. Balance of convenience:
Justice Charney ruled that the balance of convenience favoured the tenant, especially given that rent was current and substantial investments had been made in the premises. He emphasized that if the Notice of Default had been properly drafted in compliance with the Act, the landlord’s position might have been stronger. However, given the non-compliance and lack of communication, the tenant’s position prevailed.

The court stressed the importance of insurance compliance. Section 20(8) of the Commercial Tenancies Act restricts courts from granting relief if the insurance is not in place at the time of application. The judge noted that failure to maintain insurance is a particularly serious default, citing Tauro v. Yu.

Final disposition

The court issued an interlocutory injunction preventing the landlord from terminating the lease, re-entering the premises, or removing the tenant’s property. However, the injunction was conditional. If the landlord serves a new, valid Notice of Default that clearly sets out which terms of clause 8.01 are unmet, the tenant will have 20 days to provide compliant proof of insurance. If the parties cannot agree on whether the updated insurance meets the lease’s terms, they may return to court for a determination on that specific issue. The injunction will remain in effect until that motion is decided. The court also provided timelines for submissions on costs if the parties are unable to resolve that matter privately. There was no monetary award, damages, or costs granted or ordered in this decision.