Authors: Nicolas Brochu, Marc-André Lemire, Louis-Paul Gamache
Publication ǀ December 30, 2020
On November 20, 2020, in six separate judgments, the Superior Court granted the applications for safeguard orders, and ordered the Hudson's Bay Company ULC ("The Bay") to pay the rent owed to the landlords of six shopping centers in Quebec: (i) Galeries de la Capitale, (ii) Promenades Gatineau, (iii) Centre Rockland, (iv) Centre Laval, (v) Mail Champlain, and (vi) Jardins Dorval (collectively, the "Shopping Centres").
More specifically, the Honourable Katheryne A. Desfossés, j.s.c., ordered the payment of rent due since September 2020, as well as the payment of rent due monthly until February 2021 in the files relating to Galeries de la Capitale and Promenades Gatineau, in which Fishman Flanz Meland Paquin represented the subsidiaries of Oxford Properties Group, namely Capitale Holdings Inc. in the first file, and 9257-4749 Québec Inc. and Montez l'Outaouais Inc. in the second.
The owners of the Shopping Centers have filed an originating application following the failure of The Bay to pay its rent since April 2020, namely since the mandatory closure of the Shopping Centers ordered by government decree. After the reopening of the stores, The Bay never resumed payment of its rent.
Justice Desfossés sanctioned The Bay's behaviour, noting that these were experienced commercial parties. In her words, "a party cannot take justice into its own hands in such a case", and cannot unilaterally reduce the rent owed without prior court authorization.
Having considered the criteria for granting a safeguard order, namely the appearance of right, serious or irreparable harm, balance of convenience and urgency, the Superior Court granted the landlords' applications.
Appearance of right of landlords
The landlords' appearance of right was established by the mere proof of the leases and the obligations arising therefrom with respect to the monthly rent payment by The Bay.
The Court rejected the arguments of The Bay, which was challenging the application for a safeguard order on the basis that it had been deprived of a portion of the benefit owed by its landlords. The Bay alleged that the landlords of the Shopping Centers had failed to operate a "first class shopping center" since the advent of the COVID-19 pandemic, as required by the leases between The Bay and the lessors of the Shopping Centers. This justified, in its view, the reduction of its correlative obligations, namely the payment of rent, pursuant to the exception of non-performance provided for in Article 1591 of the Civil Code of Québec.
However, the leases signed between the parties explicitly provided for the waiver by The Bay of the right to invoke the exception of non-performance: The Bay had undertaken, in full knowledge of the facts, to pay the rent due without the possibility of abatement, compensation or deduction. As Justice Desfossés pointed out, this provision of the leases obliged The Bay to take the legal route to have the alleged default by the landlords sanctioned and to continue to pay the rent in the meantime. The Bay therefore had no right to reduce its rent payment obligation in response to an alleged default by the landlords.
The Court added that the lateness of The Bay's argument mitigated its weight. The Bay had withheld 100% of the rent since April 1, 2020, but had not sent the owners of Galeries de la Capitale and Promenades Gatineau a demand letter requiring them to correct their alleged default until September 2020.
It should be noted that The Bay also argued that the closure of the Shopping Centers imposed by the Quebec government constituted a disturbance of law within the meaning of Article 1858 of the Civil Code of Quebec, and that the landlords, which were required to guarantee tenants against such disturbances, could not exonerate themselves from their obligations in this regard. Justice Desfossés noted that she did not have to address this issue at this stage, which was rather a question relating to the merits of the case.
Serious or irreparable harm
It is well established that at the stage of an application for a safeguard order, where a tenant is still occupying the leased premises and is carrying on business therein, the Court may order the payment of rent in order to safeguard the rights of the landlord. It would be unfair for a landlord to have to pay common expenses and maintain the building without obtaining the rent due. This would constitute serious or irreparable harm. This reasoning simultaneously fulfilled the criterion of urgency.
Balance of convenience
On this point, the Court similarly ruled in favour of the owners of the Shopping Centres. In its view, without the order sought, the landlords would suffer a significant reduction in rent, while their own payment and maintenance obligations would be maintained.
Furthermore, The Bay did not argue that the payment of rent would place it in a precarious financial position and did not question the recovery of any debt it might have against the landlords. The safeguard order would only restore a certain temporary balance between the parties during the proceedings pending a definitive solution to the dispute
 “1858. The lessor is bound to warrant the lessee against legal disturbances to enjoyment of the leased property. Before pursuing his remedies, the lessee shall notify the lessor of the disturbance.”