Executive Summary: Key Legal and Evidentiary Issues

• A commercial tenant sought relief from forfeiture after admitting to breaching its lease.
   
• Chronic late payment emerged as central evidence of unreasonable tenant conduct, with 43 of 44 monthly rent payments made late.
   
• Undischarged builder's lien and certificate of pending litigation persisted despite over a year of landlord demands.
   
• Justice Lema applied the three-factor test from Saskatchewan River Bungalows Ltd v Maritime Life Assurance Co without resolving whether it is conjunctive or weighted.
   
• Proportionality arguments based on the tenant's $3.3 million investment in the premises failed for lack of supporting evidence.
   
• Ultimately, the court denied forfeiture relief and granted the landlord's cross-application, including a declaration of lease termination.
   

Facts of the case

Rayn Cultivation Inc., a commercial tenant operating a cannabis cultivation facility, admitted to breaching its lease with landlord Rocor Holdings Ltd. and applied for relief from forfeiture. Rocor cross-applied for a declaration that the lease was terminated and for related relief, including eviction. The tenant's rent payments were chronically late: 43 of 44 monthly payments were late, with delays ranging from one to 19 days, often paid only after repeated landlord reminders. On a 2024 operating-costs catch-up amount, the landlord had agreed to an instalment plan as a one-off accommodation, which the tenant then defaulted on before eventually paying. On a 2025 catch-up payment of $19,277.35, demanded "forthwith" per the lease and reiterated by the landlord in April and May 2026 emails, the tenant paid only $1,500, leaving $17,777.35 unpaid as of the June 10, 2026 application date, with no further payment shown by the July 16, 2026 hearing. A builder's lien was registered against the premises on March 11, 2025, with an associated certificate of pending litigation (CLP) registered July 11, 2025; despite landlord demands dating to March 2025 and repeated tenant assurances that the matter was "being taken care of," the lien and CLP remained on title through at least the landlord's May 28, 2026 title search. The tenant also did not dispute an outstanding water bill of $2,938.79 owed to the County of Leduc.

Policy and legislative provisions at issue

Several lease provisions governed the dispute. Section 5.4 required payment of operating-cost catch-up amounts "forthwith" upon the landlord's calculation and request. Sections 13.1(e) and 16.3 obligated the tenant to discharge any liens filed against the property, while section 16.1 addressed related indemnification obligations tied to the lien matter. Sections 8.2 and 8.4 made the tenant responsible for utility charges, including the disputed water bill. Section 13.2(c) provided that, on termination for tenant default, trade fixtures and furnishings would become the landlord's property unless the landlord required their removal, operating as additional liquidated damages. Section 17.4 entitled the landlord to indemnification-level costs. The governing legal test for relief from forfeiture came not from the lease but from Saskatchewan River Bungalows Ltd v Maritime Life Assurance Co, [1994] 2 SCR 490, which directs courts to weigh the conduct of the applicant, the gravity of the breaches, and any disparity between the value of the property forfeited and the damage caused by the breach.

Reasoning and analysis

Justice Lema found it unnecessary to decide whether the SRB test is conjunctive (as the landlord argued) or a weighing of three factors (as suggested in Monk v Farmers' Mutual Insurance Company (Lindsay), 2019 ONCA 616), since the tenant lost under either approach. On the first factor, tenant conduct, the court identified seven grounds for finding it unreasonable: chronic late rent payments; default on the agreed instalment plan; insufficient evidence of ability to pay outstanding amounts, including only a bare assertion of "present financial ability" unsupported by evidence; the persistent, undischarged lien and CLP despite repeated assurances; the unpaid water bill; the absence of any explanation for the late payments; and the tenant's own failure to argue that its conduct had been reasonable. The court noted that tendering or clearing arrears, even after termination, can weigh in a tenant's favour, citing 1218807 Alberta Ltd v Muslim Association of Canada Ltd and the judge's own earlier decision in Mimi's Parlour Ltd v 1816112 Alberta Ltd, but found no such tendering occurred here. On the second factor, gravity of the breaches, applying guidance from Ontario (Attorney General) v 8477 Darlington Crescent, 2011 ONCA 363, the court found the breaches "relatively modest" in scale but not offset by evidence of willingness or ability to pay. On the third factor, proportionality, the tenant cited an approximately $3.3 million investment in the premises and the potential loss of roughly 2,000 live cannabis plants, but the court found this evidence lacked the detail needed to establish a disproportionate outcome — the tenant did not address replacement premises, relocation costs or timing, a breakdown of the $3.3 million figure, or the effect of lease section 13.2(c) on trade fixtures.

Ruling and overall outcome

Justice Lema concluded that, whether the SRB test is conjunctive or weighted, the tenant's unreasonable conduct was decisive and was not counterbalanced by the modest gravity of the breaches or by any disproportionality in the tenant's favour. The court dismissed Rayn Cultivation Inc.'s application for relief from forfeiture and granted Rocor Holdings Ltd.'s cross-application, declaring the lease terminated and granting the other relief sought, including indemnification-level costs under section 17.4 of the lease. The judgment does not state a specific dollar figure for the costs award — the amount is Not Specified. The date for delivering vacant possession was left to be agreed between the parties or fixed by the court following further submissions.