INTRODUCTION
Adequate housing was recognized as part of the right to an adequate standard of living in article 25 of the 1948 UDHR and in article 11.1 of the 1966 International Covenant on Economic, Social, and Cultural Rights. Both the Canadian and Indian constitutions recognize rights to dignified living and equality in all spheres of life. Even then, gaps in legislation persist. The struggles of minorities in occupying tenancy are very often sidelined in the name of legal technicalities, for example, free choice of the landlord. Such discriminatory practices deny access to better living and economic opportunities for the minority community.
Judicial notice of such historical or societal discrimination can be viewed as both progressive and desirable. It is less common in civil cases, but a recent case shows that it can and will be used where appropriate. In the case of 8573123 Canada Inc. (Elias restaurant) v. Keele Sheppard Plaza Inc., 2021 ONCA 371, the Court of Appeal upheld a judgment in which judicial notice was taken of the existence of anti-Black racism in Canadian society. Such an observation is important in realizing the fundamental right of dignified living. This case is significant for India because religious and caste-based discriminations are prevalent on a large scale even today. I will discuss Justice Morgan’s ratio in detail, with reference to the Indian legal picture.
Case Background
The tenant (respondent) operated a restaurant and bar in the Keele Sheppard Plaza Inc. (Toronto) under a lease agreement dated August 1, 2012, entered into with the landlord (appellant). The restaurant offered African/Black/Caribbean food where a large chunk of the customer base was from the Black community.
Key articles of the lease agreement:
- The lease was for a five-year term, ending July 31, 2017.
- Art. 1.1(i) authorizes only one use for the premises: “Restaurant business, including liquor license.”
- There were two options to renew the lease for an additional period of five years.
- Further, a written notice of an intention to exercise the options was to be given at least six months prior to the expiry of the lease.
- The ownership of the Plaza changed during the term of the lease in April 2016.
However, the tenant missed the date for submitting written notice of its intention to renew the lease. The owners of the tenant tried to connect with the landlord and manager on several occasions, both before and after the cutoff date of January 31, 2017. The landlord was very unresponsive, and the manager questioned the tenant’s lawyer’s authority to represent his clients. Hence, the tenant stayed in an overholding position from August 2, 2017, to May 28, 2020, when finally the landlord issued notice of termination.
The landlord’s argument was that the tenant did not attract “like-minded, family-oriented customers” and that they were operating a “liquor bar.” He indicated distaste towards the business and subjectively called the respondent an “unattractive tenant.” While submitting what seemed like a prospective lease agreement, the landlord argued that a medical business in the plaza would be more economically viable instead.
Following all the above incidents, Justice E.M. Morgon (application judge) of the Ontario Supreme Court had an application request by the tenant (respondent in the appeal) for relief from forfeiture and injunction so the landlord (appellant) does not evict them.
Arguments of the appellant
- The landlord took issue with the application judge’s conclusion that it studiously avoided the tenant’s calls.
- His affidavit states that the business does not attract “like-minded, family-oriented customers.”
- It is the landlord’s position that a new tenant would offer increased rental income. He demonstrated that potential by presenting what seemed to be only a preliminary agreement from a prospective tenant.
- Appellant wants to terminate the tenancy of 8573123 Canada Inc. o/a Elias Restaurant due to the tenant’s failure to give timely written notice of its intention to exercise an option to renew the lease.
Arguments of the respondent
- Due to a change in Plaza’s ownership, it was not clear as to whom the written notice was to be delivered.
- The tenant invested $150,000 in improvements to the property when it took it over in 2013. The fact is unchallenged by the landlord and manager.
- Despite the COVID-19 lockdown restrictions, the tenant maintained its takeout business and never missed paying any base rent or additional rent.
- Counsel for the tenant points out that nothing substantial on record indicates that there has ever been a complaint about the tenant or its customers.
- The real point of the landlord is that the “wrong” kind of families eat at this particular restaurant. His observations are racially derogatory and stereotyping. The entire ordeal reflected a prejudicial attitude of the landlord towards the tenants, which was uncalled for.
- Hence, the tenant sought relief from forfeiture pursuant to S. 98 of the CJA (1990).
Issues
- Whether the termination of the commercial lease by the appellant would be lawful or not?
- Whether the application judge was entitled to take judicial notice of ‘unconscious bias’ in the appellant’s refusal to negotiate a renewal of the lease?
- Is there a requirement to provide evidence of an unconscious bias?
Relevant provisions
Originally an equitable form of relief, the relief from forfeiture is found broadly under Section 98 of the Courts of Justice Act (CJA) and Section 20 of the Commercial Tenancies Act, Ontario. Although proper legal terms are in place to grant relief, the courts utilize their discretionary power to grant such relief. The extent of such power varies from case to case. The discretion comes into play when parties fail to uphold their part of the transaction in good faith. The courts can base their discretionary power on the conduct of the parties, disparity between the value of the property forfeited and the damage caused by the breach, etc.
Judicial observation by Justice Edward Morgon (the Application Judge)
After reviewing the evidence from the respective parties, Justice Morgan found that the tenant had shown good faith in attempting to communicate their desire to renew the lease. The calls were “studiously avoided” because the landlord sought to replace the respondent with a more “suitable” business. The “real issue” for the appellants is that the tenant is a black-owned business catering to the Afro-Caribbean community.
The contractor who worked at the Plaza on the landlord’s behalf deposed in his statement that the customers standing in the hallway (who he took to be of the tenant’s restaurant) were smoking, drinking beer, gambling, and detracting from the appeal of the Plaza for families. However, he has failed to establish the fact that they were, in reality, the tenant’s customers.
Weighing of the Equities: The power to relieve from forfeiture is discretionary and predicted on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of the contract, visits an inequitable consequence on the party that breached the contract.
The tenant was not in breach of the lease, and no financial loss has been established by the landlord. Substantial improvements worth approx. $150,000 were made on the premises since 2013. Additionally, the landlord has failed to show that it would suffer any real financial loss from the tenant’s continued tenancy. Hence, the equities and balance of convenience weigh in the tenant’s favor to have relief granted under Section 98 of the CJA.
Justice Morgan went on to state that irreparable harm would be done to the tenant had the lease been terminated, given the tenant would lose the premises and the goodwill associated with its well-established location. The customers cannot be subjected to the indignity of being excluded from the premises based on racial bias.
Unconscious bias: The landlord’s stereotypical portrayal of the tenant’s customers’ behavior fits an established pattern in society. It has been identified as “othering of minority people… in the guise of legal method.”
The court observed that anti-Black racism rests on unstated and unchallenged assumptions learned over a lifetime. They often influence our decision-making without any conscious reference to them.
In the words of Chief Justice McLachlin:
“The matter is more complicated, less express than that. In fact, the racial or sexual stereotypes are there, in our minds, bred by social conditioning and encouraged by popular culture and the media. We tend to accept them as truths.”
Justice Morgan (the application judge) held that motivation—whether the landlord was aware of its own subconscious attitude and its effect—is not the point. He firmly believed that societal realities pertaining to black businesspeople must be factored into the exercise of discretion in considering equitable remedies and held that the equities weighed in favor of the tenant.
Decision: The court deemed the lease to continue for the next five-year term, i.e., July 31, 2022. All the terms and conditions of the lease were to remain the same, including the second option to extend the lease. The landlord was to repossess the premises only in strict accordance with the terms of the lease.
Observations by the Court of Appeal:
The Court of Appeal accepted the fact that enough evidence (both direct and circumstantial) was available to support the application judge’s conclusions. The landlord did not directly confront the tenant regarding its evidence, as no cross-examination was done before hearing of the application. Further, he has not demonstrated an overriding error in the judge’s assessment of the evidence presented.
The language in the affidavit of the appellant was racially colored, which is supposed to be condoned. Hence, the application judge was right to take judicial notice of anti-Black racism in Canada. The Court of Appeal quoted the Application Judge’s reasons, where he observed, “The societal realities pertaining to Black businesspeople like the tenants must be factored into the exercise of the Court’s discretion in considering equitable remedies like injunctions and relief from forfeiture.”
The Ontario Court of Appeal refused to interfere with the decision of the Supreme Court. Based on all the evidence presented, the application judge was entitled to conclude that anti-Black racism was relevant to the landlord’s refusal to negotiate a renewal of the lease.
Appeal stands dismissed.
Critical analysis of the judgment and its relevance in Indian legal context
The following excerpts from an article are worth mentioning:
“Earlier this month, this newspaper reported that a Muslim IAS aspirant in Pune resorted to a ‘Hindu’ pseudonym to overcome the difficulty of obtaining paying-guest accommodation. Keen followers of the news from India, like us, recognize this as an example of periodic reports from cities across the country about the difficulties facing middle-class Muslims (not to mention the occasional film star) in the rental or property market. That should disturb anyone who believes that people’s access to important things like housing, schooling, or jobs should not be determined by things over which they have no control, such as which community they were born into.”
Systematic disadvantages are prevalent not just in Canada but in every jurisdiction around the world. In India, people from religious and economic minorities face challenges in finding dignified housing and quality of life that do not compromise their cultural habits.
The Indian constitution’s chapter three (fundamental rights) extensively emphasizes the concepts of “dignified living” and “equality for all.” Although the Protection of Civil Rights Act of 1955 addresses caste-based discrimination in housing areas, it is astonishing that there is no comprehensive and specific legislation in India that expressly prohibits discrimination in housing and tenancy areas specifically.
It was rightly pointed out by Justice Morgon that a single case dealing with commercial tenancy cannot possibly address society’s many challenges with respect to racial injustice; it equally cannot ignore them. Hence, the willingness of the Canadian judiciary to take judicial notice of deeply embedded unconscious racial bias is applaudworthy and will go a long way in serving racial justice.
On the other hand, the Indian judiciary has not directly dealt with the concerning issue of tenancy discrimination faced by a large chunk of the minority population in the country. The case of Zroastrian Co-Operative vs. District Registrar Co-Operative (2005) indirectly infuses these discriminations in the legislative framework. The Supreme Court in the particular case allowed the cooperative societies to make byelaws restricting the sale of property to members of certain religions. It is important to address pressing concerns of certain communities but not at the cost of breaching equality principles.
Suggestions
- Need for an ‘anti-discrimination’ legislation or amendments to the RERA Act in line with Articles 14 and 21 of the Indian constitution. The Fair Housing Act of the U.S. is a good example in this case and prohibits discrimination on grounds like race, color, religion, sex, etc.
- Until a comprehensive law comes in, the states can make amendments in their respective Rent Control Acts by adding anti-discriminatory provisions. For example, legal recourse for people who face such discrimination.
- Fair housing initiatives like Maharashtra RERA rules, where it was included in the provisions that developers must have an anti-discriminatory clause in the declaration for registering a real estate project. In case the developer fails to observe these rules, the allottees have the right to file a complaint with Maharashtra RERA.
- Civic and social sense must be inculcated in the general public to rise above limiting beliefs.
Conclusion
Implicit biases based on race, gender, religion, etc., are still prevalent across borders today. Taking judicial notice of systematic inequalities is an inherent duty of our justice systems. The law of equity involves striving to assess and provide fairness. The judgment of the Canadian Supreme Court rightly calls out potentially biased human behavior in dealing with day-to-day business and will go a long way in serving civil justice for historically suppressed communities. The Indian judiciary and legislature must work in tandem to make property rights more inclusive.