ESTOPPEL IN COMMERCIAL LEASES

Estoppel (fin de non-recevoir), is a legal principle that allows a court to declare a claim or defense that is otherwise legally well founded to be declared "not receivable" (irrecevable) due to the presence of reprehensible or non-cooperative conduct of a party including a failure to act in good faith. Such conduct need not amount to fault or negligence. The evaluation of the conduct is based on the principles of equity and good faith. The courts, which have substantial room to appreciate a party's conduct, are trending more frequently to invoke estoppel, which adds a further layer of uncertainty to predicting the probable outcome of litigation. While all persons including judges are created equal, their appreciation of a parties conduct, which is should be objectively considered, may nevertheless differ as a result of a judge's individual perspective. This is not a criticism but merely a practical observation since a party's reprehensible conduct or bad faith should never be allowed to be rewarded. An interesting illustration of estoppel in a commercial lease setting can be found in the Quebec Court of Appeal decision 9378-1417 Québec Inc. -vs- Groupe Ilqueay Inc., 2023 QCCA 351. The parties entered into a commercial lease for five years terminating on 2020-07-31. In mid-March 2019, the tenant verbally informed the landlord of its intention to vacate the premises prior to the end of the term namely in June 2019. The tenant reiterated its intention in mid-April by email to which the landlord replied that it expected the lease be respected although it was prepared to discuss terms and conditions for an early termination. In its reply, the landlord also undertook to communicate with the tenant to arrange a meeting. In May, the tenant, not having heard from the landlord, reached out to inquire regarding the landlord's intentions. The landlord did not reply. The tenant eventually vacated the premises in September 2019, ten months prior to the end of the term. Landlord filed suit claiming unpaid rent for ten months plus legal fees. The landlord's suit was dismissed by judgment in first instance which judgement was affirmed in appeal. The court concluded that the landlord's lack of cooperation since April 2019 amounted to bad faith on its part and its failure to minimize its damages (it made no effort to find a new tenant after retaking possession of the premises but instead, occupied the premises itself) justified the dismissal of landlord's claim on the grounds of estoppel.