Hudson's Bay Company argues Victoria mall blocked lease assignment in unpaid rent case

·3 min read
The Hudson's Bay Company has faced a number of court challenges over unpaid rent throughout the COVID-19 pandemic. A photograph the downtown Toronto flagship Hudson's Bay Company store in Toronto on Monday, Jan. 27, 2014.  (Nathan Denette/The Canadian Press - image credit)
The Hudson's Bay Company has faced a number of court challenges over unpaid rent throughout the COVID-19 pandemic. A photograph the downtown Toronto flagship Hudson's Bay Company store in Toronto on Monday, Jan. 27, 2014. (Nathan Denette/The Canadian Press - image credit)

The Hudson's Bay Company (HBC) scored a win in the Supreme Court of B.C., Wednesday, where it is defending itself against an application from the owner of a Vancouver Island mall that seeks what could eventually be more than $3 million in unpaid rent by the Canadian retailer.

The rulings are only the latest movement in a case that was first filed in July 2020.

Anthem Crestpoint Tillicum Holdings Ltd. operates the Tillicum Centre mall in Victoria, where HBC currently holds a lease until 2024.

In June of 2019, HBC closed its Home Outfitters store at the mall, but as part of the lease, was required to continue to pay rent, according to court documents.

At first, HBC paid its monthly rent of $58,760.50. But shortly after the pandemic hit, HBC sent a letter to Anthem, letting them know it would no longer pay rent.

"As you are aware, the global COVID-19 pandemic has created a unique and unprecedented landscape for the world and, in particular, for the retail industry," wrote HBC.

"Due to this extremely urgent and unforeseen situation, HBC has not made April's and May's rent payments and does not intend to make future rent payments until further notice."

The pandemic has proved a difficult storm to weather for one of Canada's largest retail companies. Recently, HBC lost a separate Supreme Court case against a Penticton, B.C., shopping centre involving unpaid rent due to the pandemic.

Last year, landlords at Coquitlam Centre locked the doors of the Bay after it failed to pay rent.

And in Ontario, The Bay was ordered to pay half the rent it owed to landlords of another mall.

Assigning the lease to new tenants

In court, Anthem sought a partial summary judgment for the unpaid rent it is currently owed.

It did not terminate HBC's lease, it said, and that until the contract is over or a new tenant moves in, HBC must pay rent.

By the end of the contract, HBC will owe Anthem around $3.6 million in rent.

HBC argued in court that Anthem refused to consent to another retailer, Value Village, to move into the space and take over the lease.

It said Anthem's summary judgment request should be dismissed so it can find evidence to support the allegation.

"HBC seeks to explore the true reasons behind Anthem's refusal to consent," argued HBC, further claiming that Anthem wouldn't consent to the assignment of the lease because it plans to redevelop the property and an additional lease term could get in the way.

One section of the lease between Anthem and HBC states "the tenant will have the right to assign this lease or sublet the whole or any portion of the tenant's store with the prior approval of the landlord, such approval not to be unreasonably withheld or unduly delayed," Justice Miriam Gropper noted.

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HBC claimed Anthem never marketed the empty store as available on its website.

"[Anthem] had and continues to have an obligation to act in good faith, to assist HBC in its effort to mitigate, and to make reasonable efforts to mitigate its own losses, if any," HBC wrote in its response to Anthem's notice of civil claim.

Back in October 2020, the initial summary judgment application by Anthem was adjourned so HBC could conduct discovery of documents and oral history on Anthem's conduct around the proposed Value Village assignment, as well as other potential stores.

But HBC said these attempts were blocked by Anthem's team and it refused to provide any documents, claiming it was not relevant, according to the court files.

Discovery once again granted

In the end, Gropper agreed with HBC.

"I find that HBC has raised a genuine issue to be tried and that summary judgment cannot be granted to Anthem in the circumstances," she wrote.

Gropper dismissed Anthem's application for a summary judgment and granted HBC's application for further discovery of Anthem's failure to support the assignment or the sub-lease of the space.

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