The Estate of Sim Fai Liu v. Chau et al. [Indexed as: Liu Estate v. Chau]

69 O.R. (3d) 756

[2004] O.J. No. 306

Docket No. C38641

Court of Appeal for Ontario

McMurtry C.J.O., Rosenberg and Gillese JJ.A.

February 6, 2004 [c1]

Civil procedure -- Trial -- Trial judge directing female defendant to leave courtroom while her husband was testifying because credibility was in issue and trial judge was concerned that female defendant would tailor her evidence so that it would be consistent with that of male defendant -- Direction contrary to rule 52.06(2) of Rules of Civil Procedure -- Party's inherent right to be present at trial may be curtailed only in exceptional circumstances which did not exist here -- Existence of credibility concerns or fact that party is to be witness not constituting ground for excluding party from part of trial -- Breach of rule 52.06(2) not entitling defendants to new trial as order did not occasion substantial wrong or miscarriage of justice -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 52.06(2).

Landlord and tenant -- Arrears -- Landlord's estate bringing action for order terminating tenancy and fixing amount of arrears of rent, property taxes and business taxes -- Trial judge finding that landlord and then his estate waived right to claim arrears -- Finding of waiver of rent being supported by evidence of course of conduct of landlord and his estate over many years -- Findings with respect to property taxes and business taxes being unsupported by any evidence other than testimony of tenants -- Under s. 13 of Ontario Evidence Act, trial judge not being entitled to rely on uncorroborated evidence of tenants in respect of any matter occurring before death of landlord -- Estate's appeal allowed in respect of arrears of property and business taxes -- Evidence Act, R.S.O. 1990, c. E.23, s. 13. [page 757]

The tenants had operated a hair salon since 1986 in the basement of a building owned, until his death, by the deceased landlord. The 1986 lease was renewed for a further six years in 1991. In 1996, the tenants spent a substantial amount of money to renovate and expand the salon. In 1997, they submitted a handwritten Offer to Lease for a further eight years with a renewal option for a further eight years. The landlord did not accept the offer. According to the tenants, he said he could not read the writing and that he would have his lawyers prepare a typed Offer to Lease. The standard form lease which was prepared was for a five-year term, and included many terms that were not applicable to the premises. The tenants testified that the landlord crossed out various inapplicable terms and that he initialled the first three changes but then, because there were so many, he used a pen to cross out the inapplicable terms and simply stopped initialling the changes. The tenants testified that the landlord changed the term of the lease from five years to eight years with an option to renew for a further eight years. The tenants initialled those changes but the landlord did not. The tenants continued to occupy the premises. The landlord died in 1999. His widow took the position that the tenants were month-to-month tenants and could be removed at any time. The tenants relied upon the 1997 lease. The landlord's widow received legal advice that the 1997 lease was invalid, and her lawyer wrote to the tenants confirming that the tenancy was month-to-month. The tenants remained in the premises until August 2001, when the landlord's widow sold the building and demanded that the tenants vacate the premises. The tenants refused.

The landlord's estate brought an action for a declaration that the tenants were month-to-month tenants and an order terminating the tenancy and fixing the arrears of rent, including business taxes. At the opening of the trial, counsel for the tenants asked for and obtained an order excluding witnesses. The trial judge directed that the female tenant be excluded from the courtroom while her husband, the male tenant, testified. The trial judge found that the 1997 lease was invalid and that the tenants were month-to-month tenants. He found that it was more probable than not that the landlord had not agreed to the changes to the 1997 Offer to Lease which he did not initial and that he had made the few changes that were initialled, signed the Offer to Lease and gave it to the tenants. The trial judge held that the landlord had waived arrears of rent and business taxes. He terminated the tenancy and ordered that a writ of possession would issue. The tenants appealed. The estate cross-appealed the dismissal of the claim for payment of arrears.

Held, the appeal should be dismissed; the cross-appeal should be allowed in part.

The trial judge's direction that the female tenant leave the courtroom for part of the trial was contrary to rule 52.06(2) of the Rules of Civil Procedure, which provides that an order for exclusion of witnesses may not be made in respect of a party to the action. The rationale for excluding the female tenant was that credibility was in issue. The concern that the female tenant might tailor her evidence so that it would be consistent with that of her husband was not a sufficient reason for dispensing with the rule. Excluding a party because of the possibility that she will tailor her evidence does not give proper weight to the true basis for the party's right to be present. Given the fundamental nature of the right to be present, the circumstances in which a trial judge would be justified in ordering that a party not be present during a part of the trial would have to be exceptional. A party's inherent right to be present at trial may be curtailed where the party acts in a manner which disturbs the judicial conduct of the trial, or persists in failing to conform to accepted rules and procedures. These circumstances would be covered by the trial judge's power under rule 52.06(4) to [page 758] remove anyone from the courtroom who is interfering with the proper conduct of the trial. The fact that a party is to be a witness is not a ground for exclusion. However, the breach of rule 52.06(2) did not entitle the defendants to a new trial as it did not occasion a substantial wrong or miscarriage of justice pursuant to s. 134(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43. The female tenant was present for all of the Estate's case and therefore knew most of the case put against herself and her husband. The same counsel who was present throughout the proceedings represented her and her husband. Their interests were in every sense identical.

In his reasons for judgment, the trial judge referred to a hearsay statement that was central to the case. The landlord's widow testified that the landlord told her that the tenants were month-to-month tenants and that there was no lease. While this part of her evidence was not admissible for its truth, it was admissible for a limited purpose as part of the narrative. While the trial judge apparently relied on the hearsay evidence as one piece of evidence supporting the probability that the landlord did not agree to the changes to the 1998 Offer to Lease which he did not initial, the trial judge gave many reasons for disbelieving the evidence of the tenants and this part of his reasons was not important to his findings about the validity of the 1998 Offer to Lease. The trial judge gave a number of cogent reasons for finding that the tenants' evidence could not be accepted. He did not misapprehend the evidence or fail to deal with relevant evidence.

Section 13 of the Evidence Act provides that "In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence." In dismissing the claim for arrears of rent, property and business taxes because he found that the landlord and the estate had waived their right to claim those arrears, the trial judge relied upon a course of conduct in that the landlord and then the estate consistently accepted cheques for less than the amount of the rent and made no demand for arrears. There was evidence to support the trial judge's finding of waiver as applied to the rent. The landlord, and then the estate, did in fact accept cheques for $2,000 for years, despite the fact that the lease called for increasingly greater amounts of rent. However, there was no evidence to corroborate the tenants' evidence that they paid the property taxes to the landlord in cash. Applying s. 13 of the Evidence Act, the Estate was entitled to succeed on this part of the claim. There was also no evidence of waiver with respect to the business tax arrears, apart from the testimony of the tenants. The Estate was entitled to succeed on this part of the claim.

APPEAL and CROSS-APPEAL from judgment of Wright J., [2002] O.J. No. 2860 (QL) in an action for an order terminating a tenancy and fixing an amount of arrears.

Cases referred to Baywood Paper Products Ltd. v. Paymaster Cheque-Writers (Canada) Ltd. (1986), 57 O.R. (2d) 229, 13 C.P.C. (2d) 204 (Dist. Ct.); Blajic v. Windsor Airline Limousine Service Ltd., [1995] O.J. No. 4045 (QL) (C.A.); Changoo v. Changoo (1999), 45 R.F.L. (4th) 194, 33 C.P.C. (4th) 86 (Ont. Gen. Div.); Hrup v. Cipollone (1994), 19 O.R. (3d) 715, 117 D.L.R. (4th) 440, 33 C.P.C. (3d) 275 (C.A.); Pam v. Gale, [1950] 2 W.W.R. 802 (Man. K.B.); R. v. Hertrich, Stewart and Skinner (1982), 137 D.L.R. (3d) 400, 67 C.C.C. (2d) 510 (Ont. C.A.); Rando v. 917429 Ontario Ltd., [1998] O.J. No. 2640 (QL) (Gen. Div.); Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, 20 Alta. L.R. (3d) 296, 115 D.L.R. (4th) 478, 168 N.R. 381; Sissons v. Olson (1951), 1 W.W.R. 507 (B.C.C.A.) [page 758]

Statutes referred to Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(6) Evidence Act, R.S.O. 1990, c. E.23, s. 13

Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 2.03, 52.06

Richard P. Quance, for appellants. John Legge and Grace Tsang, for respondent.

The judgment of the court was delivered by

[1] ROSENBERG J.A.: -- This is an appeal and cross-appeal from a judgment of Wright J. with respect to a commercial tenancy. The trial judge found that an Offer to Lease dated July 28, 1997 was invalid and that the appellant tenants were therefore only month-to-month tenants. The principal ground of appeal concerns the effect of the trial judge's decision to exclude one of the parties from the courtroom while her husband, the other party, testified.

[2] The principal issue on the cross-appeal concerns the trial judge's decision with respect to arrears of rent and business taxes. The landlord submits that the trial judge erred in holding that the landlord had waived these arrears. A complicating feature in both the appeal and cross-appeal is the effect of s. 13 of the Evidence Act, R.S.O. 1990, c. E.23, providing that in an action by or against the executors of an estate, an opposite party shall not obtain judgment on his or her own evidence in respect of any matter occurring before the death of the deceased, unless such evidence is corroborated by some other material evidence.

[3] For the following reasons, I would dismiss the appeal and allow the cross-appeal in part.

The Facts

The lease issue

[4] The appellants, Peter and Annie Chau, have operated a hair salon since 1986 in the basement of a building formerly owned by Dr. Sim Fai Liu. I will refer to the Chaus as the tenants. The 1986 lease was renewed for a further six years pursuant to an Offer to Lease dated June 25, 1991. The renewed lease expired in June 1997. In 1996, the tenants spent a substantial amount of money to renovate and expand the salon. [page 759]

[5] In May of 1997, the tenants submitted a handwritten Offer to Lease for a further eight years with a renewal option for a further eight years. Dr. Liu did not accept that offer. At the time, according to the tenants, Dr. Liu said he could not read the writing and would have someone prepare a typed Offer to Lease. He had his lawyers prepare an Offer to Lease. This standard form lease, which is dated July 1, 1997, was for a five-year term. It included many terms, such as deposit for rent, maintenance of a parking lot, shovelling snow and so on that were not applicable to these premises.

[6] The tenants testified that on July 28, 1997, they met with Dr. Liu and discussed the July 1, 1997 Offer to Lease. They testified that Dr. Liu began crossing out the various terms that were not applicable to this tenancy. Dr. Liu initialled the first three of these changes but then, because there were so many, he used a thick black pen to cross out the inapplicable terms and simply stopped initialling the changes. The tenants testified that Peter Chau changed the term of the lease from five years to eight years with an option to renew for a further eight years. The tenants initialled these changes but Dr. Liu did not. They testified that Dr. Liu said, "[d]on't worry. The bottom . . . say 'acceptance'. When I sign my name on it everything will be fine. . . . Don't you trust me?" Dr. Liu's signature does appear on the last page as do the signatures of the tenants. According to the tenants, Dr. Liu put red seals beside their names and the tenants and Dr. Liu each took a copy of the revised Offer to Lease now dated July 28, 1997.

[7] The tenants continued to occupy the premises and, as in the past, provided Dr. Liu with 12 post-dated cheques for rent. Dr. Liu passed away on April 22, 1999. In October 1999, a dispute arose between Dr. Liu's widow, Edith Liu, and the tenants. Mrs. Liu took the position that the tenants were month-to-month tenants and could be removed at any time. The tenants relied upon the 1997 lease. Mrs. Liu claimed to know nothing about the lease. The tenants provided a copy to her. She sent the copy to her lawyer and received advice that the lease was invalid. The lawyers wrote to the tenant and confirmed that this was a month-to-month tenancy. The tenants remained in the premises and very little of any consequence occurred until August 2001 when Mrs. Liu sold the building and her lawyer wrote the tenants demanding that they vacate the premises. The tenants refused.

[8] The Estate of Dr. Liu brought an application for a declaration that the tenants were month-to-month tenants. It also sought an order terminating the tenancy and fixing the arrears of rent, including business taxes. [page 760]

The arrears issues

[9] Under the 1991 lease, the tenants were to pay monthly rent as follows:

July 1991 to June 1993: $1,870 plus GST

July 1993 to June 1995: $2,000 plus GST

July 1995 to June 1997: $2,200 plus GST

[10] The tenants were also to pay their share of the realty and business taxes. At that time, the City of Toronto sent a business tax bill directly to tenants. That system changed in 1998. The business tax was rolled into the realty tax and the city sent the bill to the landlord and it was up to the landlord to obtain reimbursement from tenants for their share of the taxes. Under the 1991 lease, the tenants should have been paying $2,000 plus GST since July 1993 and $2,200 plus GST since July 1995. In fact, they had only been paying $2,000. The tenants testified that because of the recession, business was bad and so in 1993 Dr. Liu told them to leave the rent at $2,000.90 ($1,870 plus GST) [^1]. They had a similar conversation with him in July 1995. The tenants also testified that they paid their share of the realty taxes, but at Dr. Liu's request, paid in cash.

[11] Under the 1997 "lease", the tenants were to pay monthly rent as follows:

July 1997 to June 2001: $2,000

July 2001 to June 2003: $2,200

July 2003 to June 2005: $2,400

[12] The clause in the lease requiring the tenants to pay GST had been crossed out and initialled by the tenants, but not by Dr. Liu. The tenants were also to pay their own business taxes. Peter Chau testified that at the July 28, 1997 meeting they discussed the costs of the renovations that tenants had made the year before. According to Mr. Chau, Dr. Liu said that they could pay the $2,000 rent to the end of December 2001 and they would not have to reimburse him for the first $10,000 of the business taxes. The renovations had cost about $20,000 so, in effect, Dr. Liu [page 761] would be paying for about one-half of the renovations. Under the 1991 lease, the tenants were solely responsible for the costs of the renovations.

[13] The notice of application was issued in September 2001. The Estate claimed arrears for rent because the tenants were not paying $2,200 plus GST from 1995 to 1997 but only $2,000 and from July 2001 to November 2001 because the tenants were only paying $2,000 instead of $2,200 as required under the 1997 "lease". The Estate also claimed arrears for realty taxes from December 1995 to December 31, 1997 and arrears for business taxes from January 1998 to November 2001.

The Reasons of the Trial Judge

[14] The trial judge doubted that Dr. Liu would have accepted the July 28, 1997 Offer to Lease with all of the handwritten changes without having had it retyped. He also was of the view that Dr. Liu was in the habit of initialling changes. He found it was probable that Dr. Liu had made the few changes that were initialled, signed the Offer to Lease and gave it to the tenants some time in June. He found it unlikely that Dr. Liu made the "don't you trust me?" statement on July 28th. In the trial judge's view, Dr. Liu's initials do not appear on the various changes, especially those extending the lease to eight years with an option to renew for a further eight years, because he did not agree with them. He thought it made no sense that Dr. Liu would do a "complete turn around" and agree to those terms. The trial judge found it strange that Mrs. Liu has been unable to locate Dr. Liu's copy of the July 28th lease. The trial judge also had difficulty accepting that the discussions respecting the business taxes took place. The trial judge found as follows [at para. 36]:

I do not accept the Chaus' evidence. It is not credible. Their evidence makes no common sense. The weight of the evidence supports my finding that it is more probable that Dr. Liu did not agree to the changes made on the July 28, 1997, Offer to Lease which he did not initial and did not sign on July 28, 1997, as accepting the changes.

[15] The trial judge therefore found that the July 28, 1997 Offer to Lease was not a valid document and the tenants had been month-to-month tenants since July 1, 1997.

[16] The trial judge then turned to the arrears of rent, business and property taxes. He found that Dr. Liu was prepared to allow the tenants to remain provided they paid the $2,000 per month rent rather than having to evict them and risk not being able to find a new tenant. There was no evidence of any demand for payment of any arrears and no evidence of any document purporting [page 762] to advise the tenants that they owed any amounts to Dr. Liu. While there were letters from the Estate's lawyer advising the tenants that they were month-to-month tenants, there was no demand for arrears. The trial judge held [at para. 47] that in view of this course of conduct, the Estate had waived its right to any arrears:

I find that from December 1995, to the commencement of this application in September 2001, Dr. Liu and the Estate engaged in a course of consistent conduct not to demand of or indicate to the tenants that they owed any arrears of rent or arrears of business or property taxes. I find that that course of conduct constitutes a waiver of the right to now claim those arrears.

[17] The trial judge therefore dismissed the claim for payment of arrears. He terminated the tenancy and ordered that a writ of possession could issue.

Analysis

The appeal

Exclusion of Annie Chau from the trial

[18] At the opening of the trial, counsel for the tenants asked for an order excluding witnesses. The trial judge made the order. It appears that the tenants remained in the courtroom during the plaintiff's case. Counsel for the tenants began their case by calling Peter Chau. Before he began testifying, counsel for the Estate noted that Annie Chau was in the courtroom and asked if that was appropriate. He pointed out that there was an order excluding witnesses and, though she was a party, "surely the order would apply to somebody who is going to hear the evidence of her husband". Counsel for the tenants stated that she was a party and entitled to be in the courtroom and not excluded. The trial judge said this:

But I believe that the issue is clearly one of credibility as to the authenticity of the July 28th document so therefore I think probably it's better that she be excluded in fairness to the plaintiff.

[19] The trial judge directed that Annie Chau leave the courtroom. Peter Chau then testified. His testimony was lengthy and detailed. It was apparent that he had the most dealings with Dr. Liu, but Mrs. Chau was present for the July 28th meeting. After Mr. Chau completed his testimony, Annie Chau testified. She required the assistance of an interpreter. Her testimony was briefer than that of her husband's. Her evidence was essentially similar to that of Mr. Chau. Peter Chau had testified that the meetings with Dr. Liu were partly in English and partly in Chinese. [page 763] Annie Chau testified that her husband would translate the English parts of the conversations for her.

[20] The trial judge's direction that Annie Chau leave the courtroom for part of the trial was contrary to rule 52.06(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. That rule provides, in part, that an order for exclusion of witnesses "may not be made in respect of a party to the action". The judge may, however, direct that a party give evidence before any other witnesses. As well, under rule 52.06(4), the trial judge may exclude from the courtroom "any person who is interfering with the proper conduct of the trial". That exception had no application in this case.

[21] Counsel for the Estate suggests that the trial judge has a discretion to exclude a party, especially where credibility is in issue. He referred us to the decision in Rando v. 917429 Ontario Ltd., [1998] O.J. No. 2640 (QL) (Gen. Div.) where Ground J. granted a motion for an order excluding the co-defendant from the hearing. It is not, however, clear that case concerned exclusion of a party at trial. In his brief endorsement, Ground J. referred to the decision of the British Columbia Court of Appeal in Sissons v. Olson (1951), 1 W.W.R. 507 as the leading authority. Sissons deals with exclusion of a party while his co-plaintiff was being examined for discovery. The endorsement also makes no reference to rule 52.06. I do not think Rando is authority for the trial judge having discretion to exclude a party from the trial.

[22] In Changoo v. Changoo (1999), 33 C.P.C. (4th) 86, 45 R.F.L. (4th) 194 (Ont. Gen. Div.), a ruling on a motion by the plaintiff to cross-examine each of the three defendants on their affidavits in the absence of the others, Cullity J. provides some assistance in interpreting rule 52.06. He expressed the view that aside from the provisions of rule 52.06(4), which, as indicated, permits the trial judge to exclude any person who is interfering with the proper conduct of the trial, the judge may have the power to exclude a party by virtue of rule 2.03 which provides as follows:

2.03 The court may, only where and as necessary in the interests of justice, dispense with compliance with any rule at any time.

[23] I need not decide whether it is open to a trial judge to invoke rule 2.03 and dispense with compliance with rule 52.06(2). In this case, the rationale for excluding Ms. Chau was that credibility was in issue. The concern, one can assume, is the possibility that Ms. Chau would tailor her evidence so that it would be consistent with that of her husband. That was not a sufficient basis for dispensing with the rule. See Changoo at paras. 13-17. Excluding a party because of the possibility she will tailor her evidence does not give proper weight to the true basis for the [page 764] party's right to be present. As Borins D.C.J. said in Baywood Paper Products Ltd. v. Paymaster Cheque-Writers (Canada) Ltd. (1986), 57 O.R. (2d) 229, 13 C.P.C. (2d) 204 (Dist. Ct.) at p. 239 O.R., "[t]he presence of a party at the examination for discovery, like the presence of a party at trial, is consistent with due process and the right to protect his or her interests by observing the conduct of the examination."

[24] Given the fundamental nature of the right to be present, the circumstances in which a trial judge would be justified in ordering that a party not be present during a part of the trial would have to be exceptional. For example, a real probability of intimidation (Changoo at para. 12) or the circumstances referred to by O'Halloran J.A. in the Sissons case at p. 509 W.W.R.:

It seems to me, with respect, we must start with the principle that every person has an inherent right to be present at a trial or any other proceedings to which he is a party. Such a right, however, must not conflict with the fair and proper judicial conduct of the action or proceedings. Inherent rights are invariably accompanied by concomitant duties. For example if a party should act in a manner to disturb the judicial conduct of the trial or proceedings, or persist in failure to conform to accepted rules and procedure, it would not be surprising if the court or presiding judicial official should adjourn the hearing or, if he found it necessary, order that the interrupting party be removed.

(Emphasis added)

[25] These circumstances would be covered by the trial judge's power under rule 52.06(4) to remove anyone from the courtroom who is interfering with the proper conduct of the trial. The fact that a party is to be a witness is not a ground to exclude them. See Pam v. Gale, [1950] 2 W.W.R. 802 (Man. K.B.) at p. 805 W.W.R. and Baywood at p. 235 O.R.

[26] In the criminal context, the rule that an accused is entitled to be present throughout the trial is rigorously enforced. In R. v. Hertrich, Stewart and Skinner (1982), 137 D.L.R. (3d) 400, 67 C.C.C. (2d) 510 (Ont. C.A.) at p. 537 C.C.C., Martin J.A. explained the rationale for the rule in these terms:

The essential reason the accused is entitled to be present at his trial is that he may hear the case made out against him and, having heard it, have the opportunity of answering it: R. v. Lee Kun (1915), 11 Cr. App. R. 293. The right of the accused to be present at his trial, however, also gives effect to another principle. Fairness and openness are fundamental values in our criminal justice system. The presence of the accused at all stages of his trial affords him the opportunity of acquiring first-hand knowledge of the proceedings leading to the eventual result of the trial. The denial of that opportunity to an accused may well leave him with a justifiable sense of injustice. Indeed, in my view, an examination of the Canadian decisions shows that the latter principle is, in fact, the implicit and overriding principle underlying those decisions.

(Emphasis added) [page 765]

[27] It seems to me that similar concerns apply in the civil context. Parties have the right to be present, not only to hear the case put against them, but as a matter of fairness and openness and to avoid "a justifiable sense of injustice" because they were deprived of "the opportunity of acquiring first-hand knowledge of the proceedings leading to the eventual result of the trial".

[28] The proper course in this case would have been for the trial judge to have denied the plaintiff's application to exclude Ms. Chau. He might have indicated that he could take into account that Ms. Chau was present during her husband's testimony in assessing her evidence.

[29] While the tenants have therefore established that there was a breach of the rule, this does not entitle them to a new trial. To succeed on this ground of appeal and obtain a new trial, the tenants must show that a substantial wrong or miscarriage of justice was occasioned, pursuant to s. 134(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43. That provision is "all-encompassing" and is broad enough to cover even a serious procedural error as occurred in this case. See for example, Hrup v. Cipollone (1994), 19 O.R. (3d) 715, 117 D.L.R. (4th) 440 (C.A.) at p. 719 O.R. In Blajic v. Windsor Airline Limousine Service Ltd., [1995] O.J. No. 4045 (QL) (C.A.), this court dismissed an appeal where the trial judge had excluded the party along with all the other witnesses.

[30] In this case, the tenants attempt to meet the burden of showing that a substantial wrong or miscarriage of justice was occasioned in two ways. They submit that excluding Annie Chau was itself a substantial wrong or miscarriage of justice and that the trial judge completely failed to deal with Ms. Chau's testimony in his reasons.

[31] In my view, the tenants have not demonstrated that the appeal should be allowed on this basis. Ms. Chau was present for all of the Estate's case and therefore knew most of the case put against her and her husband. The same counsel who was present throughout the proceedings represented her and her husband. Their interests were in every sense identical. I do not agree with the submission that the trial judge did not deal with Ms. Chau's evidence in his reasons. On most occasions, he did lump her evidence in with that of her husband but that was because it was identical to his on the critical points. While there was a lengthier treatment of Mr. Chau's evidence, this was simply because Mr. Chau had more evidence to give, having conducted most of the negotiations with Dr. Liu, and because he, unlike Ms. Chau, was subject to a lengthy and probing cross-examination on the circumstances of the July 28th meeting. [page 766]

Inadequacy of Reasons and Misapprehension of Evidence

[32] The tenants submit that the trial judge's reasons were inadequate, that he misapprehended the evidence and relied upon inadmissible hearsay. I will deal with the hearsay issue first. Some hearsay crept into the proceedings, especially during the Estate's case during the testimony of Mrs. Liu. Counsel for the tenants objected and the trial judge was aware of the problem. He also noted that some of the hearsay related to matters that were not contentious. In his reasons, the trial judge made reference [at para. 9] to one hearsay statement that was central to the case:

Edith Liu testified that she picked up copies of [the July 1, 1997] Offer to Lease from the lawyer's office. She said that her husband gave the Offer to Lease to the Chaus who would not agree to the lease terms and they never returned the lease. She stated that her husband told her, "They are month to month tenants, there is no lease."

(Emphasis added)

[33] This part of Mrs. Liu's evidence was not admissible for its truth. It was, however, admissible for a limited purpose as part of the narrative of the events. It also may explain some of Mrs. Liu's later conduct in her dealings with the tenants. More problematic is that the trial judge returned to this evidence [at para. 35] when he came to deal with the central issue of the validity of the July 28th Offer to Lease:

Dr. Liu's wife and daughter have been unable to find the second original of the July 28, 1997, Offer to Lease amongst Dr. Liu's papers. If Dr. Liu received the second original document at the alleged meeting on July 28, 1997, it is strange that it cannot be found because it would be the document which governed the landlord and tenant relationship in a lease of eight years. It is more likely, that because he did not agree with the changes and did not initial the changes, he did not have in his possession the second original or a copy of the July 28, 1997, Offer to Lease. This likelihood fits in with Dr. Liu's report to his wife that the tenants do not have a lease and that they were month to month tenants.

(Emphasis added)

[34] However, the trial judge gave many reasons for disbelieving the evidence of the tenants and I am not satisfied that this part of the trial judge's reasons were important to his findings about the validity of the July 28th Offer to Lease.

[35] The tenants submit that the trial judge's reasons are inadequate in that he did not refer to all of the relevant evidence and failed to deal with all of the issues in the case. The trial judge is under no obligation to refer to all of the evidence in the case. His reasons are sufficient if they address the contentious issues in the case and the evidence bearing on those issues. The trial judge [page 767] reviewed much of the evidence bearing on the central issue, the validity of the July 28th lease. He gave a number of cogent reasons for finding that the evidence of the tenants could not be accepted, such as the following:

-- According to the tenants, Dr. Liu went to the trouble of having a lawyer prepare a typed version of the Offer to Lease because he could not read the handwritten version presented by the tenants but then was content with the July 28th version, which is heavily marked up;

-- Dr. Liu had an Offer to Lease prepared that was for a five-year term, having obviously rejected the eight-year term and eight-year option offered by the tenants in their handwritten offer, yet for no apparent reason reverted back to the eight-and-eight term;

-- Very minor changes to the lease were initialled by Dr. Liu but the most important, the term of the lease and the option, were not; and

-- Dr. Liu was 78 years of age when he presented the Offer to Lease and would be 96 after the full run of the July 28th version.

[36] The trial judge gave some other reasons, but these are sufficient to demonstrate that he dealt with the issues at hand. In the end, the trial judge found that the tenants' version of events simply did not accord with common sense.

[37] The tenants submit that the trial judge misapprehended evidence and failed to deal with other relevant evidence. In their factum, the tenants list ten matters that they say the trial judge failed to consider or misapprehended. I have reviewed all of them. In my view, they are actually referred to by the trial judge or are inconsequential. I will provide some examples. The tenants say that the trial judge failed to consider that Peter Chau approached Dr. Liu with respect to renewal of the lease in May 1997 and provided a handwritten Offer to Lease. In para. 6 of his reasons, the trial judge specifically refers to this evidence. The tenants say that the trial judge failed to consider their evidence that the blank July 1st offer was presented at a meeting on July 28th at which time changes were made and the offer was signed and red seals applied. Of course, this is the tenants' position. The trial judge reviewed at considerable length the evidence bearing on this issue and found against them on that issue. The tenants submit that the trial judge failed to take into account [page 768] the unlikelihood that the tenants would have renovated the premises if they were only month-to-month tenants. However, this fails to take into account that the renovations were made in 1996, during the previous lease. At that time, they had no reason to believe they would be month-to-month tenants.

[38] The tenants also submit that the trial judge erroneously relied in part on the fact that Mrs. Liu and her daughter were unable to find a copy of the July 28th Offer to Lease. I have set out that part of his reasons above. The trial judge found it strange that if that offer was valid and governed the relationship between the parties that Dr. Liu would not have a copy. The tenants say that the trial judge failed to take into account that Mrs. Liu could not find any of the originals of the earlier leases. The evidence was somewhat confusing on this issue. Mrs. Liu actually testified that she had many leases and thought that she did have copies of the earlier leases. In the circumstances, the trial judge was entitled to take into account that the current "lease" was not amongst Dr. Liu's papers.

[39] I would make one final observation about the appeal. The trial judge found against the tenants without resorting to s. 13 of the Evidence Act. I have considerable doubt that there is any evidence that corroborates the tenants' evidence about the July 28th Offer to Lease. The only pieces of evidence to which the tenants were able to point are a 1999 MLS listing that refers to the property as income producing and a 2000 Agreement of Purchase and Sale signed by Mrs. Liu that lists the existing tenants including the following:

1. The Basement Hair Salon is paying $2,000/month, including GST plus own utilities.

[40] I do not see how this evidence confirms that there was a valid eight-year lease as opposed to a month-to-month tenancy.

[41] Accordingly, I would dismiss the appeal.

The Cross-Appeal

[42] The trial judge dismissed the claim for arrears of rent, property and business taxes because he found that Dr. Liu and the Estate had waived their right to claim those arrears. The trial judge relied upon a course of conduct in that Dr. Liu and then the Estate consistently accepted cheques for $2,000, although the rent was greater, and made no demand for arrears. In Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co., [1994] 2 S.C.R. 490, 115 D.L.R. (4th) 478, at p. 500 S.C.R., Major [J.] summarized the requirements of waiver as follows: [page 769]

Waiver will be found only where the evidence demonstrates that the party waiving had (1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them.

[43] The Estate submits that there is no evidence to corroborate the evidence of the tenants that Dr. Liu intended to waive arrears in rent and taxes and therefore the trial judge erred in dismissing this part of the claim. The Estate relies upon s. 13 of the Evidence Act, which I have referred to earlier. For convenience, the full text of the section is set out here:

13. In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.

[44] In my view, there was evidence to support the trial judge's finding of waiver as applied to the rent. There was not just the tenants' evidence that Dr. Liu had agreed to accept $2,000. There was a course of conduct extending over many years in which Dr. Liu accepted the $2,000 cheques, notwithstanding that from 1995, the 1991 lease called for increasingly greater amounts of rent. This course of conduct continued until Dr. Liu's death in 1999 and thereafter until the application was served in 2001. It is also confirmed to some extent by the Agreement of Purchase and Sale previously referred to signed by Mrs. Liu and which indicated that the tenants were paying "$2000/month, including GST, plus own utilities". In my view, this was sufficient evidence to corroborate the tenants' evidence with respect to arrears of rent.

[45] I have greater difficulty with the property and business tax arrears. The tenants testified that they paid the property taxes in cash to Dr. Liu. They do not claim that he waived those arrears. There is no evidence to corroborate the tenants' evidence on this point. In my view, applying s. 13, the Estate is entitled to succeed on this part of the claim.

[46] With respect to the business tax arrears, in my view there is no evidence of waiver. The tenants testified that Dr. Liu agreed to forgive the first $10,000 of the business tax taking into account the renovations that the tenants made in 1996. This is the only evidence that Dr. Liu agreed to waive these taxes. However, the trial judge [at paras. 31-33] did not accept this part of the tenants' evidence:

I have difficulty accepting that these discussions took place. The renovations had been completed and paid for by the Chaus more than a year prior to the alleged meeting of July 28, 1997. There is no evidence that there was any discussion with Dr. Liu prior to July 28, 1997 that he should share in the payment of the renovations. The Offer to Lease in force at the time the [page 770] renovations were done clearly stated that any alterations were to be done at the tenants' expense.

I find it interesting that Mr. Chau would have, at the alleged meeting of July 28, 1997, a copy of the renovation invoice from April 1996 in his possession. I also find it difficult to accept that Dr. Liu, over a year after the renovations were completed, would be willing to pay $10,000 when most of the leasehold improvements were for the benefit of the tenants.

If these matters were discussed they are important changes to the July 28, 1997, Offer to Lease. Considering the myriad of changes made to that document I find it odd that these additional changes were not made on the document.

[47] Without the tenants' testimony, there is no evidence capable of amounting to waiver as defined in Saskatchewan River Bungalows Ltd. Merely because neither Dr. Liu nor the Estate made any demand until 2001 is not, in my view, capable of amounting to proof of waiver in the sense of "(1) a full knowledge of rights; and (2) an unequivocal and conscious intention to abandon them". Finally, there is no evidence to corroborate the tenants' evidence on this point within the meaning of s. 13. Accordingly, the Estate is also entitled to succeed on this part of the claim.

Disposition

[48] Accordingly, I would dismiss the appeal and allow the cross-appeal in part as indicated. The Estate is entitled to its costs of the appeal and the cross-appeal, which I would fix at $10,000 inclusive of GST and disbursements.

Appeal dismissed; cross-appeal allowed in part.

[^1]: Apparently because the bank kept making mistakes with the $2000.90 cheques, the tenants and Dr. Liu agreed that the tenants only had to pay $2,000.