Court of Appeal for Ontario

Date: 2026-03-18 Docket: COA-25-CV-0971

Sossin, Gomery and Osborne JJ.A.

Between

Highbury Narrows Ltd. Plaintiff (Appellant)

and

LAF Canada Company and LA Fitness International, LLC Defendants (Respondents)

Jordan Diacur, for the appellant

Jeffrey Haylock and Jeffrey Wang, for the respondents

Heard: March 10, 2026

On appeal from the judgment of Justice James A. Ramsay of the Superior Court of Justice, dated June 18, 2025.

Reasons for Decision

[1] This appeal centers on the interpretation of a provision in a commercial lease setting out the landlord's remedies in the case of the tenant's default. The motion judge concluded that, when Highbury Narrows Ltd. chose to terminate its lease with its tenant LAF Canada for failure to pay rent, Highbury limited its right of recovery to rent and expenses due at the date of termination, plus a fixed penalty amount.[^1]

[2] Highbury contends that the motion judge's interpretation of the lease overlooks wording that preserved the landlord's remedies in law and equity. It argues that such remedies necessarily include the landlord's right, on termination for the tenant's default, to recover the present value of unpaid rent to the end of the unexpired term of the lease, based on Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd., 1971 CanLII 123 (SCC), [1971] S.C.R. 562. Highbury also says that the motion judge erred in dismissing its claims for the cost of removing a pool installed by LAF Canada, maintenance expenses and repairs; and in awarding costs on the motion to the respondents.

[3] We are not persuaded that the motion judge erred as Highbury contends.

[4] The motion judge's interpretation of the lease is a determination of mixed fact and law to which this court must defer absent an extricable error of law or a palpable and overriding error: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-52.

[5] Highbury's claim for prospective rent after termination was governed by s. 19.2 of the lease:

19.2 LANDLORD'S REMEDIES. Upon any Event of Default by Tenant pursuant to Section 19.1 above, and the expiry of the relevant notice and cure period ..., in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to (A) terminate this Lease and all rights of Tenant hereunder without the requirement for any further notice; or (B) have this Lease continue in effect for so long as Landlord does not terminate this Lease and Tenant's right to possession of the Premises, in which event Landlord shall have the right to enforce all of Landlord's rights and remedies under this Lease including the right to recover the Minimum Rent, Additional Rent and other charges payable by Tenant under this Lease as they become due under this Lease... .

[6] The motion judge found that s. 19.2 gave Highbury two options if the tenant failed to respond to a notice of unpaid rent arrears: (1) it could terminate the lease, or (2) it could have the lease continue and collect further rent, if it did not end the tenant's possession. He concluded that this interpretation was consistent with a plain reading of s. 19.2, as well as with s. 19.3 of the lease. The latter section gives the landlord the right to apply to the court for re-entry, but again emphasizes that, "if Landlord does not elect to terminate this Lease, then Landlord may from time to time, without terminating this Lease, either recover all rental as it becomes due or relet the Premises". The motion judge rejected Highbury's argument that the words "in addition to any other remedies available to Landlord at law or in equity" at the beginning of s. 19.2 preserved the landlord's right to sue for prospective rent after termination of the lease "in view of the specific words to the contrary used later in that very paragraph and in the next."

[7] We are not persuaded that the motion judge erred in law in interpreting s. 19.2 of the lease. He read s. 19.2 with consideration both to the plain meaning of the words in the provision and to the surrounding terms. His interpretation did not strip the reference to "any other remedies" of meaning. For instance, this phrase could refer to remedies such as the landlord's right to seek injunctive relief or to exercise a distress remedy. As the motion judge reasonably found, however, the reference to "any other remedies" in s. 19.2 could not have reasonably intended to preserve a right that was explicitly precluded later in that same section.

[8] Highbury argues that this interpretation is inconsistent with Highway Properties. Highway Properties addressed whether a landlord could, as a general proposition, advance a claim for recovery of rent for the remainder of the term of a commercial lease after a tenant repudiated it. The Supreme Court held that this remedy could be available insofar as a lease is a contract. Highway Properties does not establish that a claim for prospective rent can be made in every case. As Laskin J. noted, "[l]est there be any doubt on the point", the lease in Highway Properties did not preclude a claim for prospective damages.

[9] The motion judge's decision is not inconsistent with the reasoning or outcome in Highway Properties. He simply determined that, given the terms of the parties' contract, the landlord's claim was restricted on its termination of the lease. The motion judge's decision is not, as Highbury contends, "commercially absurd", nor does it undermine the applicability of Highway Properties in a case where the terms of a lease do not explicitly preclude a claim for prospective damages on termination.

[10] Highbury takes issue with the motion judge's suggestion that Highway Properties might not apply because it dealt with repudiation of a lease by a tenant as opposed to termination by the landlord. Highbury says it was unfair for the motion judge to distinguish the case in the absence of party submissions on this point or any notice from the motion judge that he might find Highway Properties distinguishable. We disagree. It was open to the motion judge to observe that Highway Properties arose in another factual context. He did not ultimately rely on this distinction in concluding that, given the terms of the lease in this case, it did not assist Highbury.

[11] We find no error in the motion judge's rejection of Highbury's other claims.

[12] The motion judge found that the lease permitted Highbury to require the tenant to remove the pool, but that Highbury never demanded that LAF Canada do so, nor did it remove the pool itself. In these circumstances, he concluded that there was no basis to order LAF Canada to pay to remove the pool. The motion judge likewise found that there was no provision for the tenant to pay for maintenance of the premises after lease termination and no contractual term requiring the tenant to pay expenses associated with a change of exterior signage.

[13] These were findings of fact and mixed fact and law to which this court must defer, given the absence of any palpable and overriding error identified on this appeal.

[14] Finally, it was well within the motion judge's discretion to award partial indemnity costs of $25,615.62 to the respondents. As he noted in his costs endorsement, Highbury claimed over $1,000,000 in damages and recovered just over $140,000, which the respondents conceded they owed. The respondents had moreover made a series of offers to settle prior to the summary judgment motion hearing for amounts of at least $140,000 and up to $580,000. The motion judge reasonably concluded that Highbury would have been better off accepting any of these offers and could accordingly not be viewed as the successful party on the motion. He furthermore noted that Highbury's conduct delayed the litigation, and that the respondents' costs were modest. The motion judge's reasoning is unimpeachable and so there is no basis to revisit the costs award.

[15] The appeal is dismissed, with all-inclusive costs of $17,500 to the respondents.

"L. Sossin J.A."

"S. Gomery J.A."

"P.J. Osborne J.A."

[^1]: The other respondent, LA Fitness International, LLC, is named as a defendant as an indemnitor under the lease.