CITATION: 1888900 Ontario Inc. v. Francis L Enterprises Inc., 2018 ONSC 1139
DIVISIONAL COURT FILE NO.: 091/17 DATE: 2018 02 15
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
BETWEEN:
1888900 ONTARIO INC.
Lance Gao, for the Appellant
Appellant
– and –
FRANCIS L ENTERPRISES INC., FRANCIS LOGBO, TOLA AYODEJI
No one appearing for the Respondents
Respondents
HEARD at Toronto: February 15, 2018
MYERS J. (Orally)
[1] The appellant 1888900 Ontario Inc. appeals from the decision of Deputy Judge McNeely dated January 27, 2017 after a trial in Toronto Small Claims Court. The action before the court is for arrears of rent under a lease of commercial premises. The appellant raises a number of concerns with the judge’s holdings that limited its recovery to $1,641.00.
[2] At first, the appellant says that the trial judge committed an error by failing to hold the personal respondents’ liable as indemnifiers under the terms of the lease. At page 2 of the transcript of the trial judge’s reasons, the trial judge found that there was no indemnity clause in the lease. Rather she found that the indemnifiers signed under the heading “Indemnifier” but that the signatures alone was too ambiguous and insufficient to create personal liability.
[3] I have reviewed the provisions of the lease that was before the trial judge. In fact, there were two leases, one replaced the other. Both leases have a full and proper indemnity clause that makes clear, with specificity, that the landlord’s agreement to enter into the lease with the corporate tenant was based upon the indemnity provided by the Indemnifiers which included a covenant:
(a) to make the due and punctual payment of all monies and charges expressed to be payable under the lease;
(b) to effect prompt and complete performance of all and singular the terms, covenants, conditions and provisions in the lease contained on the part of the tenant to be kept, observed and performed; and
(c) to indemnify and save harmless the landlord from any loss, cost, or damages arising out of any failure to perform any terms, covenants, conditions and provision of the lease.
[4] Under the provisions of the Supreme Court of Canada decision in Housen v. Nikolaisen, 2002 SCC 33, this court can only interfere with a decision of a trial judge below in the event that the judge has made an error of law, or an error of fact or mixed fact and law with the latter two being assessed on a standard of a palpable and overriding error. In this case, the judge simply failed to recognize that the indemnity provisions were part of the lease that were admitted as exhibits in the trial before her. The error is palpable on the record and is overriding in the sense that it is determinative of the liability of the two personal respondents.
[5] On that basis, I allow the appeal and hold that Francis Logbo and Tola Ayodeji are personally responsible for the damages in the amount ordered by the trial judge as I will be amending further in these reasons.
[6] The appellant complains that the judge erred by holding that the tenant was entitled to credit against rent arrears for the amount of $9,890.00 representing a deposit for last month’s rent and a security deposit paid to the plaintiff under the lease. During the term of the tenancy, the plaintiff sold the premises to a new owner. It was the evidence of the tenant at the trial, that the trial judge accepted, that the deposits that the tenant paid were not given to the new owner. How the tenant would know this fact was not explored in evidence. However, Mr. Gao points me to page 96 of the transcript in which the tenant under cross-examination conceded that the lease that was in force between the appellant and its tenant is the very same lease that it is now in force between the tenant and the new landlord.
[7] Looking at the lease, it is clear that the tenant has the right in the last month of the lease to take advantage of the rent deposit and not to pay last month’s rent and to the return of damage deposit if there is no damage. The judge failed to appreciate, in my view, that the tenant would be obtaining a windfall if it was both able to deduct the amount of the last month and security deposits from its arrears and at the same time take full benefit of those deposits against the current landlord. Given the evidence of the tenant that it is under the same lease and therefore has the rights to the deposit under the lease as against the new landlord, the effect of accounts as between the appellant and the new landlord were irrelevant to the issues before the court. The judge therefore erred in basing her decision on an irrelevant factor and failing to appreciate the evidence that was properly available to her on the record that changes the outcome on this issue and is therefore overriding in the sense of the case law. Therefore, I find that the applicant is also entitled to the sum of $9,890.00 representing an amount wrongly credited by the trial judge below.
[8] The appellant then complains that his claim for rent arrears was wrongly limited to the sum of $5,141.00 by the trial judge in relation to a finding made by the judge that there had been a settlement between the parties on the arrears. The appellant says that the settlement was rejected by the tenant. In any event, the tenant never paid the amount agreed and the settlement was done to avoid court as a compromise. The appellant argues that the settlement should not be binding once it was breached and court was required. I have reviewed the reasons of the trial judge on this point. At page 6, she found:
I find it and accept and find as a fact that there was an agreement between the parties, negotiated seemingly with the assistance of counsel to pay $5,141 and that agreement is evidenced very clearly in Exhibits 10, 11, 12 and 13. So you know, forget whatever the deal was before, there was a meeting of the minds that $5,141 was going to be paid and that was the deal.
[9] I cannot find that I have a basis to interfere with this finding of fact by the judge. There is no palpable or overriding error regardless of what I think about the commercial viability of the deal. The judge had ample evidence before her on which to make the finding that she made and accordingly, I dismiss this ground of appeal.
[10] The appellant also argues that the judge erred in denying it the amount of $50.00 which is set as a fee in the lease for each of 29 bounced or late cheques. In fact, the lease only provides for a fee for bounced cheques. There is no entitlement for a fee for late cheques. Moreover, the trial judge found that once the appellant knew that the tenant had closed its prior bank account, it was unreasonable in depositing the ongoing cheques just to obtain the fee for those cheques. In light of the wording of the fee clause in the lease and the position of the judge in assessing the reasonableness of the appellant’s conduct from the perspective of equity and good conscience, I cannot find that the trial judge made any error on this point and dismiss this piece of the appeal.
[11] The appellant also argues that the judge ought to have allowed it the sum of $621.31 in respect to hydro arrears that the tenant failed to pay. However, those arrears arose prior to the time at which the judge found that the parties entered into the settlement agreement that set the entire amount of arrears as at the date of that agreement. Accordingly, the amount of the hydro arrears was subsumed in or included in the $5,141 settlement agreement that the judge found and I am not in a position to change that holding.
[12] The appellant also argues that the judge erred in accepting the evidence of the tenant and its principals to the effect that they paid $2,500 in cash to the appellant in respect of partial compliance with the settlement agreement. The decision of the trial judge was one based upon the credibility of the witnesses whom the judge heard. The assessment of witnesses’ credibility is within the particular province of the trial judge. There is no basis in the material before me to say that the judge erred or made a palpable and overriding error in the assessment of that outcome. Accordingly, this ground of appeal is dismissed.
[13] The appellant argues that the judge erred in denying it recovery of $2,260 which it claimed as interest on funds that it was required to borrow in order to make up the cash flow losses it was suffering when the tenant was in arrears under its lease. The trial judge dealt with the claim for interest as if it was subject to the prejudgment interest provisions of s. 128 of the Courts of Justice Act. This was a misapprehension of the appellant’s claim. The appellant’s reference to interest was a truthful characterization of the payment that it made to its lender. But, the claim as against the tenant was one for damages. That is, the appellant was required to incur costs as a result of the tenant’s breaches. The appellant’s evidence before the trial judge was clear on this point and was not rejected by the judge. Rather she accepted it but mischaracterized the claim as one for prejudgment interest rather than damages. Correcting that error of law, in my view the appellant is entitled to the sum of $2,260.00 as damages reasonably flowing from the tenant’s breach of lease.
[14] In all, the trial judge awarded the plaintiff $1,641. To that, I have added the sums of $9,890 and $2,260 for a total judgment in favour of the appellant of $13,791 plus prejudgment interest at the rate awarded by the trial judge. The appellant is entitled to its costs of the appeal which I fix in the amount of $4,500 which includes both disbursements for the transcripts below and payment to a paralegal to help prepare the appeal.
[15] Finally, as I made clear at the outset of these reasons, the judgment for $13,791 plus prejudgment interest, plus costs is to go against all three defendants so that all of Francis L Enterprises Inc., Francis Logbo, and Tola Ayodeji are liable to the appellant in the amount so found.
[16] I have endorsed the Appeal Book and Compendium as follows: “Appeal allowed for oral reasons dictated in court today.”
___________________________ MYERS J.
Date of Reasons for Judgment: February 15, 2018
Date of Release: February 16, 2018
CITATION: 1888900 Ontario Inc. v. Francis L Enterprises Inc., 2018 ONSC 1139
DIVISIONAL COURT FILE NO.: 091/17 DATE: 2018 02 15
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BETWEEN:
1888900 ONTARIO INC.
Appellant
– and –
FRANCIS L ENTERPRISES INC., FRANCIS LOGBO, TOLA AYODEJI
Respondents
ORAL REASONS FOR JUDGMENT
MYERS J.
Date of Reasons for Judgment: February 15, 2018
Date of Release: February 16, 2018