Court of Appeal for Ontario
Date: 20210604 Docket: C67449
Roberts, Zarnett and Sossin JJ.A.
BETWEEN
Paletta International Corporation Plaintiff (Respondent)
and
Liberty Freezers London Ltd. Defendant (Appellant)
Counsel: Kim G. Ferreira and Asad Ali Moten, for the appellant Robert C. Dunford and Sarah Wouters, for the respondent
Heard: January 27, 2021 by video conference
On appeal from the judgment of Justice Dale Parayeski of the Superior Court of Justice, dated August 26, 2019.
L.B. Roberts J.A.:
Overview
[1] This appeal arises out of the parties’ dispute over the interpretation of a commercial lease for refrigerated premises.
[2] The parties entered into an agreement to lease on October 5, 2010 (“the lease”). The respondent landlord undertook to carry out an extensive retrofit of the premises to accommodate the appellant tenant’s commercial frozen food warehousing and distribution business.
[3] The parties agreed that the lease would commence when the retrofit was substantially completed in accordance with the requirements and specifications of the Canadian Food Inspection Agency (“CFIA”). The appellant informed clients that it would begin offering services in April 2011. However, this date was based on what the trial judge found to be an assumption rather than a concrete term of the lease.
[4] The retrofit was not completed by April 2011 and, by June 2011, the appellant was forced to cancel contracts with important clients. In October 2011, with work still ongoing, the appellant put the respondent on notice that it required a firm commencement date and a copy of the final form of the lease. In January 2012, the respondent proposed a final form of lease (“the proposed lease”), which referenced new terms not contained in the lease. These new terms included the requirement that the appellant pay additional rent to reimburse the respondent for new pallet racking that the respondent had installed in the premises. The proposed lease also required a third-party indemnifier, introduced limits on the appellant’s ability to sublet to its clients, and deleted terms that provided for six months’ base free rent.
[5] On March 29, 2012, the appellant advised the respondent that it would not be taking possession of the premises. The appellant took the position that the respondent had failed to complete the promised retrofit by the purported April 2011 deadline and had repudiated the lease by attempting to introduce material new terms into the proposed lease. In response, the respondent commenced this action against the appellant to recover damages for breach of contract, and engaged Colliers Macaulay Nicolls Inc. (“Colliers”) to list the property for lease by a new tenant.
[6] In February 2013, as part of a general corporate restructuring of the Paletta group of companies, the respondent transferred the premises to a related numbered company, 2362302 Ontario Inc. (“236”), to hold bare title to the property in trust as nominee for the respondent. Under the nominee agreement, the respondent remained the beneficial owner of the leased premises and retained all rights and privileges to the property, including the right to receive all rents from any leases.
[7] On April 4, 2013, 236 executed an offer to lease with Eastern Meat Solutions Inc. and entered into a final form of lease indenture on June 14, 2013 (“the Eastern lease”). The term of the Eastern lease commenced on June 1, 2013. However, Eastern’s obligations to pay base rent were suspended for three months until September 1, 2013. Realty taxes, utilities, maintenance and other fees owing as additional rent were payable immediately, notwithstanding the rent-free period.
[8] The parties proceeded to trial in 2018. The respondent successfully argued before the trial judge that it had complied with the terms of the lease and that the appellant was in breach for failure to take possession. The respondent claimed substantial damages that it said were not mitigated by re-leasing the premises to Eastern.
[9] The trial judge concluded that the lease was valid and binding and that the parties had not entered into the proposed lease. Relying on the evidence of the project’s lead engineer, the trial judge found that substantial completion had been achieved, and the lease had commenced, in April 2012. He found the appellant was in breach of the lease and awarded the respondent damages in the amount of $2,006,001.99. The trial judge also ordered that the appellant forfeit to the respondent its $200,000 deposit paid under the lease.
Issues
[10] The appellant raises the following issues:
i. Did the trial judge err by concluding that the terms of the lease were certain and that the respondent had not introduced new terms? ii. Did the trial judge err in finding that “substantial completion” provided an ascertainable commencement term and that the parties did not agree to a definite commencement date? iii. Did the trial judge err in his interpretation of “substantial completion” under the lease and in his conclusion that the retrofit was substantially complete in April 2012? iv. Did the trial judge err in his determination of damages?
[11] I shall analyze each of these arguments in turn.
Analysis
(i) Certainty in the terms of the agreement
[12] The appellant submits that there was uncertainty in the agreement between the parties concerning rent, pallet racking and third-party indemnification due to the introduction of new terms in the proposed lease, and the deletion of existing terms. The appellant argues that the proposed lease differed substantially from the lease, calling into question whether the parties had truly reached an agreement on the material terms of their contractual relationship, or whether certain essential elements were subject to ongoing negotiations.
[13] In my view, the trial judge’s determination that the lease was a valid lease agreement and that the parties never entered into the proposed lease disposes of this argument. The effect of the trial judge’s conclusion is that the lease’s terms continued without alteration. No issues about the certainty of the original provisions concerning rent and third-party indemnification were raised before the trial judge, who noted that “the only term with which [the appellant] takes substantial exception is the commencement term”, which I address in the following section.
[14] Similarly, no issue was raised with respect to the certainty of the terms concerning the existing pallet racking. Indeed, the lease clearly provides for pallet racking at para. 21 under the heading “Pallet Racking”:
- The Parties acknowledge that the Leased premise is fully racked throughout and the pallet racking is the property and belongs to the Lessor. The Lessee shall have the right to use the racking all or in part. No racking is to be removed without written notice to the Lessor by the Lessee and written authorization from the Lessor for such removal. Any racking, if removed, shall be done at the expense of the Lessee. The Lessee is to maintain and repair all racking in use by the Lessee. The Lessee is responsible for any racking it requires for its operation at its own expense.
[15] Shortly after the lease was signed, the appellant expressed dissatisfaction with the existing racking and the parties engaged in discussions regarding the manufacture and installation of new and different racking. The additional terms that the respondent subsequently submitted to the appellant in the proposed lease related to the new and different racking that the respondent had installed pursuant to the parties’ discussions. The trial judge determined that there was no agreement about the new racking and dismissed the respondent’s claim for damages in relation to the new racking.
[16] The trial judge’s conclusion that there was no agreement for any of the new provisions in the proposed lease did not render uncertain the provisions of the existing lease regarding the identity of the parties, rent or the existing racking. The provisions governing subletting and allowing the appellant six months of base free rent remained unaltered.
[17] I see no error in the trial judge’s determination of these issues.
(ii) Commencement based on “substantial completion”
[18] The appellant argues that the trial judge erred in finding that “substantial completion” provided a sufficiently clear marker for the commencement of the lease and repeats its position taken at trial that the parties in fact agreed to a definite commencement date in April 2011. Since these arguments are no longer the main thrust of the appellant’s appeal, I would address them briefly.
[19] Put simply, I disagree. The trial judge determined that the lease was silent with respect to a definite substantial completion date and that it would be unreasonable to infer one from the circumstances. His finding was amply supported by the record.
[20] In this case, the text of the lease ties the commencement of the lease to the “substantial completion” of the respondent’s retrofit of the premises:
- THE LEASE shall commence upon substantial completion of the Landlord’s work hereinafter referred to as the “Final Commencement Date” and shall terminate ten (10) years and six (6) months from the date of commencement. [Emphasis added.]
[21] The “Landlord’s work” is in turn described in Schedule B to the lease. As discussed below, Schedule B sets out a list of tasks to be carried out by the respondent to ensure that features such as the electrical and heating systems were in good working order and “in accordance with CFIA regulations and specifications”. There is no express provision in the lease stipulating a specific date as the “Final Commencement Date” and, with the exception of Schedule B, the lease does not define or give any additional content to the term “substantial completion”. It was open to the parties to define commencement in these flexible and commercially reasonable terms. I see no error in the trial judge’s finding that the lease did not provide for a specific date.
[22] Moreover, having reviewed the communications and interactions between the parties, the trial judge was not satisfied that the parties had otherwise agreed on a specific date for substantial completion of the retrofit or that the respondent made any such representation to the appellant. As the trial judge noted, the parties were, at best, hopeful and the appellant “assumed” that the premises would be ready by April 2011 when it communicated that date to potential clients. It was open to the trial judge to come to these conclusions based on the record before him. There is no basis to interfere with the trial judge’s conclusion that it would be unreasonable in these circumstances to infer an implied commencement date.
[23] The appellant submits that if there was no fixed or implied commencement date, then the trial judge erred in concluding that the term “substantial completion” was certain.
[24] In my view, it was reasonable for the trial judge to conclude that “substantial completion” was ascertainable because it was tied to the “Landlord’s work” as set out in Schedule B to the lease. Having stipulated the work that had to be substantially completed, the parties provided in their lease agreement the terms by which they could ascertain with sufficient precision when and whether the work was in fact substantially complete.
[25] The term of a lease is not uncertain simply because the parties define commencement in relation to a contingent future event. In Canada Square Corp. v. Versafood Services Ltd. (1982), 130 D.L.R. (3d) 205 (Ont. C.A.), at pp. 225-226, Morden J.A. considered a lease agreement which the parties had agreed would commence at “substantial completion of the building”. He wrote: “As a matter of principle I can think of no valid reason why, if parties choose to agree that a lease is to commence on a future specified contingency, a court should not uphold their bargain.”
[26] While, as I explain below, the trial judge made certain errors in his determination of when and whether the “Landlord’s work” was substantially complete, which affected his evaluation of damages, the trial judge did not err in finding that the lease was sufficiently clear to permit the identification of a breach. Nor do I find that the trial judge erred in holding that the respondent did not breach or repudiate the lease. He correctly concluded that the parties never agreed to a commencement date in April 2011, and that the appellant’s refusal to take possession constituted a breach.
(iii) When was the “Landlord’s work” substantially complete?
[27] The trial judge concluded that the Landlord’s work was substantially complete in April of 2012 when, according to project engineers, the premises were ready for commercial occupancy and only minor work remained. He rejected the appellant’s argument that substantial completion of the premises only took place on August 6, 2013, when the CFIA granted a register number and registered the property. The appellant argues that this was an error.
[28] The interpretation and application of the term “substantial completion” as it appears in the lease involves questions of mixed fact and law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50. The trial judge’s conclusions are owed deference on appeal absent palpable and overriding error. However, as I will explain, the trial judge did in fact commit a palpable and overriding error in his application of the lease to the facts established at trial.
[29] Specifically, the trial judge misapprehended the evidence as to when “substantial completion of the Landlord’s work” took place and, as a result, when the lease and the appellant’s obligations as tenant thereunder commenced. This error led to a miscalculation of the respondent’s damages.
[30] For ease of reference, I set out again the relevant provisions of the lease:
THE LEASE shall commence upon substantial completion of the Landlord’s work hereinafter referred to as the “Final Commencement Date” and shall terminate ten (10) years and six (6) months from the date of commencement. [Emphasis added.]
THE LESSOR will supply and install at its expense only the Items listed on Schedule “B” attached hereto and all other interior works shall be the responsibility of the tenant.
[31] According to these provisions, the lease would commence when the “Landlord’s work” was substantially complete. As the trial judge correctly observed, the term “Landlord’s work” is given meaning by paragraph 10 and Schedule B to the lease. Schedule B sets out the respondent’s obligations as landlord to supply and install certain features on the premises in accordance with CFIA regulations and specifications:
The Lessor shall make ensure [sic] the following are in good working order prior to handing over of the premises to the tenant and in accordance with CFIA regulations and specifications [Emphasis added.]:
a. no roof leaks b. sprinkler system c. supply & install refrigerated panels d. Supply & install all refrigerated equipment; Compressors, evaporator coils, condensers, piping, vessels. In accordance with the refrigeration loads required as agreed between the parties e. underground heating of the concrete floor f. existing electrical system g. heating system where appropriate considering the Tenants intended use of the premises h. Landlord to construct, at a mutually acceptable location within the existing Premises, an office and welfare facility to a maximum of 30 people.
[32] In this case, the trial judge correctly recognized at para. 19 of his reasons that “substantial completion” effectively incorporated two conditions: 1) the installation of the features set out in Schedule B, and 2) that such features were to be installed in accordance with CFIA regulations and specifications. However, he committed a palpable and overriding error in finding that the Landlord’s work was substantially complete in April 2012. While there was evidence that the premises were ready for commercial occupancy in April 2012, there was no evidence that the work was completed to the standard required by the CFIA at that time.
[33] As the trial judge noted in his reasons, the respondent’s principal, Angelo Paletta, commented in his March 2, 2011 email on behalf of the respondent to John Diduck of the appellant that the “[s]tart date would be upon substantial completion of the works on Schedule B by the Landlord as per the Offer to Lease”. Mr. Paletta also testified that the respondent engaged Sandra Fulton of Fulton Food Safety Inc., a former CFIA inspector, to ensure that the work to be completed achieved compliance with CFIA requirements. He confirmed that a letter from Ms. Fulton’s firm dated April 17, 2012 set out a list of deficiencies, and that as at June 2013, the premises were not yet in substantial compliance with CFIA requirements for the purposes of the final inspection that would take place before the CFIA would register the premises. Mr. Paletta conceded during cross-examination that there was no evidence as to when, if at all, prior to the August 6, 2013 CFIA registration the premises came into compliance with CFIA requirements.
[34] The only other evidence with respect to the status of the premises was given by Giancarlo Lancia of Lanhack Consultants Inc., the lead consulting engineering firm that completed the retrofit. Mr. Lancia testified that the premises at large were ready for occupancy in accordance with the applicable provisions of the Building Code Act, S.O. 1992, c. 23 and its regulations as at April 2012 and that any work done after April 2012 was minor and did not affect the occupancy of the premises. Importantly, however, Mr. Lancia said that he had nothing to do with CFIA compliance, could not say whether the premises were CFIA compliant, and was not qualified to give an opinion as to compliance with CFIA requirements with respect to the work set out in Schedule B. Mr. Lancia as an engineer was qualified to speak to substantial completion in relation to the Building Code. However, as he acknowledged, he was not qualified to confirm CFIA compliance.
[35] The trial judge appears to have conflated “substantial completion” of the building under the Building Code with “substantial completion” of the work in relation to CFIA requirements as stipulated in Schedule B to the lease. That the premises were ready for occupancy does not mean that they were substantially complete as far as CFIA requirements were concerned, most notably, the refrigeration components. There was no evidence as to when the CFIA deficiencies noted by Ms. Fulton in her April 2012 letter to the respondent were corrected, when Eastern obtained its CFIA licence to carry on business, or when the CFIA carried out its final inspection prior to registration. In the absence of that evidence, the only available evidence of substantial completion as far as CFIA compliance was concerned was the registration of the building on August 6, 2013.
[36] As the trial judge acknowledged, the terms “substantial completion of the Landlord’s work” had to be construed in conjunction with the provisions of Schedule B and the requirement that the Landlord’s work be in accordance with CFIA regulations and specifications. Mr. Lancia’s evidence about the general state of the premises had nothing to do with CFIA regulations and specifications or the refrigeration system that had to be approved. The trial judge erred by apparently relying on Mr. Lancia’s evidence with respect to the CFIA requirements and by failing to take into account the respondent’s admissions that there were CFIA deficiencies and that there was no evidence of substantial completion in accordance with CFIA regulations and specifications until the CFIA registered the premises in August 2013.
[37] The respondent argues that the trial judge made no error in rejecting the date of CFIA registration as the substantial completion date because Schedule B did not require CFIA registration. As the trial judge found, CFIA registration could not be considered a “lease condition precedent” because the CFIA approval process required more than substantial completion of the Landlord’s work; it would not be granted until the tenant demonstrated that the operation of its business met CFIA standards. The difficulty with this argument is twofold.
[38] First, there is no suggestion that the parties contracted for a “lease condition precedent” based on CFIA registration. It was not a term of the lease that the premises be registered before occupancy, nor did the parties stipulate that CFIA registration was a condition for achieving “substantial completion”. Rather, the parties contracted that the Landlord’s work was to be completed “in accordance” with CFIA regulations and specifications. The trial judge misconstrued the significance of CFIA compliance as a term or item of the Landlord’s work when instead it was the standard to which that work was required to conform.
[39] Second, the respondent’s argument and the trial judge’s conclusion do not respond to the evidentiary lacuna about when substantial completion in accordance with CFIA regulations and specifications was achieved. While it is true that Schedule B does not require CFIA registration and that CFIA registration goes beyond what is necessary to achieve substantial completion, the fact is that the August 6, 2013 CFIA registration is the only evidence of CFIA compliance available in this case. To be sure, CFIA registration is not the only evidence that could demonstrate such compliance. However, the August 6, 2013 CFIA registration was the only evidence available at trial that the work listed in Schedule B was in compliance, substantial or otherwise, with CFIA regulations and specifications. There was no evidence of CFIA compliance before August 6, 2013. Indeed, the unchallenged evidence, as indicated in the letter of Fulton Food Safety, and as confirmed by Mr. Paletta, was that as at April 2012, there was still work left to do to achieve CFIA compliance.
[40] As a result, the trial judge made a palpable and overriding error in finding that substantial completion occurred in April 2012, which in turn affected his calculation of damages, to which I now turn.
(iv) Damages
[41] The appellant submits that the trial judge made several reversible errors in his assessment of the respondent’s damages. Specifically, the appellant argues that the trial judge’s error with respect to the commencement date translated into an error in his calculation of damages regarding lost rent, rent differential, and the various tax, maintenance, and utility fees payable by the appellant under the lease. Further, the appellant submits that the trial judge failed to find that the respondent had completely mitigated its damages by re-leasing the premises to Eastern, and he erred in awarding damages to the respondent without any evidentiary foundation that it was the respondent and not another corporate entity that had incurred the damages claimed.
[42] The respondent argues that the trial judge’s findings regarding damages are subject to appellate deference and reveal no palpable or overriding error permitting appellate intervention.
(a) Damages tied to the substantial completion date
[43] The trial judge’s error regarding the substantial completion date requires a fresh assessment of the respondent’s damages claim. That the premises were not substantially complete until August 6, 2013 materially affects the trial judge’s award of damages. Under the lease, the date that the Landlord’s work was substantially complete provides the “Final Commencement Date” for the lease and, in consequence, marks the commencement of the appellant’s obligation to pay rent, realty taxes, utilities and maintenance fees.
[44] Of the $2,006,001.99 damages award, the trial judge’s error concerning the substantial completion date affects an amount of $1,780,001.99, which must be considered afresh in light of the August 6, 2013 substantial completion date. I deal below with the balance of the damages award, $226,000, for settlement amounts paid to Colliers on account of commission.
[45] The amount of $1,780,001.99 was awarded for the following categories of damages from the April 2012 substantial completion/lease commencement date fixed by the trial judge, as follows:
i. lost rental income of $900,000; ii. rent differential between the lease with the appellant and the new lease with Eastern in the amount of $422,262.00; iii. realty taxes from April 2012 to June 2013 : $200,122.64; iv. utilities from April 2012 to June 2013: $154,307.37; v. maintenance fees from April 2012 to June 2013: $50,145.48; vi. a 15% administrative fee for non-payment of the realty taxes and utilities: $53,164.50.
[46] With respect to item (i), the trial judge calculated lost rental income from the April 2012 lease commencement date to the date that the premises were re-leased to Eastern. This category of damages must be reconsidered in the light of the correct lease commencement date of August 6, 2013. Under the lease, the appellant was not required to start paying rent for six months from the commencement of the lease, namely, based on the August 6, 2013 lease commencement date, until February 6, 2014. Eastern commenced paying rent under the Eastern lease in September 2013.
[47] As a result, there is no basis for the respondent’s lost rental income claim. This amount of damages should be set aside.
[48] Similarly, with respect to item (ii), the assessment of damages for any rent differential between the leases has to be undertaken afresh in the light of the corrected August 6, 2013 substantial completion/lease commencement date.
[49] The parties should provide their submissions of no more than two pages about this issue with a detailed calculation of any rent differential within seven days of the release of these reasons.
[50] As items (iii) to (vi) relate to the period between April 2012 and June 2013, when the premises were not substantially complete, there was no obligation on the part of the appellant to pay those amounts. Accordingly, these damages must be set aside.
(b) Amounts paid by other corporate entities
[51] The appellant submits that the trial judge erred in awarding the respondent any damages for items (iii) to (v) above and the remaining amount of $226,000 for the settlement of a commission dispute with Colliers because there was no evidence that the respondent, rather than another corporate entity, paid those amounts.
[52] My setting aside of items (iii) to (vi) disposes of those amounts. I shall therefore focus here on the settlement amount paid to Colliers. To frame this issue, it is helpful to set out in some detail the evidence concerning the payment of the settlement funds.
[53] At trial, Mr. Paletta identified a copy of a certified cheque issued on September 14, 2015 by Penta Properties Inc. in the amount of $226,000 that referenced a court file number and Colliers’ statement of claim dated December 10, 2013 against the respondent and 236. Mr. Paletta explained that it was a payment made to Colliers through its solicitor in settlement of Colliers’ action to recover its commission arising out of its listing agreement with the respondent in relation to the lease with the new tenant, Eastern.
[54] Mr. Paletta testified that Penta was one of a number of separate but related Paletta corporate entities. He confirmed that the respondent did not make the settlement payment and that, if not Penta, the identity of the corporate entity that ultimately paid the amount may depend on a year-end journal entry adjustment.
[55] Mr. Paletta was unable to confirm or produce the journal entries. In response to an undertaking, the respondent’s counsel had advised that the respondent had suffered a fire in December of 2017 and that, “[a]s a result, all records not provided to you have either been burnt to a crisp or are frozen solid from the water. As a result, our client is unable to produce any further documents.” Mr. Paletta testified that, in order to confirm whether the adjusting entries were made, he would have to return to his office and check the purchase journals or journal entries, “if we didn’t lose them in the fire”.
[56] Mr. Paletta testified that if an amount was paid by the wrong company, the accountants “would have picked it up” and corrected it with an appropriate adjusting journal entry. He testified that “at each year end, the accountants come in and make whatever respective journal entries to make sure the costs are allocated to the right company”. He confirmed that other than instructing the accountants, he was not involved in the accounting for the Paletta group of companies.
[57] The following exchange took place during Mr. Paletta’s cross-examination on these issues:
Q. So we’ll agree that Penta paid it? A. That’s where the cheque comes from, yes. Eventually, it may get adjusted. Q. And those adjustments have never been provided, have they? A. I answered that question already too. Q. What’s the answer? A. No, they weren’t.
[58] The trial judge concluded that it was foreseeable that Colliers would be paid a commission when Eastern became a tenant, and he awarded the respondent the $226,000 paid in settlement of Colliers’ action. However, the trial judge did not specifically address which corporate entity paid the settlement funds. Presumably, the trial judge’s conclusion in relation to the same issue of which corporate entity paid the realty taxes, utilities, and maintenance claimed by the respondent as damages, would apply to the commission issue. The trial judge explained his reasoning as follows:
Cancelled cheques and other documentation make it plain that Paletta did not directly make all of the payments. Some payments were made by other Paletta companies. I was told that such expenses were paid through any number of Paletta companies with reconciliation and adjustment taking place at year end. While unorthodox from an accounting perspective, there is nothing sinister about this. What is utterly clear is the simple fact that [the appellant] did not cover these expenses as it would have under the terms of the lease obligations which it avoided.
[59] I agree with the appellant that the trial judge’s acceptance of Mr. Paletta’s evidence concerning the respondent’s accounting practices was in error.
[60] In my view, the evidence fell far short of demonstrating that the respondent, as opposed to Penta, another, separate corporation, paid the settlement funds to Colliers. There was no evidence that the respondent incurred any debt or obligation to reimburse Penta for any amount it had paid. Since the Supreme Court’s decision in Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165, reaffirming the rule in Foss v. Harbottle (1843), 67 E.R. 189 (U.K.H.L.), it is a trite proposition that a plaintiff can only recover as damages losses it has suffered. The respondent has no claim for damages suffered by a separate corporate entity, even a subsidiary: Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 220 D.L.R. (4th) 611 (Ont. C.A.), at para. 30.
[61] Mr. Paletta frankly conceded that he did not perform the accounting for the Paletta companies. His evidence that the accountants “may” have made journal entries “if” the wrong Paletta company paid the funds, was entirely speculative and insufficient to prove that the respondent paid the commission settlement and therefore suffered the loss. There is no evidence that such accounting year end adjustments had to be made or in fact were made. There may have been a whole host of legitimate tax and accounting reasons for Penta to have borne the expense, rather than the respondent, such that no adjusting entry was made at year end to attribute the expense to the respondent. As a result, there was no evidence on which the trial judge could make any finding that the respondent paid the settlement funds.
[62] The respondent did not meet its burden to prove its damages resulting from the settlement with Colliers. As in Martin v. Goldfarb (1998), 41 O.R. (3d) 161 (C.A.), at paras. 74-76, the lack of cogent evidence supporting the quantum of damages has resulted in an erroneous decision. The fact that the respondent may have lost some of its evidence in a fire does not excuse its failure to call cogent evidence. As the appellant points out, the bulk of discovery and disclosure in this action had been completed by the time of the fire. Moreover, it was not entirely clear from Mr. Paletta’s evidence whether the journal entries had been destroyed or were simply unavailable. Nor was there any explanation as to why the respondent could not provide the evidence through another means, such as, for example, by calling the corporate accountants to testify as to the journal entries or other adjustments that were made.
[63] This is not simply the case of a difficult assessment of damages; rather there was no evidence to support the claim in relation to the commission settlement. The commission settlement damages award must therefore be set aside.
(c) Forfeiture of the appellant’s $200,000 deposit
[64] Given my determination that the trial judge made no error in concluding that the appellant had breached the lease, it follows that he made no error in determining that the appellant had forfeited its deposit to the respondent.
[65] However, it is not clear whether the $200,000 credit for the deposit is reflected in the trial judge’s calculation of damages. The parties agree that the deposit should be deducted from the damages otherwise payable by the appellant.
[66] Paragraph 6 of the judgment should be amended to provide that the deposit, plus any accumulated interest, shall be deducted from the damages awarded to the respondent under the judgment. In the event there are no damages, the deposit should be paid to the respondent.
Disposition
[67] I would allow the appeal on the issue of damages in accordance with these reasons. I would otherwise dismiss the appeal.
[68] The appellant achieved substantial success on this appeal and is entitled to its partial indemnity costs in the amount of $43,000, inclusive of disbursements and applicable taxes.
[69] The appellant is also entitled to an amount of its partial indemnity trial costs that reflects its success on the issue of damages. If the parties cannot agree on that amount, they may submit brief written submissions of no more than two pages plus a costs outline within seven days of the release of these reasons.
Released: June 4, 2021 “L.R.” “L.B. Roberts J.A.” “I agree. B. Zarnett J.A.” “I agree. Sossin J.A.”
