Court File and Parties

COURT FILE NO.: CV-15-535726 DATE: 2020-08-14 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: T & C Holdings Limited, Plaintiff AND: Booster Juice Inc., Defendant

BEFORE: Stinson J.

COUNSEL: Stephen Jackson, for the Plaintiff Stuart R. Mackay, for the Defendant

HEARD at Toronto: by written submissions

Reasons for Decision as to Costs

[1] The Plaintiff landlord claimed $425,000.00 from the Defendant tenant for the breach of a commercial lease of a relatively small retail space in a shopping plaza. The facts were largely undisputed. The parties disagreed about the legal effect of some of the events. They also disagreed about the proper calculation of the damages payable by the Defendant, if any. I heard the trial in Toronto on January 20, 22, and 24, 2020.

[2] In my Reasons for Judgment released March 31, 2020, I found Defendant liable to Plaintiff for damages for arrears of rent in the amount of $22,976.87. That sum represented the unpaid rent from the date Defendant abandoned the premises to the date Plaintiff sold the plaza. From this was subtracted a non-controversial credit due to Defendant in the amount of $17,257.50, leaving the net sum of $5,719.37 owing to Plaintiff by Defendant.

[3] After Defendant breached the lease by abandoning the premises (but for unrelated reasons), Plaintiff decided to sell the plaza. The premises remained vacant at the time Plaintiff accepted an offer to purchase and also when the sale was completed.

[4] During the course of the litigation Plaintiff raised, among other issues, the matter of the effect of the vacancy on the sale price of the plaza. Plaintiff’s expert testified that the lost net rental income associated with the breach of the lease would have equated to a diminution in value of the premises of approximately $240,000 while Defendant’s expert testified that the vacancy had no impact on the purchase price. On the evidence before me, I was not prepared to find that the vacancy had any measurable impact on the price paid for the plaza.

Positions of the parties in relation to costs

[5] Plaintiff seeks costs on a full indemnity basis in the amount of $73,369.86. It submits that it should recover costs on the Superior Court scale, despite having recovered a judgment for less than $6,000. It argues that I should decline to apply Rule 57.05(1) of the Rules of Civil Procedure, since the issues were complex and the discovery process was helpful in narrowing them. Plaintiff further points to the provision in the lease that requires the Tenant to pay to the Landlord all costs incurred by the Landlord, including legal expenses on a solicitor and his own client basis, arising as a result any default in Tenant’s obligations.

[6] Defendant submits that Plaintiff should recover no costs and that costs should be awarded in its favour. Defendant argues that it was the successful party, since Plaintiff had claimed $425,000 and recovered only 1.3% of that amount. Defendant points out that, from the outset, it had offered to resolve the dispute by making a lump sum payment of $5,211.75, or three months’ rent. Given that Plaintiff was awarded only $5,719.37, Defendant submits that Plaintiff acted unreasonably by commencing and prosecuting the litigation through judgment. In the alternative, Defendant submits that no costs should be awarded, relying on Rule 57.05(1) of the Rules of Civil Procedure.

Analysis

[7] In any case, as Plaintiff’s submissions acknowledge, awarding costs is a discretionary exercise. Plaintiff does not argue that the Court’s discretion is ousted by the clause contained in the lease that I mentioned above.

[8] The amount of the judgment is well within the monetary jurisdiction of the Small Claims Court. It therefore brings into play Rule 57.05(1) of the Rules of Civil Procedure, which states as follows:

If a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs.

[9] Plaintiff relies on a series of cases in which judgments within Small Claims Court limits have been granted, but Courts have awarded Superior Court costs despite Rule 57.05(1) of the Rules of Civil Procedure. These cases include Hunt v. TD Securities Inc., Tossonian v. Cynphany Diamonds, 2015 ONSC 766 and Singh v. Qualified Metal Fabricators Ltd., 2016 ONSC 4220. Those cases all involved complex issues of fact and law in which the processes of the Superior Court were important for ascertainment of the underlying evidence. That was not the situation here, in my view.

[10] Rather, this case involved a central evidentiary question from Plaintiff’s perspective: could it establish that the Purchaser paid less for the plaza due to the vacancy in the Defendant’s premises? Absent its ability to prove that proposition, Plaintiff’s maximum recovery could not exceed its net rental loss, or $5,719.37.

[11] As I noted in my Reasons for Judgment (at para. 16):

[T]here was no evidence from [Purchaser] whether the absence or presence of a rent-paying tenant in [Defendant’s] Premises had any impact on the price that it initially proposed or ultimately agreed to pay.

Rather, Plaintiff relied on an expert opinion that was, in effect, a mathematical calculation of a diminution in the purchase price keyed upon a notional cap rate applied to the plaza’s net income stream, to arrive at a so-called “loss of value”. This evidence fell well short of proving that the Purchaser would have paid more, a fact about which only the Purchaser could have testified.

[12] Thus, despite lacking direct evidence on this key issue, Plaintiff chose to invoke the full process of the Superior Court. It declined to accept a reasonable settlement proposal from Defendant which would have made it nearly whole. Moreover, there is nothing before me to suggest that Plaintiff attempted (or was even prepared) to engage in any negotiation with Defendant regarding a more generous settlement than the one initially proposed.

[13] I therefore conclude that this is a case in which I should exercise my discretion under Rule 57.05(1) of the Rules of Civil Procedure to order that Plaintiff should recover no costs.

[14] As to Defendant’s request for costs, I note that its offer was for less than the sum it was ordered to pay. It had to know – certainly by the end of the discovery process – that its minimum exposure to Plaintiff was likely to be the sum awarded at trial. Despite that knowledge, and its undisputed breach of the lease, it never deviated from its original proposal, which it must have known was deficient.

[15] Having regard to Defendant’s conduct, I do not consider this a case in which an award of costs to an unsuccessful defendant is appropriate.

Conclusion and Disposition

[16] For the above reasons, I order that no costs shall be paid by or to either party.

Stinson J. Date: August 14, 2020