COURT OF APPEAL FOR ONTARIO

DATE: 20000704

DOCKET: C30898

RE: 1039198 ONTARIO INC. (Plaintiff/Respondent)

v. ASH PHARMACIES INC. and AZIM MITHA (Defendants/ Appellants)

BEFORE: McMURTRY C.J.O., MORDEN and ROSENBERG JJ.A.

COUNSEL: E. Hyer,
for the appellant

R. Shastri and L. H. Zucker,
for the respondent

HEARD: June 26, 2000

On appeal from the judgment of Madame Justice A. M. Molloy dated
October 22, 1998

E N D O R S E M E N T

[1] The only issues in this appeal from a judgment of Molloy J.
concern the assessment of damages. The appellants argue that the
trial judge erred in finding that the respondent took reasonable
steps to mitigate its damages.

[2] The appellants point to a number of factors that they argue
show that the lease of Unit 9 at a reduced rent to 1104727
Ontario Inc. was not reasonable in the circumstances. They argue
that the transaction was not an arm's length transaction and that
the lease contained terms designed to favour the company’s
principal. The trial judge was aware of the circumstances
surrounding the entering into the lease. She reviewed the
relevant circumstances and accepted the explanation of the
respondent’s witness for the decision to lease to 1104727 Ontario
Inc. and to do so on the impugned terms. We see no basis for
interfering with what was essentially a factual determination.

[3] We do not agree with the appellants that the trial judge
proceeded on an incorrect principle by, in effect, holding that
as a matter of law they were required to adduce appraisal
evidence to show that the mitigation efforts were not reasonable.
Rather, the trial judge’s reasons indicate that she was satisfied
with the efforts made by the respondent to mitigate its damages
and there was no appraisal evidence to cast doubt upon the
reasonableness of those efforts.

[4] The tenant of Unit 10 vacated in 1996. The respondent took
no steps to pursue the tenant or the person who provided an
indemnity agreement. The appellants argue that the trial judge
erred in failing to find that the losses flowing from the
abandonment of Unit 10 by the replacement tenant were remote. In
our view, the issue was not one of remoteness. The question was
whether the respondent took reasonable steps to mitigate. After
the tenant vacated, the respondent took steps to find a new
tenant. Eventually it was able to do so but at a reduced rate.
The new tenant was also 1104727 Ontario Inc.

[5] The respondent having taken steps to mitigate its losses in
relation to Unit 10, the onus of establishing that those efforts
were not reasonable fell upon the appellants. They adduced no
evidence that, in the circumstances, failing to pursue the tenant
(apparently a shell company) was unreasonable. The only evidence
before the trial judge was that the respondent’s principals
believed that the indemnifier had returned to Hong Kong. There
was no contrary evidence from the appellants. The trial judge
was satisfied that the respondent had made reasonable efforts and
we have not been persuaded that she erred in doing so.

[6] In calculating the amounts of future rents on Units 9 and
10, the trial judge made an estimate based on current amounts
reduced by a factor for uncertainty of recovery. We agree that
the trial judge’s approach was the correct one and see no basis
for interfering with her decision to use a factor of 50%. The
weight to be given to the factor does not seem to have been
addressed in argument at trial and was raised for the first time
in this court in oral argument. The trial judge referred to
circumstances that made the collection of future rents uncertain
and that were capable of supporting her conclusion.

[7] Counsel for the appellants did not pursue the question of
the irregular distress proceedings in oral argument. There is no
merit to this ground of appeal. The trial judge’s findings of
fact are supported by the evidence.

[8] Accordingly, the appeal is dismissed with costs.

(signed) "R. McMurtry C.J.O."

(signed) "J. W. Morden J.A."

(signed) "M. Rosenberg J.A."