DATE: 20040507
DOCKET: C36978

COURT OF APPEAL FOR ONTARIO

RE:

1072154 ONTARIO LIMITED (Plaintiff) (Respondent) - and CARA OPERATIONS LIMITED (Defendant) (Appellant)

BEFORE:

LABROSSE, WEILER and CHARRON JJ.A.

COUNSEL:

Ivan Y. Lavrence for the appellant

Jeffrey W. Kramer for the respondent

HEARD & ENDORSED:

May 4, 2004

On appeal from the judgment of Justice Keith A. Hoilett of the Superior Court of Justice dated August 17, 2001.

APPEAL BOOK ENDORSEMENT

[1] This appeal involves the interpretation of a contract. Most of the key facts are not in issue. Cara submits that the contract required the landlord to complete the building in accordance with the schedule attached to the lease and that if after giving notice that the building was completed anything in the schedules was not complete Cara was entitled to terminate the contract subject to the requirement that it act in good faith. In our opinion the trial judge correctly found that the contract required Cara, in the exercise of good faith, to consider the other options in the contract namely, the completion of the building by Cara and the deduction of this amount from the rent or billing the landlord. The trial judge found that having regard to the stage construction had reached and the reasons why the landlord's work had not been fully completed, Cara had acted unreasonably in failing to consider the other two options available to it. It was open to the trial judge to reach the conclusion that Cara therefore did not proceed in good faith, failed to use best efforts to achieve the business objectives of the agreement, and acted on irrelevant considerations. We would accordingly dismiss the appeal with respect to liability.

[2] With respect to damages, we see no error in the trial judge's discretion in assessing the damages on the basis of a portion of the lease. However, we are of the opinion that the trial judge erred in failing to deduct from the amount of rent payable under the lease the $50,000 that would have been required to complete the building. Thus, the appeal with respect to damages is allowed in part to the extent indicated and the cross-appeal is dismissed. Based on the landlord's failure to mitigate we see no merit in the cross-appeal on damages and it is dismissed.

[3] Having regard to the fact success on the appeal was divided, costs of the appeal are to the respondent and are fixed in the amount of $5000.