Court of Appeal for Ontario
Date: 20230112 Docket: C70134
van Rensburg, Sossin and Copeland JJ.A.
Between
Northwinds Brewery Ltd. Plaintiff/Defendant by Counterclaim (Respondent)
and
Caralyse Inc. Defendant/Plaintiff by Counterclaim (Appellant)
Counsel: Bryan Fromstein and A. Fabio Longo, for the appellant Gasper Galati and Phillip Wallner, for the respondent
Heard: November 21, 2022
On appeal from the judgment of Justice John R. McCarthy of the Superior Court of Justice, dated November 26, 2021, with reasons reported at 2021 ONSC 7682, and from the costs order, dated March 16, 2022, with reasons reported at 2022 ONSC 1659.
van Rensburg J.A.:
A. Overview
[1] This is an appeal of a judgment in an action concerning a commercial lease (the “Lease”) between the appellant, Caralyse Inc. (the “Landlord”), and the respondent, Northwinds Brewery Ltd. (the “Tenant”). The Landlord challenges the trial judge’s conclusions that it was not entitled to receive rent in accordance with the Lease in respect of a part of the Common Area where the Tenant had installed equipment and constructed a shed (the “Shed Area”) and a mezzanine it installed in the Premises, and that the Tenant had validly exercised an option to extend the Lease for a second five-year term. The Landlord also seeks to appeal the award of costs in favour of the Tenant.
[2] For the reasons that follow, I would allow the appeal on one issue only: although the trial judge was entitled to fix “non-lease-based rent” at 50% of the combined rent under the Lease for the Shed Area, he erred in limiting the Landlord’s recovery of arrears of such rent to two years preceding the commencement of its counterclaim, applying the basic limitation period under the Limitations Act, 2002, S.O. 2002, c. 24, Schedule B (the “Limitations Act”), instead of the six-year limitation period under s. 17(1) of the Real Property Limitations Act, R.S.O. 1990, c. L.15 (the “RPLA”). I would refuse leave to appeal costs and I would dismiss the balance of the appeal.
B. The Proceedings
[3] The Landlord owns a commercial plaza in Collingwood, Ontario, where the Tenant, leasing two units (the “Premises”), operates a restaurant, brewpub, and retail business. The Lease, which is dated January 6, 2014 was for an initial five-year term that began July 1, 2014 (the “Commencement Date”), after a six-month fixturing period. The Lease provides for annual minimum rent of $12 per square foot, and requires the Tenant to pay as “Additional Rent” its proportionate share of annual taxes, maintenance and insurance (“TMI”) and operating costs, which for the first year was fixed at $7.40 per square foot. After the Tenant gave notice in October 2018 to extend the Lease for a second five-year term, the Landlord issued a series of default notices. The Tenant obtained interim and interlocutory injunctions restraining the Landlord from terminating the Lease and interfering with its quiet enjoyment of the Premises. The proceeding was converted into an action in which the parties exchanged pleadings, including the Landlord’s Statement of Defence and Counterclaim which was dated January 29, 2021.
C. The Trial Decision
[4] Several issues proceeded to trial, including: (1) whether the Tenant was in default under the Lease; (2) whether the Landlord was in default; (3) whether the Landlord was entitled to receive rent for (i) the Shed Area and (ii) the mezzanine; (4) whether the Tenant had validly exercised its option to extend the Lease for a second five-year term; and (5) the applicable limitation periods for the various claims.
[5] The Tenant was largely successful. The trial judge observed that the parties had a relationship that was “plagued by difficulties, disagreements, and misunderstandings from the outset”. He generally preferred the evidence of the Tenant’s principal to that of the Landlord’s principal.
[6] The trial judge found that it was not until the Tenant served a notice of extension in October 2018 that the Landlord raised any serious concerns, including issues about the Shed Area and mezzanine, and TMI. He rejected the Landlord’s evidence that it had sent Additional Rent statements to the Tenant in each of the years 2015 to 2017 setting out the Tenant’s proportionate share of TMI and operating expenses. He concluded that the Landlord had not proven any rent arrears, any default by the Tenant or any other reason for the Landlord to terminate the Lease, and that the Tenant had validly exercised its option to extend the Lease for a second five-year term. He awarded the Tenant damages for breach of the Landlord’s covenant to repair in the sum of $7,159.04 (after concluding the Tenant had incurred costs of $29,352.53 to repair and maintain the roof and HVAC systems since the Commencement Date, and after applying the two-year limitation period under the Limitations Act).
[7] The trial judge concluded that the “Rentable Area of the Premises” did not include the mezzanine, and therefore that no rent was payable under the Lease for this area. As for the Shed Area, while it was not part of the Rentable Area of the Premises, the Landlord was entitled to receive “non-lease-based rent” at a rate of 50% of the “combined rent” (minimum rent plus the Tenant’s share of TMI and operating expenses) under the Lease. The Landlord was awarded the sum of $1,791.80 (non-lease-based rent arrears retroactive to February 1, 2019, again applying the two-year limitation period under the Limitations Act), and the trial judge declared that the Tenant was to continue paying non-lease-based rent at the rate of $52.70 monthly “until the earlier of the Tenant ceasing to utilize [the] shed space, the parties agreeing otherwise, the termination of the Lease or further court order”.
[8] The trial judge awarded the Tenant costs on a partial indemnity basis in the inclusive sum of $116,516.71, the amount sought by the Tenant, which the trial judge found to be reasonable and proportional to the result in what he described as “intense, high stakes litigation which demanded the time and attention of diligent counsel and support staff”.
D. Issues
[9] The Landlord raises four issues in this appeal:
- Did the trial judge err in his approach to the Shed Area by (a) awarding non-lease-based rent at 50% of the combined rent under the Lease; and (b) applying the two-year limitation period under the Limitations Act, rather than the six-year limitation period applicable to “rent arrears” under the RPLA?
- Did the trial judge err in concluding that the mezzanine was not part of the Rentable Area of the Premises?
- Did the trial judge err in concluding that the Tenant had validly exercised its option to extend the Lease?
- Did the trial judge err in his award of costs?
E. Discussion
(1) Issue One: Did the trial judge err in respect of the Shed Area?
[10] The shed is a 62 square foot wooden structure located outside the Premises in the Common Area of the Landlord’s commercial plaza. The shed houses external ground level machinery required for the Tenant’s use of the premises, including a glycol chiller, a CO2 tank and a beer fridge condenser. The equipment and shed were installed before the Tenant began operating its business. The shed, which is locked, provides security for the equipment and protects it from the elements.
[11] After the Tenant gave notice of its intention to extend the Lease, the Landlord asserted that it had never authorized the shed, and that the Tenant had made a structural change to the Premises without permission, encroaching outside the space it paid rent for. Although the Landlord initially requested the removal of the shed, by the time the matter proceeded to trial, its claim was that the construction of the shed without prior approval was an act of default under the Lease, or alternatively that the Tenant was required to pay rent for the Shed Area retroactive to the Commencement Date. The Tenant’s position was that the shed was not structural in nature, such that the Landlord’s approval was not required, and it was a permitted addition that did not increase the Rentable Area of the Premises.
[12] In addressing these claims, the trial judge made two findings in favour of the Tenant. First, he concluded that the installation of the brewing equipment and exterior shed was not a structural alteration to the Premises requiring the Landlord’s authorization. Second, he rejected the Landlord’s assertion that the Rentable Area of the Premises included any portion of the Common Area, saying, “[t]here is nothing that would permit me to do so in the lease and that definition cannot support a more liberal interpretation”.
[13] However, the trial judge also recognized that the Tenant had “made bold with an exterior space which does not form part of the demised premises under the lease”. Although he observed in passing that the shed was an addition authorized under Article 10.2 of the Lease, he ultimately characterized the shed as an unauthorized use of the Common Area. Accordingly, he indicated that he would impose rent on the Tenant for such use, which he noted was “independent of the lease itself”, and which he characterized as “non-lease-based rent”. He stated that “the imposed obligation is justified based upon fairness, equity, and commercial exigencies”.
[14] In determining the appropriate rate for the non-lease-based rent of the Shed Area, the trial judge considered what a reasonable tenant in the position of the Tenant would expect to be charged and what a reasonable landlord would expect to receive. He noted that the space was small, appurtenant to the Premises, and could not otherwise serve as a source of revenue for the Landlord. Even so, the Tenant put the space to profitable use while the Landlord continued to own it, insure it, and pay taxes on it. There was no evidence that the Landlord had to maintain or service the Shed Area, and the Tenant had “effectively appropriated” the space and taken on the care, control and maintenance of it. The trial judge fixed the non-lease-based rent at 50% of the combined rent for the Premises, which he stated was $10.20 per square foot, in accordance with the Lease calculated annually and paid monthly. [1] Such rent was payable until the earlier of the Tenant ceasing to utilize the shed space, the parties agreeing otherwise, the termination of the Lease or further court order.
[15] In awarding the Landlord non-lease-based rent retroactive only to February 1, 2019, two years before the Landlord asserted its counterclaim, the trial judge stated that the two-year limitation period under the Limitations Act that was applicable to the Tenant’s claim for damages for breach of the covenant to repair “should similarly operate to disentitle the Landlord to claim arrears on non-lease-based rent beyond 2 years from when the counterclaim was issued”.
[16] The Landlord asserts that the trial judge erred in the amount awarded in respect of the Shed Area. The Landlord says that the trial judge erred in creating a new contract between the parties when he imposed “non-leased based rent” at a rate of 50% of the rent payable under the Lease instead of the full rate. The Landlord also contends that the trial judge erred in applying the Limitations Act: it was entitled to rent arrears retroactive to six years prior to the issuance of the counterclaim pursuant to s. 17(1) of the RPLA.
[17] The Tenant contends that the trial judge made no error in his treatment of the Shed Area: the trial judge was entitled to award the Landlord “non-lease-based rent” that was based on a reasonable amount considering all the circumstances. The Tenant asserts that the trial judge correctly applied the two-year limitation period to the Landlord’s claim for what was essentially a licence to use the Shed Area or an award of damages, and not a claim for arrears of rent under the RPLA.
[18] In my view, the trial judge did not err when he declared the Tenant’s continued right to occupy the Shed Area, and fixed rent for that space at a rate that was 50% of the combined rent under the Lease. As I will explain, however, he ought to have applied the six-year limitation period under the RPLA to the Landlord’s claim for arrears of such rent.
[19] As I have already noted, by the time the parties reached trial, the Landlord did not seek an order requiring the Tenant to remove the shed and prohibiting the Tenant from continuing to use the Shed Area. Rather (in addition to claiming that the Tenant was in breach of the Lease for having constructed the shed), the Landlord sought rent for the Shed Area at the rate provided for under the Lease retroactive to the Commencement Date, while the Tenant requested a declaration that the shed need not be removed, and asserted that no rent was payable for the shed.
[20] After concluding that the Shed Area did not form part of the Rentable Area of the Premises, and recognizing that, if the Lease continued, the Landlord was prepared to permit the Tenant to continue to occupy the Shed Area provided it received rent, the trial judge provided for a remedy that protected the status quo and was responsive to the respective interests of the parties. He recognized that the Tenant had installed the shed prior to the Commencement Date under the Lease, and that the shed and the equipment it housed were essential to the Tenant’s business. He recognized the Tenant’s continuing right to exclusively occupy the Shed Area going forward, while also accepting that the Landlord was entitled to future rent for the Shed Area, as well as arrears of rent. Because the Tenant’s use of the Shed Area, although an appropriation of the Common Area, was not covered by the Lease, the Lease rental rate did not necessarily apply. In fixing the rate at 50% of the combined rent under the Lease, the trial judge considered, based on the circumstances of the parties, what would be a reasonable rate for the Shed Area. I am not persuaded that there was any reversible error in the trial judge’s determination of an appropriate rent for the Tenant’s past and future use and occupation of the Shed Area.
[21] As for the limitation period issue, the trial judge stated that the same two-year limitation period that was applicable to the Tenant’s claim for damages for breach of the Landlord’s duty to repair should apply to the non-lease-based rent arrears. He did not consider whether the Landlord’s claim for rent was subject to s. 17(1) of the RPLA.
[22] In my view, the trial judge erred in law in applying a two-year limitation period to the Landlord’s claim for the Tenant’s past use and occupation of the space. The claim is governed by the six-year limitation period for rent arrears under the RPLA.
[23] Section 17(1) of the RPLA provides that “no arrears of rent, or of interest in respect of any sum of money charged upon or payable out of any land or rent … or any damages in respect of such arrears of rent or interest, shall be recovered by any distress or action but within six years next after the same respectively has become due”. “Rent” is defined under the RPLA as including “all annuities and periodical sums of money charged upon or payable out of land”.
[24] The term “arrears of rent” has an objective meaning under the RPLA. As Mew J. noted in Pickering Square Inc. v. Trillium College Inc., 2014 ONSC 2629, 44 R.P.R. (5th) 251, aff’d on other grounds, 2016 ONCA 179, 64 R.P.R. (5th) 175, the term does not depend on how rent is defined by the parties in their lease; it is not “an empty vessel that the parties may fill at their discretion”. It must be interpreted in light of the context, scheme and object of that statute and the law of limitations in Ontario: at para. 52.
[25] Although the Shed Area was not part of the Rentable Area of the Premises (and therefore did not attract rent under the Lease), this conclusion did not take it outside the terms of the RPLA. Monthly payments by the Tenant to the Landlord for the exclusive occupation of the Shed Area fit neatly within the RPLA’s definition of “rent” as they constitute “periodical sums of money charged upon or payable out of land”.
[26] I will briefly deal with the Tenant’s assertion that, notwithstanding that he used the term “non-lease-based rent”, the trial judge recognized and imposed a licence fee, or alternatively that the amount was a form of damages – both of which, according to the Tenant, would fall under the two-year limitation period under the Limitations Act.
[27] The Tenant asserts that the arrangement imposed by the trial judge was accurately described in his subsequent reasons [2] as granting the Landlord “rent in the nature of a license fee”, which would take it outside the definition of rent arrears under the RPLA. However, as the parties acknowledged in oral argument on the appeal, no one at trial argued that the Tenant’s occupation of the Shed Area was in the nature of a licence. In addition, the trial judge’s findings that the Tenant had occupied the Shed Area exclusively since the Commencement Date and that the space was essential to the Tenant, his recognition that the Tenant had ongoing rights to the Shed Area that were not dependent on the Landlord’s agreement, and his award of “non-lease-based rent” are consistent with a lease, not a licence.
[28] Nor, as the Tenant argues, did the Landlord claim or the trial judge award the Landlord damages. The award of “non-lease-based rent” is unlike the landlord’s claim for damages for its tenant’s intentional interference with contractual relations and oppression in Sterling Waterhouse Inc. v. LMC Endocrinology Centres (Toronto) Ltd., 2015 ONSC 3987, aff’d on other grounds, 2016 ONCA 343, a case relied on by the Tenant. In that case, the nature of the misconduct for each cause of action “[distanced] the claims from the type of real property claim that would fall under s. 17 of the RPLA, even though the damages [related] to rent”: at para. 35. By contrast, the Landlord’s claim in this case in relation to the Shed Area was consistently referred to by the trial judge as a claim for rent retroactive to the Commencement Date: see paras. 33, 50 and 97. And, that is precisely what the trial judge ordered: non-lease-based rent from the Commencement Date (subject to the applicable limitation period), together with a declaration that the Tenant had an ongoing right to occupy the space, and an ongoing obligation to pay rent. In any event, even if the arrears could be characterized as a form of damages, the six-year limitation period prescribed by s. 17 applies not only to arrears of rent but also to “damages in respect of such arrears”.
[29] For these reasons, I would allow the Landlord’s appeal in relation to the Shed Area, only to the extent that the Landlord is entitled to recover arrears of non-lease-based rent retroactive to six years prior to the issuance of its counterclaim.
(2) Issue Two: Did the trial judge err in respect of the mezzanine?
[30] During the fixturing period in early 2014, the Tenant constructed an internal mezzanine that measures 781 square feet and sits above an office and washrooms also installed by the Tenant. The Landlord claimed that the mezzanine increased the Rentable Area of the Premises. The trial judge disagreed.
[31] The Landlord asserts that the trial judge made three reversible errors in finding that Tenant did not have to pay rent for the mezzanine because it was not included in the Rentable Area of the Premises. First, he referred to wording in the offer to lease that was not included in the Lease, notwithstanding that there was an entire agreement clause. Second, he relied on the parties’ post-contractual conduct to determine the parties’ intentions in relation to the rentable space when there was no ambiguity in the Lease, contrary to Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, 404 D.L.R. (4th) 512. Third, he failed to consider Schedule B of the Lease, which describes the Tenant’s permitted work and required the Tenant to remove existing mezzanines.
[32] The Tenant asserts that there is no extricable legal error in the trial judge’s interpretation of the Lease, which is entitled to deference: see Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 50.
[33] I would not give effect to this ground of appeal.
[34] In determining whether the mezzanine was included in the Rentable Area of the Premises, the trial judge properly focused on the wording of the Lease. The Lease defines the “Rentable Area of the Premises” as “the rentable area of the Premises, expressed in square feet, measured from (a) the inside surface of all walls, doors, and windows of the Premises”. Article 1.1(e) of the Lease provides that the Rentable Area of the Premises is “[a]pproximately 5,600 square feet, subject to certification in accordance with [Article] 3.7”. Article 3.7 in turn provides for the Tenant to have the Rentable Area of the Premises measured and certified by its architect or surveyor, and to have the certificate of measurement sent to the Landlord. If the certified Rentable Area of the Premises differs from the measurement set out in Article 1.1(e), the rent will be adjusted retroactive to the later of the Lease Commencement Date and the date of any change or alteration in or to the Premises, which increases or decreases the Rentable Area of the Premises.
[35] Based on these provisions, the trial judge held that Rentable Area of the Premises simply meant the “square footage measured at the ground floor encompassed within the walls of the building structure”. He concluded that the term could not bear the interpretation suggested by the Landlord as there was nothing in the Lease or any other document to suggest that the mezzanine should be included.
[36] In coming to this conclusion, the trial judge did not err by referring to the offer to lease. The Landlord had relied on the fact that a mezzanine was specifically excluded from the rentable area in the offer to lease, and that it was not mentioned in the Lease itself, to argue that the mezzanine the Tenant installed was part of the rentable area. The trial judge rejected this interpretation, concluding instead that since the offer to lease specifically excluded the mezzanine that was onsite before the Tenant made its alterations, the omission of any mention of a mezzanine in the Lease represented a mutual understanding that it was not to be included. Both parties relied on the offer to lease as part of the circumstances surrounding the execution of the Lease.
[37] Nor did the trial judge err in considering the communications between the parties, which the Landlord characterizes as irrelevant subsequent conduct. These communications included: (a) the Tenant providing the Landlord with an architectural drawing in 2014 that measured the Rentable Area of the Premises at 5,106 square feet based on the inside surface of all walls, doors, and windows; (b) the Landlord providing the Tenant its own measurement of the space in July 2015, which bore the notation “Mezzanine: Not Measured (as per client’s instructions)”; and (c) the Landlord’s failure to dispute the Tenant’s 2014 architectural drawings (which depicted the mezzanine) and square footage measurements for more than a year. The trial judge inferred from this conduct that the Landlord accepted that the mezzanine would not be included in the Rentable Area of the Premises. Given that Article 3.7 of the Lease expressly contemplates further actions which might affect the size of the Rentable Area of the Premises, these communications between the parties were directly relevant to the determination of whether the mezzanine was included. Moreover, the trial judge was not only interpreting the Lease in these passages; he was also considering the conduct of the Landlord and its timing in raising issues, including taking issue with the Rentable Area of the Premises after the Tenant gave notice of its intention to extend the Lease.
[38] Finally, the trial judge did not err by failing to consider Schedule B of the Lease. This argument, raised for the first time on appeal, does not assist the Landlord. Schedule B refers to the Tenant’s removal of any existing mezzanine as part of the “Base Building Work” the Tenant would perform to ready the Premises for its own improvements. While it provides for the Tenant to complete the “Tenant’s Work” – work required to ready the Premises for its business – it does not specify the work that will be done and says nothing about the mezzanine the Tenant was installing.
(3) Issue Three: Did the trial judge err in concluding that the Tenant had validly exercised its option to extend the Lease?
[39] The Lease provides for three options to extend the initial term for successive five-year periods on the same terms, subject to increases in the rent (including an increase in minimum rent to $13 per square foot for the first extension period). The Tenant was required to provide at least six months’ written notice. On October 28, 2018 the Tenant gave written notice to extend the initial term for a further five years commencing on July 1, 2019 and expiring on June 30, 2024. Approximately six weeks later the Landlord raised alleged breaches of the Lease by the Tenant.
[40] At trial the Landlord argued that the Tenant was in breach of the Lease or had committed various acts of default and was therefore not entitled to extend the Lease, and also asserted that the notice was defective because it was conditional. The trial judge disagreed and declared that the option to extend had been validly exercised.
[41] On appeal, the Landlord advances two arguments. First, it asserts that, while the trial judge recited the correct test in considering whether the exercise of the option was “clear, explicit, unambiguous and unequivocal”, he failed to apply the test to the uncontroverted facts. The Landlord contends that, in its notice purporting to exercise the option to extend, the Tenant unilaterally set Additional Rent for the extension period at $7.40 per square foot, notwithstanding that the Landlord provided a statement on January 30, 2019 estimating Additional Rent at $11 per square foot. The Tenant was seeking to negotiate further, and therefore failed to provide an unequivocal and clear exercise of its option to extend. Second, the Landlord asserts that the trial judge erred in concluding that none of the TMI notices (including the January 30, 2019 notice) had been properly delivered by the Landlord because they were not emailed, when the Lease provides for the parties to provide written notice by mail.
[42] I would not give effect to these arguments. The trial judge accepted that the Tenant had given notice that was clear, explicit, unambiguous and unequivocal. He rejected the argument, made here, that the notice was invalid because the Tenant purported to exercise the option on conditions, saying that the Tenant was doing nothing more than confirming the extension based on the provisions of the Lease and the reality on the ground. The validity of the notice was not affected by the fact that the Landlord subsequently purported to set out a different rate for the Additional Rent. The notice was not, as the Landlord asserts, an attempt to unilaterally fix the Tenant’s proportionate share of the TMI and operating expenses for the second five-year term. The rights and obligations of the parties (including the increase in minimum rent for the second term and any increase in Additional Rent) continue to be governed by the Lease.
[43] As for the Landlord’s submission that the trial judge erred in asserting that the TMI notices should have been provided by email, when the Lease provides for notice to be given in writing, nothing turns on this submission. Irrespective of how the Lease contemplated written notice to be given, there was no evidence of the Landlord ever delivering notice or communicating by mail. As the trial judge found, email was overwhelmingly the preferred method of communication between the parties. Moreover, the trial judge disbelieved the evidence of the Landlord’s principal that the 2015, 2016 and 2017 statements of TMI and operating expenses had been delivered contemporaneous to their dates: there were no covering letters, proofs of delivery or accompanying communications for any of these statements before they were attached to the Landlord’s email of December 14, 2018, objecting to the exercise of the Tenant’s option to extend the Lease.
(4) Issue Four: Did the trial judge err in his award of costs?
[44] The Tenant was awarded partial indemnity costs with HST and disbursements in the amount of $116,516.71, the amount it sought in its bill of costs. The Landlord asserts that the trial judge erred in principle by not considering its own bill of costs in determining the reasonable expectations of the losing party. The Landlord contends that the trial judge appears to have overlooked the bill of costs that it provided, pointing to para. 10 of the costs reasons where the trial judge said: “It is often difficult to appreciate what the losing party’s expectations of costs might have been. Without evidence on the point, the court is left to speculate”.
[45] I disagree. The trial judge referred to the fact that the parties provided both oral and written submissions on costs. He specifically adverted to the Landlord’s position that the Tenant should recover no more than 50% of reasonable partial indemnity costs or $34,174.59, (which was alternative to its argument that, because of the divided success in the action, the parties should bear their own costs). Although the Landlord’s bill of costs and written submissions before the trial judge were not included in the record on appeal, the parties confirmed that the specific amount adverted to by the trial judge was indeed one half of the partial indemnity costs set out in the Landlord’s bill of costs.
[46] This is not a case where a judge drew a permissible inference that the amount claimed by the successful party was reasonable because the losing party failed to file its own bill of costs: see Smith Estate v. Rotstein, 2011 ONCA 491, 106 O.R. (3d) 161, at para. 50, leave to appeal refused, [2011] S.C.C.A. No. 441. Rather, the trial judge determined a reasonable and proportional amount after considering all relevant factors under r. 57 of the Rules of Civil Procedure, including the complexity and number of issues in dispute, the size of the evidentiary record, the lengthy and detailed submissions of counsel, and the fact that, although the Landlord was successful on one issue, the Tenant was presumptively entitled to costs. The trial judge addressed the factor of proportionality, noting that, while at first glance the amount claimed for costs greatly exceeded any monetary award granted to the Tenant, there was much more at stake: the Landlord sought very serious orders and declarations from the court, including a significant judgment for arrears of rent, a lifting of the injunction, mandatory orders, and a termination of the Lease. He concluded that the partial indemnity costs claimed by the Tenant were reasonable and proportional to the result in the case, noting that the Tenant’s bill of costs was thorough and detailed and there was no suggestion that any of the disbursements were unreasonable or that any of the work done on the file was duplicative or unnecessary.
[47] I see no reversible error in the trial judge’s award of costs to the Tenant or in the amount he fixed for reasonable partial indemnity costs. Nor does the Landlord meet the test for leave to appeal costs. The Landlord has not established “strong grounds upon which [this court] could find that the judge erred in exercising his discretion”: Brad-Jay Investments Limited v. Village Developments Limited (2006), 218 O.A.C. 315 (C.A.), at para. 21, leave to appeal refused, [2007] S.C.C.A. No. 92.
[48] Finally, even with the Landlord’s limited success in respect of the Shed Area on this appeal, there is no reason to interfere with the costs awarded in the court below.
F. Disposition
[49] For these reasons I would allow the appeal in respect of the Shed Area, such that the Landlord is entitled to non-lease-based rent for the Shed Area retroactive to six years prior to the issuance of its counterclaim. I would dismiss the balance of the appeal and refuse leave to appeal costs. If the parties are unable to agree on the costs of the appeal, the court will receive written submissions from the parties limited to three pages each, exclusive of any bill of costs, to be provided within 20 days of these reasons.
Released: January 12, 2023 “KMvR” “K. van Rensburg J.A.” “I agree Sossin J.A.” “I agree J. Copeland J.A.”
[1] In arriving at this figure, the trial judge appears to have used $13 per square foot as the minimum rent amount and $7.40 per square foot as the additional rent (the Tenant’s share of TMI and operating expenses) amount. The minimum rent under the Lease only increased from $12 to $13 per square foot on July 1, 2019, the commencement date for the second term of the Lease.
[2] The trial judge released Reasons on Motion to Amend Reasons for Judgment and Costs on March 4, 2022, in which he corrected the non-lease-based rent to $52.70 monthly.
