Axia Property Management Inc. v. Carleton Condominium Corp. No. 217

CITATION: Axia Property Management Inc. v Carleton Condominium Corp. No. 217, 2024 ONSC 289

COURT FILE NO.: DV-23-2765

DATE: January 15, 2024

SUPERIOR COURT OF JUSTICE (DIVISIONAL COURT) – ONTARIO

BETWEEN: Axia Property Management Inc., Plaintiff (Respondent)

AND: Carleton Condominium Corporation No. 217, Defendant (Appellant)

BEFORE: Honourable Mr. Justice Martin James

COUNSEL: Ian Davidson, Agent for the Plaintiff Victor Yee, Counsel for the Defendant

DATE HEARD: November 1, 2023

Appeal from the Small Claims Court decision of Deputy Judge J. Arrigo dated December 15, 2022 in SC-18-152066 and SC-18-152066 D1

Facts

[1] The summary of facts is drawn substantially from the appellant’s factum. The respondent did not file a factum admitting or disputing the facts as stated by the appellant or presenting its own version of the facts.

[2] The Defendant (Appellant), Carleton Condominium Corporation No. 217 (“CCC 217”), is a non-profit residential condominium corporation. The Plaintiff (Respondent), Axia Property Management Inc. (“Axia”), was formerly retained to manage the operations of CCC 217.

[3] Axia commenced a Plaintiff’s Claim bearing Ottawa Small Claims Court File No. SC-18-152066 on December 13th 2018, and CCC 217 commenced a Defendant’s Claim bearing Ottawa Small Claims Court File No. SC-18-152066-D1 on April 23rd 2019 (collectively, the “Action”). The trial of the Action was heard on September 7th 2022 (the “trial”).

[4] The Defendant’s Claim was dismissed and does not form part of this appeal.

[5] Axia claimed damages against CCC 217 for breach of contract; specifically, a breach of the restrictive covenant in the Management Agreement between CCC 217 and Axia (the “Management Agreement”) which prohibited CCC 217 from entering into a management contract with a condominium management services provider that directly or indirectly involved a former Axia employee, for 1 year after Axia’s termination.

[6] CCC 217 and a neighboring condominium corporation (“OCCC 587”) each had separate management contracts with Axia.

[7] Annette Fleury (“Ms. Fleury”) was an Axia employee who served as the condominium manager for both CCC 217 and of OCCC 587. Ms. Fleury resigned from her employment at Axia and she became employed by Eastern Ontario Property Management Group (“EOPMG”).

[8] CCC 217 and OCCC 587 terminated their separate management contracts with Axia, and CCC 217 and OCCC 587 entered into new, separate management contracts with EOPMG within 1 year of their termination of their contracts with Axia. Ms. Fleury continued to provide services to both companies as an employee of EOPMG.

[9] CCC 217 was the sole Defendant in Axia’s Action – Ms. Fleury, EOPMG, and OCCC 587 were not named as Defendants.

[10] The trial judge found that CCC 217 breached its obligations to Axia by terminating its agreement with Axia and entering into a new contract with EOPMG after Ms. Fleury had accepted a position with EOPMG in circumstances where Ms. Fleury continued to provide services, all within a year of the termination.

[11] The Small Claims Court awarded $25,616.92 in damages against CCC 217 which equaled Axia’s lost profit at both CCC 217 and OCCC 587. However, OCCC 587’s separate management contract with Axia did not contain the same restrictive covenant that CCC 217’s did. OCCC 587 was not prohibited by its contract with Axia from receiving services from Ms. Fleury immediately following her departure from Axia.

[12] Axia conceded that its damages for the loss of the services provided by Ms. Fleury to CCC 217 amounted to $11,633.59.

[13] The remainder of the judgment was for the profit that Axia would have received from the management services Ms. Fleury provided to OCCC 587.

[14] The trial judge held that, “Axia’s damages is the loss of Annette Fleury as a property manager for Axia for one year while she continued to work on behalf of a new employer at CCC 217”.

[15] The evidence at trial showed that OCCC 587’s own “separate” Board of Directors was responsible for terminating OCCC 587’s “separate” management contract with Axia.

[16] The Court did not find that there was a breach of contract by OCCC 587. Unlike CCC 217, OCCC 587 was not restricted from entering into a new management contract with EOPMG that included services provided by Ms. Fleury.

Issue

[17] Did the trial judge commit a reviewable error in holding that Axia’s damages included the loss of revenue attributable to OCCC 587?

Position of the Appellant

[18] CCC 217 says that the trial judge erred in holding that Axia’s damages included the revenue it lost when OCCC 587 terminated its management contract with Axia.

[19] The correct measure of damages is the profit Axia lost when CCC 217 terminated its management contract with Axia and entered into a new contract with Ms. Fleury’s new employer, without regard to the actions of OCCC 587 and Axia’s loss of profit from that corporation.

Position of the Respondent

[20] Ms. Fleury was Axia’s employee directly responsible for providing management services to both CCC 217 and OCCC 587.

[21] Typically her responsibilities required that she spend about half a day per week providing management services to CCC 217 and half a day per week providing management services to OCCC 587.

[22] When Ms. Fleury left her employment with Axia and took a similar position with EOPMG, both CCC 217 and OCCC 587 opted to terminate their contracts with Axia.

[23] As a direct result of these decisions, Axia lost the income generated by not one, but two clients, and CCC 217 is the party responsible for this loss because it breached its contract with Axia. Therefore, CCC 217 should be required to compensate Axia for the full measure of its losses.

Discussion

[24] The legal question posed by this appeal is one of mixed fact and law which means that the findings of the trial judge on the damages issue should not be disturbed unless the appellate court determines that the decision is based on a palpable and overriding error. This standard of review accords great deference to the result at trial. An appeal court is not entitled to substitute its own view of a proper award unless it is demonstrated that the trial judge made an error in principle, misapprehended the evidence, failed to consider relevant factors, considered irrelevant factors, made an award without any evidentiary foundation, or otherwise made a wholly erroneous assessment of the damages.

[25] Each condominium corporation has a separate and independent legal identity. OCCC 587 operated completely independently of CCC 217.

[26] Unlike CCC 217, OCCC 587 was not bound by the covenant not to obtain services from a former Axia employee for at least one year. OCCC 587 was free to obtain management services from Ms. Fleury immediately following her departure from Axia without breaching any obligation that it may have owed to Axia. Axia may have sustained a loss due to the decision of OCCC 587 to continue to receive services from Ms. Fleury, but that loss is not compensable by CCC 217.

[27] It is a well-established legal principle that a party cannot do indirectly that which it cannot do directly. Relating this principle to the evidence in this case, OCCC 587 was entitled to retain the services of Ms. Fleury without waiting for a year to pass. Axia had no basis for suing OCCC 587 and in fact, didn’t make a claim against this company. Accordingly, Axia cannot claim from CCC 217 the loss it sustained due to OCCC 587’s decision to terminate Axia’s contract and to continue to receive services from Ms. Fleury when she changed employers.

[28] The trial judge failed to explain the legal basis for holding CCC 217 for the losses attributable to the decisions of OCCC 587. The inclusion of Axia’s loss attributable to OCCC 587 without adequate reasons eliminates the deference otherwise owed to the trial judge’s decision.

[29] Moreover, my review of the record leads me to conclude that there is no legal basis upon which the trial judge could properly include the loss attributable to OCCC 587 in the award of damages against CCC 217.

Disposition

[30] This court finds that the trial judge committed a reviewable error by including the respondent’s loss attributable to OCCC 587 in the judgment against CCC 217. As a result, the appeal is allowed to the extent that the damages payable by CCC 217 shall be reduced from $25,616.92 to $11,633.59.

[31] Interest payable under the Small Claims Court judgment shall be adjusted to accord with this decision.

[32] In my view, the Small Claims Court damages award can be adjusted by this court without sending the matter back to the trial judge for a re-assessment of damages because an appropriate and fair adjustment of the respondent’s damages can be determined on the appeal record.

[33] I am advised that as of the date of the hearing of this appeal, the trial judge had not released a decision respecting the costs of the action in Small Claims Court.

[34] As for the costs of this appeal, the appellant has already submitted a costs outline. Any further costs submissions by the appellant shall be delivered within 10 days, and the respondent shall have 15 days to respond.

Justice M. James

January 15, 2024