ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
SIRDI SAI SWEETS INC.
Plaintiff
- and -
INDIAN SPICE & CURRY LTD., JAIPUR GORE PLAZA INC., PEEL STANDARD CONDOMINIUM CORPORATION NO. 767, MADHU GROVER, RAKESH MAHDU, JEFF LAL and RAKESH UPPAL
Defendants
A N D B E T W E E N:
INDIAN SPICE & CURRY LTD. and RAKESH UPPAL
Plaintiffs by Counterclaim
- and -
SIRDI SAI SWEETS INC. and RAMESH MEHTA
Defendants by Counterclaim
No one appearing for the Plaintiff
M. Michael Title,
for the Defendants/Plaintiffs by Counterclaim Indian Spice & Curry Ltd. and Rakesh Uppal
Ramesh Mehta, in person
HEARD: October 6, 7, 8, 10,14, 15, 16, 17, 20, 21, 22 and December 8, 11, 2014
F.L. Myers J.
REASONS FOR decision
Background
[1] For oral reasons delivered on December 8, 2014, the plaintiff’s action was dismissed. At that time, Mr. Mehta declined to continue the cross-examination of Neeru Uppal for the purposes of the counterclaim against him personally. Moreover, he declined to participate any further in the trial to defend the counterclaim. Accordingly, the defendants represented by Mr. Title closed their case and the matter was put over for argument.
[2] As the plaintiff’s action has already been dismissed, argument was limited to the counterclaim and costs.
The Arrears
[3] By written lease dated January 24, 2005, the plaintiff rented commercial condominium premises from the defendant Indian Spice & Curry Ltd. The premises were located in a retail mall. The plaintiff opened a restaurant under its lease. In its claim, the plaintiff alleged that its landlord and others breached its exclusive right to sell certain types of food at the mall. It claimed that the breaches caused it to suffer damages by way of loss of profits. The plaintiff’s business ultimately failed and the landlord evicted it for non-payment of rent in 2009. The landlord counterclaims against the plaintiff for rent arrears and against Ramesh Mehta on a personal guarantee in the plaintiff’s lease.
[4] Covenants in a lease are independent. That is to say, even if the plaintiff had been proven correct in its allegations, it was still required to pay rent. Rent expense would have been a deductible expense in any calculation of the plaintiff’s future profits. Accordingly, regardless of whether the plaintiff’s claim had succeeded or was dismissed, rent was due and payable by the plaintiff.
[5] Mr. Mehta provided some evidence during the trial concerning the landlord‘s acquiescence in rent arrears while the plaintiff made efforts to sell its business. There was no formal agreement forgiving rent. Any forbearance that may have been offered by the landlord terminated in 2009 when it commenced efforts to cajole the plaintiff to meet its obligations and ultimately terminated the lease due to the plaintiff’s failure to do so.
[6] Mr. Mehta argued that the plaintiff was not liable for rent arrears that arose in late 2008 and early 2009 when it had “subleased” the restaurant to others. There was no evidence put forward by Mr. Mehta of any formal sublease. There was one disputed document that referred to an agreement that Mr. Mehta claimed would have forgiven the arrears if a proposed sale of the business had come to fruition. That sale did not proceed. Even if there were one or more subleases, there is no indication in any admissible evidence, that the terms of any sublease included a release of the liability of the plaintiff for rent as head tenant.
[7] Neeru Uppal’s evidence was that arrears of rent and utilities as of the date of termination of the lease amounted to $115,292.81. The number was not seriously challenged. Her calculations were supported by bank statements and other contemporaneous financial records. The quantum was not an issue that turned on any finding of Neeru Uppal’s credibility as a witness.
The Guarantee
[8] Mr. Mehta was a guarantor of all of the plaintiff’s obligations under its lease. Article 3.7 of the lease provided a limited guarantee. It was limited in the sense that it was terminable in the event that the lease was ever assigned to an independent third party and all of the plaintiff’s construction and other obligations up to the time of such an assignment had been performed. No assignment occurred prior to the termination of the lease. Accordingly, the guarantee remains enforceable in accordance with its terms.
[9] Mr. Mehta argued that he is not liable under the guarantee because the lease called for an indemnity agreement to be appended as schedule “E” and no such document was ever agreed upon or signed. However, the lack of an independent indemnity does not undermine the applicability of the guarantee. It was common practice to include both guarantees and indemnities in leases in order to avoid the risk that a guarantee might become unenforceable on the bankruptcy of the tenant based on pre-2005 common law.[^1] While that law no longer applies,[^2] it is not surprising to see a form of lease from 2005 that was drafted in that manner.
[10] During his cross-examination, Mr. Mehta testified that when the lease was amended in August, 2005, Rakesh Uppal agreed to delete the guarantee once Mr. Mehta made his initial investment of $200,000 into the plaintiff and the plaintiff performed its promised tenant’s work. This evidence is inconsistent with the terms of the guarantee set out in the lease which were never formally amended. As noted above, the guarantee as agreed is terminated only on an assignment and then only if the tenant’s work and all additional obligations of the plaintiff were fulfilled up to the time of assignment.
[11] Mr. Mehta argued that he had intended to ask Dr. Uppal about this issue had the trial continued. However, when the court asked Mr. Mehta if he wished to re-open his case in the counterclaim for this purpose, Mr. Mehta thought about the issue during a break and ultimately argued the counterclaim without Dr. Uppal’s evidence.
[12] I do not see a basis in Mr. Mehta’s evidence by which he can avoid the express and unambiguous terms of the guarantee in the lease. His evidence did not provide a basis for an estoppel or any other defense to the enforcement of the lease contract nor a separate collateral warranty. Nor can he, by oral evidence, contradict or alter the meaning of the words used in the lease or, by oral agreement, amend the lease.
[13] Moreover, if necessary to go further, I would not have accepted Mr. Mehta’s evidence of an oral amendment to the guarantee in any event. First, Mr. Mehta claimed that Dr. Uppal had previously agreed that because there was no schedule “E” to the lease, there would be no guarantee required of Mr. Mehta in any event. One wonders why Mr. Mehta’s name was inserted in the lease as a guarantor and why Mr. Mehta signed the lease in that capacity if the parties had agreed that he was not to be guarantor. Moreover had they agreed that Mr. Mehta was not going to be bound as a guarantor because there was no schedule “E”, then why would there have been a discussion months later, in August, 2005, about the termination of the guarantee upon the tenant’s work being performed? Mr. Mehta’s arguments conflict. If there was no guarantee at all, then there would have been nothing to limit in August.
[14] In addition, the notion that when Mr. Mehta signed the lease amendment document he made an oral agreement which he trusted Rakesh Uppal to implement later, is utterly inconsistent with Mr. Mehta’s conduct throughout. Mr. Mehta clearly demonstrated at trial a penchant to carefully document everything to which he accorded significance. He boasted about his business acumen and his knowledge of the need for proper documentation.[^3]
[15] Mr. Mehta was meticulous in requiring handwritten changes to the draft lease amendment document that he signed with Rakesh Uppal. Mr. Mehta required handwritten changes to the draft to confirm receipt of certain deposits and to limit the plaintiff’s investment to $200,000. Similarly, Mr. Mehta had previously had Rakesh Uppal sign a copy of the proposed floor plan for the leased premises to evidence the landlord’s approval under the lease of the proposed layout. Mr. Mehta prepared letters for the landlord’s execution to formally confirm that the plaintiff had taken possession of the premises and for other matters. Mr. Mehta had witnesses sign various documents including even handwritten notes of meetings, to evidence their authenticity. When he discussed the receipt that is at Tab 85 of the exhibit brief, Mr. Mehta testified that he was careful to get receipts for payments made. When he personally delivered copies of his lawyer’s demand letter to members of the board of directors of the condominium corporation, he required that they sign acknowledgements of receipt of the letter. It is simply not possible to believe that Mr. Mehta would have made such a substantial change to the lease terms and not required that the lease amendment document be amended to reflect a term of such importance when he had in fact insisted upon and made a number of other more minor amendments to that very document. It is contrary the extreme meticulousness with which Mr. Mehta acted at all other times in respect of documentation.
[16] In his reply examination, Mr. Mehta made a fundamental admission. He said that he fulfilled the lease until he stopped when cash flow was hard and his efforts to sell the restaurant had failed. “I couldn’t arrange any other money and had to sue”. That was the simple reality.
[17] Accordingly, judgment will issue in the counterclaim against both defendants jointly and severally in the principal amount of $115,292.81. The judgment is in favour of the landlord, Indian Spice & Curry Ltd., only. Mr. Title confirmed that Rakesh Uppal is not seeking relief in the counterclaim any longer.
Interest
[18] Prejudgment interest is claimed under the provisions of article 3.5 of the lease. The lease provides for interest on outstanding amounts to accrue at the rate of 18% per annum, calculated at the rate of 1.5% per month. This is a simple interest calculation. If interest were calculated on a compound basis, one would expect the agreement to use the words “compound interest” or interest would not simply be “calculated” on a monthly basis, it would “compound” on a monthly basis. Moreover, interest that compounds at the rate of 1.5% per month would exceed the stated annual rate of 18%. That could raise an issue under section 4 of the Interest Act, R.S.C. 1985, c I-15. In all, I read article 3.5 of the lease as providing simple interest at 18% per annum.
[19] In the prayer for relief in the counterclaim, prejudgment interest is sought under the provisions of the Courts of Justice Act, R.S.O. 1980, c.C.43. However, the prayer for relief does include the usual basket clause. Moreover, there is no prejudice to the defendants by counterclaim in granting leave to amend, if necessary. There was never any doubt that the landlord was seeking to enforce the terms of the lease in the counterclaim. Accordingly, prejudgment interest should be calculated at the rate of 18% per annum or 1.5% per month from July 7, 2009 until the date of this judgment and the amount of interest so calculated should be included in the principal amount of the judgment. Thereafter, the judgment will bear interest at the same rate.
Costs
[20] The landlord seeks its costs under the terms of article 15.4 of the lease on a substantial indemnity basis. Whether under that section or the tenant indemnity contained in article 11.4(b) of the lease, there is no reason why the agreement between the parties should not govern. The billable rates for Mr. Title and Mr. Gilmour set out in their accounts and summaries are quite reasonable. Moreover, the hours are reasonable particularly in light of the difficulty of dealing with Mr. Mehta after the plaintiff’s former lawyer left the scene in 2012. At 90% of full fees in accordance with the prevailing definition, the costs in favor of the defendants/plaintiffs by counterclaim represented by Mr. Title and previously by Mr. Gilmour are fixed at $250,779.01.
[21] In addition, the plaintiff was unsuccessful and had raised allegations of intentional torts against the defendants represented by Mr. Title. That, too, is an appropriate basis for finding the plaintiff liable for costs on a substantial indemnity basis in this case. Harris v. Leikin Group Inc., 2014 ONCA 479
[22] Mr. Title seeks to have Mr. Mehta held jointly and severally liable for the full amount of costs. He expressly disclaimed any argument of piercing the corporate veil or third-party liability for costs of the plaintiff. Rather, he argues, Mr. Mehta’s status as a defendant by counterclaim should lead to the same liability for costs as the plaintiff because there was really no defense to the counterclaim and Mr. Mehta’s only real hope of avoiding paying rested upon the plaintiff recovering damages in excess of the arrears of rent otherwise due. On that basis, Mr. Title asserts that there was no real distinction in the trial or pretrial proceedings between the issues in the main claim and in the counterclaim.
[23] It seems to me that the issue may be simpler. The plaintiff is liable for costs on a substantial indemnity basis for the reasons set out above. Mr. Mehta is liable for all of the obligations of the plaintiff as guarantor. Accordingly, even without an independent assessment of costs against Mr. Mehta, he is liable personally for costs on a substantial indemnity basis.
[24] Mr. Title argues that it is appropriate for Mr. Mehta to be responsible for costs on a substantial indemnity basis in view of his unmeritorious, unsupported, and vexatious allegations throughout. I agree with Mr. Title to the extent that the manner in which Mr. Mehta conducted the proceeding was, at times, vexatious and tended to lengthen unnecessarily at least the duration of the trial. Having reviewed the pre-trial decisions of Justice Wilson with respect to trial management efforts, it is clear that Mr. Mehta’s unwillingness to accept the application of procedural laws to him led to the need for repeat appearances and much unnecessary complexity. This is not simply a question of Mr. Mehta being a non-lawyer. There were several times throughout the trial where the court provided assistance to Mr. Mehta in terms of legal process, definitions, and explaining rulings. Unfortunately, when Mr. Mehta was unhappy with information or rulings received, he all too frequently ignored them - blaming his brain problems in many cases. Similarly, he was abusive towards witnesses and blamed his brain problems for his inability to restrain himself despite exhortations by the court.
[25] The bulk of Mr. Mehta’s costs submissions related to his arguments concerning a separate piece of litigation that was commenced by one or more of the defendants in Brampton. The litigation was dealt with by various judges in Brampton and was ultimately dismissed on consent. Mr. Mehta says that Mr. Gilmour, who was then counsel for the landlord, delivered 11 fraudulent affidavits in a Mareva injunction motion in Brampton. But the proceeding was resolved on consent. There is no basis for the costs of this action to turn upon anything done or not done in that action. If Mr. Mehta had a concern with the conduct of the parties in the Brampton action, he had his remedies there. I previously ruled during the trial that the details of the Brampton lawsuit were not admissible in relation to the plaintiff’s claims of punitive and aggravated damages in respect of the breaches of its lease that were alleged in the statement of claim. I do not see the outcome or conduct of parties in the Brampton litigation impacting the costs of this litigation despite Mr. Mehta’s belief that serious wrongs were done to him and to his family in the Brampton litigation.
[26] In all, it seems to me that Mr. Mehta is liable as guarantor and, therefore, bears liability for the costs as ordered against the plaintiff. While not necessarily applicable, I have considered Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), (2004), 71 O.R. (3d) 291 and the factors set out in rule 57.01, to determine if there is any reason to try to limit the normal operation of the guarantee in respect of costs that are payable by Mr. Mehta. In light of the various factors set out in Boucher and the rule, and, especially, issues of access to justice, not just for the plaintiff but for the successful defendants as well, I see no basis to exercise any discretion to try to ameliorate the effects of the parties’ agreements in respect of costs.
[27] Mr. Title may amend the draft form of judgment that he prepared to conform to these reasons and submit the revised draft directly to my office for signing. The court dispenses with any need for Mr. Mehta to approve the form or content of the draft judgment.
F.L. Myers, J.
DATE: December 15, 2014
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
SIRDI SAI SWEETS INC.
Plaintiff
- and -
INDIAN SPICE & CURRY LTD., JAIPUR GORE PLAZA INC., PEEL STANDARD CONDOMINIUM CORPORATION NO. 767, MADHU GROVER, RAKESH MAHDU, JEFF LAL and RAKESH UPPAL
Defendants
A N D B E T W E E N:
INDIAN SPICE & CURRY LTD. and RAKESH UPPAL
Plaintiffs by Counterclaim
- and -
SIRDI SAI SWEETS INC. and RAMESH MEHTA
Defendants by Counterclaim
REASONS FOR DECISION
F.L. Myers J.
Released: December 15, 2014
[^1]: Cummer-Yonge Investments Ltd. v. Fagot et al., 1965 295 (ON SC)
[^2]: Crystalline Investments Ltd. v. Domgroup Ltd., 2004 SCC 3
[^3]: His evidence was that he is “the strongest businessman in the world”. He said that although he was only 60 years old, he had “400 years of business experience”.