Court File and Parties
COURT FILE NO.: CV-13-58376 DATE HEARD: May 19, 2016
Superior Court of Justice - Ontario
RE: Boyce v. Labelle
BETWEEN: Walter Boyce, Plaintiff/Moving Party and Carrie Labelle o/a Herbal Magic Cornwall, Defendant/Respondent
BEFORE: Honourable Mr Justice Martin James
COUNSEL: Christopher Hunt for the Applicant Christopher Morris for the Respondent
Endorsement
[1] This matter involves a motion for judgment by a landlord following the tenant’s decision to vacate the premises before the end of the term of the lease. The landlord says the tenant wrongfully repudiated the lease, entitling the landlord to damages for both rental arrears and for the prospective losses arising during the unexpired future term of the lease. The tenant says there was an ongoing problem respecting the inadequacy of parking for her customers that constituted a material breach of the lease by the landlord and which justified the tenant’s decision to vacate the premises.
[2] As a preliminary matter, both parties sought to refer to affidavit evidence that was delivered subsequent to the timeline the parties had agreed to several months prior to the hearing of the motion. In the interests of fairness to both sides, neither party was permitted to refer to the recently-prepared affidavits.
[3] This motion for judgment is to be determined in accordance with the principles set out by the Supreme Court of Canada in Hryniak v Mauldin, 2014 SCC 7.
[4] The issues are as follows:
- Is the tenant’s contention that she was entitled to vacate the premises as a result of a material breach of the lease by the landlord a genuine issue requiring trial?
- Is there a genuine issue requiring a trial with respect to the landlord’s claim for and calculation of arrears of rent to the date of default?
- Is there a genuine issue requiring a trial respecting the landlord’s calculation of his claim for lost future rent?
Issue #1
[5] The landlord was justified in taking the position that the tenant had wrongfully repudiated the lease. The evidence established that there was a history of late or missed rental payments. The tenant was clearly unable or unwilling to keep the lease payments consistently up to date.
[6] The lease did not provide that the tenant was entitled to a specific number of parking spaces. In addition, the tenant cannot show a documented pattern of parking problems. The tenant’s notice to the landlord of an alleged parking issue was inadequate. The landlord says that there was one parking complaint made by the tenant which was promptly attended to. The evidence falls well short of what is required to justify the tenant’s decision to vacate the premises. The tenant’s allegations do not rise to the level of constituting a genuine issue requiring a trial. Even if there was a breach of the landlord’s obligation to provide adequate parking, the tenant was not justified in repudiating the agreement when considered in the context of the landlord’s obligations pursuant to the lease. The tenant’s only remedy would have been to seek monetary compensation for her damages. The issue of the landlord’s entitlement to treat the tenant’s actions as a wrongful repudiation of the lease can be determined justly without a trial.
Issue #2
[7] Having determined that the tenant wrongfully repudiated the lease, the landlord is entitled to judgment for the arrears of rent. At the hearing of the motion, counsel for both parties agreed that the arrears amounted to the sum of $22,957.46. The tenant’s position respecting arrears was premised on her assertion that she was entitled to vacate the premises and therefore there were no arrears but this point has been determined in favour of the landlord. The calculation of the arrears are agreed to and do not require a trial. The landlord is entitled to a judgment for the arrears in the amount of $22,957.46. Prejudgment interest and post-judgment interest shall accrue at the rate of 10% per year. Although the lease provides for interest at the rate of 18% and this rate was used to calculate interest to the date of default, in the current interest rate environment such a rate, although contractually agreed to, is excessive, if not punitive.
Issue #3
[8] The landlord’s claim for the lost future rental stream subsequent to the tenant’s default is summarized on the spreadsheet attached to the landlord’s notice of termination as a schedule under the heading “Estimate of Economic Loss After July 19th, 2013”. This claim consists of the base rent accruing from the date of default in July 2013 to the end of the rental term, being May 31, 2019, of $130,115.55 plus additional rent, as shown on the spreadsheet, of $90,949.99, for a total claim of $221,065.54.
[9] The rights of a landlord where a tenant has wrongfully repudiated the lease were established by the Supreme Court of Canada in the well-known decision of Highway Properties Ltd., v. Kelly, Douglas and Co., [1971] S.C.R. 562 (see paragraphs 14, 28).
[10] The remedy chosen by the landlord in this case was to terminate the lease but on notice to the tenant that the landlord would be claiming damages for the lost rent arising during the unexpired future term of the lease.
[11] Damages on this footing are established by determining the present value of the unpaid future rent less the actual rental value of the premises for that period. No such evidence has been provided by the landlord in this case. There is no present value statement with respect to the lost rent during the unexpired term and no evidence of the actual rental value of the premises. In Morguard Corporation v. 2063881 Ontario Inc., et al., Perell, J said that a landlord in this situation is required to provide a present value calculation (paragraph 27). Similarly there was no evidence of the actual rental value of the premises. There is likely some amount that a new tenant would be prepared to acquire the premises, quite possibly on a reduced rent basis, which would operate as a credit to the present value calculation of the lost prospective rent. I am not prepared to speculate what these amounts should be. There is a genuine issue requiring a trial with respect to the proper calculation of this component of the landlord’s claim.
[12] There is also a question with respect to whether the landlord took reasonable steps to mitigate his losses by moving promptly to adequately market the recently vacated space. The evidence suggests that there were other vacancies in the landlord’s strip mall in addition to the vacancy created when the tenant in this case decided to move out. In order for a landlord to put himself in a position to claim damages from a tenant for unpaid future rent, the landlord must demonstrate that he has attempted to minimize his loss, it being understood that while the tenant may have an evidentiary burden, the overall burden of proof remains with the landlord as plaintiff. The landlord’s evidence on this point is vague and lacking in details.
[13] Following the principles enunciated by the Supreme Court of Canada in the Hryniak case, I direct that there should be a summary trial with respect to the landlord’s claim for lost future rent. Subject to the directions of the trial judge, the evidence of both parties shall be by way of affidavit, subject to the requirement to make their affiants available for cross-examination by opposing counsel.
[14] As a visiting judge, I do not deem it appropriate to remain seized of this matter as scheduling can be problematic.
[15] On the issue of costs, I have reviewed the bill of costs submitted on behalf of the landlord which indicates that the landlord’s actual costs of the motion are approximately $8,700. Counsel for the tenant has submitted a bill of costs calculated on the same basis totaling $6,400.
[16] On a preliminary basis and subject to receiving submissions from counsel if they wish to submit same within twenty days on a schedule agreed to by counsel, my view is that there should be no order as to the costs of the motion. Success was divided and neither party was completely successful. The tenant’s assertion that there was a material breach of the lease was dismissed. At the same time, while the landlord received judgment for a portion of his claim, the larger portion of the landlord’s claim, the claim for lost prospective rent, could not be determined justly on the motion and was ordered to trial.