Court File and Parties

COURT FILE NO.: 13-CV-58376 DATE: 20180816

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

WALTER BOYCE Plaintiff – and – CARRIE LABELLE o/a HERBAL MAGIC OF CORNWALL Defendant

COUNSEL: Christopher J. Hunt, for the Plaintiff Christopher P. Morris, for the Defendant

HEARD: June 13, 2018 and July 17, 2018 (Ottawa)

REASONS FOR DECISION

H.J. Williams, J.

BACKGROUND

[1] Carrie Labelle leased space in a Cornwall, Ontario strip mall known as Times Square in order to operate a weight loss business known as Herbal Magic.

[2] Ms. Labelle took over the space from another tenant by signing a lease amending agreement in 2009. Ms. Labelle signed a second lease amending agreement in May of 2012.

[3] The expiration date of the lease was May 31, 2019.

[4] Ms. Labelle left the premises in July of 2013. She argued that the landlord, Walter Boyce, had failed to provide a sufficient number of parking spaces.

[5] Mr. Boyce started a legal action against Ms. Labelle and brought a motion for summary judgment.

[6] In his May 27, 2016 endorsement, James J. found that Ms. Labelle had wrongfully repudiated the lease and that Mr. Boyce was entitled to judgment in an agreed-to amount for arrears of rent to the date Ms. Labelle vacated the property.

[7] James J. found that a trial was required to determine whether Mr. Boyce was entitled to damages for the time period after Ms. Labelle vacated the property until the end of the lease. James J. also found there was a question about whether Mr. Boyce had taken reasonable steps to mitigate his loss.

[8] James J. ordered a summary trial. He ordered that the evidence of both parties be by way of affidavit and that the affiants be made available for cross-examination.

ADDITIONAL (POST-SUMMARY JUDGMENT MOTION) FACTS

[9] The space leased by Ms. Labelle was vacant until October 31, 2016.

[10] A new tenant took over the space on November 1, 2016.

[11] The monthly rent being paid by the new tenant is lower than the rent Ms. Labelle had paid.

THE ISSUES

[12] The summary trial involved the following issues:

(1) Did Mr. Boyce take reasonable steps to mitigate his loss after Ms. Labelle vacated the property? (2) What are Mr. Boyce’s damages, if any?

ISSUE #1: Did Mr. Boyce take reasonable steps to mitigate his loss after Ms. Labelle vacated the property?

Ms. Labelle’s position

[13] Ms. Labelle argued that Mr. Boyce failed to take reasonable steps to mitigate his loss after she vacated the property.

[14] Ms. Labelle says that although she left the premises in July, 2013, Mr. Boyce did not hire a real estate agent to market the Times Square building until June of 2014.

[15] Ms. Labelle argued that the unit she had vacated was not added to a listing of available units in Times Square until August of 2014 and that, for a three-month period in the spring of 2016, for reasons unknown, the building did not appear in the listing at all.

[16] Ms. Labelle argued that a “for lease” sign was not placed in the window of the unit she had leased until June of 2015, almost two years after she vacated.

[17] Ms. Labelle also argued that although Mr. Boyce may have taken some steps to advertise the Times Square building, he was less engaged in advertising the particular unit she had leased.

Mr. Boyce’s position

[18] Mr. Boyce argued that he took reasonable steps to find a new tenant for the unit vacated by Ms. Labelle and that the fact that he found a new tenant is evidence of the reasonableness of the steps he took.

[19] Mr. Boyce said that he had worked in the leasing business for almost 40 years and that he has managed 500,000 square feet of property, primarily in Ottawa.

[20] Mr. Boyce said that market conditions in Cornwall were “terrible” at the relevant time. He described the rental market in the city as “very soft”. Mr. Boyce said that there are landlords in Cornwall who give their properties away and others who charge less than market rents. He said that tax rates in central Cornwall are high. He said that the pace of leasing vacant properties in Cornwall is “very, very slow.”

[21] Mr. Boyce said that there are typically multiple vacancies in the Times Square building and that some units have remained vacant for a very long time.

[22] Mr. Boyce’s son James, who was the real estate broker hired by Mr. Boyce to market the Times Square building, agreed that once a unit in the building becomes vacant, it can take a substantial period of time to find a new tenant.

[23] Mr. Boyce said that the length of time that Ms. Labelle’s unit was unoccupied, from July, 2013 to November, 2016 was typical and not unexpected, given the modest level of demand for rental units in Cornwall.

[24] Mr. Boyce said that he finds tenants through his long-standing connections in the communities where his buildings are located and through brokers, when he engages them. He said that he always puts up signs in buildings with vacancies to advertise that there is space for lease. He said that if a building has multiple vacancies, he intentionally does not put a sign in every unit.

[25] Mr. Boyce said that he received some rental inquiries about the Times Square building in October of 2013, just three months after Ms. Labelle moved out.

[26] Mr. Boyce said that no expressions of interest were ignored or rejected.

[27] Mr. Boyce said that his son James had become involved in marketing the building in October of 2013 and that he formally hired his son’s brokerage, C.B.R.E., in June, 2014.

[28] On cross-examination, Mr. Boyce agreed that Ms. Labelle’s unit was not included among C.B.R.E.’s available listings until August, 2014.

[29] Mr. Boyce said that, at some point, a sign was placed in the window of the unit vacated by Ms. Labelle. He said that he could not say when the sign was placed in the unit but that it was after October of 2013 and no later than June, 2015; he knew that the sign was there in June, 2015 because of a dated photograph.

[30] Mr. Boyce’s son James said that serious discussions about a potential tenant for Ms. Labelle’s unit began in July, 2016 and that he had worked diligently for about five months to secure the new tenancy, which began November 1, 2016.

Discussion

[31] The parties agree that Ms. Labelle bears the onus of proving that Mr. Boyce failed to mitigate his loss.

[32] The onus on the defendant to prove a failure to mitigate is a “heavy one” but if it is met, the defendant is relieved of liability for any damages that can be traced to the plaintiff’s inactivity or to conduct which exacerbates rather than mitigating the plaintiff’s loss: Fridman, G.H.L. The Law of Contract in Canada, 6th ed. Toronto: Carswell, 2001 at p. 731.

[33] A plaintiff must take “all reasonable steps to mitigate the loss consequent on the breach” (Fridman, supra, at p. 730) but is not obliged to take “all possible steps” to reduce its loss (Waddams, S.M. The Law of Contracts, 7th ed. Toronto: Thomson Reuters at para. 760.)

[34] Ms. Labelle took issue with Mr. Boyce’s failure to retain C.B.R.E., a real estate broker, to market the property until June of 2014. However, Mr. Boyce had testified that his real estate broker son James had been involved in marketing the property by October, 2013, three months after Ms. Labelle left the property.

[35] I find that Ms. Labelle could have given Mr. Boyce more time to find a new tenant by giving him advance notice of her intention to leave the building, but she did not do so. Mr. Boyce testified that Ms. Labelle had signed a lease for new premises for Herbal Magic in March, 2013, four months before she vacated the Times Square property. His evidence on this point was not contradicted; when Mr. Boyce’s lawyer asked Ms. Labelle on cross-examination when she signed the lease for the space on Ninth St., Ms. Labelle said that she could not remember.

[36] Included in evidence was a sign Mr. Boyce found on the door of Ms. Labelle’s Times Square unit on July 19, 2013, directing her clientele to a new address on Ninth St. in Cornwall effective July 15, 2013, two days after she moved out of Times Square. Ms. Labelle’s planned move to the new address had obviously been in the works for some time before she vacated the space she had leased from Mr. Boyce.

[37] Ms. Labelle argued that Mr. Boyce had acted unreasonably by failing to place a “for lease” sign in the unit she had vacated until June of 2015. This was a misstatement of Mr. Boyce’s evidence, which was that the sign was put up some time after October of 2013 and before June of 2015. Regardless, Mr. Boyce testified that there was a sign at all times on the Times Square building and that he does not put signs in all vacant units in a building because of the negative optics.

[38] I find Ms. Labelle’s argument that Mr. Boyce failed to mitigate his loss by not moving more quickly to place a sign in her unit to be unpersuasive; a sign was posted on the Times Square building, any interested prospective tenant would have made inquiries about the specific units that were available for lease and that the Herbal Magic unit was vacant likely would have been obvious to any interested passer-by.

[39] I also find that, having done business in Cornwall since 2009, Ms. Labelle, while not in the real estate business, cannot have been unaware of general economic conditions in Cornwall at the time she vacated the property in July of 2013. Ms. Labelle would have or should have known that it would not be easy for Mr. Boyce to find a tenant to replace her, a factor that was considered by the Supreme Court of Canada in Apeco of Canada, Ltd. v. Windmill Place , [1978] 2 S.C.R. 385 when the court concluded that a landlord who was unable to re-rent premises quickly due to poor market conditions had not failed to mitigate his loss.

[40] Mr. Boyce’s evidence that the market in Cornwall was terrible and that the length of time Ms. Labelle’s unit was vacant was typical and not unexpected was not contradicted.

Conclusion

[41] I find that Mr. Boyce took all reasonable steps to reduce his loss and, in doing so, I reject Ms. Labelle’s argument that Mr. Boyce failed to mitigate his loss.

ISSUE #2: What are Mr. Boyce’s damages?

[42] Mr. Boyce requests $235,303.06 in damages, broken down in the following manner:

(1) Basic and additional rent from August 1, 2013 to October 31, 2016 in the amount of $122,684.73; (2) The present value of the difference between the rent which would have been paid by Ms. Labelle to the end of the lease on May 31, 2019 and the rent paid by Mr. Boyce’s new tenant, in the amount of $12,538.88; (3) Additional damages incurred in respect of the new tenant in the amount of $11,108.34; and (4) Interest on the amounts payable on (1) and (2), above, in the amount of $88,971.11 to February 7, 2018. [1]

Items (1) and (2), above: Rent

[43] Ms. Labelle argued that Mr. Boyce is not entitled to the damages in paragraphs 42(1) and 42(2), above, because he did not take all reasonable steps to mitigate his loss but does not dispute the method of calculation of these damages. Ms. Labelle’s argument that Mr. Boyce failed to mitigate his loss has been rejected.

[44] I find that Mr. Boyce is entitled to the damages in paragraphs 42(1) and 42(2), above.

Item 3, above: Additional damages

[45] Ms. Labelle argues that the $11,108.34 in “additional damages” is a sum that would have been payable by Mr. Boyce at some point, regardless of when Ms. Labelle left the premises and even if she did not leave until the end of her lease.

[46] When Mr. Boyce was cross-examined, he agreed that the “additional damages” of $11,108.34 represented costs incurred in order to lease the unit after Ms. Labelle left. Mr. Boyce said that it is possible that the same costs would have been incurred if Ms. Labelle had stayed in the premises until the end of her lease. He said that some of the costs may have been avoided had she done so. He also said that these costs could have been higher at the end of her lease.

[47] I accept Ms. Labelle’s argument that costs of this nature likely would have been incurred by Mr. Boyce when he found a new tenant for Ms. Labelle’s unit, regardless of when she left the premises.

[48] The precise amount of costs that would have been incurred at the end of the lease is somewhat speculative; Mr. Boyce said that these costs could have been more or less than the $11,108.34 he claimed. I find that the best evidence of what these costs would have been at the end of Ms. Labelle’s lease is the amount Mr. Boyce paid as of November 1, 2016, $11,108.34.

[49] Ms. Labelle’s lease did not expire until May 31, 2019. By incurring these costs as of November 1, 2016, when the new tenant’s lease began instead of as of June 1, 2019, following the expiration of Ms. Labelle’s lease, Mr. Boyce incurred the costs 31 months earlier than he would have had Ms. Labelle not breached her lease.

[50] I have concluded that a fair way to compensate Mr. Boyce for not having had the use of the $11,108.34 for the 31 months is to award him interest, at the applicable prejudgment interest rate of 1.3%, [2] for 31 months. This amounts to $373.06.

Item 4, above: Interest

[51] Ms. Labelle argues that interest requested by Mr. Boyce of 18 per cent, compounded daily, is unconscionable, not permitted under the lease and has already been found by James J. to be “excessive, if not punitive.”

[52] Section 8.06 of the parties’ lease states that: “All arrears of rent shall bear interest at the rate of eighteen per cent (18%) per annum calculated per diem from the date the same shall be incurred by the Landlord until paid by the Tenant.”

[53] Although the lease provided for interest “calculated per diem”, Mr. Boyce’s evidence was that, in arriving at the figure of $88,971.11 in interest to February 7, 2018, the 18 per cent interest was calculated, not on a “per diem” or daily basis but rather at the end of each month during the period of Ms. Labelle’s default.

[54] I find that although 18 per cent interest is a high rate of interest, it is the interest rate that was agreed to by the parties and was set out in the lease. In his May 27, 2016 decision, James J. noted that the 18 per cent rate was used by the parties to calculate the agreed-to rental arrears to the date of Ms. Labelle vacated the premises. James J. accepted the parties’ agreed-to calculation, which incorporated the 18 per cent rate, but then ordered prejudgment and post-judgment interest at 10 per cent.

[55] I find that Mr. Boyce is entitled to interest at 18 per cent, calculated monthly, on rent owed by Ms. Labelle from August 1, 2013 to the date of this judgment.

[56] No interest is payable on the damages awarded to Mr. Boyce for rent owed by Ms. Labelle from the date of judgment to the end of the term of her lease.

[57] For consistency, I will follow the lead of James J. and award post-judgment interest at the rate of 10 per cent.

CONCLUSION

[58] The plaintiff shall have judgment as follows:

(1) Damages for basic and additional rent from August 1, 2013 to October 31, 2016 in the amount of $122,684.73; (2) Damages in the amount of the present value of the difference between the rent which would have been paid by Ms. Labelle from November 1, 2016 to the end of the lease on May 31, 2019 and the rent paid by Mr. Boyce’s new tenant in the amount of $12,538.88; (3) Additional damages incurred in respect of the new tenant in the amount of $373.06; and (4) Interest at 18 per cent, calculated monthly, on the damages for rent owed from August 1, 2013 to the date of judgment; [3] and (5) Post-judgment interest shall be at the rate of 10 per cent.

COSTS

[59] The parties have exchanged and provided me with bills of costs.

[60] If the parties cannot agree on costs, they may deliver brief written submissions to supplement their bills of costs in accordance with the following schedule and page limits:

• The plaintiff may deliver written submissions of no more than three pages in length within 14 days of the date of this decision;
• The defendant may deliver written submissions in response of no more than three pages in length within 14 days of the date of receipt of the plaintiff’s submissions; and
• The plaintiff may deliver any reply submissions of no more than three pages in length within seven days of the date of receipt of the defendant’s submissions.

[61] The parties’ submissions may be filed by sending them to me, care of the trial coordinator.

Date: August 16, 2018 Madam Justice H. J. Williams

Footnotes

[1] I assume, although this was not confirmed, that February 7, 2018 was simply the date to which interest was calculated for purposes of Mr. Boyce’s affidavit evidence and that Mr. Boyce is also seeking interest subsequent to February 7, 2018. I have decided the interest issue in a manner that will permit the parties’ lawyers to clarify this, if appropriate.

[2] Mr. Boyce’s statement of claim was issued July 25, 2013.

[3] If the parties cannot agree on this amount, they may write to me with their respective positions and calculations, care of the trial coordinator.