2072467 Ontario Inc. v. Dr. Matthews P.C., 2020 ONSC 2739

COURT FILE NO.: CV-13-478530 DATE: 20200501 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

2072467 Ontario Inc. Plaintiff – and – Dr. Matthews Professional Corporation, Dr. Matthew Professional Corporation and Paul Matthews, a.k.a. Dr. Paul Matthews Defendants

Counsel: Macdonald Allen, for the Plaintiff Peter Danson, for the Defendants

HEARD: September 23-27, October 1-2, 2019

reasons for judgment

NISHIKAWA j.

Overview

[1] The plaintiff landlord, 2072467 Ontario Inc. (the “Landlord”), commenced this action against the tenant, Dr. Paul Matthews (the “Tenant”), for breach of a lease for office space (the “Lease”) at 901 Jane Street, Unit 200 in Toronto, Ontario (the “Premises”).

[2] The Landlord seeks damages for rental arrears, rent for the balance of the Lease term, and costs incurred in connection with the termination of the Lease. Since the Tenant’s departure from the Premises until the trial, the Landlord has not re-let the Premises.

[3] The Tenant signed a five-year lease with the Landlord in September 2010 and moved into the Premises in December of that year. The Tenant left the Premises in March 2012, long before the expiry of the Lease on December 31, 2015. The Tenant alleges that the Lease was fundamentally breached by the Landlord due to the following problems with the Premises: (i) an insect infestation; (ii) the presence of mold; (iii) roof leaks; (iv) problems with the HVAC system; (v) frequent breakdowns of the elevator; and (vi) safety issues caused by the customers of another tenant of the property, a bar/restaurant named Island Breeze (the “Restaurant”).

[4] The Tenant claims legal and equitable set-off in the amount of $175,000 for losses allegedly incurred as a result of the Landlord’s fundamental breach of the Lease. In the alternative, the Tenant alleges that the Landlord breached the covenant of quiet enjoyment and seeks a 50 percent abatement on all rent paid on the Lease.

[5] The main issue in this case is whether the Tenant abandoned the Premises in breach of the Lease or whether the conditions complained of by the Tenant constitute a fundamental breach of the Lease or a breach of the covenant of quiet enjoyment by the Landlord.

[6] The trial was originally scheduled to proceed on January 14, 2019. That date was adjourned after the Tenant dismissed his counsel and failed to attend the pre-trial conference. Given the lengthy delay in proceeding with this matter, the trial was set for September 23, 2019, peremptory on the Tenant.

Issues

[7] The issues to be determined in this proceeding are as follows:

(a) Did the Tenant breach the Lease by abandoning the Premises before the end of the Lease term?

(b) Did the Landlord fundamentally breach the terms of the Lease such that the Tenant was justified in terminating the Lease?

(c) Did the Landlord breach the covenant of quiet enjoyment?

(d) Did the Landlord take adequate steps to mitigate its damages?

(e) If the Landlord’s claim for breach of the Lease is made out, to what damages is it entitled?

(f) Is the Tenant entitled to legal or equitable set-off?

(g) Is the Tenant entitled to an abatement of rent?

Facts

The Parties

[8] The plaintiff Landlord is the numbered company that owns the property at 901-909 Jane Street, [1] a small shopping centre known as “Janedale Plaza” located at the corner of Jane Street and Eglinton Avenue in Toronto, Ontario (the “Plaza”). The Premises is located on the second floor of the Plaza and measures approximately 2,738 square feet. The Premises was previously used as a medical office, and had eight rooms, a reception area, a washroom and a small kitchen area.

[9] The Landlord was incorporated in 2005, the year that it purchased the Plaza. The principal of the Landlord is Gregory Chang. The Plaza is the only commercial rental property that the Landlord owns.

[10] The other tenants at the Plaza at the time included a pharmacy, a physiotherapy clinic, an employment agency known as Jane Alliance, a Royal Bank branch, a convenience store and a dollar store.

[11] Since 2009, the Plaza has been managed by a property management company, Prime Real Estate Group Inc. (“Prime”). Although there was no signed agreement between the Landlord and Prime at the relevant time, both the Landlord and Prime understood their relationship to be governed by an unsigned Property Management Agreement between them dated November 23, 2011 (the “Property Management Agreement”). An earlier version of the agreement was also never signed.

[12] The defendant Tenant is a medical doctor licensed to practice medicine in the Province of Ontario. The Tenant has been in practice for over 25 years. For the past 17 years, he has practiced in the area near the Plaza. Before entering into the Lease, the Tenant practiced at a walk-in clinic at the Jane Park Medical Centre at 877 Jane Street (“Jane Park”). From 2003 to 2005, the Tenant had an office at White’s Pharmacy at 725-727 Jane Street (“White’s Pharmacy”).

The Witnesses

[13] The witnesses for the Landlord were: Mr. Chang, Gabriela Reid, Wendy McKay, Barbara Kless, and Christie DeBolt. Ms. Reid and Ms. McKay were both employees of Prime. Ms. Reid was the Director of Real Estate at Prime from 2010 to 2015. Ms. McKay was the property manager for the Plaza from July 2011 to March 2012. Ms. Kless was the listing agent for the Premises both before and after it was leased to the Tenant. Ms. DeBolt was the President of PMG Realty Corp. (“PMG”), the real estate brokerage associated with Prime.

[14] The witnesses for the Tenant were Dr. Matthews, Claudia Campos, Jorge Campos, Rosa Hernandez, Dennis Pavao, and Roxanne Milton. Ms. Campos has been the Tenant’s office manager since 2010. From 2003 to 2010, Ms. Campos worked for another medical office where the Dr. Matthews practiced. Mr. Campos is Ms. Campos’ brother and assisted in the cleaning of the Premises. Ms. Hernandez was a medical assistant employed by the Tenant. Mr. Pavao’s company, DBM Landscaping Ltd., had a contract with Prime for the daily maintenance of the Plaza. Ms. Milton is a patient of Dr. Matthews.

[15] Given the number of years that have passed since the events at issue in this proceeding, many of the witnesses had vague recollections of the relevant events. In addition, a number of documents no longer exist because employees, including the two property managers during the relevant time, Emily Luciani and Ms. McKay, left Prime. [2]

The Lease

[16] In September 2010, Dr. Matthews became aware that the Premises was available for lease. Dr. Matthews testified that he heard about the Plaza from Ms. Campos, after a representative of Prime came by to ask if any doctors were looking for office space. Dr. Matthews wanted to leave the office where he was practicing at the time due to certain practices that he found objectionable. Dr. Matthews contacted Mr. Chang, who referred him to Ms. Kless, an agent at PMG. Dr. Matthews decided to let the Premises. Ms. Kless testified that she did not recall showing the Premises to the Tenant, and that it was likely shown by Ms. Luciani, the property manager at the Plaza at the time. Ms. Kless testified that the Landlord determined the rent, with input from the property manager on the amounts paid for taxes, maintenance and insurance, and that the Landlord’s lawyers prepared the Lease.

[17] Ms. Campos testified that she went to see the Premises with the Tenant to see how much space there was to determine what items and supplies would be needed. Ms. Campos observed that the Premises was very dirty, like it had not been cleaned for a long time. Ms. Campos noticed cocoons, webs and insect shells. In one room at the end of the hallway (the “Filing Room”), there were files and boxes, old printers and cartridges left behind by the previous tenant. Ms. Campos testified that she said they would “deal with it” because the Tenant wanted to leave the other office promptly. Ms. Campos further testified that in the Filing Room, there were ceiling tiles that she believed were moldy because they had a greenish colour and were damp and caving in.

[18] On September 15, 2010, the Landlord and the Tenant executed the Lease, which was for a term of five years commencing on January 1, 2011 and ending on December 31, 2015. Although the Tenant entered into the Lease in the name of Dr. Matthews Professional Corporation, no entity by that name existed at the time. The professional corporation was not incorporated until March 2015. The Tenant did not bring this to the Landlord’s attention.

[19] The Landlord paid PMG a commission of $10,828.79 for its role in brokering the Lease.

[20] Under the Lease, the Tenant was permitted to use the Premises “solely for the purpose of a medical practice for a general practitioner[.]” The Gross Rent for the first year was $12 per square foot per annum, or $32,856 per year plus HST in equal monthly installments. The gross rent increased by $1 per square foot each year in the subsequent years.

[21] Section 6.01 of the Lease required that the Landlord “operate and maintain the Shopping Centre and the Common Areas and Facilities in a reputable manner acting as a prudent landlord of a similar shopping centre having regard to size, character, age and geographical location.”

[22] Section 1.03 defines “Common Areas and Facilities” as “all common areas, facilities, utilities, improvements, equipment and installations which are not designated or intended for the exclusive use or benefit of any one tenant” including the roof, ceiling and floor slabs, all facilities and equipment for the production, generation or transmission of heating, ventilating and air conditioning, entrances and exits to and from adjacent streets, escalators, elevators, and washrooms. Section 6.02 of the Lease states:

The Tenant shall have the non-exclusive right to use the Common Areas and Facilities from time to time provided hereunder by the Landlord in common with others entitled thereto, and subject to the provisions of this Lease, and if the amount of such Common Areas and Facilities be diminished, the Landlord shall not be subject to any liability nor shall the Tenant be entitled to any compensation or diminution or abatement of Rent, nor shall such alteration or diminution of such Common Areas and Facilities be deemed constructive or actual eviction, or a breach of any covenant for quiet enjoyment.

[23] Section 11.09 required that the Landlord maintain and repair “as would a prudent owner of similar premises,” the structure of the Shopping Centre, including the “structural elements of the roof.” At the same time, section 8.04 of the Lease excludes the Landlord’s liability for death, injury or damage to property of the Tenant or of others on the Premises, “from any cause whatsoever, whether or not any such damages, loss or injury result from the negligence of the Landlord..[.]” This includes injury or damage to property from “fire, explosion, falling plaster, steam, gas, electricity, water, rain or snow or leaks from any part of the Leased Premises… or from the roof… or by any other cause of whatsoever nature.” Section 8.04 also excluded liability for damage caused by, among others, other tenants or persons in the Plaza.

[24] Under section 2.01 of the Lease, the Tenant acknowledged and agreed that he was “taking the Leased Premises ‘as is’ save and except for” certain work that the Landlord undertook in the Lease to complete prior to the commencement of the fixturing period. The work included replacing any stained and damaged ceiling tiles, painting the interior of the Premises and ensuring that all electrical, plumbing and HVAC systems were in good working order.

[25] Pursuant to section 2.02 of the Lease, the Tenant was required to “remove all trash, refuse and garbage from the Leased Premises to such areas and locations as the Landlord shall from time to time designate and upon completion of the Tenant’s Work in the Leased Premises. The Tenant shall clean the Leased Premises and the area adjacent to same, and all garbage and trash shall be removed therefrom, failing which, the Tenant shall pay to the Landlord upon demand, the cost of removing same plus 10% thereon.”

[26] Under section 11.14 of the Lease, the Tenant was required to “promptly notify the Landlord of any damage to, or deficiency or defect in any part of the Shopping Centre, any part of the Leased Premises or any equipment or utility system or installations therein located and serving the Leased Premises, notwithstanding the fact that the Landlord may have no obligations with respect to the same.”

[27] In addition, under section 11.17, the Tenant was required to engage at its own cost “such pest extermination contractor as the Landlord may direct and at such intervals as the Landlord may require” if requested by the Landlord.

[28] Under the Lease, the Tenant was required to take out and keep in full force and effect insurance against all common risks. This included business interruption insurance and liability insurance. It is undisputed that at no time did the Tenant have an insurance policy for the Premises.

[29] Section 13.01 prohibited the assignment, subletting or the occupation by others of all or any part of the Premises, without prior written consent of the Landlord.

[30] Section 16.01 contained the Landlord’s right to re-enter on default. Pursuant to section 16.02, re-entry is not to be construed as an election to terminate unless the Tenant was given written notice of such intention. Section 16.02 further stated:

Should the Landlord at any time terminate this Lease for any breach, in addition to any other remedies it may have, it may recover from the Tenant all damages it may incur by reason of such breach including the cost of recovering the Leased Premises, reasonable solicitor’s fees, and including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to Rent reserved in this Lease for the remainder of the stated Term over the then reasonable rental value of the Leased Premises for the remainder of the stated Term, all of which amounts shall be immediately due and payable by the Tenant to the Landlord.

The Tenant’s Issues with The Property

[31] On a number of days in November 2011, Ms. Campos went to the Premises with her brother, Jorge Campos (“Mr. Campos”), and their mother, Mercedes Campos (“Mercedes”), to clean and prepare it. Dr. Matthews did not attend the Premises while it was being cleaned.

[32] Both Ms. Campos and Mr. Campos testified that the Premises was very dirty when they first attended. Mr. Campos testified that some rooms were so dirty that they could not get into them. They found many dead bugs near the sink area in one of the examination rooms.

[33] Ms. Campos and Mr. Campos both testified that after Mercedes went in to clean the public washroom in the common area, she returned with red marks on her face and was very itchy. Mr. Campos testified that he told Mercedes not to go back into the public washroom and went in himself. He observed bugs that resembled fruit flies in the washroom but believed they were something else. He also experienced bites and itchiness.

[34] Ms. Campos testified that she felt some itchiness “here and there” after cleaning the Premises but ignored it because she was busy and excited about opening the office. Ms. Campos discovered that in the Filing Room, the previous tenant, Dr. Bhupal, had left behind various files, boxes and other items. The Tenant and Ms. Campos knew Dr. Bhupal because Dr. Matthews had previously shared office space with him at Jane Park. Ms. Campos testified that they left the items in the Filing Room because she did not think they should be removed or thrown away. Mr. Campos testified that when he tried to move files in that room, he developed a rash on the side of his body that he used to hold the files. The rash was red and itchy. Mr. Campos then left the files and boxes in the Filing Room. Dr. Matthews referred Mr. Campos to a specialist when the rash would not go away.

[35] Ms. Campos testified that there were ceiling tiles in the Filing Room that were discoloured and looked damp, and that they were collapsing. Both Ms. Campos and Mr. Campos believed they were moldy because of the greenish colour. Mr. Campos stated that he told Ms. Campos to advise Dr. Matthews about the mold.

[36] Ms. Campos also discovered that one room at the Premises contained echocardiogram (ECG) equipment owned by A&M Echo Doppler Inc (“A&M Echo”). The Tenant had not been aware of the ECG equipment because the room was locked when they first visited the Premises. A&M Echo later asked if they could remain there to conduct ECGs. Because the Tenant did not require all of the examination rooms, on December 23, 2010, he entered into an agreement with A&M Echo to sublet the room to them for a one-year term for $500 per month for rent, utilities and other expenses.

[37] The Tenant did not use the room with the ECG equipment or the Filing Room. Out of remaining rooms, the Tenant used three as examination rooms for his practice. Ms. Campos testified that they opened the windows to let the cold air in, and after a while, she stopped seeing bugs.

[38] After the Campos’ cleaning efforts, Dr. Matthews opened his practice to patients in December 2010. Although the term of the Lease began on January 1, 2011, the Tenant opened to patients on the first Monday in December. The Tenant’s evidence is that after moving into the Premises, his practice expanded rapidly because he had both regular patients and walk-in patients.

Insects

[39] Ms. Campos testified that while the bug problem subsided somewhat in the cold weather, the problem became worse as time went on. Ms. Campos and Ms. Hernandez testified to seeing black dots the size of chia seeds on their clothing and on the examination table. Neither witness could identify what kind of insects they were. Ms. Hernandez testified that when she sanitized the examination tables in the morning, there were often bug carcasses on them. She said that the bugs were “speck-like,” would stick to clothing and cause the skin to itch. Ms. Hernandez testified that Ms. Campos cleaned four to five times a week because of the bugs.

[40] Ms. Campos testified that she told Ms. Luciani about the bugs over the telephone and when Ms. Luciani came by the building. Ms. Campos testified that she also told Mr. Pavao, as well as Ms. McKay, after she took over as property manager in July 2011.

[41] Dr. Matthews’ testimony about the bugs differed from that of Ms. Campos and Ms. Hernandez. He said that he saw “black dots” and that he knew they were in the common washroom and the ECG room. He testified that he “never” saw bugs in the any of the examination rooms. Dr. Matthews did not think the black dots were bed bugs or fleas. While this could be due in part to Ms. Campos’ diligent cleaning efforts, if the bugs were such a problem, it is likely that he would have seen them in the examination rooms or that they would also have appeared on his clothing. When asked what the consequence was of the presence of insects in the office, Dr. Matthews stated “[j]ust that they were there, in the public washroom.” Dr. Matthews testified that Ms. Campos advised him that A&M Echo refused to come to the Premises anymore because of the insects there. A&M Echo later removed its equipment from the Premises.

[42] Mr. Pavao, who was responsible for cleaning the interior and exterior common areas, testified that there was a problem with cockroaches in the basement and that he set “sticky traps” for bugs in the public washrooms and hallways on the second floor. Mr. Pavao did not recall specifically telling Prime that there was a problem with insects and was not aware that Prime had a pest control company attend the Plaza regularly. Mr. Pavao did not testify to any infestation or complaints from the Tenant or other tenants of the second floor.

[43] In May 2011, Ms. Campos called Magic Pest Control to fumigate the Premises. While Dr. Matthews knew that a pest control company was called, it was not clear from the evidence whether he instructed her to do so or whether she did so of his own initiative. The invoice states that the company sprayed for fleas. Ms. Campos testified that even after the fumigation, the bugs did not go away. Dr. Matthews could not recall if the pest control company sprayed for bugs but recalled that they found no infestation and did not find the insect of which Ms. Campos complained.

[44] The only written complaint by the Tenant in evidence was a letter dated May 27, 2011 from the Tenant to Prime (the “May 2011 Letter”) stating that there is a “bug infestation in the building.” The letter states that at first they thought the insects were fleas or bedbugs and that they may have been brought in by patients who saw Dr. Matthews with those problems. This is inconsistent with the evidence that bugs existed when the Campos first cleaned the Premises. The letter further stated that the Tenant called a pest control company that “[p]ut a white powder on the corners which seems to be helping more than the stinky liquid used to fumigate” but did not see any improvement. The Tenant requested that the public washrooms be fumigated as soon as possible to control the infestation and stop it from spreading. Both Ms. Campos and Dr. Matthews deny authoring the May 2011 Letter. Dr. Matthews insists that Ms. Campos wrote the letter, but Ms. Campos testified that she did not write or review the letter and only added the handwritten note at the bottom requesting a copy of the thermostat key. Ms. Campos testified that she was too busy with her own work to review this letter and that Dr. Matthews took care of it with a paralegal.

[45] In any event, the May 2011 Letter was received by Prime. In response, and despite the term in the Lease would have permitted the Landlord to require the Tenant to engage an exterminator, the Landlord had an exterminator inspect the Premises. The note on the invoice from Certified Pest Control dated May 27, 2011 states “inspection – Dr. office for fleas and bedbugs found none. Found no other evidence of biting insects other than a few dead spiders.”

[46] An invoice from Certified Pest Control dated June 8, 2011 for regular service states: “Sprayed top floor and hallways for general insect control” and “Inspected doctors office, employee complaining of bites, found no insect problem.” There is also a further invoice dated July 13, 2011 for regular service. There were invoices from the pest control company on approximately a monthly basis from April to October 2011.

[47] In September 2011, Prime arranged for duct cleaning, as evidenced by an invoice dated September 9, 2011 from Ontario Duct Cleaning. The invoice includes a handwritten note “901 Jane St. #95” and “Dr. Matthews Office.” Ms. Campos recalled two men from a duct cleaning company attending the Premises. She testified that she removed a piece of clothing that she was wearing to show them the insects on it, but they only laughed. Ms. Campos testified that the insect problem persisted after the duct cleaning but that she did not make further complaints to Prime.

[48] Ms. McKay, who took over as property manager of the Plaza in July 2011, testified that other than an issue with cockroaches in the basement, she was not aware of an insect problem at the Plaza. She did not recall whether the ducts were cleaned in response to the Tenant’s complaints about an insect infestation. A property management report from Prime to the Landlord for the period ending September 30, 2011 (the “September 2011 Report”) states that “Insects were located in the second floor of the property. [Pest control] along with Duct Cleaners were dispatched to the property.”

[49] Ms. Campos made a video-recording of the condition of the Premises on March 29, 2012 (the “March 2012 Recording”). The recording is out of focus and unsteady, but insects that look like flies in the light fixture coverings and larger insects that look like cockroaches on the floor of an examination room and in the Filing Room can be seen. It is difficult to determine the number of insects based on the recording, as it is unclear whether the same or different areas of the Premises are shown. In each case there appear to be approximately a half dozen insects. The tiny black insects about which the Tenant complained cannot be seen on the recording.

[50] Based on the evidence, I find that there were unidentified bugs in the Premises. The degree to which there was an infestation, and the origin of the insects, cannot be determined based on the inconsistent evidence of the Tenant’s witnesses. While insects were depicted on the March 2012 Recording, they were not those that the Tenant had complained about. The Tenant had a pest control company fumigate the Premises on one occasion. The Landlord had a pest control company attend the Plaza regularly and sent the company to service the Tenant’s unit in May 2011.

Mold

[51] As described above, Ms. Campos and Mr. Campos testified that they suspected mold was present in the office because of the damp and discoloured ceiling tiles in the Premises, specifically in the Filing Room. Ms. Campos testified that she showed either Ms. Luciani or Mr. Pavao the mold but could not recall whom. Ms. Campos admitted that she did not ask Prime or Mr. Pavao to change the ceiling tiles or to clean up the suspected mold because they “closed the room and didn’t use it” as there were other rooms to use.

[52] Dr. Matthews also testified that he saw mold “once” in the Filing Room but could not recall when. Dr. Matthews stated that he told Ms. Campos to have “the cleaners” deal with the mold. When asked to identify the cleaners, Dr. Matthews stated Jorge and Mercedes Campos. Mr. Campos and Mercedes were not cleaners, but Ms. Campos’ family members and also Dr. Matthews’ patients. Dr. Matthews testified that he believed that Mr. Campos and Mercedes had cleaned the whole Premises, including the Filing Room with the mold, but were unable to get rid of the mold entirely. However, Mr. Campos and Ms. Campos testified that the Filing Room, which contained the previous tenant’s belongings, was not cleaned because of the items left behind and because the room was not needed by Dr. Matthews.

[53] Even though it was the Tenant’s obligation to clean the Premises before moving in, the Tenant did not engage any professional cleaners to prepare the Premises for occupation. The Tenant left the cleaning to Ms. Campos to deal with. The previous tenant’s belongings, which Dr. Matthews testified that he did not know about, were left in the Filing Room. When asked whether he notified Prime about the mold, Dr. Matthews stated that he “complained through Claudia [Ms. Campos]” and that the Landlord knew because Ms. Campos told them. Ms. Campos, however, did not ask to have the mold removed. There is no written record of a complaint to Prime. Despite acknowledging that mold could be a health hazard on cross-examination, the Tenant did not personally verify that the Filing Room had been cleaned or advise the Landlord of the suspected mold.

[54] Other than the testimony of the Tenant’s witnesses about the greenish ceiling tiles in the Filing Room, there is no conclusive evidence of the presence of mold in the Premises. Moreover, while mold was suspected to exist in one of the other units on the second floor, a subsequent report from Prime to the Landlord for the period ending March 31, 2012 stated that a consultant was retained to conduct a test and “mold was not detectable in [the unit].” The report further stated that there was “considerable water damage” and that mold would be a concern if it was not addressed. By the date of this report, the Tenant had left the Premises. As a result, I find it unlikely that there was mold in the Premises.

[55] Under the Lease, one of the exceptions to the “as-is” provision is that the Landlord was required to replace all stained and damaged ceiling tiles. None of the Landlord’s witnesses could state whether or not this work was done because none of them personally attended the Premises before the Tenant moved in and there were no documents to reflect that the ceiling tiles were changed. Ms. Luciani, the property manager at the time, was not a witness at trial as the Landlord was unable to locate her.

[56] Mr. Pavao testified that it was unlikely that he changed the ceiling tiles before the Tenant moved in because it did not appear on his invoice to Prime. However, Mr. Pavao’s invoicing practices were inconsistent, as he later testified that the replacement of ceiling tiles was “not worth noting” because he kept them in stock and would replace them whenever there was an issue.

[57] As a result, I find that at least in the Filing Room, the ceiling tiles were not replaced, since Dr. Matthews, Ms. Campos, Mr. Campos and Ms. Hernandez all testified to seeing damp and discoloured ceiling tiles in that room. In addition, the March 2012 Recording shows ceiling tiles that are stained brown and damaged. In a couple of places, the ceiling tiles are broken or missing. I recognize, however, that some of this may have resulted from the leaks on February 16, 2012.

[58] However, the Tenant did not bring this omission to the Landlord’s attention. On cross-examination, Ms. Campos admitted that before the Tenant moved in, she did not ask Mr. Pavao or Ms. Luciani to change the ceiling tiles. Based on Ms. Campos’ evidence, the Filing Room was closed and left as it was, since the Tenant did not need the space. The May 2011 Letter that the Tenant sent to complain about the insect infestation did not mention any mold or the damaged ceiling tiles.

Roof Leaks

[59] At trial, the Tenant attempted to establish that the Landlord had been advised to change the roof as early as 2010 but had delayed in doing so because it wanted to avoid spending money on the Plaza. Much time was spent going over various invoices for repairs made to the roof and estimates for further repairs. The issue of whether the Landlord replaced the roof in a timely manner is largely irrelevant, however, because the Tenant’s own evidence is that he experienced leaking in the Premises on only one occasion and that was when the roof was being replaced.

[60] The evidence shows that numerous repairs were made to the roof at various times from 2000 to 2010. Mr. Chang testified that one-third of the roof was replaced shortly after he purchased the Plaza. The roofing contractor who made the repairs noted on an invoice dated April 8, 2011 that: “Note: The roof is in very poor condition!” This warning was repeated on an invoice dated September 16, 2011.

[61] In May 2011, there were serious leaks from the roof over the other second floor units, 201 and 205. In July 2011, the Landlord received a thermal roof moisture scan that indicated that approximately 50 percent of the roof was saturated. In the September 2011 Report, Prime recommended to the Landlord that the roof replacement be made an immediate priority. A further visual inspection was conducted by an external consultant on November 4, 2011. The consultant stated that the roof was past its service life and estimated a replacement cost of $120,000. In an email dated November 7, 2011, from Ms. McKay to Mr. Chang, Ms. McKay recommended against a retrofit.

[62] After asking Prime to obtain various quotes, the Landlord ultimately hired Anax Roofing Inc. to replace the roof at a cost of approximately $100,000. On February 2, 2012, Prime sent a memorandum to all tenants of the Plaza advising that contractors would commence work on the roof on February 7, 2012 and the following couple of weeks until the work was completed. The memorandum provided a contact number for tenants to call with any questions. The work was mostly complete in February 2012, with minor additional work in March 2012.

[63] On February 16, 2012, the Tenant experienced water leaking through the roof in the waiting area and some of the examination rooms. Dr. Matthews, Ms. Campos and Ms. Hernandez testified to putting buckets under the leaks to catch the water. The Tenant provided a video recording taken that day which shows significant amounts of water leaking through the ceiling in at least two different rooms and the waiting area. Numerous buckets are visible. Ms. Campos worried that some of the ceiling tiles would collapse or that the covers of the light fixtures would fall from the weight of the water.

[64] Ms. Milton, a patient of Dr. Matthews, testified that she had an appointment for 10 a.m. that day but was not seen because of the leaking. Ms. Milton stated that she was in the reception area when large amounts of water were coming from the ceiling tiles and dripping from the fluorescent lights. Dr. Matthews testified that he was examining Ms. Milton while water was leaking from the ceiling in the examination room. However, nothing turns on this discrepancy.

[65] Dr. Matthews testified that this was the “only time” there was water leaking from the roof while he was at the Premises. Ms. Campos stated that before the February 16, 2012 incident, there were leaks that were not that bad and consisted of “one or two drops.” While the September 2011 Report mentions complaints about water leaks on the second floor, this was not from the Tenant but rather from tenants of another unit.

[66] Ms. Campos and Dr. Matthews testified that the office had to be closed because they could not deal with the leaks and see patients at the same time. While the Tenant’s witnesses believed that the office was closed for a few days, there were entries in the appointment book showing that the office re-opened the next day. There was no evidence to suggest that there were problems seeing patients at the Premises the day after the leaking.

[67] It is clear from the evidence, and based on the notice from Prime, that on February 16, 2012, work on the roof replacement was taking place. Ms. Campos testified that around that time, Mr. Chang came by and told her that there might be a lot of noise from the work on the roof. Ms. Campos did not recall whether he mentioned anything about potential leaking. As a result of the roof replacement work, it was also necessary to remove the HVAC units on the roof, which caused an interruption to the heating in the Plaza.

[68] Despite having received the memorandum from Prime, the Tenant did not connect the roof replacement work to the leaking they experienced that day. Dr. Matthews stated that Ms. Campos complained to Prime about the leaking. Ms. Campos testified that she contacted the property manager but provided no details about this call. Ms. Campos admitted that she did not request that Prime attend to clean up the Premises after the leaking. Had the Tenant spoken to Prime or the Landlord about the heavy leaking on February 16, 2012, he would have been advised that the leaking was connected to the roof work. The fact that the Tenant believed that the leaking may have been due to heavy snowfall supports a finding that the Tenant made no complaints or inquiries about the leaking on February 16, 2012.

Elevator Issues

[69] According to the Tenant’s witnesses, the elevator in the Plaza was frequently out of service. This was a problem for the Tenant because many of his patients were elderly, used walkers or wheelchairs, or had strollers and needed the elevator to get to the second-floor Premises. Dr. Matthews and Ms. Campos testified that when the elevator was out of service, Dr. Matthews sometimes went to examine patients in the pharmacy on the main floor. Ms. Milton testified that she had to have someone attend appointments with her to help her up the stairs.

[70] The Tenant’s evidence as to how frequently the elevator broke down varied significantly. Ms. Campos testified that the elevator broke down approximately two or three times a month. Ms. Hernandez testified that the elevator broke down two to three times a week. Dr. Matthews said once a week “at one point[.]” Mr. Pavao also stated that the elevator was down a couple of times a month and that there was an extended period during which the elevator was out of service. The Tenant’s other witnesses did not recall this.

[71] Ms. McKay testified that while the elevator was old, it was not unserviceable. The license was renewed by the Technical Standards and Safety Authority in June 2011 for a period ending on December 15, 2011. The Landlord had the elevator serviced quarterly by ThyssenKrupp Elevator Limited, as evidenced by regular invoices.

[72] The Tenant submits that an adverse inference should be drawn from the Landlord’s failure to preserve the elevator logbooks. The Tenant also argues that an adverse inference should be drawn from Ms. Reid’s inconsistent testimony. Ms. Reid testified at trial that the logbooks would only state when ThyssenKrupp attended, but on examination for discovery, she had testified that service issues would be recorded in the logbook. I decline to draw any adverse inferences from the absence of the elevator logbooks or Ms. Reid’s inconsistent testimony about the logbooks. The logbooks did not become an issue until 2019, when the Tenant examined Ms. Reid for discovery and requested an undertaking to obtain the logbooks for 2011 and 2012 from ThyssenKrupp. At the time they were requested, the logbooks no longer existed, since regulations only require that they be kept for five years. In addition, nothing turns on Ms. Reid’s testimony about the information that the logbooks would have contained, if they still existed.

[73] The evidence demonstrates that the elevator was out of service at least a couple of times a month, but that it was regularly serviced by ThyssenKrupp. The Lease does not contain any provision to suggest that the Tenant insisted that the elevator was essential to its use of the Premises. To the contrary, the Lease permits the Landlord to take the elevator out of service for maintenance and repair.

Problems with the HVAC System

[74] The Tenant alleges that he experienced frequent problems with the heating and cooling of the Premises and that he had to close his office on various dates because the heat or cold was unbearable. Based on entries in the Tenant’s appointment book, which was maintained by Ms. Campos, the Tenant submits that the office was closed on eleven days during the material time because of various issues, including the heating and cooling. On one of the eleven days, the Tenant saw two patients.

[75] In the summer of 2011, the appointment book shows that the office was closed on three days due to “A/C”. On the other dates, no reason is specified for the closure.

[76] Based on an invoice from the Landlord’s contractor, Forecast Mechanical Air Systems Inc. (“Forecast”) dated July 4, 3011, in response to a complaint that the second floor was too cold, Forecast attended and addressed air distribution issues. On July 22, 2011, the Tenant complained about cooling in July 2011 and Forecast replaced a blown fuse. A further invoice dated August 19, 2011 from Forecast states that air distribution was adjusted as the second floor was too cold. An invoice dated September 15, 2011 states that a blown fuse was replaced after no cooling was reported in the Premises.

[77] Dr. Matthews testified that during the winter of 2012, there was no heat for a few days at a time. Ms. Campos testified that they sometimes had to wear their winter coats in the office because of the cold.

[78] The heating and cooling issues were confirmed by Mr. Pavao, who testified that he distributed heaters or fans to the units at various times. Mr. Pavao testified that when he arrived at the Plaza in the morning, it was often extremely cold, and he would advise Prime. The portable heaters and fans were stored in the basement of the Plaza and distributed to tenants when necessary. The invoices from Mr. Pavao’s company show that four additional heaters were purchased and distributed on February 13, 2012 and that the heaters were distributed again on February 24, 2012.

[79] In February 2012, due to the roof replacement work, the HVAC system had to be disconnected and reconnected, which caused a loss of heating while the units were disconnected. This is reflected in an invoice from Forecast dated February 29, 2012 for disconnecting and moving condensing units and rooftop units to replace the roof. Another invoice from Forecast on the same date states that a broken belt was replaced due to “No heat in unit #200/202.” Neither invoice states on what date the work took place. The lack of heating in February 2012 was thus to some extent, but not solely, connected to the roof replacement.

[80] The Landlord’s position that the HVAC systems were maintained regularly is supported by invoices for quarterly preventative maintenance from Forecast.

Safety Concerns

[81] The Tenant further alleges that the Premises was unsafe because customers of the Restaurant and homeless or other persons in the neighbourhood would gain entry to the Plaza after hours through unlocked doors.

[82] After the office closed for the day, Dr. Matthews would depart and Ms. Campos would continue to work until 9:00 or 10:00 p.m. to complete billing and other administrative work. Ms. Campos testified that in the evenings, she heard people wandering the hallways of the second floor of the Plaza. Ms. Campos testified that she was fearful because the neighbourhood was unsafe at night and because while working at the previous office one night, an unauthorized person gained entry into the office. Ms. Campos testified that customers of the Restaurant or homeless people would gain access to the second floor of the Plaza through the back door, even though it was supposed to be locked after 5:00 p.m. Ms. Campos testified that because she felt unsafe, she never opened the door of the Premises and that Mr. Campos would pick her up after work. Ms. Campos testified that in the parking lot, she once saw a man come out of a car with a baseball bat. Mr. Campos testified that on more than one occasion he saw some customers of the Restaurant fighting in the parking lot. However, they did not call the police.

[83] The Tenant alleges that intoxicated customers from the Restaurant or homeless people in the neighbourhood would gain access to the Plaza through the unlocked back door and sleep in the building at night. Ms. Campos testified that on one occasion, she found a woman sleeping by the elevator and that she saw urine, feces and vomit on the floor of the hallways in the morning. Dr. Matthews testified that one morning he came to the Plaza and saw four to five drunk people. While Ms. Campos had stated that she saw human waste in the morning, Dr. Matthews testified that there were occasions when he left in the evening and saw human waste or vomit. Ms. Hernandez did not see human waste but testified that she could smell it.

[84] The Tenant’s evidence was supported by Mr. Pavao, who testified that he occasionally found “drug addicts” or “drunks” sleeping in the back of the Plaza, drug paraphernalia in the public washroom and feces in the hallway of the Plaza. Mr. Pavao generally arrived at the Plaza at 6:30 a.m. to clean before the tenants arrived. Mr. Pavao also attended in the evening when snow removal was required. He testified that he sometimes found the front door unlocked or an item wedged in the back door of the building so that it could be reopened from the outside. Both Mr. Pavao and Ms. Campos testified that the last tenant to leave the Plaza was responsible for locking the front door. However, other than speaking to one tenant about how often the front door was left unlocked, Mr. Pavao did not advise Prime or the tenants that he found the front door unlocked or the back door wedged open. Mr. Pavao’s view was that it was up to the tenants to complain to Prime. He stated that it was “not his duty” to ensure that the back door was locked or to tell the tenants to ensure that it was locked. Given that it was Mr. Pavao who had to clean up after unauthorized individuals who entered the Plaza, this is a puzzling response. Also, since Mr. Pavao was there to clean the Plaza every morning before the tenants arrived, any waste left behind ought to have been cleaned up by the time the tenants arrived. The fact that Ms. Campos observed human waste when she arrived later that morning means that it was not.

[85] In any event, there is no evidence that the Tenant complained to Prime or the Landlord about safety issues raised by unauthorized individuals entering the Plaza or fighting among customers of the Restaurant. Ms. Campos testified that she voiced her concerns to Mr. Pavao but did not pay attention to the back door because she was busy working. Mr. Pavao testified that he told the tenants to deal with Prime. Unless specifically alerted to the problem by a tenant or Mr. Pavao, the Landlord could not have known about the doors being left unlocked or wedged open. Unlike Mr. Pavao, the Prime property managers who attended the Plaza would not have been there first thing in the morning or at night. The Tenant submits that the Landlord ought to have installed security cameras around the Plaza to address these safety issues, but failed to do so because it did not want to spend the money. [3] However, the Tenant’s witnesses admit that they never requested that safety cameras be installed.

The Tenant’s Complaints to the Landlord

[86] The Tenant claims that Ms. Campos repeatedly made complaints to the Landlord’s property management company and that the Landlord failed to address those complaints. Ms. Campos testified that whenever there was an issue, she telephoned Ms. Luciani, when she was the property manager, or left a message with her assistant, Ms. Manal Sousa. As noted above, Ms. Luciani could not be located to be a witness at trial. [4] Ms. Campos also made complaints to Mr. Pavao when she saw him at the Plaza.

[87] Ms. Campos testified that after Ms. McKay replaced Ms. Luciani as property manager in July 2011, she called the Prime office and left messages with Ms. Sousa. Ms. Campos testified that it took longer for Ms. McKay, whom she only saw at the Plaza once, to respond than Ms. Luciani. Ms. McKay testified that she did not receive any complaints from the Tenant regarding bugs, mold, leaks, heating or cooling, the elevator or safety issues.

[88] Based on the evidence, I find that it is more likely than not that Ms. Campos called the Prime office and left messages with Ms. Sousa. Although Ms. McKay does not remember specific complaints, based on the September 2011 Report, it appears that at the very least, complaints were made regarding insects. In respect of the heating and cooling, as Ms. McKay testified, those types of complaints were common from tenants, and were likely relayed to Mr. Pavao, who provided heaters or fans as necessary.

[89] It is unlikely that any complaints were made regarding leaks during this time since, based on the Tenant’s evidence, no significant leaks were experienced until February 2012. Similarly, for the reasons stated above, no complaints were made about the potential existence of mold in the Premises.

[90] There is no evidence of any complaints to Prime regarding the safety issues raised by the Tenant. Given that some of the issues involved another tenant, the Restaurant, and are more serious in nature, if such complaints were made, they would have been documented or raised with the Landlord.

[91] Under the Lease, the Tenant was required to notify the Landlord of “any damage to, or deficiency or defect in any part of the Shopping Centre, any part of the Leased Premises or any equipment or utility system or installations therein located and serving the Leased Premises notwithstanding the fact that the Landlord may have no obligations with respect to the same.” The Lease required notice under the Lease to be delivered in person or by registered mail to Prime. This provision refers to any notice which “may be or is required to be given” under the Lease and may not, strictly speaking, apply to damage, defects or routine complaints about the Premises. However, if the Tenant was of the view that the issues were not simply minor inconveniences but went to the essence of the Lease, the Tenant ought to have provided notice to the Landlord or Prime in writing.

[92] When the Tenant did eventually complain in writing, the May 2011 Letter mentioned only the bug infestation and did not mention mold, leaking, problems with the elevator, heating or cooling, or safety concerns arising from the Restaurant. While both Dr. Matthews and Ms. Campos deny authoring this letter, the Tenant does not claim that the letter was unauthorized.

[93] The Tenant had a video recording of the leaks on February 16, 2012 as well as the condition of the Premises. However, the Tenant did not send this video to Prime or the Landlord or demand any action on the leaks or other issues. Ms. Campos testified that while she recorded all of the videos, it was up to Dr. Matthews whether or not to send them.

[94] The only written complaint that details all the problems that the Tenant alleges is a letter dated February 26, 2012 to Prime (the “February 2012 Letter”). In the February 2012 Letter, the Tenant states that he is “having some serious problems at 909 Jane Street.” The problems listed include: “roof leaks”, “a bug problem”, heating and cooling problems, the “elevator breaks down almost every month”, a “ceiling in one of the examination [rooms] collapsed.” The letter further states that men from the bar use the entrance way and hallway to smoke cigarettes and marijuana and “as a toilet”, and that they fight in the parking lot. The letter concludes with the following statement: “ If these conditions are not fixed we will have to move! ” (Emphasis in original.)

[95] Dr. Matthews testified that a paralegal whom he retained to assist him spoke to Ms. Campos and prepared the letter. However, Ms. Campos testified that she had no involvement with the paralegal or with the February 2012 Letter.

[96] The Landlord denies receiving the February 2012 Letter and has no record of it. The letter was not found in Prime’s file for the Plaza. Dr. Matthews did not specifically recall how the letter was delivered and testified at trial that it was either mailed to Prime or handed to Ms. McKay when she attended the Plaza. In response to an undertaking, Dr. Matthews had stated that the letter was sent by Ms. Campos by fax. No fax confirmation was provided. In response to an undertaking, the Tenant stated that no electronic version or metadata of the February 2012 letter could be obtained because Ms. Campos “did not know how” to do this. At trial, Ms. Campos denied any involvement in drafting or sending the February 2012 Letter.

[97] Based on Dr. Matthews’ inconsistent evidence about how the letter was sent, I find that the February 2012 Letter was not sent to Prime or to the Landlord. This is further supported by the fact that Ms. Campos, who managed almost every aspect of the Tenant’s practice and who made all the complaints regarding the Premises, had no knowledge of the letter. Had Ms. Campos been involved in drafting or sending the letter, she would have remembered. Dr. Matthews’ testimony makes clear that he did not personally send it. In any event, it was not delivered to Prime personally or sent by registered mail, as required under the notice provision of the Lease. The Tenant did not at any time follow up with Prime or the Landlord about the letter or before he moved out of the Premises, which also supports the finding that the letter was not sent. Since the February 2012 Letter was not sent to Prime or to the Landlord, the Landlord was never provided with written notice about any of the issues raised by the Tenant in this proceeding, other than the insect problem that was detailed in the May 2011 Letter.

The Tenant Leaves the Premises

[98] Dr. Matthews testified that at some point in February or March 2012, he spoke to the landlord at White’s Pharmacy at 725-727 Jane Street (“727 Jane”) about renting space on a temporary basis. The Tenant was familiar with the property and the landlord because he worked in a medical office in that building from 2003 to 2005. On March 12, 2012, the Tenant entered into a lease for office space at 727 Jane. There is no evidence of a short or interim lease for 727 Jane.

[99] The lease was for a term of five years beginning on March 12, 2012. The rent for the first year was $18,000 including HST, payable in equal monthly installments. While the Tenant initially pleaded that the rent for 727 Jane was higher, the lease makes clear that the rent is lower than the rent for the Premises. The space at 727 Jane was smaller than the Premises but was newly renovated.

[100] The Tenant left the Premises some time in March 2012. None of the Tenant’s witnesses recalls when this occurred. Ms. Campos testified that the move took place gradually in March 2012 and that during the month of March, they were “in both places.” This is odd, given that the Tenant would have had to tell patients which office to attend. Based on the date of the lease for 727 Jane, it is likely that the Tenant abandoned the Premises earlier than he is willing to admit. The March 2012 Recording shows that the Premises was mostly vacated, other than office furniture and a couple of examination tables. Ms. Campos testified that they did not need to move the examination tables and other items to the new premises because there was already equipment there that they could use. The Tenant did not pay rent for April 2012 or from that date forward.

[101] Ms. Campos took a video of the Premises on April 18, 2012 showing the condition of the Premises when they left it. By that date, the Tenant had thoroughly cleaned the Premises and, despite earlier concerns that they contained patient files, disposed of the files and boxes left behind by the previous tenant. Ms. Campos testified that she recorded the Premises on that date to show the condition in which the Tenant had left it.

[102] In the Statement of Defence, the Tenant specifically pleaded as follows:

Accordingly, Dr. Matthews advised the plaintiff’s property managing company of the termination of the lease. The management company, as a representative and agent of the plaintiff, did not oppose or object to the termination of the lease by the defendant, and by their acquiescence acknowledged the fundamental breach of the lease agreement by the plaintiff.

[103] At trial, Dr. Matthews admitted that he did not advise Prime but that that they “may have been notified by [Ms. Campos].” Ms. Campos testified that she did not believe that Prime was notified. I find that contrary to the Tenant’s pleading, the Tenant never contacted Prime or the Landlord to advise that he would be leaving the Premises or that he was terminating the Lease.

[104] On April 12, 2012, Prime sent a letter to the Tenant advising that he was in default of the Lease for failure to pay $3,086.88 in rent and that the default had to be cured within five days of the letter.

[105] On or about May 3, 2012, the Landlord sent written notice to the Tenant terminating the Lease as a result of the Tenant’s failure to pay rent and for default due to abandonment of the premises. The Landlord requested that the Tenant contact Mr. Chang directly to arrange for the return of any moveable property remaining on the Premises. The Tenant had left behind some furniture, including desks and an examination table and some shelving units. At the time the Lease was terminated, the Tenant owed $6,187.88 in rental arrears.

[106] The Tenant admitted that he received both letters but did not respond to either.

[107] Mr. Chang testified that he both called and attended the Tenant’s office and found that it was locked. On one occasion, he spoke to Ms. Campos by telephone, who told him that the office was closed because the floor of the Premises was being buffed and they could not work. Ms. Campos recalled that she may have spoken to Mr. Chang once but did not specifically recall this conversation. Mr. Chang testified that he had hoped to speak to the Tenant because he “desperately” wanted a doctor’s office at the Plaza and wanted to see if he could get the Tenant to return. However, he was not able to speak to Dr. Matthews or to Ms. Campos about this.

Analysis

Did the Tenant Breach the Lease by Abandoning the Premises?

[108] A tenant who abandons a lease prior to the expiry of the term of the lease has breached the contract: 90 Nolan Court v. 6592503 Canada Inc., 2015 ONSC 4924, 59 R.P.R. (5th) 185, at paras. 85-87 [90 Nolan Court]. Unless the Tenant was justified in repudiating the Lease, the Tenant’s abandonment of the Premises before the end of the Lease term in December 2015 was a breach of the Lease.

[109] The Tenant argues that the conditions described above constitute a fundamental breach of the Lease, giving him the right to terminate the Lease. Alternatively, the Tenant submits that the Landlord breached the covenant of quiet enjoyment.

Did the Landlord Fundamentally Breach the Lease?

[110] A fundamental breach occurs when the conduct of one party to the contract substantially deprives the other party of the whole benefit of the contract: Statti Investments Ltd. v. Baresa Kitchen Cabinets Inc., 2014 ONSC 2466, O.J. No. 2410, at para. 31 [Statti Investments]. A fundamental breach is a breach that goes to the root of the contract, and, as a consequence, “the performance of the contract becomes something totally different from that which the contract contemplates:” Kenny Alwyn Whent Inc. v. J. Mao Dentistry, 2016 ONSC 584, 65 R.P.R. (5th) 269, at para. 5 [Kenny Whent], quoting Fridman, The Law of Contract in Canada, 6th ed (Toronto: Thomson Reuters, 2011), at p. 575.

[111] In the leasing context, if the lease was not fundamentally breached, the tenant is required to fulfil its obligations under the lease. Where a fundamental breach occurs, the tenant may terminate the lease early without the need to perform the balance of the contract: Statti Investments, at para. 31. In Statti Investments, also at para. 31, Parayeski J., relying on the Court of Appeal of Ontario’s decision in Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd, 2006 ONCA 16346, 270 D.L.R. (4th) 181 (Ont. C.A.), noted that allowing a tenant to terminate early “is an exceptional remedy that is available only in circumstances where the entire foundation of the contract has been undermined, that is, the very thing bargained for has not been provided.” In that case, Parayeski J. found that the flooding incidents complained of by the tenant were not a fundamental breach giving rise to a right to terminate the lease. Similarly, in Kenny Whent, Pierce J. found that the presence of mice and spiders did not give rise to a fundamental breach of a lease for a dental office.

[112] In determining whether there has been a fundamental breach, the court must consider the nature and purpose of the contract and the benefits for which the parties bargained: Kenny Whent, at para. 6. In Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92, 88 O.R. (3d) 721, at para. 27 [Spirent Communications], the Court of Appeal identified the factors that should be considered when determining whether or not a fundamental breach has occurred:

(i) The ratio of the party’s obligations not performed to the party’s obligations as a whole;

(ii) The seriousness of the breach to the innocent party;

(iii) The likelihood of a repetition of such breach;

(iv) The seriousness of the consequences of the breach; and

(v) The relationship of the part of the obligation performed to the whole obligation.

[113] The Landlord and Tenant’s respective obligations under the Lease are key to assessing the factors identified in Spirent Communications. The Landlord was to provide the Tenant with office space in the Plaza for a medical office. Under section 6.01 of the Lease, the Landlord was required to operate and maintain the Plaza and the common areas and facilities “in a reputable manner acting as a prudent landlord of a similar shopping centre having regard to size, character, age and geographical location.” Pursuant to section 11.09, the Landlord was required to maintain and repair the structure of the Plaza, including the structural elements of the roof, “as would a prudent owner of similar premises[.]”

[114] The Tenant was permitted to use the Premises “solely for the purpose of a medical practice for a general practitioner” and had a non-exclusive right to use the common areas and facilities. Notably, pursuant to section 2.01 of the Lease, the Tenant agreed that he was “taking the Leased Premises ‘as is’ save and except for” certain work that the Landlord undertook to complete prior to the commencement of the fixturing period. Section 2.02 of the Lease required that the Tenant remove all garbage from the Leased Premises upon completion of the tenant’s work and to clean the Premises and the area adjacent to it.

Bugs, Mold and Leaks

[115] In my view, on their own, none of the problems identified by the Tenant constitute a fundamental breach of the Lease. As determined above, the Tenant’s evidence regarding the existence of mold and the extent of the bug problem was inconsistent. While Ms. Campos testified that these were all serious problems, in his testimony, Dr. Matthews minimized them.

[116] There is no conclusive evidence of the existence of mold. Even if there was mold in the Premises, this would not constitute a fundamental breach of the Lease, particularly because the Tenant has failed to alert the Landlord to the existence of mold.

[117] In respect of the bug problem, after the one occasion on which the Tenant complained in writing, the Landlord responded by having an exterminator inspect the Premises and by having the ducts cleaned. The Landlord also had an exterminator attend the Plaza on a monthly basis, demonstrating that it took steps to ensure that insect problems in the common areas were addressed. As found by Pierce J. in Kenny Whent, at paras. 30-31, there was no record of complaints to the Landlord and the Landlord took reasonable steps when it became aware of the problem, as evidenced by invoices from exterminators. Where the Landlord’s response has been reasonable, it is up to the Tenant to advise the Landlord if the problem has not been resolved: SunLife Assurance Co. of Canada v. Pentex Print Master Industries Inc., at para. 42 [Pentex Print].

[118] Moreover, section 11.17 of the Lease required that “if requested by the Landlord, the Tenant shall engage at the Tenant’s cost such pest extermination contractor as the Landlord may direct and at such intervals as the Landlord may require.” While there is no evidence that the Landlord made any such request, the Tenant would have been aware, based on this provision, that he was responsible for pest control inside the Premises. As it is unclear from the evidence as to where the insects originated, there would be no basis to find, as the Tenant alleges, that they came from the common areas and were therefore the Landlord’s responsibility. In fact, the Tenant’s May 2011 Letter, which neither Dr. Matthews nor Ms. Campos admit to writing, stated that they initially thought the insects could have originated with the Tenant’s patients.

[119] Similarly, the roof leaks did not constitute a fundamental breach of the Lease. As detailed above, before the roof replacement in February 2012, the Tenant did not experience any significant water leaking from the roof. Ms. Campos testified to a couple of drops of water and Dr. Matthews had not previously seen any leaking. The leaks that occurred on February 16, 2012 were serious but were an exceptional occurrence that resulted from the work to replace the roof. Under the Lease, the Landlord was not only entitled but obligated to undertake this work, as it was a structural element of the Plaza. In fact, the Tenant criticizes the Landlord for failing to replace the roof sooner. There is insufficient evidence to support the Tenant’s position that the Landlord knew in May 2011 that the roof had to be replaced but failed to do so. In any event, the Landlord’s failure to replace the roof in May 2011 is immaterial, since the Tenant’s own evidence is that he experienced little to no leaking in that time period or at any time before February 16, 2012.

[120] Although Prime had alerted the tenants of the Plaza to the roofing work, the Tenant did not connect the roof replacement work to the leaks on February 16, 2012. This is unfortunate because it appears that the significant leaking experienced on that date precipitated the Tenant’s departure from the Premises. While additional or more specific communication may have helped, the Tenant neither complained nor inquired about the cause of the significant leaks that it experienced on February 16, 2012.

Elevator/HVAC

[121] The problems with the elevator and HVAC system were undoubtedly an inconvenience to the Tenant, whose medical practice included elderly patients and individuals with mobility limitations. The evidence is unclear as to how often this occurred. At most, the Tenant closed his office for 11 days, however, only three of those days were specifically attributed to problems with the air-conditioning.

[122] I find that neither the fact that the elevator was frequently out of service nor the problems with heating and cooling constitute a fundamental breach of the Lease. The Landlord was required to operate and maintain the Common Areas and Facilities in a reputable manner acting as a prudent landlord of a similar shopping centre. As Ms. McKay testified, as the Plaza and its facilities were old, it was not uncommon for breakdowns to occur. However, the elevator and HVAC systems were regularly maintained, and any breakdowns were promptly addressed by the Landlord.

[123] Moreover, there is no evidence to suggest that the elevator or HVAC system had to be replaced. To the contrary, the license for the elevator was renewed, including in June 2011, by the Technical Standards and Safety Authority. The Landlord had a contract with Forecast for quarterly preventative maintenance on the HVAC system. When issues arose with the heating and cooling, the evidence demonstrates that Mr. Pavao distributed fans and heaters to the Tenants or Forecast attended to respond.

Security Concerns

[124] The security concerns raised by the Tenant do not constitute a fundamental breach of the lease. There is minimal evidence regarding any such incidents, which to the extent that the did occur, took place after office hours. The Tenant’s patient, Ms. Milton, brought her eight-year old granddaughter with her to the appointment on February 16, 2012 and testified that she was not concerned about her safety because “nothing ever happened there.”

[125] At no point was the Landlord made aware of any security incidents. If the fighting or trespassing by customers of the Restaurant were of concern to the Tenant, the Tenant should have complained either to Prime or to the Landlord. The Tenant’s failure to do so at any time suggests that the concerns were not as serious as portrayed at trial. Ms. Campos continued to work late at the Premises and Dr. Matthews did not provide any additional security measures for her. No one ever called the police. Mr. Pavao testified that he did not advise Prime about individuals propping an item in the back door to regain entry to the Plaza, even though this required him to clean up after them.

[126] Based on the failure to advise the Landlord or Prime, or request any security measures, I conclude that the Tenant viewed these issues as more of a nuisance than legitimate risks to the security of his staff or patients.

[127] While the Tenant points to the Landlord’s failure to install security cameras before 2014, the Tenant admitted that they never asked for security cameras to be installed. In 90 Nolan Court, at paras. 80 and 92, the court found that the tenant could have sought the landlord’s consent and installed additional security cameras. In any event, as Ms. Reid testified, it is unclear that closed circuit cameras would have been helpful in preventing any incidents, because they would not have been monitored.

[128] The Tenant also alleges that the Landlord had an obligation to advise the Tenant of an armed robbery that took place at the RBC branch at the plaza in 2010. Ms. Reid, the only Prime employee at the time to testify, stated that she did not know about the incident. The Landlord was aware of the incident. The Tenant has not alleged that had he known about the incident, he would not have entered into the Lease. Even if the Landlord had an obligation to tell the Tenant about the incident, the failure to do so would not permit the Tenant to terminate the Lease. Moreover, the security issues of which the Tenant complains bear no relation to that incident.

[129] Moreover, the Tenant himself did not conduct any basic due diligence before renting the Premises. He was very familiar with the neighbourhood, since he had been practicing in the area since 2003. The Tenant was also aware of the existence of the Restaurant but did not make any inquiries about it or its clientele. He did not speak to the previous tenant of the Premises, Dr. Bhupal, even though he knew him, or any other tenants at the Property regarding the Landlord or Prime.

Summary

[130] In terms of the seriousness of the consequences of the breach, Dr. Matthews testified that as a doctor, he is required to provide a clean and safe environment for his patients. He was concerned that he might have problems with the College of Physicians and Surgeons (the “College”) if complaints were made about the conditions at the Premises. However, he never raised this concern with the Landlord. Dr. Matthews did not personally make any verbal complaints to Prime or to the Landlord. The evidence clearly demonstrates that the Tenant left it up to Ms. Campos to deal with. Dr. Matthews testified that that was what he “was paying her for.” However, it is Dr. Matthews who must provide a safe and clean environment for his patients and Dr. Matthews who was the Tenant under the Lease. He cannot disclaim all responsibility by delegating it to Ms. Campos. As the Tenant’s office manager, Ms. Campos took on responsibility for almost everything from collecting blood samples to billing and referrals. Ms. Campos’ ability to deal with issues relating to the Premises was limited, not only because she was dealing with so many other issues, but because she was not aware of the terms of the Lease. Ms. Campos did not specifically know that the Tenant agreed to take the Premises “as-is”, that he was obligated to clean it before occupancy, or that he was responsible for pest control in the Premises.

[131] Moreover, the Tenant testified that Ms. Campos complained to Prime about certain issues, such as the Filing Room, when Ms. Campos had not. If Dr. Matthews thought that Ms. Campos’ complaints were not being sufficiently addressed by Prime, it would be reasonable to expect that he would contact Prime himself or that he or Ms. Campos would escalate and contact the Landlord directly. When asked whether Ms. Campos ever spoke to the Landlord, he testified that he thought that she spoke to Mr. Chang once. If the problems were such that the Tenant believed that he was being deprived of the benefit of the Lease, it would be reasonable to expect that he would contact the Landlord or put the complaints in writing.

[132] In Pentex Print, at para. 42, Molloy J. stated that: “It is not enough for a tenant to simply complain. The Tenant must notify the landlord of the severity of the problems, and that the tenant considers the landlord’s failure to rectify the problem to be a breach of its lease.”

[133] Notably, other than the May 2011 Letter regarding the insects, the Tenant did not make a written complaint to the Landlord or to Prime about any of the above conditions. I have determined above that the February 2012 was not sent to the Landlord or to Prime. The Tenant never specifically advised the Landlord or Prime that he was being deprived of the benefit of the Lease because of breakdowns of the elevator and HVAC system, the roof leaks, the existence of bugs and mold, or because of safety concerns. The Tenant did not advise the Landlord that he had to close his practice on certain days or that he had to see patients in the pharmacy on the first level because the elevator was not working. At no time did the Tenant refuse to pay rent, seek an abatement or state that it would leave the Premises if the issues were not rectified.

[134] Not only did the Tenant’s failure to notify the Landlord of the alleged deficiencies deprive the Landlord of the opportunity to correct them, it was also a breach of section 11.14 of the Lease, which required that the Tenant “promptly notify the Landlord of any damage to, or deficiency or defect in any part of the Shopping Centre, any part of the Leased Premises or any equipment or utility system or installations therein located[.]” The Tenant also failed to advise the Landlord of the items left behind by the previous tenant and simply left them in the Filing Room because he did not need that room.

[135] In respect of the obligations not performed in relation to the obligations as a whole, I have found that the Landlord addressed the Tenant’s complaints about insects and the HVAC system. Moreover, the Landlord, through Prime, had the elevator regularly maintained, and had an exterminator attend the Plaza monthly. The Landlord replaced the roof at a cost of over $100,000. While I have found that the Landlord failed to replace the ceiling tiles as specifically required under the terms of the Lease, the Tenant did not advise the Landlord that this had not been done. In addition, if the Tenant found that the common areas were not kept clean by Mr. Pavao, he should have raised this with Prime or the Landlord.

[136] The Tenant alleges that the Premises was in substandard condition because the Landlord was “cheap” and avoided spending money to replace the roof or install security cameras. The Tenant also submits that the Landlord left matters in Prime’s hands and, contradictorily, that the Landlord was more engaged than Mr. Chang admitted in his testimony. The Landlord’s reliance on Prime to manage the property was appropriate, since Prime was the property manager of the Plaza. Prime provided written reports to the Landlord on a monthly or quarterly basis, and consulted with Mr. Chang regarding major repairs over $5,000. If the Tenant felt that Prime, or Mr. Pavao, were not addressing his complaints, he could have gone to the Landlord but did not do so at any time.

[137] Moreover, the issue is not whether the Landlord was cheap or whether the Landlord ought to have been more involved, but whether the Landlord substantially performed its obligations under the Lease. Based on the express terms of the Lease and the evidence adduced at trial, I find that the deficiencies complained of by the Tenant do not constitute a fundamental breach of the Lease. Even when taken together, the deficiencies did not substantially deprive the Tenant of the entire benefit of the Lease. The “problems were aggravating and continuous, but they were not, even when taken together, sufficient to constitute a fundamental breach of the tenant’s lease.” Pentex Print, at para. 38. The Tenant agreed to take the Premises “as-is” and to clean it before occupancy. The Tenant failed to alert the Landlord to the various issues of which he now complains.

[138] It is also worth noting the fact that the Tenant was also in default of other obligations under the Lease. As discussed, Dr. Matthews failed to notify the Landlord of the issues in breach of section 11.14 of the Lease, and failed to deal properly with the left-behind items in the Filing Room. In addition, Dr. Matthews admitted that he failed to take out any insurance, even though he was required to have business interruption and liability insurance under the Lease. Finally, the Tenant’s agreement with A&M Echo was contrary to section 13.01, which specifically precluded any assignment, subletting or occupation of any part of the Premises by others without the prior written consent of the Landlord.

[139] The Tenant has failed to satisfy me that the entire foundation of the contract has been undermined such that he is entitled to the extraordinary remedy of being relieved from his obligations under the Lease.

Did the Landlord Breach the Covenant of Quiet Enjoyment?

[140] In the alternative, the Tenant alleges that the Landlord breached the covenant of quiet enjoyment. A landlord’s covenant to provide quiet enjoyment means that a landlord must not substantially interfere with the tenant’s enjoyment of the premises: London Prestige Ltd. v. Wellington Harlech Centre Inc., 2019 ONSC 2364, 6 R.P.R. (6th) 306, at para. 31 [London Prestige]. To be actionable, a landlord’s interference must substantially affect the tenant’s normal and lawful use of the premises. The interference must be grave and permanent such that it renders the premises substantially unfit for the purposes for which it was leased. Inconvenience and annoyance to the Tenant or his employees do not constitute interference with the right to quiet enjoyment unless they are of a serious nature and unless there is actual interference with the ability of the Tenant to use the Premises for the purpose for which they were leased: Pentex Print at para. 31.

[141] A tenant who complains of interference with their right to quiet enjoyment must bring that matter to the landlord’s attention and to give the opportunity to remedy it: Pentex Print, at para. 10; see also Albamor Construction & Engineering v. Simone, at paras. 24-25. In Pentex Print, the tenant had not advised the landlord of another tenant’s employees loitering around the building. The court also found, at paras. 39-40, that the issues complained about by the tenant were not sufficiently serious to be a breach of the tenant’s right to quiet enjoyment.

[142] In this case, the security concerns raised by the Tenant about customers of the Restaurant were not so grave and permanent as to render the premises substantially unfit for a medical office. The issue, to the extent that it did exist, was mainly after office hours. Moreover, the Tenant did not complain about the safety or security of their staff or patients until February 2012 Letter, which I have found was not delivered to the Landlord. As a result, the Tenant did not give the Landlord the opportunity to remedy the alleged interference with his right to quiet enjoyment.

[143] As for whether the other deficiencies complained of by the Tenant result in a breach of the covenant of quiet enjoyment, as discussed above, there is insufficient evidence of the insect or mold problems to find a breach of the covenant of quiet enjoyment.

[144] Similarly, the elevator and HVAC breakdowns were intermittent, and were not so grave or permanent as to render the Premises substantially unfit to be used as a medical office. The leaks were limited to the date of the roof replacement and similarly would not constitute a breach of the covenant of quiet enjoyment. Moreover, section 6.02 of the Lease states that any diminution of the Common Areas and Facilities would not result in any liability on the Landlord, “nor would the Tenant be entitled to any compensation or abatement of rent, nor would such alteration or diminution of such Common Areas and Facilities be deemed constructive or actual eviction, or a breach of any covenant for quiet enjoyment.”

[145] Based on the foregoing, the Tenant has failed to demonstrate that the Landlord breached the covenant to quiet enjoyment. In the event that I have erred in this finding, I find that the Tenant failed to provide the Landlord with sufficient notice to enable the Landlord to remedy any of the breaches.

Did the Landlord Adequately Mitigate Its Damages?

[146] A landlord who terminates a lease and claims prospective damages as a result of the tenant’s breach has a duty to mitigate damages: Weins Canada Inc. v. Ensil Corporation, 2019 ONSC 5406, O.J. No. 4765, at para. 46 [Weins Canada]. A landlord must take reasonable steps to mitigate its losses by moving promptly to rent out the vacated space. A landlord cannot recover for losses that could have been avoided by acting reasonably: Midland Plaza Inc. v. Midland Medical Services Inc., 2015 ONSC 7608, O.J. No. 6430, at para. 56 [Midland Plaza].

[147] The party alleging a failure to mitigate bears the onus of proof on a balance of probabilities to demonstrate not only that the plaintiff failed to take reasonable efforts to find a substitute, but also that a reasonable profitable substitute could be found: Southcott Estate Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2 S.C.R. 675, at para. 45. If the Tenant establishes a failure to mitigate, he is relieved of liability for such damages as can be traced to the Landlord’s own inactivity or conduct that exacerbates rather than mitigates his loss: Kenny Whent, at para. 82.

[148] The Tenant alleges that the Landlord failed to take reasonable steps to mitigate his damages because it failed to list the Premises after an initial listing expired. The Tenant further alleges that for certain periods of time, no sign was posted in the window of the Premises and the Landlord made no effort to market the Premises by advertising it in a medical journal or through the College. The Tenant argues that the Premises failed to attract any tenants because the advertised rent was too high. The Tenant submits that had the Landlord made reasonable efforts to re-lease the Premises, it would have been leased, at the latest, by July 2015. At the time of the trial, the Premises remained vacant.

[149] In this case, after terminating the Lease, the Landlord retained a cleaning service to clean the Premises. The Landlord promptly retained Ms. Kless [5] to list the Premises. The Premises was listed on the Multiple Listing Service (“MLS”) for over one year from June 2012 to October 31, 2013. Ms. Kless testified that during that time, she showed the Premises to two or three prospective tenants. She further testified that there were weekly meetings among agents in the office at which available properties and prospective tenants were discussed. The main floor unit at the Plaza was listed at the same time.

[150] The rent on the listing was twice the rent paid by the Tenant. Mr. Chang and Ms. Kless testified that this was supported by the market at the time. Mr. Chang testified that he was prepared to negotiate the rent, but the Premises failed to generate interest. He further testified that the Tenant’s rent under the Lease had been significantly discounted.

[151] After the listing with Ms. Kless expired, the Landlord asked Ms. DeBolt at PMG to help him lease the Premises. Unfortunately, there was a misunderstanding between Mr. Chang and Ms. DeBolt. Mr. Chang testified that he thought that Ms. DeBolt had listed the Premises on MLS. However, Ms. DeBolt understood that she was assisting the Landlord informally and they did not have a listing agreement. On cross-examination, Ms. DeBolt admitted that it would be standard industry practice to list the Premises on MLS. No one contacted Ms. DeBolt to lease the Premises. In 2014, Ms. DeBolt was successful in leasing a unit on the first floor to a Subway franchise. In 2015, she leased another first flor unit to Dr. Alled, as further detailed below.

[152] In addition to going through agents, Mr. Chang spoke to his son, who was completing a neurosurgery residency at the time, about whether he knew any doctors who would be interested in the Premises. Mr. Chang testified that he also made inquiries with the tenants who owned the pharmacy and physiotherapy clinic at the Plaza as to whether they knew any doctors who would were looking for space.

[153] The evidence shows that there was a sign on the Premises at various points in time but that at other times, there was no sign. When the Premises was listed with Ms. Kless, there was a Behar Group sign in the window of the first-floor unit. A photograph of the Premises in August 2014 shows a PMG sign in a window of the Premises. A photograph taken in July 2015 shows no sign in the window of the Premises. However, there was a sign in the first-floor window in May 2015. A photograph taken in April 2016 shows a sign in the window of the Premises at that time. It is not known for how long the sign remained, but a photograph taken in June 2017, shows no sign. In September 2018, there was no sign in the window of the Premises but in May 2019, a sign is again visible in second floor window.

[154] In 1212763 Ontario Ltd. v. Bonjour Café, 2012 ONSC 823, 17 R.P.R. (5th) 104, the court found that retaining a real estate agent, soliciting prospective tenants and showing the premises all constitute efforts to mitigate by the landlord. In Midland Plaza, at paras. 71-72, the court rejected the tenant’s allegation that the landlord had not done enough to release the premises because there was no sign in the window. In that case, the evidence demonstrated that the landlord had commercial listings, viewings of the property and a rental sign elsewhere in the plaza.

[155] The Tenant has not satisfied me that the Landlord failed to adequately mitigate its damages. The Landlord took reasonable steps to re-let the Premises, including engaging real estate agents to market the Premises and making his own inquiries. There was a sign in the window of the Premises at various times, as well as a sign in the first floor of the Plaza. In addition, the rent at which the Premises was listed was a starting point, determined by Ms. Kless in conjunction with the Landlord and the property manager, who would be aware of the costs. Moreover, the Landlord, who was faced with three vacancies within approximately the same time frame, wanted to re-let the Premises as quickly as possible.

[156] I agree with the Tenant that the Premises ought to have been listed on MLS after the listing agreement with Ms. Kless ended, in order to ensure maximum exposure to the market. Ms. DeBolt recognized that this would have been standard practice. Moreover, Mr. Chang ought to have known whether or not the Premises was listed. However, Ms. DeBolt was able to secure a lease with Subway for the main floor of the Plaza, even though the property was not listed. In Kenny Whent, at para. 94, Pierce J. rejected the defendant’s submission that the landlord failed to make reasonable efforts to mitigate damages because the property was only listed for three months. In this case, the Premises was listed for over one year, and additional steps were taken by the Landlord.

[157] In assessing the plaintiff’s efforts at mitigating damages, “the courts are tolerant, and the innocent party need only be reasonable, not perfect; in deciding what is a reasonable way to mitigate the effects of a breach of contract, the innocent party is not to be held to too nice a standard; it need only act reasonably, using what is known then, without hindsight and it need not do anything risky”: Banco De Portugal v. Waterlow & Sons, Ltd., [1932] A.C. 452 at 506 (H.L.); Syncrude Canada v. Babcock & Wilcox Canada ltd., 1997 ABCA 194, at para. 41; Janiak v. Ippolito, 1985 SCC 62, [1985] 1 S.C.R. 146, at para. 28. The fact that the Landlord could have taken additional steps does not mean that the steps taken were inadequate. Some of the Tenant’s suggestions of additional steps the Landlord ought to have taken are vague and lacking in evidentiary support. For example, it is unclear how the College could have assisted or in which medical journals the Landlord could have listed the Premises.

[158] Moreover, even if the Landlord failed to take reasonable steps to mitigate damages, the Tenant has not provided any evidence to show that mitigation was possible, in that a reasonable substitute was available to the Landlord. The fact that the Premises remains vacant long after he expiry of the Lease in 2015, and long after the Landlord can claim damages from the Tenant, suggests that the failure to re-let the Premises is not due to a lack of reasonable efforts.

[159] The Tenant also argues that the Landlord decided to forego the possibility of leasing the Premises as a medical office when, in July 2015, he leased the first-floor unit to Dr. Alled, who established the New Jane Walk-In Clinic (the “Walk-In Clinic”) on the main floor of the Plaza. The Tenant argues that since the area is “saturated” with medical offices, once the first-floor unit was rented to the Walk-In Clinic, it was no longer possible to rent the Premises as a medical office. The Tenant’s view is that this “caps” the Landlord’s damages for loss of rent on the Premises to July 2015.

[160] I do not accept the Tenant’s position that the lease of the first-floor unit to Dr. Alled puts an end to the Landlord’s damages on the basis that this effectively precluded the Premises from being rented as a medical office. Other than the existence of the walk-in clinic and other medical clinics in the area, without evidence of the demographics and demand for family practitioners, there is no support for the Tenant’s argument that the area was “saturated” and that the Premises could not be leased as a medical office. In addition, both Mr. Chang and Ms. DeBolt testified that the first-floor tenant had initially indicated that he was setting up an x-ray clinic, and that he was interested in expanding to the Premises for a general practice. They both believed that Dr. Alled could help attract tenants for the Premises. Ms. DeBolt verified that the tenant had a licence for an x-ray clinic. In the end, the first-floor unit became a Walk-In Clinic providing a range of services and no general practice was set up in the Premises. The Tenant has not provided any evidence to suggest that the Premises could not have been rented for purposes other than as a medical office. Accordingly, there is no basis for limiting the Landlord’s loss of rent on the Lease to July 2015.

To What Damages is the Landlord Entitled?

[161] Where a tenant has breached a lease, a landlord may:

(a) Keep the lease alive and sue or distrain for rental arrears;

(b) Keep the lease alive and re-rent the premises on behalf of or for the defaulting tenant;

(c) Terminate the lease and retake possession of the property; or

(d) Terminate the lease but with notice to the defaulting tenant that prospective damages will be claimed for loss of the benefit of the lease over its unexpired term.

Weins Canada, at para. 37.

[162] Under the fourth option, the landlord can claim damages for losing the benefit of the lease over its unexpired term: Morguard Corporation v. 6753060 Canada Inc., 2018 ONSC 4910, O.J. No. 4280, at para. 20 [Morguard]. To compensate the landlord for the breach, the landlord must be put in the position that they would have been in had the tenant honoured its lease obligations: Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, O.J. No. 3012, at paras. 33-34.

[163] In such circumstances, the proper measure of damages for a terminated lease includes the unpaid rent to the date of the breach and the present value of the loss of the future rent: Morguard, at para. 22. The present value of the loss of future rent is the present value of the unpaid rent for the remainder of the lease term minus the actual rent paid for the premises for that period. In Kenny Whent, at paras. 78 and 119, the court ordered the tenant to pay the landlord damages in the amount of rent from the breach to the end of the lease term, minus the security deposit. See also 90 Nolan Court, at paras. 86, 96 and 114.

[164] The Landlord terminated the Lease in writing on May 3, 2012, without prejudice to its rights under the Lease, “including without limitation its claim for all amounts of rent payable, interest, all payments of annual minimum rent, additional rent and other sums, and all damages caused by the forfeiture of the lease, including all legal costs and expenses.”

[165] Under section 16.02 of the Lease, if the Landlord terminates the Lease for any breach, “in addition to any other remedies it may have, it may recover from the Tenant all damages incurred by reason of such breach, including the cost of recovering the Leased Premises, reasonable solicitor’s fees, and including the worth at the time of such termination of the excess, if any, of the amount of rent and charges equivalent to rent reserved in this Lease for the remainder of the stated Term over the then reasonable rental value of the Leased Premises for the remainder of the stated Term, all of which amounts shall be immediately due and payable by the Tenant to the Landlord.”

[166] Accordingly, the Landlord is entitled to damages arising from the Tenant’s breach of the Lease, including rental arrears in the amount of $6,187.88 and the balance of the rent under the Lease of $151,603.24, plus pre- and post-judgment interest.

[167] The Landlord seeks interest at a rate of prime plus five percent per annum, as provided in section 4.03 of the Lease. The Landlord has provided an ongoing calculation of damages from April 1, 2012 to October 2, 2019, including interest at a rate ranging from 7.7 percent to 8.95 percent depending on the prime rate at the relevant time. The total is $246,153.84, including rent and interest.

[168] “Trial judges have wide discretion under s. 130 of the Courts of Justice Act to allow pre- or post-judgment interest at a rate higher or lower than the rate of interest prescribed by the Act where they consider it just to do so”: Stellarbridge Management Inc. v. Magna International (Canada) Inc., 2004 ONCA 9852, [2004] O.J. No. 2102, 71 O.R. (3d) 263 (C.A.) at para. 85; leave to appeal denied [2004] S.C.C.A No. 271.

[169] In closing submissions, other than the request for interest at the contract rate, neither party made submissions on the interest rate that should be applied in this case. As a result, and because the amount is significant, I will permit further submissions on the applicable interest rate, as further provided below. The submissions should address sections 128 to 130 of the Courts of Justice Act and relevant case law and include a calculation of the total amount of damages including interest at the applicable rate. [6]

Is the Tenant Entitled to Legal or Equitable Set-Off?

[170] In the Statement of Defence, the Tenant pleaded legal or equitable set-off in the amount of $175,000. Alternatively, the Tenant claims legal or equitable set-off of 50 percent on all rent paid and owing due to the “substandard” conditions of the Premises and common areas. The issue of set-off was not substantially pursued at trial.

[171] As noted above, the Tenant claims that he closed the office on eleven days because of problems with the elevator and HVAC system. The Tenant also claims that as a result of having to move from the Premises to 727 Jane, he lost patients and his income was reduced. The Tenant alleges that while at the Premises, he saw approximately 50 patients a day, but that at 727 Jane, he sees only 20-30 patients per day.

[172] Since I have found that the Tenant failed to demonstrate a fundamental breach of the Lease or a breach of the covenant of quiet enjoyment, the Tenant is not entitled to any damages for which there could be legal or equitable set-off.

[173] Moreover, legal set-off is not available in this case because the Tenant’s claims are not liquidated: Algoma Steel Inc. v. Union Gas Ltd., (2003) 2003 ONCA 30833, 63 O.R. (3d) 78, at para. 23-25 [Algoma Steel].

[174] Equitable set-off, where it is established, operates as a defence to a claim. The requirements for equitable set-off must be met. The elements were described in Algoma Steel, at para. 26:

1. The party relying on a set-off must show some equitable ground for being protected against the adversary's demands.
2. The equitable ground must go to the very root of the plaintiff's claim.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim.
4. The plaintiff's claim and the cross-claim need not arise out of the same contract.
5. Unliquidated claims are on the same footing as liquidated claims.

[175] In this case, the Tenant’s claim to set-off is closely connected to the Landlord’s claim for outstanding rent, such that it would be manifestly unjust to allow the Landlord to enforce payment without taking into consideration the cross-claim. Both claims arise from the same Lease.

[176] However, not only has the Tenant failed to establish that the Landlord breached the Lease, the Tenant’s claims of lost income and patients lack evidentiary support. Dr. Matthews testified that he lost patients when he left the Premises for 727 Jane Street because, generally speaking, every move causes a loss of patients. No other reason was provided for the loss of patients. However, Dr. Matthews testified that when he first moved to the Premises, his practice grew more rapidly than expected. Therefore, it cannot be the move alone that caused him to lose patients after he left the Premises.

[177] As noted above, the Tenant was required to have insurance for both business interruption and for all perils commonly insured against. In breach of this term, the Tenant failed to obtain any insurance which ought to have been available to him.

[178] Accordingly, the Tenant is not entitled to legal or equitable set-off.

Is the Tenant Entitled to an Abatement of Rent?

[179] The Tenant seeks an abatement of rent in the amount of one-half of all rent paid, including the deposit, or $47,131.37.

[180] Abatement of rent is available in a commercial lease situation where the tenant establishes that it is not receiving or enjoying a benefit which it had reasonably expected in return for paying rent: Cvokic v. Belisario, at paras. 15-17.

[181] The Tenant relies on Hreit Holdings 45 Corporation v. R.A.S. Food Services (Kenora) Inc., at para. 42 to argue that a wrongdoer is not relieved from the necessity of paying damages simply because they cannot be assessed with certainty. In that case, however, the court did not order an abatement of rent for breach of an exclusivity clause because there was no evidence that the Tenant was prevented in any way from carrying on business as it had before.

[182] As I have found that the Tenant has failed to demonstrate a fundamental breach of the Lease or a breach of the covenant of quiet enjoyment, there is no basis on which to order an abatement of rent.

[183] Moreover, section 6.02 of the Lease specifically precludes any abatement of rent for any diminution of the Common Areas and Facilities, which would include the elevator and HVAC system. In any event, as noted above, the Tenant has little evidence to support that the breakdowns in the elevator and HVAC system caused him to close his office. Of the eleven dates in the calendar when the Tenant had to close his office, a reason was stated for only three of those days.

Conclusion

[184] Based on the foregoing, the Landlord is entitled to $157,791.12 in damages for breach of the Lease, plus pre- and post- judgment interest at the applicable rate.

[185] I have requested further submissions on the applicable interest rate, as detailed above. At trial, counsel requested an opportunity to make submissions on costs due to offers to settle having been made. Given the constraints on the court’s operations and resources during the current pandemic, the parties are encouraged to agree on the issues of the applicable interest rate and costs.

[186] In the event that no agreement on interest and/or costs is reached, Plaintiff’s counsel shall submit their bill of costs and submissions on interest and costs within 21 days of the release of these Reasons. The Defendant’s submissions on interest and costs are due within 14 days of receiving the Plaintiff’s submissions. No submissions are to exceed a total of five double-spaced pages (excluding calculations). All submissions shall submitted by email to my judicial assistant, at Roxanne.johnson@ontario.ca. No reply submissions are to be made without leave. If no submissions are received within this time frame, the parties will be deemed to have resolved the issues of interest and costs.

Nishikawa J.

Released: May 1, 2020

Footnotes

[1] 901 Jane Street is the address of the plaza and 909 Jane Street is the mailing address for the office building portion of the property.

[2] The parties consented to the admissibility of all the documents in their joint book of documents, with the exception of eight documents that were never referred to in testimony, as identified in the index to the joint book.

[3] In 2014, the Landlord installed security cameras at Prime’s recommendation because of the number of slip and falls at the Plaza.

[4] Based on inconsistent evidence given by Ms. Reid as to the reason for Ms. Luciani’s departure, the Tenant seeks an inference that Ms. Luciani was terminated by Prime because she took the tenants’ side. At trial, Ms. Reid testified that Ms. Luciani was terminated due to a restructuring but on discovery, she had testified that she did not know why Ms. Luciani left. This inconsistency is not a sufficient basis on which to draw the inference sought. In any event, the reason for Ms. Luciani’s departure is irrelevant to the issues in this proceeding.

[5] Ms. Kless had left PMG in 2011 to join the Behar Group.

[6] The calculation of interest provided by the Landlord at trial appears to be on a monthly basis and compounding, which would not be consist with the terms of the Lease.