Court File and Parties

COURT FILE NO.: CV-19-1754 DATE: 20220316 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Northwinds Brewery Ltd., Applicant – and – Caralyse Inc., Respondent

Counsel: Michael Hochberg, for the Applicant Bryan D. Fromstein, for the Respondent

HEARD: March 4, 2022

Reasons on motion to amend reasons for judgment and costs

Mccarthy J.

Introduction

[1] Following a four-day hearing in May 2021, and further to my reasons for judgment dated November 26, 2021, the parties have returned before me with oral and written submissions on the issue of costs. At the same time, the Applicant Tenant seeks a clarification, and if necessary, a correction or amendment, to my reasons for judgment in respect of the amount found to be owing to the Respondent Landlord for non-lease-based rent. (“NLB rent”).

Amendments to Reasons

[2] The court retains the jurisdiction to amend reasons for judgment before an order is issued and entered.

[3] I agree that the NLB rent was inaccurately calculated and awarded by the court. The intention was to grant the Landlord this NLB rent in the nature of a license fee for the use of the exterior shed space. The amount of $10.20 per square foot was deemed to be a reasonable yearly rate for the 62 square foot housing shed. This equated to $632.40. In keeping with Section 1.1 of the lease dated January 6, 2014, this NLB rent should have been calculated annually and paid monthly. That being the case the annual NLB rent of $632.40 should be added to the monthly rent otherwise payable. That amount is $52.70.

[4] My reasons, and in particular paragraphs 96-100 and 104-105, are therefore amended accordingly. The NLB rent for the exterior shed space is set at $52.70 monthly. Calculated over the 34 months between February 1, 2019, and December 1, 2021, this yields the sum of $1,791.80. The Landlord is entitled to recover that amount from the Tenant. Commencing on December 1, 2021, the Tenant shall pay to the Landlord an amount for NLB rent of $52.70 monthly until the earlier of the events contemplated at sub-paragraph 104(l) of the reasons. The orders and declarations sub-paragraphs within paragraph 104 are therefore amended in accordance with these corrections in order to give effect to them. There shall be judgment accordingly.

Costs – Rule 57.01 Considerations

[5] The Tenant seeks its cost on a substantial indemnity basis in the amount of $186,846.23 consisting of: $155,596.25 for fees, HST of $20,227.51 and disbursements of $11,022.47. In the alternative, it seeks costs on a partial indemnity scale with fees of $93,357.75, HST of $12,136.51, which together with its disbursements, total $116,516.73. For its part, the Landlord points to the divided success in the reasons and suggest that the parties should bear their own costs. In the alternative, the Landlord maintains that the divided success should result in the Tenant recovering no more than 50% of reasonable partial indemnity costs or $34,174.59.

[6] As I found in my reasons, the Landlord’s pattern of conduct was often regrettable, and no doubt served as the catalyst for the parties’ dispute. The Landlord’s incomprehensible failure to adhere to the provisions of the lease, to deal with issues in a timely manner and to conduct itself in a business-like fashion gave rise to misunderstandings, led to conflict, and fostered a climate where tension and uncertainty hovered over the term of the lease. Taken as a whole, however, the Landlord’s conduct falls short of deserving of a costs sanction or having to pay costs on anything but a partial indemnity basis.

[7] It could be argued that the Tenant has, in a somewhat ironic fashion and to a limited extent, benefitted from the Landlord’s numerous failings: the latter’s historical failure to deliver proper TMI statements during the first term left the rent largely unadjusted and by that, kept money in the Tenant’s pocket. The Landlord failed to address the exterior shed issue until well into the term, and in so doing, likely deprived itself of potential license fees or supplementary rent which it could have demanded or negotiated.

[8] The Tenant was largely successful in the application. I see no reason to deprive it of partial indemnity costs throughout simply because the court found the Landlord to be entitled to some modest NLB rent for the use of the shed space. Nor can I find any unreasonable conduct on the part of the Tenant pre or post-litigation. The appropriation of the exterior space for the purpose of housing its brewing equipment was indeed unilateral, but the shed itself appears to be of modest dimensions, inoffensive in its appearance and unobtrusive in its location. Although there was no evidence on the point, I have no difficulty concluding, based on the way the Tenant conducted itself in business and from the testimony the court heard from Mr Conway, that had the Landlord approached the Tenant in a civilized and rational way, the entire exterior shed issue could have been resolved over a cup of coffee. I am not prepared to saddle the Tenant with any costs of its threatened injunction motion in the summer of 2020. The motion was never brought. Moreover, considering the intransigence of the Landlord on the patio issue during a time of province-wide crisis and hardship, it would be repugnant to order any kind of costs to the Landlord in those circumstances.

[9] The issues on the application were of fundamental, one might even say existential, importance to the Tenant. It had countless dollars and untold hours invested into establishing and building its business which by all accounts has been a remarkable success. The termination of the lease by lock-out or non-renewal might have proven catastrophic. Orders to remove the new front windows, uproot and re-locate the brewing equipment and/or disassemble the mezzanine might have resulted in significant expense, delay and disruption. The right to quiet enjoyment of the premises, a benign enough sounding notion, was one well worth ensuring for a Tenant beleaguered by threats of being locked out.

[10] It is often difficult to appreciate what the losing party’s expectations of costs might have been. Without evidence on the point, the court is left to speculate. There is no reason to believe that Mr. Goldberg is anything but a shrewd and intelligent businessperson who no doubt had paid his share of legal bills long before the present litigation erupted. The Landlord must have appreciated that a complex, multi-issue application turned trial would be a risky and costly endeavour. I cannot imagine that Mr. Fromstein, who I found to be entirely knowledgeable, thorough, and competent counsel, would not have warned his client of the potential exposure to costs should the Landlord’s position on the issues prove to be partly or wholly rejected by the court.

[11] Those issues, eleven in all, were moderately complex. The lease agreement was dense; the history of the parties’ dealings was lengthy; the evidentiary record was daunting; the parties’ submissions were lengthy and detailed. There were statutory considerations and a not insignificant list of legal precedents for all to review and consider.

[12] That said, once the court made it clear that it was directing a trial of the issues, the parties’ respective counsel went about preparing and presenting the case in almost model fashion. They are both to be commended. I cannot think of one step taken that was wasteful, unnecessary, or unduly lengthy. Opposing counsel were both punctual, well prepared and unswervingly respectful to the court.

[13] At the end of the day, the largely successful Tenant is presumptively entitled to costs of the application and trial. In addition to the trial proper, the proceedings featured several court appearances, a failed mediation, a judicial pre-trial and out of court examinations. No doubt counsel also devoted countless hours to trial preparation.

[14] There remains the factor of proportionality. At first glance, the amount claimed for costs greatly exceeds any monetary award granted to the Tenant. But that is far too narrow a view. The Landlord sought some very serious orders and declarations from the court including a significant judgment for arrears of rent, a lifting of the injunction, mandatory orders and a termination of the lease. The Tenant obtained important relief and declarations which put to rest a host of outstanding and bothersome issues. Considering the issues in play and the adverse consequences the Tenant was facing, the amount sought for costs is not at all out of proportion with the result.

[15] Costs remain in the discretion of the court before whom the subject matter was heard. The litigation here involved serious issues, moderate complexity, unyielding positions, and important consequences. The Tenant was largely successful. Its evidence, interpretations and positions were mostly accepted by the court. As a result, the Tenant should be made as financially whole as reasonably possible. The principle of indemnity favours real compensation for costs incurred.

[16] I am persuaded that the partial indemnity costs claimed by the Tenant are reasonable and proportional to the result in this case. The bill of costs submitted was thorough and detailed. There is no suggestion that any of the disbursements are unreasonable or that any of the work done on the file was duplicative or unnecessary. This was intense, high stakes litigation which demanded the time and attention of diligent counsel and support staff.

Disposition

[17] The reasons for judgement dated November 26, 2021, are amended such that the Tenant shall pay the Landlord the sum of $1,791.80 in respect of NLB rent arrears to December 1, 2021, and the amount of $52.70 monthly. These figures shall replace the amounts of $21,501.16 and $632.40 as set out at sub-paragraphs 104(h) and (l) of those reasons, respectively.

[18] In respect of costs, the Applicant Tenant is entitled to recover costs on a partial indemnity basis for the amount sought. The Respondent Landlord shall therefore pay to the Applicant Tenant its costs on a partial indemnity basis in the amount of $116,516.71 inclusive of fees, HST and disbursements. Those costs are fixed and payable forthwith.

Justice J. R. McCarthy Released: March 16, 2022