Court File and Parties
COURT FILE NO.: CV-22-00681193 DATE: 20240417
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
OPB REALTY INC. Plaintiff – and – PC HEARING CORPORATION t/a HEARING SOLUCTIONS Defendant
Counsel: Gasper Galati and Latisha Cohen, for the Plaintiff
READ: April 17, 2024
Papageorgiou J.
Overview
[1] The plaintiff is an owner and landlord of a Shopping Centre (the “Landlord”). The defendant is the tenant (the “Tenant”).
[2] The main cause of action is breach of the lease agreement between them (the “Lease”).
[3] The defendant failed to defend the proceeding and was noted in default.
[4] The plaintiff brings a motion for default judgment.
Decision
[5] For the reasons that follow I am granting the judgment as sought in the amount of $450,528.14.
The Issues
[6] The main issues are:
- Issue 1: Do the materials provide a basis for a finding of liability?
- Issue 2: If so, what are the damages to which the plaintiff is entitled?
Analysis
Issue 1: Do the materials provide a basis for a finding of liability?
Consequences of noting in default
[7] Pursuant to r. 19.02 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, having not defended the proceeding, a defendant is deemed to admit the truth of all allegations of fact made in the Statement of Claim.
[8] However, pursuant to r. 19.06, a plaintiff is not entitled to judgment on a motion for judgment or at a trial merely because the facts alleged in the statement of claim are deemed to be admitted, unless the facts entitle the plaintiff to judgment.
[9] In particular, r. 19.05 provides that a motion for judgment which involves unliquidated damages shall be supported by evidence given by affidavit.
[10] In accordance with the Court’s direction the Landlord served the Tenant by delivering the motion materials for default judgment by courier to the Tenant at the address the Tenant provided in the Lease and also by emailing the Tenant at the email address at which they communicated.
The test on a motion for default judgment
[11] In addressing liability, as per the Court’s direction in Elekta Ltd. v. Rodkin, 2012 CarswellOnt 2928 (ONSC), I am satisfied that the plaintiff has established liability based upon the following deemed admissions in the Statement of Claim as well as the evidence filed:
- The Landlord and Tenant entered into the Lease on November 11, 2014, for a period of ten years ending January 31, 2025.
- The Tenant breached the Lease by failing to pay rent beginning on March 1, 2021, and by removing property from the premises after said breach.
- The Landlord gave a Notice of Default on May 12, 2021, and the Tenant failed to cure the default.
- The Landlord terminated the Lease on September 27, 2021.
Issue 2: What are the damages to which the plaintiff is entitled?
[12] In Highway Properties Ltd. v. Kelly, Douglas, and Co, [1971] S.C.R. 562, at p. 570, the Court set out the remedies that a landlord can pursue which include taking possession, ending the lease, and with notice, sue for damages on the basis of loss of the benefit of the lease over its unexpired term.
[13] Thus, the Landlords is entitled to be compensated for its loss of bargain which means it is entitled to be put in the same position it would have been in if the Tenant had not breached the Lease: Morguard Corporation v. Bramalea City Centre Equities, 2013 ONSC 7213.
[14] In Morguard, at para 34, Perell J. described the quantum of recovery for lost future rent as “the present value of the unpaid future rent for the unexpired period of the lease, less the actual rental value of the premises for that period plus reasonably foreseeable consequential losses.”
[15] The Landlord’s affidavit material provided particulars of the rent which was composed of basic rent plus additional amounts. The rent payable varied over time because of the additional amounts which were based upon variable items such as cost of refuse and waste collection, the tenants share of realty taxes etc.
Arrears
[16] The Landlord claims arrears of rent from the date of default to the date of termination in the amount of $64,847 which I grant.
Loss of bargain
[17] The Landlord also claims damages representing the amounts that the Tenant would have paid for the remainder of the Lease term in the amount of $388,234.28. The particulars are as follows:
- From Sept 2021 to Dec 2021: $28,470.21
- From Jan 2022 to Dec 2022: $113,063.76
- From Jan 2023 to Dec 2023: $116,455.56
- From Jan 2024 to Dec 2024: $119,949.12
- For the month of January 2025: 10,295.63 (the Lease terminates Jan 31, 2025)
[18] As per the case B.G. Preeco (3) Ltd. v. Universal Explorations Ltd. (1987), , 80 A.R. 225 (Alta QB) and Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51 at paras 23-25, where a landlord has chosen to terminate a lease, the landlord must mitigate its damages. The landlord is held to the standard of reasonableness.
[19] At my request, the Landlord provided the particulars of the basic and additional rent.
[20] It also provided an affidavit setting out the details of its mitigation efforts and why it has not been able to release the property. These include the fact that the premises are located in a portion of a Shopping Centre that has experienced consistent turnovers. There are currently four units that are empty. As well, the size and dimensions of the unit is set up for a smaller service-oriented user, such as a telecom provider, of which the Shopping Centre already has plenty. The capital cost to retrofit the premises would be at a great financial loss to the Landlord and would require upgrading the fire rating, additional plumbing, roof cuts for venting, increased electrical services etc. The capital cost has been cost prohibitive in converting the Premises to a more versatile space. The costs of renovation would increase the rent required from a new tenant and the Landlord has not been able to find a new tenant that can afford this.
[21] The Landlord indicates it regularly meets with potential tenants and brokers to review the Shopping Centre but has not been able to secure a new tenant through these efforts. As well the leasing market has been a challenge for the Landlord. The Landlord’s marketing team continues to run events and advertisements to bring attention to the shopping mall. I note as well that the Landlord’s claim involves the post Covid leasing market.
[22] In an analogous case, CF/Realty Holdings Inc. v. Midtowns Tiny Tots Inc., 2017 ONSC 7647, the Court accepted the landlord’s evidence that the subject rental premises were challenging to re-lease due to the specific location and orientation of the space, which had a negative impact on the desirability of the unit. The Court concluded that the Landlord had made reasonable efforts to mitigate its damages.
[23] I am satisfied that the Landlord is entitled to the full amount claimed for its loss of bargain given:
- the Landlord’s efforts to release the premises,
- the details as to the unlikelihood of the premises being rented based upon the Landlord’s explanation,
- the fact that the premises have actually been vacant until April 2024, and
- the remainder of the Landlord’s loss of bargain claim is only for approximately 8 more additional months.
Conclusion
[24] Therefore, I award the Landlord arrears of rent in the amount of $64,847.68 and loss of bargain from the termination date in the amount of $385,680.46 for a total of $450,528.14 plus interest at the contract rate of prime plus 2 %.
Costs
[25] The plaintiff requests costs in the amount of $3,000 on a substantial indemnity basis inclusive of disbursements in accordance with s. 9.2.12.3 of the Lease that states that the Tenant shall pay the Landlord all damages and costs (including without limitation all legal fees on a solicitor and client basis).
[26] I conclude that these costs are fair and find fair and reasonable. I also find that such costs were within the reasonable contemplation of the defendant and award them.
[27] The Landlord may submit a revised Judgment which recalculates the interest as the draft Judgment was submitted as of October 2023.
Papageorgiou J.
Released: April 17, 2024
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
OPB REALTY INC. Plaintiff – and – PC HEARING CORPORATION t/a HEARING SOLUCTIONS Defendant
REASONS FOR JUDGMENT
Papageorgiou J.
Released: April 17, 2024