Can-Faith Enterprises Inc. v 0932784 B.C. Ltd., 2019 BCSC 1322

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Can-Faith Enterprises Inc. v. 0932784 B.C. Ltd.,
  2019 BCSC 1322

Date: 20190808

Docket: S182143

Registry: Vancouver

Between:

Can-Faith Enterprises Inc. and Turner, Meakin Management Company Ltd.

Plaintiffs

And

0932784 B.C. Ltd. and Maurio Ramos

Defendants

Before: The Honourable Madam Justice Douglas

Reasons for Judgment

INTRODUCTION

[1]           This dispute arises from the termination of a lease agreement involving the parties including, in particular, whether an option to renew was exercised. The plaintiffs bring a summary trial application pursuant to Rule 9-7 for judgment against the defendants for arrears of rent, damages for breach of a lease agreement, leave to apply for an assessment of further damages for loss of future rent, payment by the defendants of their actual legal expenses, and interest on all amounts owed at the rate of 3% above prime. The defendants advance a counterclaim for set-off of amounts they say are due to them.

PROCEDURAL BACKGROUND

[2]           The plaintiffs commenced this action by notice of civil claim filed February 7, 2018. The defendants filed a response to civil claim on June 1, 2018 and a counterclaim on June 15, 2018.

[3]           The plaintiffs first advised the defendants of their intention to proceed with a summary trial in August 2018. On October 15, 2018, the plaintiffs obtained a one-day December 14, 2018 summary trial hearing date. The plaintiffs delivered filed copies of their notice of application for summary trial and supporting affidavits to the defendants on November 27, 2018.

[4]           On November 29, 2018, the defendants asked the plaintiffs to adjourn the summary trial on the basis service of the application materials was late and they would have insufficient time to consider whether to conduct any examinations for discovery of the plaintiffs, obtain expert evidence in support of their counterclaim, and provide a considered response.

[5]           On December 13, 2018, the plaintiffs agreed to adjourn the summary trial as their lawyer became unavailable due to unforeseen circumstances. By letter dated December 13, 2019, plaintiffs’ counsel expressly advised the defendants they should make use of the additional time afforded by the adjournment to complete any procedural steps they considered necessary before the summary trial.

[6]           The defendants scheduled no examinations for discovery and took no other steps in the action following the December 2018 adjournment of the plaintiffs’ summary trial application.

FACTUAL BACKGROUND

[7]           The plaintiff, Can-Faith Enterprises Inc. (“Can-Faith”) is the registered owner of property located at 689 Denman Street, Vancouver (the “Property”).

[8]           The co-plaintiff, Turner, Meakin Management Company Ltd. (“Turner”), is Can-Faith’s property management agent, authorised to collect rent and handle all property management responsibilities for the Property.

[9]           Pursuant to a lease dated February 23, 2012 between Basha Sales Co. Ltd., Leibel Sales Co. Ltd. and Newport Sales Co. Ltd. as landlord (the “Landlord”), 093284 B.C. Ltd. dba Rio Brazilian Steakhouse as tenant (the “Tenant”), and Maurio Ramos as indemnifier (the “Indemnifier”), premises with a total gross floor area of approximately 3,638 square feet at the Property (the “Premises”) were leased for a five-year term commencing May 1, 2012 (the “Lease”).

(a)  The Lease Agreement

[10]        The Lease provided, in part, as follows:

(a) the Tenant agreed and covenanted to pay Annual Base Rent in equal monthly instalments, in advance, on the first day of each and every month, in the amounts stipulated by the Lease (Articles 4.1(a) and 4.2(a));

(b) the Tenant agreed and covenanted to pay Additional Rent, being the aggregate of the Tenant’s Share of Tax Costs, Operating Costs, including management fees, and such other amounts, charges, costs and expenses required to be paid by the Tenant pursuant to the Lease, as estimated by the Landlord, in monthly installments in advance and at the same time as payment of Annual Base Rent (Articles 4.1(b) and 4.2(b));

(c) the Tenant agreed to pay Rent on the days and times specified in the Lease without set-off, abatement, compensation or deduction whatsoever (Article 4.1)

(d) if the Tenant shall fail to pay Rent promptly when due, the Landlord shall be entitled, if it shall demand it, to interest thereon at the rate of 3% per annum in excess of the Prime Rate, being the rate of interest declared from time to time by the main branch in Vancouver, British Columbia, of the Toronto Dominion Bank as its reference rate for commercial loans commonly referred to as its “prime rate” (Article 15.1(c));

(e) all costs and expenses incurred by the Landlord in connection with the Tenant’s default or in efforts to enforce the Landlord’s rights under the Lease, including legal costs on a solicitor and own-client basis, are to be borne by the Tenant (Article 15.1(d));

(f) a deposit of $35,103.00 will be paid by the Tenant to the Landlord to be held as a non-interest bearing security deposit (the “Deposit”) to be first applied to the Annual Base Rent for the first month of the Term and the balance ($17,599.37) shall be refunded to the Tenant at the end of the Term provided it has performed all of its obligations under the Lease. In the event the Tenant renews the Lease, the Deposit shall continue to be held by the Landlord as security for performance of the renewal lease (Article 16.11);

(g) in the event the Tenant defaults in the payment of Rent and fails to cure such default within 5 business days of receipt of written notice of default from the Landlord, then the Landlord has the right to re-enter the Premises and terminate the Lease by leaving upon the Premises notice in writing of such termination and the current month’s Rent and the next 3 ensuing month’s Rent shall thereupon immediately become due and payable by the Tenant, and the Tenant shall immediately deliver up possession of the Premises to the Landlord (Articles 15.1, 15.3, 15.4 and 15.5);

(h) if the Landlord re-enters or terminates the Lease by reason of the Tenant’s default, then, without prejudice to the Landlord’s other rights and remedies:

(i) the provisions of the Lease which relate to the consequences of termination and the provisions of the Lease as they apply with respect to acts, events, omissions which occurred prior to the termination, shall all survive termination; and

(ii) the Tenant shall pay to the Landlord on demand such reasonable expenses as the Landlord has incurred and a reasonable estimate of expenses the Landlord expects to incur in connection with the re-entry, termination, and collection of sums due and payable by the Tenant, including brokerage fees, legal fees and disbursements, the expenses of cleaning and repairing the Premises and preparing them for re-letting.

[11]        Pursuant to Article 17.1 of the Lease, the Tenant was granted an option to renew the Lease for a further term of five years, commencing May 1, 2017 and expiring April 30, 2022, on the following terms and conditions:

The Landlord covenants with the Tenant that if

(a) the Tenant gives notice to the Landlord that the Tenant wishes to obtain a renewal of this Lease, such notice to be given not later than nine months before the expiry of the initial term herein granted;

(b) at the time of giving such notice the Tenant shall not be in

breach of any covenant or condition herein contained; and

(c) the Tenant has duly and regularly throughout the initial term observed and performed the covenants and conditions herein contained;

then the Landlord shall grant to the Tenant at the Tenant’s

expense a renewal lease of the Leased Premises for a further

term of that number of years specified in subclause 1.1 (i) upon the same terms and conditions as are herein contained, save and except this covenant to renew and save and except the Annual Base Rent which shall be the greater of the Current Market Rent for the Leased Premises with its Leasehold Improvements (having regard to the duration of the renewal term) and the sum of the Annual Base Rent payable for the last year of the initial term, and save and except any rent-free periods, tenant allowances or other inducements. If the Landlord and the Tenant are unable at least three months before the expiry of the initial term to agree upon

such Current Market Rent, the determination of such Current

Market Rent shall be referred to a single arbitrator…

The determination made by the arbitrators or the majority of them, or by the single arbitrator, as the case may be, shall be final and binding upon the Landlord and the Tenant and their respective successors and assigns. The Tenant shall pay the costs of the arbitration and the arbitrator(s).

[12]        The Lease provided that Annual Base Rent for the last year of the Initial Term was $32 per square-foot of Rentable Area (i.e., $116,415.96 per annum or $9,701.33 per month).

(b)  The Indemnification Agreement

[13]        Pursuant to an indemnity agreement dated February 23, 2012 between the Landlord and the Indemnifier (the “Indemnity”):

(a) the Indemnifier covenanted and agreed to pay all rent and perform all obligations of the Tenant under the Lease and to indemnify and save harmless the Landlord from any loss, cost or damage including costs on a solicitor and own client basis, suffered by the Landlord arising out of any failure by the Tenant to perform any of the Tenant’s obligations under the Lease (s.1);

(b) the Indemnity granted by the Indemnifier to the Landlord is absolute and unconditional and the liability of the Indemnifier will not be affected in any way by any renewal of the Lease term (s.2); and

(c) the Indemnity continues to apply with respect to periods prior to, after and during the term of the Lease, as extended, modified or renewed (s.2(j)).

(c)  Assignment of Lease

[14]        By a general assignment of leases dated June 29, 2012, the Landlord’s interest in the Lease and the Indemnity was assigned to Can-Faith.

(d)  Option to Renew the Lease

[15]        The parties’ fundamental disagreement relates to whether or not the Tenant exercised its option to renew the Lease pursuant to Article 17.1. The plaintiffs say the Tenant unequivocally did so; the defendants disagree and say the correspondence in this regard from the Tenant’s lawyer was qualified and conditional.

[16]        Article 17.1 contained three conditions precedent before a valid renewal could occur:

(i)   Notice by the Tenant to the Landlord 9 months before the expiry of the initial term of the Lease;

(ii)  The Tenant must not be in breach of any covenant or condition contained in the Lease; and

(iii) The Tenant must have observed and performed its covenants and conditions contained in the Lease.

[17]        By letter dated April 20, 2016, the defendants’ lawyer, Mr. Carlisle, wrote to Turner to inquire about the renewal of the Lease while reserving the option to obtain additional renewals. On May 3, 2016, Turner responded with a request for clarification. Mr. Carlisle’s May 3, 2016 response to this request is contentious and interpreted differently by the parties.

[18]        The relevant portion of Mr. Carlisle’s May 3, 2016 letter is set out below:

“To be clear, my clients are exercising their right to a 5-year renewal term under sections 1.1(f) and 17.1(a) of the lease entered February 23, 2016. They understand that there is no further renewal (i.e. second) renewal permitted under the current lease after the renewal term expires in 2022”.

[19]        The plaintiffs say these statements indicate a clear and unequivocal renewal of the Lease. The defendants say the subsequent statements in this letter regarding modification of the Lease or a new lease qualified any such renewal.

[20]        Mr. Carlisle’s May 3, 2016 letter further stated:

“[My clients] understand there is no further (i.e., second) renewal permitted under the current lease after the renewal term expires in 2011.

That said, they also seek either a modification of the existing lease to provide a second renewal term, or a new lease at the end of the first renewal term, with a further extension being their preference.

Kindly advise that you have accepted the notice of renewal, and also indicate if you would be willing to discuss either a modification of the existing lease, or a new lease to allow my clients to occupy the premises after the renewal term ends”.

[21]        Within two days, Turner responded to Mr. Carlisle’s May 3, 2016 letter as follows:

“We have received your letter of May 3, 2016. Thank you for your prompt response in clarifying your client’s intentions regarding renewal of the Lease.

At this time we acknowledge and confirm receipt of the notice of renewal from your client, 0932784 B.C. Ltd.”

[22]        There was no further correspondence between the parties regarding renewal of the Lease until August 2016. On August 9, 2016, Mr. Carlisle wrote again to Turner. The salient portion of his letter stated as follows:

“Additionally, my clients are interested to know what the proposed new base rent will be when the lease term ends at the end of April 2017. We are open to either a renewal (which would require a lease amendment as there is no allowance for a further renewal term) or a new lease. If a new lease can’t be agreed, my clients would need time to secure alternate rental premises. It is their intention to remain in the current premises if possible.”

[23]        At that point, the plaintiffs say the Tenant had already exercised its option to renew the Lease; the defendants say Mr. Carlisle’s August 9, 2016 letter clearly indicates it had not and, in the alternative, his May 3, 2016 letter did not accurately communicate the Tenant’s intentions.

(e)  Arbitration Proceedings

[24]        On May 15, 2017, Can-Faith commenced arbitration proceedings to determine the Current Market Rent for the renewal term by issuing a notice to arbitrate. On May 19, 2017, the British Columbia International Commercial Arbitration Centre (“BCICAC”) appointed an arbitrator.

[25]        The Tenant and the Indemnifier, through their legal counsel, attended a pre-hearing conference call with the arbitrator on May 29, 2017, at which time the arbitrator’s jurisdiction to determine whether there had been a valid exercise of the renewal option was discussed. The arbitrator directed the parties to make submissions on this jurisdictional issue. The Tenant and the Indemnifier did not do so.

[26]        On August 8, 2017, the arbitrator issued his first procedural award and direction, after concluding he had jurisdiction to determine whether there had been a valid exercise of the option to renew, as that determination was a pre-condition to deciding the Current Market Rent for the renewal term.

[27]        The Tenant and Indemnifier had notice of all steps taken in the arbitration and an opportunity to make submissions.

[28]        On November 2, 2017, the arbitrator issued a partial final award finding there had been a valid exercise of the Tenant’s option to renew the Lease. On December 8, 2017, the arbitrator issued a final award determining the Current Market Rent for the renewal term was $26.50 per square foot or $96,407.00 per annum. The arbitrator also found Can-Faith was entitled to its reasonable costs of the arbitration, including its actual legal fees and disbursements, to be assessed.

(f)   Notice of Re-entry and Termination of Lease

[29]        By notice of re-entry and termination dated January 15, 2018, Turner, as agent for Can-Faith:

(i)   Terminated the Lease due to non-payment of rent;

(ii)  Demanded payment of rent arrears including three-months’ accelerated rent; and

(iii) Retained the $17,599.37 remainder of the Tenant’s security deposit.

[30]        Can-Faith says it is owed a total of $247,921.76, as of the date of termination of the Lease, comprising:

(i)   Annual Base Rent for May to December 2017 and January 2018 ($9,701.33 per month x 9 months plus GST);

(ii)  Additional Rent for May to December 2017 and January 2018 ($9,975.00 per month x 9 months plus GST);

(iii) Three months’ accelerated Annual Base Rent ($9,701.33 per month x 3 months plus GST); and

(iv) Three months’ accelerated Additional Rent ($9,975 per month x 3 months plus GST).

[31]        Can-Faith claims interest at 3% above the prime rate of 3.95% on accumulated arrears of rent and three months’ accelerated rent in the amount of $17,253.75 to November 30, 2018 pursuant to Article 15.1(c) of the Lease.

[32]        In addition, Can-Faith says it incurred $12,188.61 in expenses under the Lease to repair, restore and maintain the Premises after the Tenant vacated.

[33]        After the Tenant vacated the Premises Can-Faith retained an agent to list and market the Premises for lease. No new tenant had been secured by the summary trial hearing date.

[34]        Can-Faith claims damages for the loss of seven months’ future rent to the end of November 2018 in the amount of $144,621.03 and leave to apply for assessment of further damages for prospective loss of rent for the unexpired term of the Lease.

ISSUES

[35]        The following issues arise on this application:

  1. Is this claim suitable for a summary trial pursuant to Rule 9-7?
  2. Does the doctrine of issue estoppel prevent the Tenant from asserting it did not exercise its option to renew the Lease?
  3. Did Can-Faith comply with its obligations under the Lease and, if not, did such non-compliance constitute a fundamental breach of the Lease?
  4. Is Can-Faith entitled to three months’ accelerated rent and prospective rent for the renewal period?
  5. Has Can-Faith mitigated its damages?
  6. Are the defendants entitled to a set-off?
  7. Is the Indemnifier bound by the terms of the Indemnity?
  8. Can Can-Faith recover special costs and interest at the rate of 3% above prime on any amounts it is owed pursuant to the Lease?

LAW AND ANALYSIS

Suitability for Summary Trial

[36]        All parties must come to a summary trial prepared to prove their claim or defence as judgment may be granted in favour of any party, regardless of who has brought the application, unless the court concludes it is not possible to find the facts necessary to decide the issues or that it would be unjust to do so (Gichuru v. Pallai, 2013 BCCA 60 (CanLII) at para. 32).

[37]        The plaintiffs concede the amount at stake in this action is significant but say there is little, if any, conflict in the evidence regarding the relevant facts. They say the main issues on this application involve an interpretation of the parties’ contractual obligations based on the law. They note the defendants have had ample time to prepare for this summary trial and to obtain the evidence necessary to respond to it.

[38]        The defendants argue this matter is too complex to be determined summarily. They say the summary trial itself will consume a considerable amount of time, that credibility issues and factual disputes render this matter inappropriate for summary disposition, and that a summary trial will not resolve all issues in this litigation.

[39]        The defendants say there are critical conflicts in the evidence regarding:

  1. The parties’ intentions concerning the option to renew; and
  2. Can-Faith’s conduct (which the defendants say constitutes a fundamental breach of the Lease).

[40]        The defendants argue some issues in this case are likely to require expert evidence, that there is no particular urgency to having this matter determined summarily, and that this case raises novel issues of law (including application of the arbitrator’s final decision to matters before this Court) which make a summary trial inappropriate.

[41]        The parties agree Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. (1989), 1989 CanLII 229 (BC CA), 36 B.C.L.R. (2d) 202 (C.A.) sets out the relevant factors to be considered by a court in determining suitability for summary disposition.

[42]        If any party required expert evidence to address any matter in issue on this summary trial, there has been ample opportunity to obtain it since the start of this action in February 2018. I am satisfied the need to obtain expert evidence is not a valid reason for finding this matter unsuitable for summary disposition.

[43]        There are some conflicts in the evidence before this Court related to the defendants’ allegation Can-Faith breached its covenants under the Lease and the parties’ intentions regarding renewal of the Lease. The presence of conflicts in the evidence does not preclude determination of a matter by summary trial (Inspiration Managementsupra, at para. 57). Rather, the essential questions are whether those conflicts prevent the Court from finding the facts necessary to decide the matter and whether it would be unjust to do so. On a review of all the evidence, I conclude the answer to both questions is no.

[44]        The defendants argue it would be unjust to decide this matter summarily because the consequences of an adverse judgment would be financially onerous and possibly ruinous. I conclude that is not a relevant factor in a court’s assessment of suitability for summary disposition or whether a summary trial would be unjust. In fact, it reinforces my view that a summary trial is suitable as a prolonged trial would result in increased costs.

[45]        The essential dispute between the parties relates to an interpretation of the Lease and application of the law to largely non-controversial facts. The parties’ intentions are objectively manifested in the documents in evidence. There are no significant credibility issues which this Court must resolve to decide this summary trial. I am of the view that complexity of the legal issues on this application does not preclude a summary determination of this matter. Resolution of this action by summary trial is consistent with the principles set out in Hyrniak v. Mauldin, 2014 SCC 7 (CanLII).

[46]        Having regard to all the evidence and the factors outlined in Inspiration Managementsupra, I conclude it is possible to find the facts necessary to decide the issues before this Court and that doing so would not be unjust.

Issue Estoppel

[47]        The plaintiffs rely on the doctrine of issue estoppel and say the arbitrator’s final decision is binding on the defendants in this action. They say the defendants are barred from arguing the arbitrator had no jurisdiction to determine the validity of the Tenant’s exercise of the option to renew the Lease as this issue has already been determined by final order.

[48]        The defendants distinguish the authorities relied upon by the plaintiff on the basis the parties in those cases agreed to arbitration. By contrast, the defendants say the arbitration clause in the Lease (regarding determination of rent payable for the renewal term) was not binding because they did not renew the Lease.

[49]        The defendants note issue estoppel allows for the exercise of judicial discretion to ensure no injustice results from its application. They argue injustice may arise when there is a significant difference between the purposes, process, or stakes involved in the two proceedings and that it was unjust for the arbitrator to “bootstrap” himself to determine the validity of the renewal option when the defendants denied a renewal had occurred.

Jurisdiction of the Arbitrator

[50]        I consider as a preliminary matter whether it was open to the arbitrator to determine his jurisdiction to decide whether there had been a valid exercise of the Tenant’s option to renew the Lease.

[51]        Arbitrators are to determine their own jurisdiction under the “competence-competence principle”. Section 22 of the Arbitration Act, R.S.B.C. 1996, c. 55, confirms the BCICAC rules regarding the conduct of domestic commercial arbitrations apply to an arbitration unless the parties agree otherwise.

[52]        Rule 22(1) of BCICAC’s Domestic Commercial Arbitration Rules of Procedure (as revised September 15, 2016) states as follows:

(1) The arbitration tribunal may rule on its own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement.

[53]        The legal effect of the adoption of the BCICAC rules is that any challenge to an arbitrator’s jurisdiction should first be determined by the arbitrator unless the challenge involves a pure question of law, or one of mixed fact and law that requires for its disposition only superficial consideration of the documentary evidence in the record:  Seidel v. Telus Communications Inc., 2011 SCC 15 (CanLII) at paras. 28-29; Dell Computer Corp. v. Union des Consommateurs, 2007 SCC 34 (CanLII) at para. 85.

[54]        In this case, the arbitrator had to consider the factual matrix surrounding the Lease and the arbitration clause and interpret correspondence purporting to renew the Lease. In the circumstances, I conclude determining whether was a valid exercise of the option to renew required more than a superficial consideration of the documentary evidence and was appropriately referred to arbitration.

[55]        Accordingly, I conclude it was appropriate for the arbitrator to consider whether he had jurisdiction to decide if the limited arbitration clause in the Lease applied.

Jurisdiction to Consider Validity of Option to Renew

[56]        In Cut & Run Holdings Ltd. v. Booze Brothers Holdings Inc. 2005 BCSC 167 (CanLII), Davies J. held as follows:

24      It is, in my view, fundamental to the consideration of the relationship between the potentially competing contractual and statutory rights and remedies that may be available to the parties to this litigation to bear in mind that it is well settled law that parties to an agreement containing an arbitration clause cannot be presumed to have agreed to submit all matters which may arise between them to arbitration.

25      In that regard, I adopt the following statement from Mart Huleatt-James and Nicholas Gould, International Commercial Arbitration: A Handbook (London: LLP, 1996) at 62:

Given the consensual nature of arbitration, it is clear that no one should be obliged to submit to arbitration without having agreed to it.

Furthermore, having agreed to the arbitration of a particular dispute, a party to the arbitration should not have to acquiesce in the inclusion in the arbitration of further disputes which the other party may try to include in it, but which are outside the scope of the parties’ agreement. These latter disputes may be of a kind which the respondent party, for good reason, does not wish to have settled by arbitration.

[Emphasis added in original judgment.]

26        Thus, an arbitrator errs when, “having jurisdiction conferred upon him to decide certain matters only, he [goes] on and decide[s] matters not referred to him at all” (BC Gas Inc. v. Westcoast Energy Inc., [1990] B.C.J. No. 2924 (B.C. S.C.) at para. 30).

[57]        However, as stated in Advanced Explorations Inc. v. Storm Capital Corp., 2014 ONSC 3918 (CanLII), at para. 57:

57        A privately appointed arbitrator has no inherent jurisdiction. His or her jurisdiction comes only from the parties’ agreement: see Piazza Family Trust, at para. 63. “The parties to an arbitration agreement have virtually unfettered autonomy in identifying the disputes that may be the subject of the arbitration proceeding”:  Desputeaux c. Éditions Chouette (1987) inc., 2003 SCC 17 (CanLII), [2003] 1 S.C.R. 178 (S.C.C.), at para. 22. An arbitrator has the authority to decide not just the disputes that the parties submit to it, but also those matters that are closely or intrinsically related to the disputes: Desputeaux, at para 35.

[58]        In Desputeaux c. Éditions Chouette (1987) Inc., 2003 SCC 17 (CanLII) at para. 35, LeBel J. stated as follows:

…In order to understand the scope of the arbitrator’s mandate, a purely textual analysis of the communications between the parties is not sufficient. The arbitrator’s mandate must not be interpreted restrictively by limiting it to what is expressly set out in the arbitration agreement. The mandate also includes everything that is closely connected with that agreement, or, in other words, questions that have [TRANSLATION] “a connection with the question to be disposed of by the arbitrators with the dispute submitted to them” (S. Thuilleaux, L’Arbitrage commercial au Québec: droit interne — droit international privé (1991), at p. 115.)…

[59]        This type of analysis is consistent with Re Cliffs Over Maple Bay Investments Ltd., 2011 BCCA 180 (CanLII) at para. 32, where the Court of Appeal held that issue estoppel applies “to the issues of fact, law, and mixed fact and law that are necessarily bound up [emphasis in original] with the determination of that ‘issue’ in the prior proceeding”. The Court of Appeal undertook a similar analysis in Fortinet Technologies (Canada) ULC v. Bell Canada, 2018 BCCA 277 (CanLII) at para. 32, rev’g 2017 BCSC 1066 (CanLII).

[60]        Applying these legal principles to this case, I conclude the relevant question is whether it was reasonable for the arbitrator to decide that validity of the Tenant’s exercise of the Lease renewal option was sufficiently connected or “necessarily bound up” with the powers set out in the limited arbitration clause in the Lease to give him jurisdiction over the issue.

[61]        While the issues in this case are similar to those considered in Fortinet, the parties do not agree there was a valid exercise of the option to renew. Exercise of the option to renew was, however, effectively a condition precedent to determination of the rent payable for the renewal term.

[62]        Based on the reasoning of the Court of Appeal in Fortinet, I conclude that determining whether the option to renew was validly exercised was “closely connected or necessarily bound up” with determination of the rent payable for the renewal term.

[63]        I therefore find the arbitrator’s jurisdiction included the power to decide whether there had been a valid exercise of the Tenant’s option to renew, even if not explicitly granted to him in the Lease. I conclude it was reasonable for the arbitrator to decide whether there was a valid exercise of the option to renew as part of his determination of rent payable for the renewal term.

[64]        The defendants have not applied for leave to review a question of law under s. 31 of the Arbitration Act. The arbitrator’s decision that there was a valid exercise of the option to renew is not therefore subject to review by this Court.

Application of Issue Estoppel

[65]        A prior judicial decision will not raise issue or cause of action estoppel unless the following requirements are met:

  1. It was a final decision;
  2. Pronounced by a court of competent jurisdiction over the parties and the subject matter;
  3. Involving a determination of the same issues or cause of action as that sought to be controverted or advanced in the present litigation; and
  4. The parties to the prior judicial proceeding or their privies are the same persons as the parties to the present action or their privies (Ahmed v. Canna Clinic Medicinal Society, 2018 BCCA 319 (CanLII), at para. 10, citing 420093 B.C. Ltd. v. Bank of Montreal, 1995 ABCA 328 (CanLII) at para. 18).

[66]        I conclude the requirements of issue estoppel have been satisfied. Accordingly, the defendants are estopped from arguing there was no valid exercise of the option to renew the Lease. For the reasons stated, I have concluded the decision of the arbitrator was final. The Court of Appeal confirmed in Fortinet, supra, at para 27, the doctrine of issue estoppel may arise out of proceedings before courts and tribunals. In Huck v. Komol Plastics Co.1996 CarswellBC 1553 (W.L.) (S.C.), Hall J. held that previous arbitration proceedings can form the basis for applying the principle of res judicata. Accordingly, I conclude the arbitrator’s decision was that of a “court of competent jurisdiction”. The more contentious matter is whether the arbitration involved the same parties and the same issues as this action.

[67]        After finding he had jurisdiction to do so, the arbitrator determined the validity of the Tenant’s exercise of the Lease renewal option and the current market rent payable for the renewal term. The defendants chose not to participate in the arbitration of those matters despite having been given notice of the proceedings. They now argue there was no valid exercise by the Tenant of the Lease renewal option and the plaintiff has therefore suffered no loss of prospective rent for the renewal term. I conclude those are the same essential issues determined by the arbitrator in this case.

[68]        The defendants say the parties in this action are not the same as those in the arbitration. They note that Turner, while a plaintiff in this action, was not involved in the arbitration proceedings. The plaintiffs say Turner was included as a plaintiff in this action, in his sole capacity as agent for Can-Faith, for procedural reasons only and that Turner is not seeking to recover damages.

[69]        The central parties in this action are Can-Faith, the Tenant, and the Indemnifier; these same parties had notice of, and an opportunity to participate in, the arbitrationproceedings.

[70]        The defendants rely on Penner v. Niagara (Regional Police Services Board), 2013 SCC 19 (CanLII). The Court in that case held at para 42 that injustice may arise “where there is a significant difference between the purposes, process or stakes involved in the two proceedings”. The Court in Penner explicitly recognised “there will always be differences in purpose, process and stakes between administrative and court proceedings” and “[i]n order to establish unfairness” in the sense described, “such differences must be significant and assessed in light of this Court’s recognition that finality is an objective that is also important in the administrative law context”.

[71]        The Penner decision involved administrative disciplinary proceedings related to alleged police misconduct and a civil action for damages arising from the same incident. On that basis, it is distinguishable on its facts. In Penner, the stakes involved in the two proceedings were distinct. I do not find that to be the case here.

[72]        The Court of Appeal in Ahmed, supra at para 16, described “subject matter jurisdiction” as the authority to hear and decide the type of dispute raised. In this case, the parties granted authority to a single arbitrator to decide the rent payable for the renewal term if the parties to the Lease were unable to agree on that matter.

[73]        Courts nonetheless retain a residual discretion not to apply issue estoppel, even when the requirements are met, if it would be unjust to do so (Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44 (CanLII) at para. 62).

[74]        The defendants argue it would be unfair for this Court to apply issue estoppel on a summary trial involving “a multiplicity of distinct issues” because doing so would result in financial hardship to them. I conclude financial hardship resulting from an adverse judgment is not relevant to an assessment of whether it would be unfair for this Court to apply the doctrine of issue estoppel.

[75]        On a review of all the evidence, I am not persuaded that the application of issue estoppel would be unfair in this case.

Fundamental Breach

[76]        The defendants say Can-Faith did not fulfil its obligations under the Lease because:

(i)   The Premises were not maintained in a good state of repair; and

(ii)  Turner substantially increased its management fees payable under the Lease, thereby fundamentally altering an essential term of the parties’ agreement.

[77]        In Guarantee Co. of North America v. Gordon Capital Corp., 1999 CanLII 664 (SCC), [1999] 3 S.C.R. 423, citing to 1999 CarswellOnt 3171 (W.L.) at para. 50, Justices Lacobucci and Bastarache reviewed the law regarding fundamental breach as follows:

50      The Court was called upon to consider the doctrine of fundamental breach, defined as a failure in the breaching party’s performance of its obligations under the contract that deprives the non-breaching party of substantially the whole benefit of the agreement.

Notwithstanding that in two separate minority reasons, Dickson C.J. (La Forest J. concurring) and Wilson J. (L’Heureux-Dubé J. concurring) concluded that the seriousness of the defects in the extraction boxes did not amount to a fundamental breach, both Dickson C.J. and Wilson J. discussed the legal consequences in the event that a fundamental breach had occurred.

As to the circumstances in which the doctrine applied, Wilson J., at pp. 499-500, noted that the distinction between a mere contractual breach and a breach that is more appropriately characterised as fundamental is the exceptional nature of the remedy; while the traditional remedy for contractual breach is the obligation to pay damages, a fundamental breach permits the non-breaching party to elect instead to put to an end all remaining performance obligations between the parties. Given the exceptional nature of the remedy, Wilson J. rightly noted that the purpose of the restrictive definition of a fundamental breach is to limit the remedy to those circumstances where the entire foundation of the contract has been undermined.

[78]        The B.C. Court of Appeal has followed this test in defining a fundamental breach. In Doman Forest Products Ltd. v. GMAC Commercial Credit Corp. – Canada, 2007 BCCA 88 (CanLII), Lowry J.A. summarises the relevant authorities and principles at paras 88-92.

Alleged Breach of Lease

[79]        Details of the alleged breaches of the Lease by Can-Faith are set out in the affidavit of Ms. Mariana Ramos, an employee of the defendant company at the time. The defendants argue these breaches constitute a fundamental breach of the Lease.

[80]        The plaintiffs deny Can-Faith breached its obligations under the Lease and say that, even if the defendants could establish such breaches, they do not rise to the level of a fundamental breach. The plaintiffs note the defendants have not pleaded a rescission of the Lease or claimed corresponding damages.

[81]        The plaintiffs rely on Spirent Communications of Ottawa Ltd. v. Quake Technologies (Canada) Inc., 2008 ONCA 92 (CanLII), 88 O. R. (3d) 721. The Ontario Court of Appeal in that case summarised at para. 35 the legal principles applicable to fundamental breach. That case involved an agreement by the plaintiff to lease part of an office building. The Court described a fundamental breach as “one which deprives the innocent party of substantially the whole benefit of the contract”, thereby permitting the plaintiff in that case to treat the lease agreement as being at an end.

[82]        The Court in Spirent, supra, outlined five factors to be considered when determining whether conduct has deprived an innocent party of substantially the whole benefit of a contract as follows:

  1. The ratio of the party’s obligations not performed to that party’s obligations as a whole;
  2. The seriousness of the breach to the innocent party;
  3. The likelihood of repetition of such breach;
  4. The seriousness of the consequences of the breach; and
  5. The relationship of the part of the obligation performed to the whole obligation.

[83]        The defendants rely on the affidavit evidence of Ms. Ramos which summarises her observations regarding perceived deficiencies in the maintenance and repair of the Premises as follows:

  1. July 16, 2016:  ceiling damage which Ms. Ramos believed was due to a leak;
  2. October 5, 2016:  water leakage from the roof above the dishwasher in the kitchen at the Premises;
  3. November 27, 2016:  a “huge” ceiling leak behind the bar;
  4. December 7, 2016:  removal of the Tenant’s logo from a common window and a hole drilled into the kitchen of the Premises;
  5. February 22, 2017:  non-functioning lights in the elevator from the common area lobby to the Premises;
  6. February 28, 2017:  non-functioning elevator lights;
  7. March 2, 2017:  non-functioning elevator lights;
  8. March 2017:  building vandalism;
  9. March 23, 2017:  non-functioning elevator lights;
  10. March 28, 2017:  a roof leak in the kitchen of the Premises near the deep fryer; and
  11. March 28, 2017:  non-functioning lights in the common area lobby outside the elevator bank.

[84]        No correspondence between the parties regarding any alleged fundamental breach of the Lease at the time of the notice of termination is in evidence. The plaintiffs say the first time the defendants asserted there had been a fundamental breach of the Lease was in response to the notice of civil claim in this action.

[85]        Photographs and email messages regarding the above-noted deficiencies from Ms. Ramos to Turner were in evidence. These email communications set out Ms. Ramos’ concerns regarding the condition of the Premises and her requests that Turner take steps to address them. They also include Turner’s responses to Ms. Ramos seeking clarification regarding a hole she indicated had been drilled in the kitchen floor, outlining steps taken in an effort to resolve the stated concerns, requesting periodic status updates, and providing emergency contact information. Turner advised Ms. Ramos that, although Turner could undertake repairs if requested by the Tenant, the Lease stipulated the cost of ceiling and kitchen floor repairs at the Premises were the Tenant’s responsibility. Turner noted that the broken window in question was on building common property and not the Premises and had been replaced.

[86]        In an email communication dated February 22, 2017, Ms. Ramos refers to a second occasion that week when the elevator lights were not working and stated she had “clients” who were “mad and scared to be riding on a dark elevator”. By email dated February 28, 2017, Ms. Ramos complained she had to “shut down” lunch service early due to the elevator light problem. The same day, Turner replied that an electrician had already attended at the Premises twice to address the lighting problem and Turner had understood this matter was resolved. Turner stated an electrician would be attending at the Premises “to completely replace the lighting in the elevator”. By email to Ms. Ramos dated March 3, 2017, Turner confirmed this electrical work had been completed and the elevator lighting was verified to be in good working order.

[87]        By email to Ms. Ramos dated March 24, 2017, Turner noted it was the Tenant’s responsibility to repair and maintain signs and lighting of the ground floor entrance to the Premises.

[88]        Significantly, there was no evidence on this summary trial indicating the Tenant ever communicated to Can-Faith or Turner that any of the alleged maintenance or repair deficiencies fundamentally deprived them of any benefit under the Lease.

[89]        While the concerns set out by Ms. Ramos in her affidavit evidence may not have been fully resolved to her satisfaction before the Tenant vacated the Premises, the evidence before this Court supports the conclusion that steps were being taken by Turner to address them.

[90]        While I accept that some of the defendants’ concerns regarding the condition of the Premises may have been serious, I conclude the evidence falls short of establishing the defendants were deprived of substantially the whole benefit under the Lease as a result.

[91]        Significantly, at no time did the Tenant inform Can-Faith or Turner it had elected to rescind the Lease because of breaches by Can-Faith of its obligations under the Lease. In fact, the Tenant sought to renew the Lease on similar terms.

Increase in Management Fees

[92]        The defendants argue the substantial increase in management fees payable under the Lease significantly “altered the commercial reality” of the Lease, particularly when combined with the alleged breaches of the Landlord’s covenants under the Lease.

[93]        Can-Faith clarified the management fees payable by the Tenant were not increased by 200% as alleged by the defendants. Rather, the Tenant’s annual share of this increase was approximately $5,000, as set out in Turner’s reconciliation statement dated January 18, 2018. The plaintiffs deny they unilaterally varied the terms of the Lease by increasing the management fees payable by the defendants.

[94]        The defendants introduced no expert evidence from anyone qualified to offer such an opinion to support their argument the plaintiffs’ increase in management fees was outside the range charged by comparable real estate management companies in Vancouver at the relevant time.

[95]        Without such evidence, I am unable to find the increase in management fees constituted a fundamental alteration of the terms of Lease and amounted to a fundamental breach of the Lease.

Damages for Loss of Prospective Rent and Accelerated Rent

[96]        In addition to arrears of rent to the date of termination of the Lease, Can-Faith seeks to recover damages for the loss of prospective rent for the five-year renewal term and three months’ accelerated rent. Because I find Can-Faith’s claim for damages for prospective rent is closely connected to its claim for accelerated damages, I consider them together in my analysis.

[97]        Can-Faith’s claim for damages for prospective rent is complicated by its additional claim for three months’ accelerated rent under Article 15.5(b) of the Lease. The issue before this Court is whether Can-Faith can claim both as separate heads of damages or whether the latter is a liquidated damages clause, which would fix the amount Can-Faith can recover for loss of prospective rent.

[98]        As this issue was not argued by the parties at trial, I asked them to provide supplementary written submissions, which were received by July 10, 2019. Can-Faith takes the position the accelerated rent clause was included in the Lease to provide a remedy if the Tenant became insolvent, pursuant to s. 136(1)(f) of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”). Can-Faith says accelerated rent and damages for the loss of prospective rent are separate remedies and it is entitled to recover both. The defendants argue s. 136(1)(f) of the BIA does not specify how the accelerated rent clause in the Lease is to be characterized under contract law. They say reference to accelerated rent in the Lease is a liquidated damages clause which represents all the damages the plaintiff may recover for the loss of prospective rent.

[99]        In Highway Properties Ltd. v. Kelly, Douglas & Co., 1971 CanLII 123 (SCC), [1971] S.C.R. 562 at  pages 565 – 577, Laskin J., as he then was, writes in obiter as follows:

…Clause 5 (a), so far as relevant here, provided that if the rent or any part thereof be in arrears for 15 days or if any covenant by the tenant should be unfulfilled, and the failure to pay rent or fulfil the covenant should continue 15 days after notice thereof to the tenant, then the current month’s rent and three months’ additional rent should immediately become due and the landlord might forthwith re-enter and thereupon the demise should absolutely determine but without prejudice to any right of action in respect of any antecedent breach of the tenant’s covenants…

Lest there be any doubt on the point, clause 5 (a) of the lease (previously referred to in these reasons) does not preclude the claim made herein for prospective damages. The landlord did not invoke the clause, and hence no question arises of an irrevocable election to rely on it.

[100]     In 365175 B.C. Ltd. v. Malamute Recreations Ltd., 2000 BCCA 293 (CanLII), Rowles J.A. held as follows:

28      The notice given by the landlord on 23 April 1997 to the corporate defendant and to the Indemnifier was notice that the landlord was terminating the lease and electing to claim liquidated damages pursuant to paragraph 13.02 of the lease. There is no suggestion that the three months’ accelerated rent could be taken to be anything other than a pre-estimate of damages. In other words, there is no suggestion that it was a penalty.

29      In the first action the landlord’s claim against the tenant and the Indemnifier was, in effect, a claim for prospective damages for three months pursuant to paragraph 13.02 of the lease. In my view, electing that remedy is inconsistent with the landlord’s position in the second action that the Indemnifier had entered into a new lease. If the landlord considered that there was a new lease in existence with the Indemnifier, it could not sue the Indemnifier for three months’ prospective rent.

[101]     A liquidated damages clause, if enforced, is a “complete remedy for the entire breach specified” (Elsley v. J.G. Collins Ins. Agencies, 1978 CanLII 7 (SCC), [1978] 2 SCR 916 at p. 932). If, however, the clause is waived, as it was in Highway Propertiessupra, the plaintiff may seek to recover damages for prospective loss arising from the alleged breach.

[102]     The accelerated rent clause in the Lease was enforceable if the Landlord “re-enters the Leased Premises or if this Lease is terminated by any event set out in clause 15.3”. The evidence clearly supports the conclusion Can-Faith re-entered the Premises and terminated the Lease.

[103]     I conclude that inclusion of the three-month limit in the BIA has no bearing on whether or not the accelerated rent clause in the Lease is one for liquidated damages. Section 136(1)(f) of the BIA simply limits the amount of accelerated rent for which a landlord can claim priority in a bankruptcy proceeding. It does not prevent a landlord from setting accelerated rent at a lower or higher amount, provided no priority will be given to anything over three months’ accelerated rent.

[104]     In my view, the only reasonable interpretation is that the accelerated rent clause in the Lease provided a pre-contractual estimate of damages if the Tenant breached Article 15.5 of the Lease. By seeking to enforce this clause, Can-Faith has effectively elected to accept this amount as a complete remedy for the entire breach specified; namely, the defendant’s default in paying rent pursuant to the renewed Lease. The defendants have not argued this clause constitutes a penalty clause and I see no reason why it would be construed as such.

[105]     In the result, I find Can-Faith is entitled to recover three months’ accelerated as a complete remedy for the defendants’ breach of the renewed Lease. In the circumstances, whether or not Can-Faith provided adequate notice of its intention to pursue prospective damages becomes moot.

Mitigation of Damages

[106]     The plaintiffs retained Cushman & Wakefield on March 20, 2018 to list and market the Premises for lease. Despite the efforts of this broker, a new tenant for the Premises has not yet been found.

[107]     The onus of establishing a failure to mitigate is on the defendants. They did not examine the plaintiffs’ representatives for discovery in this action or cross-examine the affiants on this summary trial. They adduced no evidence to support the conclusion the efforts of the plaintiffs’ broker to market and lease the Premises were inadequate.

[108]     On a review of all the evidence, I conclude the defendants have not met the onus of proving the plaintiffs failed to mitigate by not making reasonable efforts to lease the Premises.

Are the Defendants Entitled to a Set-Off?   

[109]     The defendants say they are entitled to a set-off against any amounts ordered payable by them in this action as follows:

  1. $8,744.20 for a water leak payment made by the defendants on April 3, 2017, which they now say was an improper demand for which they are not responsible;
  2. $21,419.46 which they say represents excessive property management fee charges in 2016; and
  3. $17,599.37 representing the balance of the Tenant’s security deposit not returned on termination of the Lease.

[110]     The defendants also seek general damages as a set-off for alleged breaches of the Lease, as described in the affidavit of Ms. Ramos. The burden is on the defendants to prove these claims.

(a)  Water Leak Payment

[111]     By letter dated January 10, 2017, Turner wrote to the Tenant enclosing an invoice in the amount of $8,774.20 for repair costs related to a water leak “caused by Rio Brazilian Steakhouse’s kitchen dishwasher leak” incident of October 5, 2016”. The defendants paid this invoice on April 3, 2017. They now say they did so under protest in response to an improper demand which was not the Tenant’s responsibility.

[112]     Beyond this assertion, the defendants provided no evidence to support their position. The evidence on this application in insufficient to permit this Court to conclude the source of the water leak was something other than the dishwasher at the Premises.

[113]     Can-Faith relies on Article 5.4 of the Lease pursuant to which the Tenant covenanted not to commit or permit any waste or injury to the building or the Premises including leasehold improvements and trade fixtures.

[114]     On a review of all the evidence, I am not satisfied the Tenant is entitled to a set-off for the $8,744.20 water repair payment.

(b)  Property Management Fees

[115]     The defendants say Turner increased the Tenant’s share of property management fees by approximately 200% on June 20, 2016.

[116]     The defendants say this increase grossly exceeded the fees charged by a first-class real estate management company in downtown Vancouver although that assertion was unsupported by expert evidence. The defendants suggested the Court could draw the necessary inference to support this assertion in the absence of expert evidence. I decline to do so.

[117]     The plaintiffs say the defendants have had ample time and opportunity to obtain expert evidence regarding the amount of real estate fees charged in Vancouver for use on this summary trial. They also say the actual amount of the Tenant’s share of increased management fees in 2017 was about $5,000. The plaintiffs deny this increase in management fees represented a breach or variation of the terms of the Lease agreement.

[118]     On all the evidence, I am unable to conclude that the increase in the Tenant’s share of Turner’s management fees supports the defendants’ claim for a set-off in the amount of $21,419.46.

(c)  Security Deposit

[119]     The Tenant seeks return of the security deposit paid in accordance with its obligations under the Lease and says the plaintiffs were required to return this deposit at the end of the Lease.

[120]     The plaintiffs say they were entitled to retain the security deposit as security for performance after the Lease was renewed. They also say that, because the defendants have failed to perform their obligations under the Lease, Can-Faith is entitled to credit the security deposit against their claims for arrears of rent and damages.

[121]     As I have found that Can-Faith is entitled to rent arrears and liquidated damages for accelerated rent, the defendants are entitled to a credit in an amount equal to the remainder of the security deposit (i.e., $17,599.37) as a set-off against the final award.

(d)  General Damages

[122]     The defendants bear the burden of proving their general damages claim. They have not provided the evidence necessary to permit this Court to quantify their counterclaim.

(e)  Repair Costs

[123]     Can-Faith seeks to recover costs it incurred to repair, restore and maintain the Premises after the Tenant vacated on April 30, 2017. These costs are itemised in the affidavit evidence of Turner and include junk removal, gas, heating and plumbing charges, the costs of rekeying the Premises, and invoices rendered by Turner in connection with litigation.

[124]     The defendants say the plaintiffs are not entitled to damages of $12,188.61, representing repair, restoration, and maintenance costs incurred after the Tenant vacated the Premises. The defendants say the Premises were left in “pristine condition” when they vacated on April 30, 2017.

[125]     Mr. Ramos deposes in his affidavit that he has “not been afforded sufficient opportunity” to “discover why the plaintiffs incurred expenses to repair, restore, and maintain the Premises”. That statement is not persuasive. It was open to the defendants to examine the plaintiffs for discovery in this action and to question the plaintiffs about these costs.

[126]     Turner’s invoices for costs incurred in the total amount of $5,281.24 in connection with “actual or threatened” litigation properly form part of Can-Faith’s claim for expenses under Article 15.1(d) as expenses incurred by the Landlord in efforts to seek remedies for the default, as discussed below.

[127]     Article 15.5(c) of the Lease provides as follows:

(c) the Tenant or person then controlling the affairs of the Tenant shall pay to the Landlord on demand such reasonable expenses as the Landlord has incurred, and a reasonable estimate of the Landlord of expenses the Landlord expects to incur, in connection with the re-entering, terminating, re-letting, collecting sums due or payable by the Tenant, and storing and realizing upon assets seized, including without limitation brokerage fees, legal fees, and disbursements, the expenses of cleaning and making and keeping the Leased Premises in good order, and the expenses of repairing the Leased Premises and preparing them for re-letting.

[128]     I am satisfied Can-Faith is entitled to recover the expenses it incurred in the amount of $12,188.61 pursuant to Article 15.5(c) of the Lease.

Is the Indemnifier Liable Under the Indemnity?

[129]     The Indemnifier does not dispute the validity of the Indemnity but argues the plaintiffs materially altered the risk to which he agreed to his detriment by significantly increasing the management fees payable under the Lease. The Indemnifier relies on Jens Hans Investment Co. v. Bridger, 2004 BCCA 340 (CanLII), in support of his position, a decision the plaintiffs say is distinguishable on its facts.

[130]     In Jenssupra, the landlord refused to consent to a sublease and the defendant was unable to operate its business as a result. The Court found the landlord’s unreasonable refusal to consent to a sublease amounted to a material change in the risks assumed by the indemnitor, thereby discharging him from his obligations under the indemnification agreement. The plaintiffs say the parties’ obligations under the Lease remained unchanged and there is no basis for relieving the Indemnifier of his obligations.

[131]     While the Indemnifier argues the increase in management fees was a material change in the parties’ agreement and the risks he assumed, I find that position to be unsupported by the evidence.

[132]     The evidence establishes the actual annual increase in the Tenant’s share of management fees was approximately $5,000 and not 200% as alleged by the defendants. There was no expert evidence before the Court to support the conclusion such an increase fell outside the norm for comparable property management services in the downtown Vancouver area at the relevant time.

[133]     Accordingly, I conclude the Indemnifier is not relieved of his obligations under the Indemnity.

Interest and Costs

[134]     The Lease provides as follows in Articles 15.1(c) and (d):

15.1(c)  if the Tenant shall fail to pay any rent promptly when due, shall be entitled, if it shall demand it, to interest thereon at a rate of 3% per annum in excess of the Prime Rate.

15.1(d) [The Landlord] shall be entitled to be reimbursed by the Tenant, and the Tenant shall forthwith pay the Landlord, the amount of all costs and expenses (including, without limitations, legal costs on a solicitor and own-client basis) incurred by the Landlord in connection with the default or in efforts to enforce any of the rights, or to seek any of the remedies, to which the Landlord is or may be entitled hereunder.

[135]     I see no reason to depart from the parties’ agreement regarding the payment of interest and costs as set out in the Lease. The Landlord is entitled to both costs and expenses in addition to the $5,281.24 already invoiced by Turner.

CONCLUSION

[136]     My conclusions and orders are summarised as follows:

  1. This matter is suitable for summary disposition pursuant to Rule 9-7.
  2. Issue estoppel precludes the defendants from taking the position the Tenant did not exercise its option to renew the Lease.
  3. Can-Faith is not entitled to liquidated damages in the form of accelerated rent and damages for the loss of prospective rent.
  4. There was no fundamental breach of the Lease by Can-Faith.
  5. Can-Faith is entitled to damages for arrears of rent to the date of termination of the Lease in the amount of $247,921.76.
  6. Can-Faith is entitled to $12,188.61 from the defendants for expenses it incurred to repair, restore and maintain the Premises after the Tenant vacated.
  7. The defendants are entitled to credits in the amount of $9,152.64 (due to a 2017 common area expenses reconciliation) and $17,599.37 (representing the Tenant’s remaining security deposit paid pursuant to the Lease).
  8. The Indemnifier is not discharged from his obligations pursuant to the Indemnity.
  9. The defendants have not met the burden of establishing Can-Faith has failed to mitigate its damages.
  10. The defendants are not entitled to a set-off of damages and their counterclaim is dismissed.
  11. Can-Faith is entitled to recover interest on all amounts owing at the rate of 3% above prime as provided for in Article 15.1(c) of the Lease.
  12. Can-Faith is entitled to recover its costs, including its costs of this application, to be agreed upon or assessed, pursuant to Article 15.1(d) of the Lease.

“Douglas J.”