Frustration of Contract (LTB)

CET-55930-16-RV (Re), 2016 CanLII 88098 (ON LTB)

2. Section 19 of the Residential Tenancies Act, 2016 (the 'Act') states that the doctrine of frustration and the Frustrated Contracts Act apply to tenancy agreements.

3. The doctrine of frustration (or impossibility of performance as it is also sometimes referred to) requires that a number of conditions be met before the doctrine will apply as identified in the Dictionary of Canadian Law, 3rd edition, D. D, pages 513-514.

4. First, an unexpected event that was not contemplated in the contract or foreseeable must occur.

5. Second, the unexpected event cannot be self-induced or the fault of one of the parties. A frequently quoted case on frustration states that the event cannot be the fault of either party (National Carriers Ltd. V. P (Northern) Ltd. [1981]1 A11 E.R. 161 (H.L.).

6. If it were otherwise, a party could undertake a destructive act (such as destroying a rental unit by fire or flood) in order to get themselves out of their obligations under a contract. This would be a self-induced frustration and an unjust result would occur if a party could rely on their own negligent acts or fault to get themselves out of an otherwise binding contract.

7. Third, the event must drastically change the nature of the contract so that it is impossible (not just difficult or expensive) to perform the obligations under the contract. The impossibility of performance must be of a long term nature and not temporary or transient.

8. The court in Re S and J et al., 1984 CanLII 2014 (ONSC) quoted the case of Lord S S.S. Co. Ltd. v. D C Co., Ltd., 1925 CanLII 330 (UK JCPC), (1926) 1 D.L.R. 873, (1926) A.C. 108 at p. 114, (1926) 1 W.W.R. 273, which held that:

... frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

9. All the conditions must be met for the doctrine of frustration to apply. If it is determined that one condition does not apply, it is not necessary to do a further analysis of whether the other conditions were met.

TSL-79813-16 (Re), 2017 CanLII 28616 (ON LTB)

13. Section 19 of the Act speaks to the issue of frustration of contracts. It reads as follows:

19. The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements. 2006, c. 17, s. 19.

14. Frustration of contract means that a contract can be brought to an end because of some factor that makes it impossible for a party, or both parties to comply with its fundamental terms. The party that argues that the contract should be put to an end must establish that it is impossible to perform the contract.

15. The facts in this case do not establish that on a balance of probabilities the Landlord is unable to perform the contract. Rather, what is evident is that the tenancy could continue once the Landlord has repaired the residential complex. The Tenant’s unit is intact; there is no dispute that the Tenant’s unit is not damaged. The issue is that the Landlord needs to repair the remainder of the residential complex, and her presence in the unit impedes his ability to do so.

CET-53895-15 (Re), 2016 CanLII 44625 (ON LTB)

13. In this case, the Landlord did not serve the Tenant with a notice of termination of tenancy for the purpose of repairs or renovations. The repairs and renovations were only initiated because of the fire, which was an unexpected and unfortunate event. Therefore, section 53 of the Act does not apply and the Tenant is not entitled to have the right of first refusal or to reoccupy the unit.

14. The Landlord is relying on the doctrine of frustration of contract and would like termination of the tenancy on this basis.

15. Section 19 of the Act states that: The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements.

18. This tenancy is currently impossible to perform given the condition of the building. Therefore, the tenancy agreement was frustrated as a result of the fire on November 5, 2015. As a result, the parties were discharged from any performance of the tenancy agreement after November 5, 2015. Therefore, the Tenant is entitled to the return of her November 2015 rent on a pro-rated basis

TET-67067-16 (Re), 2016 CanLII 72234 (ON LTB)

1. At 4:30 a.m. on Sunday, October 11, 2015, the Tenant was sleeping on the couch when she was woken by the police and evacuated from the rental unit along with her adult son and 7 year old granddaughter. The unit was on fire. The ignition point was the balcony. The family was transported to a local hospital and released shortly after. The Tenant has been staying in a hotel ever since, waiting for the rental unit to be repaired so she can return.

2. The Landlord takes the position that the tenancy was terminated as a result of the fire based on the doctrine of frustration of contract. (See section 19 of the Residential Tenancies Act, 2006 (the 'Act').) If the tenancy was terminated at the time of the fire then the Landlord cannot be held responsible for what happened to the Tenant afterwards.

3. In the alternative, it argues that the Tenant, an occupant or guest caused the fire and the Tenant or her insurer should be liable for the damage that occurred and all of the Tenant’s losses.

4. In the further alternative, the Landlord argues that it has addressed the disrepair in the rental unit in a timely and effective manner and no remedy should flow to the Tenant from the breach of subsection 20(1).

5. For the reasons that follow the Board finds that the tenancy agreement between the Landlord and Tenant was not terminated as a result of the application of the doctrine of frustration; the evidence is insufficient to establish that it is more likely than not that the Tenant, an occupant or guest wilfully or negligently caused the fire; and the Landlord has not responded to the disrepair to the rental unit in a timely or effective manner.

11. With respect to the first definition of frustration, it cannot be said that the rental unit was utterly destroyed. It was not. It was seriously damaged but there is no question that the unit was capable of being renovated and restored.

12. With respect to the second definition of frustration it cannot be said that the fire was unforeseeable. The Tenant had fire insurance for just such an eventuality. The Landlord’s Site Supervisor estimated he had been involved in maybe ten fire restorations in his career.

13. So the evidence simply does not support the conclusion that the tenancy agreement was frustrated as a result of the fire.

It is ordered that:

1. The Landlord shall forthwith complete the repairs to the rental unit.

2. The Landlord shall return vacant possession to the Tenant as soon as the unit is habitable.

3. The Landlord shall pay to the Tenant $45.00 for the cost of filing the application.

4. If the Landlord does not pay the Tenant the full amount owing by August 13, 2016, the Landlord will owe interest. This will be simple interest calculated from August 14, 2016, at 2.00% annually on the outstanding balance.

NOT-01163-10 (Re), 2010 CanLII 18612 (ON LTB)

10. Section 19 of The Residential Tenancies Act 2006 states: “The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements”. In considering this possibility, I must find that contract between the Landlord and the Tenant (the rental agreement) was subject to an event so significant that it changed the nature of the contract to the point that the Tenant should be discharged from her obligation to the contract.

11. The Tenant’s representative offered no tangible evidence (such as photographs or a property standards report) to support her claim that the Landlord’s delayed preparation rendered the rental unit uninhabitable - thereby frustrating the contract.

12. Sub-section 37(1) of The Residential Tenancies Act 2006 (‘the Act’) states: “A tenancy may be terminated only in accordance with this Act”.

13. Sub-section 44(3) of The Residential Tenancies Act 2006 states: “A notice under section 47, 58 or 144 to terminate a yearly tenancy shall be given at least 60 days before the date the termination is specified to be effective and that date shall be on the last day of a yearly period on which the tenancy is based”.

TSL-05808-10 (Re), 2010 CanLII 58985 (ON LTB)

1. At the hearing before me the parties filed an order dated September 27, 2010 issued by the City of Toronto that says the residential complex is unsafe and that occupancy of the rental unit is prohibited.

2. As I explained at the hearing section 19 of the Residential Tenancies Act, 2006 (the ‘Act’) says: “The doctrine of frustration of contract and the Frustrated Contracts Act apply with respect to tenancy agreements.” Essentially the doctrine of frustration says that when a contract becomes impossible of performance, then the contract has come to an end. As the doctrine applies to residential tenancy agreements what this means is that when a residential complex cannot be physically lived in anymore because it has been condemned, the tenancy has come to an end by operation of law.

3. As a result, an order will issue declaring the tenancy termination by operation of the doctrine of frustration.

EAT-59142-16 (Re), 2016 CanLII 106381 (ON LTB)

8. The Landlord’s Representative invoked the “doctrine of frustration of contract” and the Frustrated Contracts Act , which apply to tenancy agreements pursuant to section 19 of the Residential Tenancies Act, 2006 (the ‘Act’). The tenancy agreement was impossible to perform, and therefore frustrated, as a result of a severe rainstorm on July 9, 2016 that left. According to the Landlord, responsibility for the leak cannot be attributed to the condition of the roof or the roof drains.

13. On July 9, 2016, the rental unit was rendered uninhabitable due to a severe rainstorm that caused a significant amount of water to leak into the Tenant’s rental unit. While the inspection report prepared for the Tenant’s insurer indicates that the roof may not have been in good condition, this evidence is contradicted by an earlier report from the Landlord’s roofing contractor. More importantly, it is not possible to conclude from the evidence before me that either the condition of the roof or that of the roof drain is directly responsible for the leak that damaged the Tenant’s unit. I find, on a balance of probabilities, that the clogged drain or the condition of the roof in general were not the cause of the leak that caused damage inside the Tenant’s unit.

14. The Tenant is entitled to reimbursement of the monthly rent for July 2016, the monthly rent for August, the last month’s rent deposit that he paid as well as interest that accrued on the deposit. The amount that the Landlord must pay the Tenant is $2,562.42.

15. The Tenant is not entitled to compensation for the increase in rent that he incurred as a result of having to move into another rental unit because that other unit is not comparable to the one that he lived in previously. While the Tenant contends that other comparable rental units were not available in the same neighbourhood, he has not presented persuasive evidence to support that contention.

16. The Landlord complied with its responsibility under subsection 20(1) of the Act to provide and maintain the residential complex in a good state of repair. It also complied with its responsibility under section 22 of the Act not to interfere with the Tenant’s reasonable enjoyment of the rental unit. Since the cause of the Tenant’s loss was something other than the Landlord’s failure to maintain the residential complex or interference with the Tenant’s reasonable enjoyment of the rental unit, the Tenant’s claim for compensation for property damage is denied.

SWL-20529-18-RV (Re), 2019 CanLII 89686 (ON LTB)

16. Furthermore, the cause of the fire was relevant to the Member’s decision in the Tenant’s application because the Landlord claimed frustration of contract. The Member quoted the Divisional Court decision in Dhillon v. PM Management Systems Inc. (2014) ONSC 5407 at para. 14 stating that “an event is not a frustrating event if it is foreseen or provided for in the contract or the frustrating event was caused by the fault of a party to the contract”. Therefore, the cause of the fire was a relevant issue in the Board’s consideration of the Landlord’s argument that the tenancy had been frustrated, and hence terminated, due to the fire.

17. While I agree with the Landlord that the Courts have indicated that issue estoppel should not be applied rigidly in a manner that results in an injustice, I do not find that to be the case here. The Landlord had a chance to present its arguments and evidence to support its position that the Tenant was responsible for the fire during the hearing of the Tenant’s application.

TST-99550-18-AM (Re), 2019 CanLII 87146 (ON LTB)

22. The Landlord relies upon the doctrine of frustration as grounds for his terminating the tenancy. In SWT-15411-18-AM (RE), 2018 CanLII 88487, the Board determined at para. 29 that the landlord cannot first unlawfully evict the tenant and thereafter obtain an order from the Board vindicating that eviction.

23. Furthermore, the fire was not a frustrating event. Section 19 of the Act states that the doctrine of frustration of contract and the Frustrated Contracts Act, R.S.O. 1990, c. F.34 apply with respect to tenancy agreements.

24. Section 3 of the Frustrated Contracts Act reads:

3. (1) The sums paid or payable to a party in pursuance of a contract before the parties were discharged,

(a) in the case of sums paid, are recoverable from the party as money received for the use of the party by whom the sums were paid; and

(b) in the case of sums payable, cease to be payable.

25. What this means is that where a tenancy agreement is frustrated the agreement to pay rent in return for the right to occupy is over. Any money paid for rent for the period after frustration occurs is refundable to the tenant and no further rent is owed.

26. In general the authorities speak of two types of frustration:

• where the rental unit has been utterly destroyed or so seriously damaged that restoration will be very protracted and resumption of ::the tenancy is not reasonably foreseeable; or

• where an unforeseeable intervening event occurs that is not the fault of either party but so significantly changes the rights and obligations of the parties that it would be unjust to hold them to their contractual bargain.

27. With respect to the first definition of frustration, it cannot be said that the rental unit was utterly destroyed. It was not. It was seriously damaged but there is no question that the unit was capable of being renovated and restored in a relatively short period of time.

28. With respect to the second definition of frustration it cannot be said that the fire was unforeseeable. The Landlord and the Tenant had fire insurance for just such an eventuality. Tenant’s Responsibility as it pertains to the Doctrine of Frustration

29. Section 34 of the Act states:

34. The tenant is responsible for the repair of undue damage to the rental unit or residential complex caused by the wilful or negligent conduct of the tenant, another occupant of the rental unit or a person permitted in the residential complex by the tenant.

CET-67363-17 (Re), 2017 CanLII 93939 (ON LTB)

37. Section 19 of the Act states that the doctrine of frustration and the Frustrated Contracts Act apply to tenancy agreements. 38. I agree with the following as set out in Order CEL-55930-16-RV:

a) The doctrine of frustration (or impossibility of performance as it is also sometimes referred to) requires that a number of conditions be met before the doctrine will apply as identified in the Dictionary of Canadian Law, 3rd edition, pages 513-514.

b) First, an unexpected event that was not contemplated in the contract or foreseeable must occur.

c) Second, the unexpected event cannot be self-induced or the fault of one of the parties. A frequently quoted case on frustration states that the event cannot be the fault of either party (National Carriers Ltd. v. Panalpina (Northern) Ltd. [1981] All E.R. 161 (H.L.).

d) Third, the event must drastically change the nature of the contract so that it is impossible (not just difficult or expensive) to perform the obligations under the contract. The impossibility of performance must be of a long term nature and not temporary or transient.

e) The Court in Re S and J et al. 1982 CanLII 2014 (ONSC) quoted the case of Lord Shaw in Lord Strathcona Steamship Co. v. Dominion Coal Co. 1925 CanLII 330 (UK JCPC), (1926) 1 D.L.R. 873

…frustration can only be pleaded when the events and facts on which it is founded have destroyed the subject matter of the contract, or have, by an interruption of performance thereunder so critical or protracted as to bring to an end in a full and fair sense the contract as a whole, so superseded it that it can be truly affirmed that no resumption is reasonably possible.

f) All the conditions must be met for the doctrine of frustration to apply. If it is determined that one condition does not apply, it is not necessary to do a further analysis of whether the other conditions were met.

39. The Landlords have not met the third part of the test for frustration of contract. While the repairs became protracted after the fire, resumption of occupancy of the rental unit was reasonably possible. The Landlords did not give the Tenant notice of termination after the fire occurred. The Landlords continued discussions with the Tenant during the repair period regarding continuation of the tenancy. On December 13, 2016, the Landlords presented a rent increase agreement to the Tenant to increase the rent by $25.00 per month in return for replacement of all cabinetry in the Tenant’ unit. In April 2017, the Landlords presented the Tenant with a “rental agreement renewal” which states that the rental unit was available to the Tenant as of June 1, 2017. This evidence does not demonstrate impossibility of performance.

40. Therefore the doctrine of frustration does not apply and the tenancy could not be considered ended when the fire occurred in July 2016.