Damages - Re: Unlawful Forfeiture (Commercial Tenancy)

Karunananthan v Zhong, 2015 CanLII 1023 (ON SCSM)

[37] The defendant submitted that pursuant to section 20 (1) of the CTA the plaintiff cannot sue the defendant for damages after he brought the Application for relief from forfeiture and that such damages action cannot be brought before this court.

[38] That section does not preclude a tenant from seeking damages after successfully bringing an application for relief from forfeiture. A plaintiff’s damages are not always fully known at the time of the application for relief from forfeiture thus a damages claim may follow at a later date. This court has wide jurisdiction to hear matters relating to the payment of money up to its monetary jurisdiction. In my view it was open to the plaintiff to bring this action before this court for damages arising in the circumstances of this case.

Pita Royale Inc. v. Buckingham Properties Inc., 2017 ONSC 5976 (CanLII)

[133] Where distress is taken illegally, the landlord may be liable for general damages to the owner of the goods or chattels distrained: Grant Equipment Corp.; Commercial Tenancies Act, s. 55.

[134] Where distress is wrongful—either because it is illegal or excessive—damages are normally special damages. In most wrongful distress cases, the plaintiff’s loss arises from conversion of the plaintiff’s property. As Harvey Haber explains, an action for damages in conversion exists in all wrongful distress cases: Harvey Haber, Tenant’s Rights and Remedies in a Commercial Lease: A Practical Guide, 2nd ed. (Toronto: Thomson Reuters, 2014), at pp. 301, 304. The measure of damages therefore follows the law of conversion, and will usually equal the value of the property at the time of conversion. Of course, as in other conversion cases, additional damages, such as for lost business, will sometimes result.

[135] Where distress is excessive, damages are normally special damages. In extreme cases, such as where wrongful distress causes a business to fail, expectation or reliance damages may be appropriate. The approach to calculating these damages is set forth in Grant Equipment Corp.:

In general, the plaintiff in an action for breach of contract is entitled to recover the amount of money that will place him or her in the position that he or she would have been in had the contract not been breached. This is referred to as the expectation interest. Where it is not possible to award the expectation interest, a party may elect to have damages that protect the reliance interest, that is, those expenditures made in reliance on the contract being performed. In situations where the loss of profit is difficult to prove, a plaintiff may elect to abandon the claim for lost profit and seek, instead, a repayment of expenses: 1413910 Ontario Inc. v Select Restaurant Plaza Corp., 2006 CarswellOnt. 8579.

In order to award damages for lost investment, the Court must be satisfied that the business would have generated sufficient revenue to recover that investment had the contract not been wrongfully terminated. The onus is on the defendant to establish that the business would not have generated revenue sufficient to recover its investment. As noted by Prof. Waddams in The Law of Damages (Looseleaf (Aurora: Canada Law Book Inc., 2005) at paragraph 5.230), and cited with approval by Blair J in Angoss II Partnership v Trifox Inc., at para 219:

Nevertheless, the result of the case may be supported on the basis that, in the absence of proof one way or the other of the profitability of the [enterprise], it is to be assumed against the wrongdoer that the enterprise would at least have broken even, that is, that the expenses would at least have been covered by revenue. It is suggested that it is not unjust to make such a presumption against the defendant who is the party in breach of contract. It would still be open, on this approach, for the defendant to prove, if possible, that the expenses would not have been recovered from revenues, and on proof of that fact, the defendant ought not to be liable to pay for the expenses.

[136] The general rule is that the burden is on the plaintiff to establish on the balance of probabilities that, as a reasonable and probable consequence of the breach of contract, the plaintiff suffered the damages claimed. If the plaintiff is not able to establish a loss, or where the loss proven is trivial, the plaintiff may recover only nominal damages.

[137] A second fundamental principle is that where it is clear that the breach of contract caused loss to the plaintiff, but it is very difficult to quantify that loss, the difficulty in assessing damages is not a basis for refusal to make an award in the plaintiff’s favour. One of the frequent difficulties in assessing damages is that the plaintiff is unable to prove loss of a definite benefit but only the “chance” of receiving a benefit had the contract been performed. In those circumstances, rather than refusing to award damages, the courts have attempted to estimate the value of the lost chance and awarded damages on a proportionate basis: 1413910 Ontario Inc. v Select Restaurant Plaza Corp., [2006] O.J. No. 5309 (S.C.).

[138] The fact that it is difficult to calculate damages is not a reason not to calculate them. “The fact that assessment is difficult is no ground for awarding nominal damages. The broad general rule is that damages which are uncertain, contingent and speculative in their nature cannot be made a basis of recovery; but this rule against recovery of uncertain damages is directed against uncertainty as to cause rather than as to the extent or measure”: Webb & Knapp (Canada) Ltd. v. City of Edmonton, 1970 CanLII 173 (SCC), [1970] S.C.R. 588, at p. 601.

[139] Punitive or exemplary damages have also been awarded against a landlord where its exercise of distress was oppressive and there have been aggravating circumstances: S. Posen, The Tenant’s Remedies for Wrongful Distress, in Haber ed., Distress, A Commercial Landlord’s Remedy (Aurora, Ont.: Canada Law Book, 2001), at pp. 134-37; Sigrist v. McLean.

[140] In Country Kitchen Ltd., the Newfoundland Court of Appeal cited Attack v. Bramwell (1963), 3 B & S 520, at p. 526, which stated as follows:

A landlord has, by law, the special privilege of paying himself his rent by seizing his tenants’ goods; and where he takes that proceeding in a way not authorized; he is a trespasser, not only in entering, but in seizing and disposing of the goods taken, and the ordinary rule is that the injured party shall recover their full value.

[141] The Newfoundland Court of Appeal further recognized that punitive damages for illegal distraint are awarded where said illegal distraint is the cause of injury to a person’s credit or reputation in the carrying out of his business by interruption of that business, or loss of supply of stock in trade as a result of the illegal distraint. In such cases, there is real damage, but damage that is difficult or even impossible to calculate with exactitude. In such instances, the courts have justified a substantial award.

Malka and Circle Inc. v. Vasilladis and Lugassy, 2011 ONSC 5884 (CanLII)

[129] This interpretive approach is consistent with the operation of s. 18(1) of the Commercial Tenancies Act, R.S.O. 1990, chap. L.7 (as amended), which provides, essentially, that every demise, whether by parol or in writing, unless otherwise agreed, shall be deemed to include an agreement that, if any part of the rent remains unpaid for 15 days “after any of the days” on which it ought to have been paid, the landlord may, without formal demand, re-enter the premises and repossess it again as the landlord’s former estate. See also: Malva Enterprises Inc. v. Rosgate Holdings Ltd. (1993), 1993 CanLII 8675 (ON CA), 14 O.R. (3d) 481 (C.A.).

[130] Accordingly, in my view the plaintiffs were overdue in making their February rent payment when it was not paid on February 1, 1999, as required by the lease. The seven-day grace period in the lease expired seven days after the plaintiffs missed that deadline. Further, the plaintiffs defaulted in their obligation to make timely monthly rent payments when they failed to pay the rent by 11:00 a.m. on February 19, 1999. It was at that point that the landlord was legally entitled to exercise his right to terminate the lease for the non-payment of rent. Mr. Vasiliadis did not, in my opinion, breach any condition of the lease. Rather, he was perfectly entitled to exercise his legal rights on February 22, 1999, given the default by the plaintiffs. Indeed, he would have been able to exercise those legal rights earlier had he not kindly agreed to the extensions sought by Mr. Malka.

[133] The law is clear that when a tenant defaults in the obligation to pay rent, the landlord has two mutually exclusive legal remedies, and must elect which remedy to pursue. The landlord can elect to enter the premises and distrain the goods owned by the tenant for purposes of satisfying the debt owed by way of rent, but with a view to continuing the lease. Alternatively, the landlord can elect to re-take possession of the premises and terminate the lease, and potentially pursue other additional remedies. See: Clarkson Co. Ltd. v. Consortium Group Ltd. (1983), 1983 CanLII 1995 (ON SC), 40 O.R. (2d) 771 (H.C.J.) at p. 778; Falwyn Investors Group Ltd. v. GPM Real Property (6) Ltd., [1998] O.J. No. 5258 (Gen.Div.) at para. 15, 18, 44; Highway Properties Ltd. v. Kelly, Douglas & Co. Ltd., 1971 CanLII 123 (SCC), [1971] S.C.R. 562; North Bay T.V. & Audio Ltd. v. Nova Electronics Ltd. (1983), 1984 CanLII 2100 (ON CA), 44 O.R. (2d) 342 (H.C.J.) at p. 345; Affirmed: (1984), 47 O.R. (2d) 588 (C.A.).