COURT OF APPEAL FOR ONTARIO

CITATION: Saramia Crescent General Partner Inc. v. Delco Wire
    and Cable Limited, 2018 ONCA 519

DATE: 20180607

DOCKET: C63845

Pepall, Trotter and Nordheimer JJ.A.

BETWEEN

Saramia Crescent General Partner Inc.

Plaintiff (Respondent)

and

Delco Wire and Cable Limited and IEWC Canada
    Corp.

Defendants (Appellants)

David R. Byers, Patrick G. Duffy and Michael Currie, for
    the appellants

Luisa J. Ritacca and Fredrick R. Schumann, for the
    respondent

Heard: March 26, 2018

On appeal from the judgment of Justice Jasmine T. Akbarali
    of the Superior Court of Justice, dated May 2, 2017, with reasons for judgment reported
    at 2017 ONSC 961 and reasons for costs reported at 2017 ONSC 3507.

Nordheimer J.A.:

[1]

The defendants appeal from the judgment of Akbarali J. that awarded the
    plaintiff damages in the amount of $1,277,000, along with interest and costs. The
    claim arises out of the defendants repudiation of a commercial lease
    respecting a property owned by the plaintiff. Subsequent to the repudiation,
    the plaintiff sold the property. Liability was admitted and the only issue at
    trial was the assessment of what damages, if any, were due to the plaintiff by
    the defendants. The trial judge found that the property was not sold at fair
    market value and awarded damages for loss of rental profits as well as loss of
    capital appreciation on the property.

[2]

On appeal, the appellants primarily argue that the sale of the property
    fully mitigated or avoided any damages, and that damages for lost capital
    appreciation were too remote. Thus the central issue in this appeal is how
    damages arising from the repudiation of a commercial lease should be
    calculated.

[3]

In my view, the trial judge erred in some aspects of her assessment of
    the damages arising from the repudiation. I would therefore allow the appeal
    for the reasons that follow.

Background

[4]

The respondent/plaintiff, Saramia Crescent General Partner Inc. (Saramia),
    is a single-purpose Ontario company. It owned a single-tenant industrial
    property known municipally as 1 Saramia Crescent in the City of Vaughan,
    Ontario (the Property).

[5]

The appellant/defendant, Delco Wire and Cable Limited (Delco), entered
    into a lease on August 3, 2000 with the prior owner of the Property (the
    Lease). The Lease was for a term of 15 years, expiring August 31, 2015.

[6]

On November 15, 2011, Agellan Capital Partners Inc. (Agellan), a company
    associated with Saramia, closed its purchase of the Property through a shell
    corporation for $2,575,000. The agreement of purchase and sale was then assigned
    to Saramia on the same day and Saramia engaged Agellan to be the asset manager
    for the Property. As a result, Saramia acquired the rights and responsibilities
    of the landlord under the Lease on November 15, 2011. Concurrently, Saramia and
    Delco agreed to extend the term of the Lease for a period of six years, from
    September 1, 2015 to August 30, 2021. The trial judge found that Saramia would
    not have purchased the Property if it had been unable to negotiate the lease
    extension.

[7]

In December 2012, the appellant/defendant, IEWC Canada Corp. (IEWC),
    purchased Delcos assets, including its interest in the Lease. The Lease was
    assigned to IEWC, with Saramias consent, on or about December 31, 2012.

[8]

Shortly after its acquisition of Delco, IEWC decided to consolidate its overall
    operations at a facility that it owned in Aurora, Ontario. Consequently, it
    began efforts to sublease the Property. IEWC contacted CBRE Limited (CBRE), a
    commercial real estate services firm, to assist in locating a subtenant.

[9]

In the course of its search, CBRE did not find anyone who was interested
    in leasing the Property. However, it did identify a number of parties that were
    interested in purchasing and occupying the Property for their own use. CBRE
    approached Agellan about the possibility of selling the Property and was told by
    Agellan to bring me a buyer. CBRE located at least three such potential buyers.

[10]

Saramia
    then negotiated agreements of purchase and sale with each of these three
    potential purchasers. Saramia set the purchase price at $3,450,000 based on its
    knowledge of the market and on the understanding that it would also receive a
    lease buy-out from IEWC. The agreements of purchase and sale included a vacant
    possession condition, allowing Saramia to refuse to carry out the transaction
    if vacant possession could not be provided by the closing date. Two of the
    three potential purchasers were unable to complete the transaction. However, the
    third purchaser was able to do so.

[11]

As
    part of this process, Saramia told CBRE that it would only consider selling the
    Property on the condition that it could negotiate a lease buyout with IEWC.
    CBRE said that IEWC was amenable to that.

[12]

In
    late October 2013, representatives of IEWC and Saramia attempted to negotiate
    mutually agreeable terms for the early termination of the Lease. However, an
    impasse developed over what the two parties thought was the appropriate measure
    for the lease buyout. Negotiations broke down.

[13]

On
    November 1, 2013, IEWC advised Saramia that it had paid rent to the end of
    November 2013, but that no further rent payments would be made under the Lease.
    Saramia accepted the repudiation of the Lease on November 14, 2013. On November
    15, 2013, IEWCs lawyer wrote to Saramia advising that Saramia should proceed
    to sell the Property to mitigate its loss. On December 10, 2013, Saramia closed
    the sale of the Property. Saramia received $3,450,000 for the Property but
    incurred a $103,458 mortgage break fee for the early termination of the
    mortgage.

[14]

On
    February 5, 2014, Saramia commenced the underlying action against the
    appellants for damages for breach of the Lease. A five-day trial was held in
    December 2016.

The Trial Judges Findings

[15]

The
    trial judge found that Saramia was forced to sell the Property when the
    appellants repudiated the Lease. She found that Saramia could not afford the
    ongoing maintenance and mortgage expenses associated with the Property without
    the rental income.

[16]

The
    trial judge also found that the sale of the Property in 2013 was not at fair
    market value. She found, as a consequence, that the sale of the Property did
    not make Saramia whole for the losses sustained as a result of the repudiation
    of the Lease.

[17]

The
    trial judge then reviewed the decision in
Highway Properties Ltd. v. Kelly,
    Douglas & Co.
, [1971] S.C.R. 562 for the basic principles relating to
    the proper assessment of damages arising from the breach of a lease. The trial
    judge then said, at para. 46:

Laskin J.s reasons are consistent with the fundamental
    principle that the goal of a damages award for breach of contract (including
    breach of lease) is to put the innocent party in the position it would have
    been in had the contract been performed as agreed. Ordinary principles of
    mitigation and remoteness are relevant. In the case of a breach of lease, the
    proper measure of damages is unpaid rent to the date of the breach plus the
    present value of the loss of the future rent, which is the present value of the
    unpaid rent for the unexpired period of the lease less the actual rental value
    of the premises for that period: see
Morguard Corp. v. 2063881 Ontario Inc.
,
    2013 ONSC 7213 at para. 23.

[18]

The
    trial judge, however, did not employ the above method of calculating the
    damages due to Saramia. Rather, she concluded that Saramia not only would have
    enjoyed the benefit of the lost rental profits under the Lease, but that it
    would also have enjoyed the capital appreciation of the Property. The trial
    judge concluded that the sale of the Property in 2013 did not account for these
    benefits, which Saramia would have enjoyed had the Lease been honoured.

[19]

The
    trial judge then proceeded to consider the three expert reports that were
    provided to her. One concerned the valuation of the Property as at December 31,
    2015. The other two expert reports involved different discounted cash flow (DCF)
    analyses presented for the purpose of quantifying the damages.

[20]

The
    expert report on valuation, prepared by Avison Young, appraised the Propertys
    value as at December 31, 2015 on either an income generation measure or direct
    comparator measure. On the income measure, the Property was appraised at
    $4,180,000. On the direct comparator measure, the Property was appraised at
    $4,465,000. The trial judge accepted the $4,465,000 appraisal in her reasons.
    That appraisal value was then used in the DCF analyses to calculate total
    damages.

[21]

The
    first set of DCF analyses were prepared by Saramias expert, KPMG. There were
    two primary scenarios analyzed in this report.
[1]
The first scenario assumed a sale price for the Property in 2021 (the end of
    the Lease term) by projecting the December 10, 2013 sale price of $3,450,000
    forward to 2021 at an assumed growth rate and discount rate of 2% per year. Thus
    the DCF effectively assumed that the real value of the Property would remain
    constant past 2013. The respondents damages under this scenario were $357,000.

[22]

In
    the second scenario, the 2021 sale price was arrived at using the December 31,
    2015 appraised value of the Property of $4,465,000. This price was then projected
    forward to 2021 at the same assumed growth rate of 2% per year along with the
    same 2% discount rate. This, in turn, assumed that the 2015 real value for the
    Property remained constant. This scenario calculated Saramias damages at $1,124,000.

[23]

The
    second set of DCF analyses were prepared by the appellants expert, Cohen
    Hamilton Steger. This report responded to the various DCF scenarios presented
    in KPMGs report. Based on the two sale prices described above, the Cohen
    report concluded that Saramia suffered no loss from the breach of the Lease. To
    the contrary, Saramia was, in fact, better off as a result of the repudiation.

[24]

The
    trial judge adopted KPMGs second scenario as the basis for her damages award,
    that is, the scenario that employed the December 31, 2015 appraised value of
    the Property. However, she deducted the mortgage break fee amount that Saramia
    had to pay from the principal amount available for reinvestment for mitigation
    purposes. The trial judge also awarded an amount of contractual interest owing
    under the Lease. Ultimately, she left the calculation of the actual loss to the
    parties to work out.

Issues on Appeal

[25]

The
    appellants submit that the Property was sold at fair market value. The sale of
    the Property, therefore, fully mitigated Saramias claimed capital loss and
    foregone rental profits attributable to the unexpired Lease term. Moreover, the
    appellants submit that damages for lost capital appreciation are too remote,
    the DCF is too unreliable, and the award of contractual interest amounted to
    double recovery. In any event, the appellants argue that the sale of the
    Property should have ended the accrual of damages past the date of sale.

[26]

Saramia
    submits that all of the trial judges findings and conclusions are correct. Saramia
    contends that the purpose of contract damages is full indemnification and the
    trial judges award reflects that fundamental principle.

[27]

As
    such, the issues on appeal are as follow:

(a)

What is the proper measure of damages for breach of a commercial lease?

(b)

Were the damages for lost capital appreciation too remote?

(c)

Were the damages mitigated?

(d)

Does the sale of the Property stop damages from accruing beyond the date
    of the sale?

(e)

Are the damages as calculated by the DCF too uncertain?

(f)

Was it an error to award the contractual interest amount as damages?

Standard of Review

[28]

A
    trial judges determination of damages is a question of mixed fact and law. Thus,
    it attracts deference on review. In order for an appellate court to interfere
    with a determination of damages, the appellants must generally show that the
    trial judge committed a palpable and overriding error. However, there is an
    exception to that standard. Where the determination of damages involves
    extricable questions of law, those questions are subject to review for
    correctness.

[29]

In
    that regard, the proper approach to be taken by an appellate court in reviewing
    a damages award was summarized in
Naylor Group Inc. v. Ellis-Don
    Construction Ltd.
, 2001 SCC 58, [2001] 2 S.C.R. 943 where Binnie J. said,
    at para. 80:

It is common ground that the Court of Appeal was not entitled
    to substitute its own view of a proper award unless it could be shown that the
    trial judge had made an error of principle of law, or misapprehended the
    evidence [] or it could be shown there was no evidence on which the trial
    judge could have reached his or her conclusion [] or the trial judge failed to
    consider relevant factors in the assessment of damages, or considered
    irrelevant factors, or otherwise, in the result, made a palpably incorrect or
    wholly erroneous assessment of the damages [] Where one or more of these
    conditions are met, however, the appellate court is obliged to interfere.

[Citations omitted.]

Analysis

(a)

The measure of damages for the breach of a lease

[30]

As
    the trial judge recognized, the fundamental principles to be applied in
    calculating damages arising from the breach of a lease are set out in the
Highway
    Properties
decision. The applicable principle was stated by Laskin J., at
    p. 570:
[2]

The landlord may elect to terminate the lease but with notice
    to the defaulting tenant that damages will be claimed on the footing of a
    present recovery of damages for losing the benefit of the lease over its
    unexpired term. One element of such damages would be, of course, 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. Another element would be
    the loss, so far as provable, resulting from the repudiation

[31]

In
    this case, however, Saramia did not re-lease the Property. Rather, it sold the
    Property. While I will discuss the ramifications of that decision on the issue
    of mitigation of damages later, it still leaves Saramia with its claim for the
    present value of the unpaid rent. However, from that value, Saramia would be required
    to deduct any savings it obtained as a result of no longer owning the Property.
    Only then will the award of unpaid rent conform with the general principle that
    contract damages are intended to place the plaintiff in the position it would
    have occupied had the contract been performed.

[32]

In
    this case, the commercial lease was a carefree lease to Saramia, that is, the
    ongoing costs associated with the Property were to be borne by the appellants. Consequently,
    no deduction had to be made for those ongoing costs. However, Saramia, on the
    sale of the Property, no longer had to make the mortgage payments associated
    with the Property. Those savings had to be deducted from the lost rental
    payments in the DCF calculation. The same concern arises with respect to any
    fees due to Agellan or that otherwise would have been incurred had the Lease
    been honoured. The respondents expert, KPMG, made those deductions in arriving
    at their damages calculations.

[33]

Had
    the trial judges analysis ended at that point, there would be much less of an
    issue to address. However, the trial judge went on to consider the loss of
    capital appreciation on the Property. After reviewing some additional
    authorities on the issue, the trial judge said, at para. 58:

The measure of damages for IEWC's breach must put Saramia in
    the position it would have been in had the lease obligations been honoured. Had
    IEWC not breached its obligations, Saramia would have continued to enjoy the
    stream of lease income. By 2015, it would have enjoyed significant capital
    appreciation in the property. By 2021, it would have enjoyed more lease income
    and the opportunity for further capital appreciation in the property (although
    it would also have run the risk of depreciation in the property). There is no
    evidence to allow me to conclude that the fair market value of the property in
    2013 would account for these specific economic benefits that Saramia would have
    enjoyed had IEWC not repudiated the lease and forced the propertys sale.

[34]

The
    first two sentences from this portion of the trial judges decision are
    correct. The balance of that portion, however, reflects an error by the trial
    judge. As I have already set out, the law is clear that what the appellants are
    liable for are the rental payments that they did not make, subject to Saramias
    duty to mitigate and the expenses Saramia avoided by selling the Property. Whatever
    but for capital appreciation there may, or may not, have been in the Property
    going forward, it is not a proper head of damages for which the appellants are
    liable through their repudiation of the Lease, if those losses are too remote
    an issue to which I now turn.

(b)

Remoteness of damages for lost capital appreciation

[35]

In
    order for a party to be liable for damages for the breach of a contract, the damages
    must not be too remote. The test for remoteness of contract damages was set out
    in the seminal decision of
Hadley v. Baxendale

(1854), 156 E.R.
    145 (U.K. Ex. Ct.), at p. 151
per

Alderson B.:

Now we think the proper rule in such a case as the present is
    this: Where two parties have made a contract which one of them has broken, the
    damages which the other party ought to receive in respect of such breach of
    contract should be such as may fairly and reasonably be considered either
    arising naturally,
i.e.
, according to the usual course of things, from
    such breach of contract itself, or such as may reasonably be supposed to have
    been in the contemplation of both parties, at the time they made the contract,
    as the probable result of the breach of it.

This test has been expressly adopted by the Supreme
    Court of Canada in several cases, including
Honda Canada Inc. v. Keays
,
    2008 SCC 39, [2008] 2 S.C.R. 362, at para. 54.

[36]

As
    such, there are two branches to the
Hadley v. Baxendale

remoteness
    test. Damages may be recovered if: (i) in the usual course of things, they
    arise fairly, reasonably, and naturally as a result of the breach of contract;
    or (ii) they were within the reasonable contemplation of the parties at the
    time of contract. It is important to highlight that remoteness applies to the
    type of loss suffered, not the quantity of a proximate loss:
1298417
    Ontario Ltd. v. Lakeshore (Town)
, 2014 ONCA 802, 122 O.R. (3d) 401, at
    para. 137. The claimed damages for lost capital appreciation in the instant
    case, however, fall outside of both branches of
Hadley v. Baxendale
.

[37]

With
    respect to the first branch, the trial judge held at para. 91 of her reasons
    that
[i]n these circumstances
, the loss of the capital appreciation was
    foreseeable and arose naturally from the breach of contract (emphasis added). In
    so saying, the trial judge appears to conflate the two branches set out in
Hadley
    v. Baxendale
, and in doing so she erred.

[38]

The
    test under the first branch of remoteness is objective:
KPM Industries Ltd.
    v. Elmford Construction Co.
(1996), 30 C.L.R. (2d) 245, 1996 CarswellOnt
    3594 (Gen. Div.), at para. 152, affirmed (1998), 113 O.A.C. 369 (C.A.);
The
    Queen v. Canamerican Auto Lease & Rental Ltd
.
(1987), 37 D.L.R.
    (4th) 591 (Fed. C.A.), at p. 604; and G.H.L. Fridman,
The Law of Contract
    in Canada
, 6th ed. (Toronto: Carswell, 2011), at p. 679.

[39]

The
    question is not whether the type of loss,
i.e.
lost capital
    appreciation, was foreseeable as arising naturally
in this
case
.
    The inquiry is whether, as a general matter and objectively viewed, lost
    capital appreciation is a type of loss that foreseeably and naturally arises according
    to the usual course of things from the breach of a commercial lease. One of
    the factors that could be used to define the foreseeable and natural types of
    losses recoverable upon breach of contract is the objective bargain inherent in
    the contract. In a commercial lease, the tenants bargain is the use of the
    premises for trade or commerce and the landlords bargain is the receipt of
    rental income. Objectively viewed, the inherent bargain in a commercial lease
    does not include the opportunity to profit from speculative capital
    appreciation. In my view, therefore, damages for lost capital appreciation do
    not fairly and reasonably arise from the breach of a commercial lease.

[40]

This
    conclusion is consistent with other decisions that have considered the issue
    including,
Canadian Medical Laboratories Ltd. v. Stabile
(1992), 25
    R.P.R. (2d) 106, 1992 CarswellOnt 593 (Gen. Div.), at para. 69, where Mandel J.
    found that the loss of capital appreciation does not naturally arise from the
    breach or repudiation of a lease. Indeed, counsel did not refer us to any case
    where loss of capital appreciation constituted damages flowing from the
    repudiation of a lease.

[41]

With
    respect to the second branch of remoteness from
Hadley v. Baxendale
, there
    is nothing in the evidence that would support a conclusion that the parties
    contemplated, at the time that they entered into or extended the Lease, that
    capital appreciation of the Property would be something for which the tenant
    would be liable to the landlord if the Lease was breached. Indeed, at the time
    that the Lease was first signed, neither IEWC nor Saramia were parties to it.
    Nor is there any evidence that a reasonable person would have contemplated such
    a loss in light of the circumstances known to the parties.

[42]

The
    lost capital appreciation ought not to have formed part of the damages
    calculation in this case because it was not a matter that was in the reasonable
    contemplation of the parties at the time that the Lease was entered into. It is
    a head of damages that is simply too remote. I note that this same conclusion
    was reached by Wilson J. in
Keneric Tractor Sales Ltd. v. Langille
, [1987]
    2 S.C.R. 440, at pp. 456-57 when dealing with the assessment of damages arising
    from the breach of a lease of chattels.

[43]

Moreover,
    in analyzing the second branch of
Hadley v. Baxendale
as she did, the trial
    judge looked at the reasonable contemplation of the parties as at the time of
    the breach, instead of at the time that the Lease was entered into. In this
    regard, the trial judge stated at para. 91 of her reasons:

If the parties had contemplated this breach of contract at the
    time they entered into the contract,
they would have contemplated
the
    lost stream of lease income and the lost capital appreciation. I reach these
    conclusions because the breach of contract was not just the repudiation of the
    lease; it cannot be separated from the manner of the repudiation of lease that
    forced the sale of the property in December 2013. The defendants knew that
    Saramia wanted a long-term lease and was not intending to sell; Saramia had
    negotiated the lease extension before purchasing the property. IEWCs broker
    was involved in efforts to sublet, then sell the property; IEWC thus knew that
    there were no prospective tenants for the single-tenanted property and that the
    property had appreciated significantly [] IEWC knew that Saramia had agreed to
    sell expecting a lease buy-out but IEWC failed to meaningfully engage in
    negotiations. Instead it repudiated the lease in a manner that bound Saramia to
    the sale price to which it had agreed in the expectation it would also receive
    a lease buy-out.

[Emphasis added.]

In doing so, it appears that the trial judge fell into
    the same error that was identified in
RBC Dominion Securities Inc. v.
    Merrill Lynch Canada Inc
., 2008 SCC 54, [2008] 3 S.C.R. 79.

[44]

The
    relevant inquiry is not
if
the parties contemplated the
breach
.
    Rather, it is whether the parties reasonably contemplated that the
type of
    damages
claimed would be the probable result of a breach of the contract
at
    the time of contract
. As McLachlin C.J.C. said in
RBC
, at para.
    12:

It is apparent that the majority of the Court of Appeal applied
    the proximity test wrongly. Instead of asking whether damages of this sort
    would have been within the reasonable contemplation of the parties had they put
    their minds to the potential breach when the contract was entered into, the
    majority of the Court of Appeal asked whether the
breach
was
    foreseeable.

[Emphasis in original.]

[45]

The
    Supreme Court has repeatedly held that the second branch of
Hadley v.
    Baxendale
is to be assessed from the standpoint of the parties at the time
    of contract. In
Fidler v. Sun Life Assurance Co. of Canada
, 2006 SCC
    30, [2006] 2 S.C.R. 3, at paras. 54-55, the court held:

It follows that there is only one rule by which compensatory
    damages
for breach of contract
should be assessed: the rule in
Hadley
    v. Baxendale
. The
Hadley
test unites all forms of contractual
    damages under a single principle [] In all cases, these results are based on
what
    was in the reasonable contemplation of the parties at the time of contract
    formation
.

[Emphasis added.]

See also
Keays
, at paras. 55-56; and
Mustapha
    v. Culligan of Canada Ltd
.
(2006), 84 O.R. (3d) 457 (C.A.), 275
    D.L.R. (4th) 473, at paras. 61-67, affirmed 2008 SCC 27, [2008] 2 S.C.R. 114,
    at para. 19.

[46]

The
    requirement to assess the parties reasonable contemplation at the time of
    contract also accords with one of the objectives of the second branch of
Hadley
    v. Baxendale
, which is to allocate the risk of loss for types of damages
    that do not arise naturally from a breach of the contract to the party that
    bargained to bear it. See, for example,
Transfield Shipping Inc. v.
    Mercator Shipping Inc
.
, [2008] U.K.H.L. 48
per
Lord Hoffmann.
    As Abella J. (dissenting in part) said in
RBC
, at para. 64 (and as
    this court noted in
Lakeshore
, at para. 138):

The principle of remoteness imposes on damage awards
    reasonable limits which are required by fairness [] It aims to prevent
    unfair surprise to the defendant, to ensure a fair allocation of the risks of
    the transaction, and to avoid any overly chilling effects on useful activities
    by the threat of unlimited liability [] This principle will be informed by
    the nature and culture of the business in question, and the particular
    contractual relationship between the parties

[47]

In
    the instant case, however, the trial judge appears to have first identified the
    unique circumstances of the breach, and the losses flowing therefrom, and then
    reasoned back to conclude that the parties would have contemplated that such
    losses were to be borne by the appellants. The trial judge did not, as she
    should have, begin her analysis with whether there was evidence that, at the
    time of contract, the loss of capital appreciation, in the face of a breach,
    would reasonably have been in the contemplation of the parties.

[48]

Indeed,
    apart from the appellants knowledge that Saramia wanted a long-term tenant,
    the remaining bases for the trial judges determination on this point were all
    events that arose after the Lease and the extension agreement were concluded. But
    it does not follow that knowledge that a landlord wants a long-term lease
    translates into knowledge that a landlord will be forced to sell the leased
    premises, much less sell at a loss, if the tenant repudiates the lease. There
    is simply no evidence that the parties, on or before November 15, 2011,
    reasonably contemplated who should bear the risk for lost capital appreciation.
    In my view, the claimed damages for lost capital appreciation on the Property
    were neither natural consequences of the breach of the Lease nor were they
    reasonably contemplated by the parties at the time of contract. As such,
    damages for lost capital appreciation are too remote in this case.

(c)

Mitigation of damages for the breach of a lease

[49]

I
    now turn to the issue of how the damages are to be calculated given that Saramia
    did not re-lease the Property. Instead, Saramia sold the Property. On this
    issue, the appellants submit that the first principle of asset valuation
    prescribes that the fair market value of an asset is equivalent to the present
    value of future net cash flows that can be generated by that asset. As a
    result, the appellants contend that Saramia fully mitigated its damages, both
    lost rental income and lost capital appreciation, through its sale of the
    Property at fair market value, since the sale price necessarily includes the
    present value of future lost rental profits. The appellants argue that any
    damages award in this case would amount to double recovery.

[50]

The
    trial judge attempted to overcome this argument by finding that the sale of the
    Property was not at fair market value. Thus the sale could not have made
    Saramia whole by fully mitigating its losses since the sale price did not
    accurately reflect the present value of future cash flows.

[51]

I
    disagree with both the trial judges reasons as well as the appellants
    submissions on this issue.

(i)

Trial judges finding of not at fair market value

[52]

I
    start with the finding that the sale was not at fair market value. This finding
    reflects both a factual palpable and overriding error and a legal error in
    interpreting the term fair market value.

[53]

I
    begin with the trial judges finding that Saramia could not afford to hold the
    Property, without the receipt of the rental payments, and thus Saramia was
    forced to sell the Property when the appellants repudiated the Lease. That was
    a conclusion that was open to the trial judge on the evidence and there is no
    basis for this court to interfere with it.
[3]
However, having reached that conclusion, the palpable and overriding factual
    error arises from the fact that there was virtually no evidence that, when
    Saramia chose to sell the Property, it did so at anything other than fair
    market value. I note that neither party filed an appraisal of the Property as
    at 2013.

[54]

It
    was Saramia that set the sale price for the Property. There is no clear and
    objective evidence that in doing so Saramia sought a price that was anything
    less than what it thought the Property was worth. Although there was some
    evidence that Saramia set the sale price while, at the same time, understanding
    that it would also receive a lease buyout from IEWC, there is no evidence that
    the sale price was set at a lower amount because of this understanding. Rather,
    it appears that Saramia expected to receive the lease buyout in addition to the
    sale price it could achieve for the Property.

[55]

Nevertheless,
    the trial judge found that the sale was not at fair market value. In doing so,
    the trial judge relied on the evidence of Ms. Attard, a Vice-President of
    Saramia, and of Frank Camenzuli, an executive at Agellan, that the requirement
    that Saramia sell the Property with a vacant possession condition negatively
    affected the value of the property.

[56]

In
    my view, it was a palpable and overriding error for the trial judge to have
    used this evidence while ignoring other relevant evidence on the issue, to
    reach the conclusion that she did. I say this for the following reasons.

[57]

First,
    as the trial judge acknowledged, neither Ms. Attard nor Mr. Camenzuli were
    experts. Their view on this issue was therefore of no real assistance. Indeed,
    it might fairly be viewed as being entirely self-serving given their respective
    connections to Saramia.

[58]

Second,
    their opinions appear to be contradicted by Saramias own Property appraisal
    expert. In deciding on the fair market value of the Property in 2015, Avison
    Young was of the opinion that the Property was worth more without a tenant than
    with one  hence the higher appraisal on the direct comparator measure as
    opposed to the income generation measure. There was no evidence to suggest that
    this disparity in value would have been any different in 2013.

[59]

Third,
    in terms of the evidence on this point, KPMG said in its report, at p. 11:

Our analysis of other market transactional data occurring
    throughout 2013 suggests Saramia achieved a price that was generally not lower
    than other comparable industrial properties transacting in the local market.

[Footnote omitted.]

[60]

In
    reaching her conclusion about fair market value, the trial judge also expressed
    concern that the Property was only marketed for sale through one broker.
    However, there was no evidence that Saramia was precluded from using other
    brokers. If Saramia chose to rely solely on CBRE, it cannot now complain that
    the process was inadequate. The same holds true regarding Saramias complaint
    that the Property was unlisted.

[61]

In
    the end result, the objective evidence was that CBRE obtained three prospective
    purchasers, all of whom were interested in purchasing the Property at the price
    set by Saramia. The available expert evidence was that the Property was worth
    more without a tenant than with one. The expert evidence also established that
    the sale price was comparable with other industrial properties transacting in
    the local market. The trial judges conclusion that the Property was not sold
    at fair market value is not reasonably supported by the evidence and thus
    constitutes a palpable and overriding error:
H.L. v. Canada (Attorney
    General)
, 2005 SCC 25, [2005] 1 S.C.R. 401, at para. 110.

[62]

In
    addition, the trial judges conclusion on this issue reflects an error of law
    in her understanding of the meaning of fair market value. The
    well-established legal definition of fair market value is what a seller is
    willing to accept and a buyer is willing to pay on the open market in an arms
    length transaction:
Musqueam Indian Band v. Glass
, 2000 SCC 52, [2000]
    2 S.C.R. 633, at paras. 9 and 37;
Prolink Broker Network Inc. v. Jaitley
,
    2015 ONSC 6484 (Div. Ct.), at para. 45; and
Victoria University v. GE
    Canada Real Estate Equity
, 2016 ONCA 646, 76 R.P.R. (5th) 104, at para.
    103.

[63]

In
    reaching her conclusion on fair market value, the trial judge focussed on the
    fact that Saramia was not a willing seller because it was forced to sell the
    Property. With respect, that is not what willing relates to in this context.
    What willing refers to is the price that is to be offered and accepted. As
    Gonthier J. said in
Musqueam Indian Band
, at para. 37:

"Value" in real estate law generally means the fair
    market value of the land, which is based on what a seller and buyer, "each
    knowledgeable and willing",
would pay for it
on the open market.

[Emphasis added.]

[64]

There
    was no evidence that Saramia sold the Property at a fire sale price or that
    it otherwise did not obtain the price that it wanted. Indeed, the presence of
    Agellan, on Saramias side, a company experienced in dealing with commercial
    properties who had been the original purchaser of the Property, would make it
    difficult to accept that anything other than a fair price would have been
    accepted. Further, the fact that three different purchasers were engaged in the
    sale process would strongly suggest that the sale reflected fair market value.
    In my view, the trial judges confusion with respect to the meaning of fair
    market value also renders her conclusion on this issue an error of law.

(ii)

Appellants
    submissions on mitigation

[65]

Despite
    my conclusion that the Property was sold at fair market value, I nevertheless
    reject the appellants submission that damages were fully mitigated for two reasons.

[66]

First,
    as this court held in
Ticketnet Corp. v. Air Canada
(1997), 154 D.L.R.
    (4th) 271 (C.A.), at paras. 92-97
per
Laskin J.A., there are
    circumstances where the sale of an asset will not fully indemnify the plaintiff
    for the lost value of future net cash flows. In all private law damages cases,
    the guiding principle is to award damages to place the plaintiff in the
    position he or she would have occupied had the wrong not occurred.

[67]

Second,
    the circumstances in this case differ from those in
Ronald Elwyn Lister
    Ltd. v. Dayton Tire Canada Ltd
.
(1985), 52 O.R. (2d) 88 (C.A.),
    [1985] O.J. No. 2633, where this court accepted the appellants proposed
    valuation method. In that case, the plaintiffs claimed conversion of business
    assets against the defendants. This court held that the value of the converted
    assets was equal to the net cash flows that would have been generated by the
    assets when used in the plaintiffs business as a going concern. This court
    stated, at para. 64, that the plaintiff:

cannot recover both the value of its business as a going
    concern and, also, damages based on the value of its assets that were
    converted. The latter are, logically, contained in the former. They are
    reflected in the profit-earning potential of the company which is embodied in
    the capitalization approach. To give both net asset value and the value of the
    business as a going concern would be contrary to the business practice
    reflected in [the accounting experts] evidence and, also, the law respecting
    damages

[Citation omitted.]

[68]

Here,
    however, Saramia did not sell its business as a going concern. The respondent
    was a single-purpose corporation. Its business was comprised of the Property
    and the Lease.
[4]
The respondent was only able to sell the Property. It was not able to sell the Property
    with the Lease since the appellants had repudiated the Lease. The proceeds from
    the sale of the Property, therefore, only account for the value of the Property.
    They do not account for the economic value that is derived from the Lease. This
    distinction between the value of land and the value of a lease was highlighted
    by the Supreme Court in
Musqueam.
Though the court split four-four-one
    on how the value of a leasehold interest should have affected the outcome in
    that case, both McLachlin C.J.C. and Gonthier J. (writing for the two
    four-judge opinions) at paras. 9 and 38, respectively, agreed that the fair
    market value of land is the exchange value of the land in fee simple  and does
    not include the value of a lease.

[69]

In
    my view, in the particular circumstances of this case, the proceeds from the fair
    market value sale of the Property do not compensate Saramia for the lost
    economic value derived from the Lease.

(iii)

The
    proper application of mitigation

[70]

The
    conclusions above, however, do not mean that the sale of the Property has no impact
    on the mitigation of damages.
[5]
The appellants would have been entitled to a reduction in the damages for the rental
    payments that Saramia should have received by re-leasing the Property, except
    that did not happen. Put another way, Saramia did not lessen its damages by
    finding another tenant to occupy the Property. While this might be said to be a
    failure of the duty to mitigate, this court observed in
Canadian Medical
    Laboratories Ltd. v. Stabile
(1997), 98 O.A.C. 3, [1997] O.J. No. 684,
    varying (1992), 25 R.P.R. (2d) 106, 1992 CarswellOnt 593 (Gen. Div.) that, in
    some instances, a landlord can mitigate its damages by selling, rather than
    re-leasing, the premises. As Carthy J.A. said, at para. 34:

It is my view that in appropriate circumstances a sale could be
    mitigation for loss of a tenant, and in those circumstances efforts to sell
    could be considered as satisfying the duty to mitigate.

[71]

I
    pointed out earlier that the trial judge found that Saramia could not afford to
    hold the Property while it looked for another tenant. It consequently had to
    sell the Property. In those factual circumstances, the sale of the Property
    satisfies the duty to mitigate. Indeed, IEWC invited Saramia to sell the
    Property precisely for the purpose of mitigating its damages.

[72]

The
    issue then becomes how damages are properly calculated where the Property has
    been sold. I return again to the basic approach established by
Highway
    Properties
, that is, that the damages are the present value of the unpaid
    stream of rental payments to the expiration of the lease. From that amount,
    however, all amounts saved by Saramia as a consequence of selling the Property
    must be deducted. This would include, in this case, the mortgage payments and any
    fees due to Agellan or that otherwise would have been incurred by Saramia had
    the Lease been honoured.

[73]

There
    is, however, another amount that, in my view, must fairly be deducted from the
    damages claimed. As a consequence of selling the Property, Saramia received a
    lump sum (the net sale proceeds after paying off the mortgage and other
    expenses) earlier than it otherwise may have if the Lease had been performed.
    Indeed, in this case, it received that lump sum some eight years before the intended
    termination of the Lease. Having chosen to mitigate its damages by selling the
    Property, and thus not be able to re-lease it, Saramia must account for the
    monies that it could have earned through an investment of that lump sum for the
    period of time remaining on the Lease.
[6]
In other words, the return on the alternate investment of that lump sum
    becomes, in one sense, the equivalent of a replacement for the net cash flow stream
    that was lost when the rental payments ceased.

[74]

The
    selection of the appropriate Property value to be used in the DCF is therefore material
    to the damages analysis because it determines the amount available to be
    reinvested for mitigation purposes. The appropriate Property value to be used
    in the DCF was the 2013 sale price. On this point, I note that there was no
    basis for using the value of the Property in 2015 to calculate the damages for
    lost capital appreciation, even if those damages were not too remote. Indeed,
    it is not evident what legal foundation there was for using the 2015 value in
    this case.

[75]

What
    seems to have happened is that Saramia obtained the 2015 value and then
    submitted it as the appropriate value to use on the basis that it was
    reasonably limiting its claim to just that amount. The trial judge appears to
    have accepted this proposition.

[76]

With
    respect, a plaintiff does not get to unilaterally decide what factors are
    appropriately considered in a damages assessment. It is the courts obligation
    to make those determinations and the court must do so based on the application
    of proper legal principles. In this case, if the claim for lost capital
    appreciation was not too remote, the relevant capital appreciation would have
    been as of the completion of the Lease in 2021. No evidence was led as to what
    the value of the Property would have been in 2021. Indeed, the only evidence on
    this point, as noted by the trial judge at para. 94 of her reasons, was that
    everyone acknowledged that the real estate market is volatile and it is
    impossible to know whether the propertys value in 2021 will be greater than or
    less than the 2015 fair market value appraisal.

[77]

Given
    that acknowledgement, using the 2015 fair market value was simply arbitrary. I
    also note that the use of the 2015 fair market value increased Saramias
    damages calculation significantly.

[78]

The
    Property was sold in 2013 and Saramia received actual proceeds from that sale.
    The 2013 sale price was the only value that reflected how much Saramia had
    available to invest for mitigation purposes on a balance of probabilities. Thus
    damages should be calculated pursuant to the DCF scenario that was based on the
    2013 sale price.

[79]

To
    dispel any suggestion to the contrary, I should add that this conclusion does
    not bring the issue of capital appreciation back into the equation because, at
    this stage of the analysis, I am not dealing with how the sale price related to
    the purchase price or how that relationship might have changed in the future.
    Rather, I am simply recognizing the reality that Saramia received a lump sum of
    cash earlier than it otherwise may have. Any benefit that Saramia obtains from
    that earlier receipt must be accounted for and applied against the loss it incurred
    as a result of the appellants repudiation.

[80]

I
    recognize that the appellants might say that the amount that Saramia could have
    earned from investing the sale proceeds may be substantially less than what a
    new tenant would have paid by way of rent. I do not dispute that possibility,
    but it was open to the appellants to lead evidence as to when a new tenant
    would likely have been found and the likely rent that a new tenant would have
    paid. They chose not to lead any of that evidence. They cannot now complain
    that those considerations are not taken into account in the mitigation of damages
    assessment when they did not provide the evidence to permit that analysis. This
    is especially so since it is the appellants who bear the onus of proving that mitigation
    was possible and that Saramia has failed in its duty to mitigate. In addition,
    and importantly, the duty to mitigate only requires Saramia to take
reasonable
steps, not any and all steps:
Asamera Oil Corp. v. Seal Oil & General
    Corp
.
, [1979] 1 S.C.R. 633, at pp. 660-61; and
Evans v.
    Teamsters Local Union No. 31
, 2008 SCC 20, [2008] 1 S.C.R. 661, at para.
    30.

[81]

I
    am aware that, in this case, Saramia was apparently contractually bound to remit
    the proceeds of the sale of the Property to its limited partners and thus could
    not invest the monies and receive a return. However, that contractual
    requirement does not release Saramia from its duty to mitigate. The damages were
    incurred by Saramia and it is Saramias duty to mitigate them. The Supreme
    Court expressly held in
Southcott Estates Inc. v. Toronto Catholic District
    School Board
, 2012 SCC 51, [2012] 2 S.C.R. 675, at paras. 26-30, that a
    single-purpose corporation has a duty to mitigate. Saramia must therefore account
    for what it could reasonably have done with the lump sum it received,
    regardless of its particular corporate structure. I note on this point that Saramia
    accepts that its damages must be reduced by the opportunity it had to invest
    the net sale proceeds.
[7]

[82]

The
    trial judge accepted that the hypothetical investment in a REIT basket, focused
    on Canadian industrial, commercial, and retail assets with a return of 6.0%, as
    utilized by KPMG, was appropriate. I do not see any basis to interfere with her
    conclusion in that regard. The trial judge was entitled to reach that
    conclusion on the evidence that was placed before her.

(d)

Accrual of damages after the sale of the Property

[83]

The
    appellants submit that Saramias sale of the Property prevented Saramia from
    being able to perform the Lease and therefore the accrual of damages for lost
    rental profits should end at the date of sale.
[8]
In support of this proposition, the appellants cite the trial courts decision
    in
Canadian Medical
, at para. 73. This issue of whether a plaintiff
    (who accepts a defendants repudiation) must remain ready, willing, and able to
    perform the repudiated contract in order to claim damages for the breach has
    been described as unresolved in Canadian law:
Webster Estate v. Thomson
,
    2008 ONCA 730, 241 O.A.C. 360, at para. 24, citing G.H.L. Fridman,
The Law
    of Contract in Canada
, 5th ed. (Toronto: Carswell, 2006), at pp. 550-51.

[84]

The
    confusion appears to stem from a line of English authorities, including for
    example,
Maredelanto Compania Naviera S.A. v. Bergbau-Handel G.m.b.H.
    Mihalis Angelos
,
The (1970)
,
[1971] 1 Q.B. 164 (E.W.C.A.)
    where Megaw L.J. stated, at pp. 209-10:

In my view, where there is an anticipatory breach of contract,
    the breach is the repudiation once it has been accepted, and the other party is
    entitled to recover by way of damages the true value of the contractual rights
    which he has thereby lost; subject to his duty to mitigate. If the contractual
    rights which he has lost were capable by the terms of the contract of being
    rendered either less valuable or valueless in certain events, and if it can be
    shown that those events were, at the date of acceptance of the repudiation,
    predestined to happen, then in my view the damages which he can recover are not
    more than the true value, if any, of the rights which he has lost, having
    regard to those predestined events.

[85]

In
    my view, those authorities are not apt in this case. Unlike the authorities that
    support the appellants submission, Saramias sale of the Property in this case
    was not an independent and inevitable event that would have occurred regardless
    of the appellants repudiation of the contract. In this regard, I share the
    trial judges opinion that the trial decision in
Canadian Medical
is
    distinguishable because the breach of the lease in that case was not the
    factual cause of the sale of the property.

[86]

Moreover,
    it would be anathema to the purpose of the mitigation doctrine to hold that a
    reasonable action taken by the innocent party intended to mitigate damages
    could be used by the wrongdoer as a means to escape liability. To the extent
    that a defendant landlord sells a leased premises as a reasonable means of
    mitigating damages following a tenants repudiation of a lease, the sale of the
    leased premises does not bar the landlords claim for lost rental payments
    after the date of sale.

(e)

The certainty of damages calculated by the DCF

[87]

I
    turn now to the calculation of damages using the DCF analysis. I begin by
    rejecting the appellants submission that the DCF was purely hypothetical and
    that the trial judge resorted to speculation to assess the landlords damages
     precisely what the case law warns against. DCF calculations based on
    projections of future performance have been accepted by this court as a
    sufficiently certain means of quantifying damages where the projections
    constitute a close approximation of what would have occurred on a balance of
    probabilities:
Ticketnet
, at para. 87.

[88]

I
    agree with the trial judge that the proper approach to calculating the damages in
    this case was the DCF method. I disagree, however, with the trial judges
    conclusion that the 2015 fair market value appraisal was the appropriate value
    to use in the DCF calculation. The appropriate value to be used was the 2013
    sale price, for the reasons that I have already given.

[89]

The
    trial judge referred to other differences in the DCF analyses that the experts
    undertook. She favoured the approach taken by KPMG on these issues. There is no
    basis upon which this court should interfere with those findings.

[90]

The
    trial judge also found that the mortgage break fee of $103,458, that Saramia
    had to pay in order to sell the Property in 2013, ought to have been deducted
    from the amount of the proceeds of sale that were available to invest for the
    balance of the term of the Lease, as opposed to simply awarding that amount as
    a separate head of damages. KPMG had done the latter. While I doubt that this
    makes any significant difference to the overall damages calculation, I agree
    with the trial judge that it makes more sense to treat that amount as reducing
    the sale proceeds that were available to be reinvested. This conclusion by the
    trial judge required the appropriate DCF calculation to be redone.

(f)

The award of
    contractual interest

[91]

Finally,
    the trial judge awarded interest on a portion of the damages at the rate of 24%
    per year, as purportedly provided for in one clause of the Lease. That clause
    related to the interest that would accrue on rent not paid when it was due. It
    seems to me to involve a rather strained interpretation of that clause in the
    Lease to apply the interest rate to a portion of the damages calculated under
    the DCF analysis. This is especially so given that Saramias interest calculations
    were imprecise, to adopt the trial judges characterization of them.

[92]

In
    any event, the trial judges reasons are unclear as to the legal basis for the
    award of contractual interest. The reasons show that she could have intended
    either that the contractual interest was a head of expectation damages
    resulting from a breached contract, or an amount awarded pursuant to the
    enforcement of a subsisting contract. In both cases, the award was in error.

[93]

In
    the first case of expectation damages, the trial judges award of contractual
    interest relies upon the assumption that, if the appellants remained in the
    tenancy until 2021, the appellants would have, in fact, defaulted on future
    rent payments such that this clause could be invoked. The trial judge simply
    stated that Saramia estimated that the appellants would incur such defaults for
    approximately 3/8 of the remaining eight years of the Lease. The trial judge
    did not analyze why she accepted Saramias submission. The reasons therefore do
    not provide the necessary basis for meaningful appellate review on this issue.
    That failure warrants appellate intervention because the reasons fail to
    provide the required link between the what and the why:
Dovbush v.
    Mouzitchka
, 2016 ONCA 381, 131 O.R. (3d) 474, at paras. 19-25.

[94]

In
    the second case, Saramias acceptance of the appellants repudiation of the
    Lease terminated the Lease. As such, Saramia cannot claim that rent arrears following
    the appellants repudiation continued to accrue past the date of termination. Saramias
    remedy in this case is a claim for expectation damages, subject to sufficient
    proof as explained above. Saramia could have chosen not to accept the
    repudiation and sue for rent arrears accruing under what would then be an
    enforceable Lease, but it chose not to. Therefore, if the trial judge awarded
    contractual interest on the basis that rent arrears continued to accrue past
    the termination date, it was an error of law reviewable for correctness.

[95]

I
    do not see any reason to strain the language of the Lease in order to have some
    portion of the damages attract this higher rate of interest. Rather, the
    damages, calculated as of December 1, 2013, should attract prejudgment interest
    in the usual course, that is, under s. 128(1) of the
Courts of Justice Act
,
    R.S.O, 1990, c. C.43 to the date of judgment.

Conclusion

[96]

I
    would allow the appeal and set aside the trial judgment and the damages award.
    In its place, I would award damages and interest to be calculated in accordance
    with these reasons, which I summarize here for convenience:

·

Damages are to be calculated using the KPMG DCF scenario based
    upon the Propertys 2013 sale price and a REIT return of 6.0%.

·

The mortgage break fee should be deducted from the net sale
    proceeds that are available to be reinvested based on the above KPMG DCF
    scenario.

·

The loss of capital appreciation on the Property is not
    recoverable.

·

The award of contractual interest is not recoverable. It is
    replaced with an award of prejudgment interest under s. 128(1) of the
Courts
    of Justice Act
.

[97]

If
    there are any issues in this regard, I would remit them back to the trial judge
    for resolution.

[98]

The
    appellants are entitled to their costs of the appeal in the agreed amount of
    $30,000, inclusive of disbursements and HST.

[99]

In
    terms of the costs of the trial, I recognize that, depending on the reduction
    in damages upon the recalculation, the offers to settle that were made may have
    a different effect than they first had before the trial judge. I therefore also
    remit both the award of trial costs, and the issue of the quantum of the trial
    costs, back to the trial judge for a fresh determination.

Released: SEP JUN 7 2018

I.V.B. Nordheimer J.A.

I agree. S.E. Pepall J.A.

I agree. Trotter J.A.

[1]

Four total scenarios were presented in the KPMG
    report. The two key inputs that drove the four scenarios were the Property sale
    price and the reinvestment return rate. Only the variation in the sale price is
    relevant for the discussion at this point.

[2]

This measure of damages for breach of a lease was
    advanced by the appellant landlord in
Highway Properties
, and was
    adopted by Laskin J. at pp. 575-76.

[3]

As explained above, the conclusion regarding factual
    causation based on the but for test, however, is not sufficient to bring
    potential foregone capital appreciation on the Property into the contract
    damages analysis. A plaintiff must also prove that the type of loss is also
    sufficiently proximate.

[4]

I recognize that Saramia may hold other assets in
    its business, such as the Agellan management contract. However, I focus here on
    the assets that held material value.

[5]

See,
e.g.
,
365 Bay New Holdings Ltd. v.
    McQuillan Life Insurance Agencies Ltd
. (2007), 55 R.P.R. (4th) 117, [2007]
    O.J. No. 521 (S.C.), reversed on other grounds (2008), 64 R.P.R. (4th) 44, 2008
    ONCA 100. Since the liability finding in that case was reversed on appeal, this
    court did not address the damages issue.

[6]

I note that this appears to have been the approach
    to damages adopted by OLeary J. in
National Trust Co. v. Bongard, Leslie
    & Co.
,

[1973] O.J. No.
    1038 (H.C.), at paras. 30-34.

[7]

See respondents factum at paras. 64 and 70.

[8]

This argument is distinct from contract frustration
    because, in this case, the appellants repudiated the Lease first. Saramia did
    not sell the Property before the appellants repudiated the Lease.


COURT OF APPEAL FOR ONTARIO

CITATION: Simopoulos (Re), 2018 ONCA 546

DATE: 20180613

DOCKET: C64630

MacFarland, Watt and Paciocco JJ.A.

IN THE MATTER OF:  MASON SIMOPOULOS

AN APPEAL UNDER PART XX.1 OF THE
CODE

Anita Szigeti, for the appellant Mason Simopoulos

Elena Middelkamp, for the respondent the Attorney
    General of Ontario

Heard: May 14, 2018

On appeal against the disposition of the Ontario Review
    Board, dated November 16, 2017.

REASONS FOR DECISION

Background

[1]

On January 6, 2012, the appellant was found not criminally responsible
    on account of mental disorder (NCRMD) on charges of criminal harassment and
    failure to comply with a recognizance (x2). As a result of these verdicts, the
    appellant came under the jurisdiction of the Ontario Review Board (the Board).
    The particulars of the index offences which occurred in May-July 2011 are
    summarized at para. 5 of the Boards reasons as follows:

The victim in respect of the index offences was a woman who was
    one of Mr. Simopoulos teachers when he was a student at Humber College.
    Details of the index offences are set out in considerable length in the
    hospital report. Essentially, Mr. Simopoulos began telling the victim that he
    loved her, made references to intimate feelings for her and persisted in this
    behaviour despite warnings to stop both from the teacher and from the school.
    Ultimately, Mr. Simopoulos was removed from the victims class and then
    contacted her repeatedly by text and email. He also attended her classroom
    during a lecture. Security was called and Mr. Simopoulos was escorted off
    school property. He again texted the teacher. The matter was reported to the
    police and Mr. Simopoulos was arrested and charged with criminal harassment.

[2]

The appellant was detained in hospital until he was discharged into the
    community in June 2017, pursuant to the conditions of his detention order that
    permitted community living in the discretion, and subject to the approval, of the
    person in charge of the hospital. He was transferred from CAMH to St. Josephs Healthcare
    Hamilton on December 15, 2014.

[3]

Throughout his stay at CAMH his behaviour was, in the words of the
    respondent, extremely problematic, until his mother was appointed as
    substitute decision maker in May 2014. He engaged in inappropriate and sexually
    suggestive conduct with female nurses. He became fixated with his then psychologist,
    Dr. Gibas, to the point where a safety plan had to be put in place for Dr.
    Gibas. After he began treatment in May 2014 his behaviour improved, but he
    still engaged in sexually inappropriate conduct and was charged with sexual assault.

[4]

The appellants use of marijuana and its impact on his mental health has
    been an issue throughout his tenure under the Board.

[5]

After his transfer to St. Josephs in December 2014 his behaviour
    improved. The appellant continued to insist, as he does today, that medical
    marijuana is helpful to him. Until 2016 it was reported that he had no insight
    into the negative impact marijuana may have on his mental health. That year he
    participated in Substance Abuse and Relapse Prevention programs and it appeared
    he had gained some insight into this aspect of illness.

[6]

However, despite the significant progress he made during his time at St.
    Josephs, soon after his discharge into the community, in July 2017, he tested
    positive for THC. He completed substance abuse programs but he remains firmly
    of the view that medical marijuana helps his anxiety and that Dr. Prats views
    that the use of marijuana is contraindicated for him are outdated and not in
    accord with modern thinking.

[7]

Paragraph 19 of the respondents factum nicely summarizes the unanimous
    opinion of the treatment team:

Although the appellant had made significant progress over the
    last year, the team opined that his situation remained fragile. He required a
    lot of support from the clinical team and without that support it was expected
    that the appellant would become even less motivated and use illicit substances
    to the point that he would become psychotic. In the clinical risk summary, it
    was also noted that the appellant had contacted some staff members through
    social media. With respect to the appellant representing a significant risk to
    the safety of the public, his risk factors were noted to include his psychotic
    disorder, active substance use disorder, and lack of prosocial behaviour and
    motivation. The treatment team was of the unanimous opinion that the appellant
    remained a significant risk to the safety of the public.

[8]

At the time of the hearing before the Board in October 2017, Dr. Prat
    had been the appellants attending psychiatrist for over two years. He noted
    that when the appellant stopped using marijuana in January 2017 his behaviour
    improved such that it led to his discharge into the community in June. However,
    soon after his discharge, he began to use marijuana and, not long after that,
    started to contact some staff members through social media, commenting about
    their appearance and the fact that he liked them.

The current appeal and analysis

[9]

While counsel for the appellant suggests the conduct was innocuous and simply
    represented the appellant reaching out because he was lonely, the difficulty is
    that this type of conduct is reminiscent of the index offence in its early
    stages. Key evidence before the Board is recited at para. 22 of the
    respondents factum:

Dr. Prat stated that after the hospital report was completed
    the appellant tested positive for marijuana on a second occasion. The appellant
    advised that he had obtained a licence for medical marijuana and had smoked
    marijuana for five days. Dr. Prat advised that he assessed the appellant on the
    day after his last dose and observed that the appellants mental status had
    changed. In his opinion, the appellant was not fully psychotic, but he was
    irritable and oppositional. Dr. Prat stated that the appellants presentation
    showed precursive signs of a potential psychotic relapse. Dr. Prat re-assessed
    him the next day and the appellants mental status had returned to his
    baseline, there was no oppositional behaviour or irritability.

[10]

It
    was Dr. Prats opinion that the recent events with respect to the appellants
    relapses with marijuana use demonstrated conclusively that marijuana has a
    negative impact on his mental health. Further, that if the appellant used lots
    of regular cannabis, even within a short period of time, he would become floridly
    psychotic and require readmission. The return of those symptoms would lead to
    impulsivity, poor judgment and an inability to conform his conduct, leading to
    conflict with other individuals and possible further interaction with the law.
    He concluded that the appellant is at much greater risk for engaging in
    impulsive, aggressive behaviour and the potential for assaultive behaviour
    remains even when his mental illness is chemically treated. The risk continues
    because of the destabilizing effect that marijuana has on his mental state.

[11]

The
    appellant argues that the Board erred in finding he constitutes a significant
    threat to the safety of the public and by failing to conduct a proper analysis
    and give reasons for the finding of significant risk.

[12]

We
    do not agree. The treatment team including Dr. Prat were unanimous in their
    opinion that the appellant remains a significant risk.

[13]

In
    its reasons the Board reviewed the risk summary contained in the Hospital
    Report and recited relevant portions at para. 7 of its reasons and in
    particular:

Mr. Simopoulos presents with several risk factors, which
    include his psychotic disorder, his active substance use disorder, and his lack
    of prosocial behaviour and motivation. Based on the above, I am of the clinical
    opinion that Mr. Simopoulos remains a risk for the safety of the public.
    Indeed, Mr. Simopoulos remains at risk for becoming psychotic if he does not
    manage to stop using cannabis. If Mr. Simopoulos were to become psychotic, he
    would require rapid admission to the hospital and would unlikely cooperate with
    staff, as per his past psychiatric history. Therefore, it is my clinical
    opinion that Mr. Simopoulos risk can be managed on a Detention Order in a
    Forensic General Unit, with a community living provision in his disposition.

[14]

Despite
    the hospitals recommendation for a continued detention order, the Board was of
    the view that in all the circumstances, the appellants care could be managed
    through the terms of a conditional discharge  which we note was the
    alternative relief requested by the appellant before the Board.

[15]

Its
    decision in finding that the appellant remained a significant risk to the
    safety of the public is not unreasonable. It was the unanimous view of the
    treatment team and of Dr. Prat. For the reasons outlined above they were of the
    view that the appellants continued use of marijuana and his intention to
    continue its use rendered him a significant threat. As the Board noted at para.
    13 of its reasons:

Dr. Prat confirmed that the use of marijuana was central to the
    significant threat issue and noted that this has been a constant for Mr.
    Simopoulos, despite efforts by the hospital to deal with the issue.

And at para. 14:

Dr. Prat confirmed that when Mr. Simopoulos was using marijuana
    during the summer, there had been a noticeable change in his mental status.

[16]

While
    the reasons of the Board could be improved upon, on the whole it is clear that
    they reviewed the evidence and accepted the opinion of the treatment team and
    Dr. Prat that the appellant remains a significant risk because of his continued
    use of marijuana and his refusal to discontinue its use.

[17]

Their
    decision is reasonable and there is no basis to interfere with the disposition.

[18]

It
    is to be hoped that the appellant will be persuaded to once again participate
    in a substance abuse prevention program to continue the progress he was making
    before his discharge into the community. The Board was hopeful that he would do
    so and hence their order provided for a pre-hearing conference to determine
    whether a six-month review would be warranted.

Disposition

[19]

The
    appeal is dismissed.

J. MacFarland J.A.

David Watt J.A.

David M. Paciocco J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Smiles First Corporation v. 2377087 Ontario Limited
    (International Union of Painters), 2018 ONCA 524

DATE: 20180608

DOCKET: C64082

Epstein, van Rensburg and Brown JJ.A.

BETWEEN

Smiles First Corporation and Union Health and
    Dental Centre Inc.

Applicants (Appellants)

and

2377087 Ontario Limited o/a International
    Union of Painters and Allied Trades District Council No. 46
, Joe Russo,
    2445855 Ontario Inc. and Frank Cundari

Respondents (
Respondent
)

Tanya Walker, for the appellants

Arleen Huggins, for the respondent

Heard: March 5, 2018

On appeal from the order of Justice Peter J. Cavanagh of
    the Superior Court of Justice, dated July 13, 2017, with reasons reported at
    2017 ONSC 4306, 87 R.P.R. (5th) 144, and reasons for costs reported at 2017
    ONSC 5081.

BROWN J.A.:

I.

OVERVIEW

[1]

The appellants, Smiles First Corporation and Union Health and Dental
    Centre Inc. (collectively Smiles First), appeal from the dismissal of their
    application under s. 21 of the
Commercial Tenancies

Act
,
    R.S.O. 1990, c. L.7 (the
CTA
), and s. 98 of the
Courts of
    Justice Act
, R.S.O. 1990, c. C.43 (the
CJA
). They also seek leave
    to appeal the costs order.

[2]

The respondent, 2377087 Ontario Limited (the Landlord), entered into a
    head lease for premises at 130 Toro Road, Toronto (the Premises) with 2445855
    Ontario Inc. (244). In turn, on or about February 1, 2015, 244 subleased the
    Premises to Smiles First by letter of intent (the Sublease). On March 21,
    2017 the Landlord gave Smiles First notice that its tenancy would end on April
    30, 2017 (the Notice of Termination).

[3]

This appeal raises two main issues:

(i)       244
    purported to assign its head lease with the Landlord to Smiles First by an
    assignment dated October 31, 2016. Did the application judge err in concluding
    the Landlord was not bound by that assignment?

(ii)      Did
    the application judge err in refusing to grant Smiles First relief from
    forfeiture of its tenancy?

[4]

For the reasons set out below, I would allow the appeal and grant a
    declaration that Smiles First is entitled to possession of the Premises until
    the end of the term of the Sublease, on the terms and conditions set out therein,
    including the amount of rent payable.

II.

FIRST ISSUE: THE EFFECT OF THE OCTOBER 31, 2016 ASSIGNMENT OF THE HEAD LEASE

The evidence

[5]

The first issue turns on: (i) the language of the assignment of the Head
    Lease; (ii) the effect of certain correspondence between the parties counsel
    in October and November 2016; and (iii) the acceptance by the Landlord of rent
    from Smiles First after November 2016.

[6]

244 initially had leased the Premises from the Landlord under a head lease
    dated January 12, 2015, for a term of 5.5 years, commencing on February 1,
    2015. 244 subleased the Premises to Smiles First for a similar term by way of the
    Sublease. 244 subleased the Premises to Smiles First at a significantly higher
    rent than it was required to pay the Landlord under the head lease.

[7]

The Landlord and 244 subsequently entered into an amended head lease
    dated July 31, 2015 (the Head Lease), with the 5.5 year term commencing on August
    14, 2015.

[8]

In mid-2016, disputes arose under both the Head Lease and the Sublease.
    On October 6, 2016, Smiles First and 244 advised the Landlord that they had
    entered into a tentative agreement to resolve their disputes. However, their
    agreement was contingent on [the Landlords] approval of assigning 244s [Head
    Lease] to [Smiles First] and/or the [Landlord] entering into a new head lease
    with [Smiles First].

[9]

Two events then occurred.

[10]

First,
    244 executed an October 31, 2016 assignment of the Head Lease to Smiles First
    (the Head Lease Assignment). By its terms, the Head Lease Assignment required
    receiving the Landlords Consent, following which 244 would transfer and
    assign to Smiles First all of its rights under the Head Lease. As matters
    transpired, neither Smiles First nor 244 ever asked the Landlord for its
    consent to the assignment.

[11]

Second,
    the Landlord, 244, and Smiles First embarked on negotiations to revise the
    leasing arrangements for the Premises. The Landlord wanted to enter into a new
    head lease directly with Smiles First, and 244 wanted nothing more to do with
    the Premises. The Landlord circulated draft Minutes of Settlement and a new
    form of head lease with Smiles First in November 2016. Smiles First and 244 did
    not sign the Minutes at that time.

[12]

That
    led the Landlord, in February 2017, to remind Smiles First and 244 that they
    had not yet returned signed Minutes of Settlement or a new head lease. 244 thereupon
    provided the Landlord with signed Minutes, which stated that 244 had abandoned
    the Head Lease as of November 1, 2016. In the Minutes, 244 also agreed to pay
    the Landlord all outstanding rent accrued from September 14, 2016 to November
    1, 2016.

[13]

Smiles
    First refused to sign the Minutes, taking the position that it was an official
    tenant pursuant to the Head Lease Assignment. The Landlord responded that it
    had not consented to the Assignment and expected Smiles First to sign a new
    head lease directly with it. The Landlord took the position that Smiles First
    now occupied the Premises as an occupant subject to a month to month term.

[14]

By
    the March 21, 2017 Notice of Termination, the Landlord notified Smiles First that
    it was terminating its tenancy of the Premises effective April 30, 2017.

Analysis

[15]

The
    application judge held that the Head Lease Assignment did not operate to assign
    244s interest in the Head Lease to Smiles First and was not effective as
    against the Landlord for several reasons:

(i)        Neither
    Smiles First nor 244 had sought or obtained the Landlords consent to the Head
    Lease Assignment, as required by the specific terms of that assignment. As a
    result, they failed to fulfill a condition precedent to the assignment of the
    Head Lease from 244 to Smiles First;

(ii)        244
    was not entitled to assign the Head Lease without the Landlords consent.
    Section 7 of the Head Lease stated 244 could assign the Head Lease [s]o long
    as the Tenant is not in default under the terms of the [Head Lease]. The
    application judge held that when 244 purported to assign the Head Lease to
    Smiles First, it was in default of the payment of rent to the Landlord; and

(iii)     the
    correspondence amongst the parties in October 2016 did not constitute actual or
    constructive notice to the Landlord of the Head Lease Assignment.

[16]

Those
    findings were based on a reasonable interpretation by the application judge of
    the terms of the Head Lease Assignment and Head Lease, informed by an
    appropriate consideration of the factual matrix, and they were open to the
    application judge to make based on the record before him:
Sattva Capital
    Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633. I see no
    basis upon which to interfere with them.

[17]

The
    application judge further held that the Landlords acceptance of rent from Smiles
    First after November 2016 did not: (i) amount to its recognition of an
    equitable assignment of the Head Lease; (ii) constitute a waiver of its rights;
    or (iii) estop the Landlord from asserting those rights. At paras. 71, 75 and
    76 of his reasons, the application judge wrote, in part:

I do not agree that Smiles First
    has shown that, by accepting rent and allowing Smiles First to remain in
    possession of the Leased premises, the Landlord intended that the assignment of
    the Head Lease to Smiles First was valid and effective. I do not agree that
    accepting the Assignment of Lease as an equitable assignment would give effect
    to the intentions of the parties. I decline to treat the Assignment of Lease as
    a valid assignment in equity.

The onus is on Smiles First to show, through evidence, that
    acceptance by the Landlord of rent paid by Smiles First reflected the
    Landlords intention to treat the Assignment of Lease as [] valid and
    effective. Smiles First has failed to discharge its onus of proving that the
    Landlord, by accepting payment of rent, intended to accept the validity of the
    assignment of the Head Lease to Smiles First.

The acceptance of rent by the Landlord during the period when
    the parties were engaged in settlement negotiations does not, in these
    circumstances, represent an implicit assertion by the Landlord that Smiles
    First is in possession of the Leased Premises as an assignee of the Head Lease
    from 244.

[18]

I
    see no reversible error in that analysis. The evidence showed that the
    Landlords acceptance of the rent was done during a period of time when it had
    made clear that Smiles First needed to enter into a new head lease directly
    with it. Smiles First was not prepared to do so on terms acceptable to the
    Landlord. In those circumstances, it was open to the application judge to find
    that the Landlords acceptance of rent while Smiles First continued to occupy
    the Premises did not amount to the recognition of an equitable assignment of
    the Head Lease or a waiver of its rights, or estop it from asserting its
    rights.

III.

SECOND ISSUE: DID THE APPLICATION JUDGE ERR IN REFUSING TO GRANT SMILES
    FIRST RELIEF FROM FORFEITURE?

[19]

Smiles
    First advances several grounds of appeal from the application judges refusal
    to grant it relief from forfeiture either under s. 21 of the
CTA
[1]
or s. 98 of the
CJA
.
[2]

The application judges use of the Minutes of Settlement

[20]

In
    considering Smiles Firsts request for relief from forfeiture, the application
    judge proceeded on the basis that 244 had agreed to abandon the Head Lease as
    of November 1, 2016. Smiles First submits the application judge erred in so finding
    because he relied, improperly, on the draft Minutes of Settlement that were
    protected by settlement privilege, which Smiles First had not waived. The
    Minutes recited 244s abandonment of the Head Lease effective November 1, 2016.

[21]

I
    am not persuaded by this submission. As the application judge noted in his
    reasons, as part of its evidence on the application Smiles First filed the
    Minutes of Settlement. As a result, the application judge was entitled to
    consider that evidence.

The effect of the surrender of the Head Lease

[22]

Before
    the application judge, the Landlord took the position that upon 244s abandonment
    of the Head Lease, the Sublease came to an end. It contended that after the November
    1, 2016 effective date of abandonment, Smiles First occupied the premises on a
    monthly tenancy, which the Landlord properly terminated by the Notice of
    Termination.

[23]

The
    application judge appeared to accept the Landlords submission. At para. 85, he
    wrote: Smiles First does not take the position that it is currently a
    subtenant  At the time that the Notice of Termination was given on March 21,
    2017, Smiles First was no longer a subtenant. Nevertheless, the application
    judge went on to conclude that even if Smiles First was a subtenant, it would
    not be entitled to relief from forfeiture under s. 21 of the
CTA
or s.
    98 of the
CJA
because the Landlord was not attempting to enforce any
    right of re-entry or forfeiture under the Head Lease, which 244 had abandoned.
    As a result, Smiles First was not entitled to an order allowing it to remain in
    possession of the premises as a subtenant on the terms and conditions of the
    Head Lease: para. 86.

[24]

For
    the reasons that follow, I conclude that the application judge erred in not
    granting Smiles First a remedy from the Landlords attempt to enforce the
    Notice of Termination and evict Smiles First from the Premises. Smiles First is
    entitled to possession of the Premises until the end of the term of, and on the
    terms and conditions contained in, the Sublease.

[25]

I
    start my analysis by recognizing that the parties placed the application judge
    in a difficult position. The argument advanced below by Smiles First lacked
    precision. Although Smiles Firsts factums on the application below clearly show
    that it sought alternative relief pursuant to the Sublease, its focus on
    securing new terms for its subtenancy understandably could lead the application
    judge to conclude that Smiles First was taking the position it was not
    currently a subtenant on the terms of the Sublease. Further, the parties did
    not provide the application judge with assistance on the key legal question: What
    legal effect did 244s abandonment of the Head Lease have on Smiles Firsts Sublease
    of the Premises? Following the hearing of the appeal, the panel called for and
    received submissions from the parties on that issue.

[26]

Nevertheless,
    I conclude, with respect, that the application judge erred in holding that
    Smiles First was not entitled to continued possession of the Premises under the
    Sublease.

[27]

The
    application judge found that 244 abandoned the premises as part of its
    settlement with the Landlord. I see no reversible error in that finding. It
    follows that 244s abandonment amounted to a surrender of the Head Lease by the
    tenant:
Daulat Investments Inc. v. Cecis Home for Children
(1991), 85
    D.L.R. (4th) 248 (Ont. Gen. Div.), at para. 26.

[28]

Having
    found that 244 abandoned the Head Lease, the application judge erred by
    accepting the Landlords submission that the surrender of the Head Lease resulted
    in the termination of the Sublease. As a matter of law, it did not. Where the
    tenant surrenders a head lease to the landlord, the subleases created by the
    surrendering tenant survive until the end of their stated terms:
Kowalski
    and Shoota v. Gale
, [1947] 1 D.L.R. 354 (Ont. C.A.), at paras. 32-33;
Shapiro
    v. Handelman
, [1947] O.R. 223 (C.A.), at paras. 6-7 and 16;
Royal Bank
    v. Loeb Inc.
, [1995] O.J. No. 1702 (Gen. Div.), at paras. 12-13; and
CTA
,
    s. 17.
[3]

[29]

Accordingly,
    the application judge erred in finding that Smiles First was not a subtenant
    when the Landlord gave its Notice of Termination.

[30]

That
    said, the application judge properly refused Smiles Firsts request for a
    declaration that pursuant to the Sublease it was entitled to remain in the Premises
    on the same terms and conditions as the Head Lease: para. 80. Smiles First
    was only entitled to remain in the Premises on the terms and conditions
    contained in its Sublease.

[31]

Nor
    was Smiles First entitled to relief under s. 21 of the
CTA
because the Landlord was not
proceeding
    to enforce a right of re-entry or forfeiture under any covenant, proviso or
    stipulation in the Head Lease, which 244 had surrendered:
Maverick
    Professional Services Inc. v. 592423 Ontario Inc.
(2001), 147 O.A.C. 209 (C.A.),
    at para. 4. Nor was this a case for relief from forfeiture under s. 98 of the
CJA
as the Landlord was not trying to enforce a right of re-entry or forfeiture by
    reason of Smiles Firsts breach of the Sublease.

[32]

However,
    Smiles First is entitled to relief against the Landlords attempt to terminate its
    possession of the Premises on the basis that it was merely a monthly tenant.
    When the Landlord delivered the Notice of Termination, Smiles First was
    entitled to possession of the premises under the terms of the Sublease. The
    Notice of Termination was of no effect. Consequently, pursuant to s. 134(1)(a)
    of the
CJA
,
[4]
I would grant Smiles First a declaration that it is entitled to possession of
    the Premises until the end of the term of, and on the terms and conditions set
    out in, the Sublease, including the amount of rent payable.

IV.

DISPOSITION

[33]

For
    the reasons set out above, I would allow the appeal, set aside the application
    judges order, and grant a declaration that Smiles First is entitled to
    possession of the Premises until the end of the term of the Sublease, on the
    terms and conditions set out therein, including the amount of rent payable.

[34]

Although,
    in the result, Smiles First has obtained relief on this appeal, it did not
    succeed on its main argument based on an assignment of the Head Lease and its
    alternative request for relief in respect of the Sublease was sufficiently
    imprecise as to necessitate calling for further submissions. In those
    circumstances, I would only award Smiles First costs of the appeal, including
    the stay motion, in the amount of $5,000, inclusive of disbursements and
    applicable taxes. I would order that no costs be awarded in respect of the proceeding
    below.

Released: GE Jun 8 2018

David Brown J.A.
I agree. Gloria Epstein J.A.
I agree. K van Rensburg J.A.

[1]
Section 21 provides:

Where a lessor is proceeding by action or
    otherwise to enforce a right of re-entry or forfeiture under any covenant,
    proviso or stipulation in a lease, the court, on motion by any person claiming
    as under-lessee any estate or interest in the property comprised in the lease
    or any part thereof, in the lessors action, if any, or in any action or
    application in the Superior Court of Justice brought by such person for that
    purpose, may make an order vesting for the whole term of the lease or any less
    term the property comprised in the lease, or any part thereof, in any person
    entitled as under-lessee to any estate or interest in such property upon such
    conditions as to execution of any deed or other document, payment of rents,
    costs, expenses, damages, compensation, giving security or otherwise as the
    court in the circumstances of each case thinks fit; but in no case is any such
    under-lessee entitled to require a lease to be granted to him, her or it for
    any longer term than the under-lessee had under the original sub-lease.

[2]
Section 98 provides:
A court may grant relief against penalties and forfeitures, on such
    terms as to compensation or otherwise as are considered just.

[3]

Section
    17 states: Where the reversion expectant on a lease of land merges or is
    surrendered, the estate which for the time being confers as against the tenant
    under the lease the next vested right to the land shall, to the extent of and
    for preserving such incidents to and obligations on the reversion as but for
    the surrender or merger thereof would have subsisted, be deemed the reversion
    expectant on the lease.

[4]

Section
    134(1) states, in part:
Unless
    otherwise provided, a court to which an appeal is taken may, (a) make any order
    or decision that ought to or could have been made by the court or tribunal
    appealed from.


COURT OF APPEAL FOR ONTARIO

CITATION: Susin v. Susin, 2018 ONCA 549

DATE: 20180615

DOCKET: M49003 (C61734)

Strathy C.J.O., Feldman and Brown JJ.A.

BETWEEN

Fermino Susin

Applicant
(Respondent)

and

Dorino Susin, John Susin, Anita Rahman, Dianne
    Susin,
Sister Stella Marie, Gloria Devenz, Esther Susin
and Theresa Lensborn

Respondents
(Appellants)

AND BETWEEN

John Susin

Applicant

and

Fermino Susin, Dorino Susin, Anita Rahman,
Dianne Susin, Sister Stella Marie, Gloria Devenz,
Esther Susin and Theresa Lensborn

Respondents

Esther Susin, acting in person

Margaret A. Hoy, for the responding party

Heard: In writing

ENDORSEMENT

[1]

This matter comes before the court by way of a motion in writing to set
    aside the order of Fairburn J.A., dated March 5, 2018, dismissing the
    appellants motion to set aside the order of Gillese J.A., which required that
    the appellants each pay the sum of $15,000 into court as security for costs of
    their appeal.

[2]

The court has directed the Registrar to give notice to the parties,
    pursuant to r. 2.1.01(3) that the court is considering making an order under r.
    2.1.01(1).

[3]

Litigation among the nine Susin siblings, relating to the estate of
    their late father, has been before this court on three prior occasions.

[4]

The appellant, John Susin, appealed an order made in 2008 by Quinn J.,
    declaring him to be a vexatious litigant. His appeal was dismissed by this
    court:
Susin v. Susin
, 2009 ONCA 231. This court observed:

[T]he record shows that there was ample evidence to support his
    finding that the appellant is a vexatious litigant. His conduct in this case is
    indicative of his persistent and unwarranted pursuit of legal proceedings that
    are both meritless and frivolous. His conduct has resulted in enormous
    inconvenience and expense, over many, many years, to opposing litigants and in
    this era of strained court resources, he can no longer be permitted
    unrestrained access to the courts of Ontario.

[5]

In 2014, this court quashed an appeal by Dianne Susin on the ground that
    the order under appeal was interlocutory:
Susin v. Susin
, 2014 ONCA
    461. In so doing the court noted, at para. 3, a trail of unpaid costs orders in
    related proceedings and observed that the appeal should also be quashed on the
    basis of the appellants' persistent and unexplained failure to honour these
    costs orders.

[6]

Again in 2014, this court upheld a finding of contempt against another
    brother, Dorino Susin:
Susin v. Susin
, 2014 ONCA 733. As Blair J.A.
    noted in that case, at para. 2, [T]he Susin brothers and sisters have been
    squabbling over the estate of their late father, John Sr., since the death of
    their mother in 1998.

[7]

The proceedings in this court are only the tip of the iceberg. In her
    endorsement in this litigation,
Susin v. Susin
, 2018 ONCA 220,
    Fairburn J.A. stated, at para. 17:

Since this court dismissed John Susin's effort to have the
    vexatious litigant designation set aside almost a decade ago, at a minimum, it
    appears that he has brought motions before over fifteen different judges, on
    over twenty different days, in at least four different jurisdictions. The
    respondent has faced the daunting task of attempting to navigate his way
    through this labyrinth of litigation brought by John Susin, all the while facing
    an increasingly dwindling estate.

[8]

The result is that a relatively modest estate, consisting primarily of
    the family home, has been dissipated, leaving behind a slew of unpaid costs
    orders against the appellants.

[9]

Moreover, the continued misconduct of some of the participants in the
    proceedings, notably John Susin, has been the subject of sanctions. January
    2016, Ramsay J. of the Superior Court of Justice found that the appellant,
    Esther Susin, had facilitated her brothers [John Susins] campaign against the
    estate and his contravention of a prior order. Ramsay J. found John Susin in
    contempt
instanter
and he was committed to prison overnight.

[10]

John
    Susin has recently been found in contempt of the vexatious litigant order and
    in January of 2018 was sentenced to 30 days imprisonment:
Susin v. Susin
,
    2018 ONSC 148.

[11]

Having
    considered the submissions of the parties, the motion to set aside the order of
    Fairburn J.A., the endorsement of Fairburn J.A., and the endorsement of Gillese
    J.A., as well as the history of this litigation, we are satisfied that the
    motion is frivolous, vexatious and an abuse of process and it is dismissed, pursuant
    to r. 2.1.02(1).

[12]

Having
    considered the foregoing matters, as well as the order of Quinn J., dated July
    23, 2008, declaring the appellant John Susin a vexatious litigant, the 11-year
    history of these proceedings, which includes numerous and substantial unpaid
    costs orders against the appellants, we are satisfied that it is appropriate to
    make an order pursuant to r. 2.1.02(3) prohibiting the appellants, or any of
    them, from making any further motions in this proceeding without leave of a
    judge of this court. Any such motion seeking leave must be made
in writing
and will not be accepted unless proof of
    service on the respondents counsel is provided at the time of filing.

[13]

In
    addition, before bringing any such motion, the appellants are required to
    satisfy all outstanding costs orders made against them by judges of both this
    court and of the Superior Court of Justice, and shall file proof by affidavit
    that they have done so.

[14]

For
    these reasons, it is ordered that:

a.

the motion to set aside the order of Fairburn J.A., is dismissed, with
    costs fixed at $1,000, inclusive of disbursements and taxes;

b.

if the appellants fail to pay security for costs, pursuant to the order
    of Gillese J.A. within 30 days, the appeal shall be dismissed as abandoned; and

c.

the appellants are prohibited from making any other motions in this
    proceeding without leave of a judge of this court, on the terms set out in
    paras. 12 and 13 of these reasons, namely:

i.

any such motion seeking leave must be made
in
    writing
and will not be accepted unless proof of service on the
    respondents counsel is provided at the time of filing; and

ii.

before bringing any such motion, the appellants are required to satisfy
    all outstanding costs orders made against them by judges of both this court and
    of the Superior Court of Justice, and shall file proof by affidavit that they
    have done so.

G.R. Strathy C.J.O.

K. Feldman J.A.

David Brown J.A.