



COURT OF APPEAL
    FOR ONTARIO

CITATION: Pickering Square Inc. v. Trillium College Inc.,
    2016 ONCA 179

DATE: 20160303

DOCKET: C58900

Strathy C.J.O., LaForme and Huscroft JJ.A.

BETWEEN

Pickering Square Inc.

Plaintiff

(Respondent by way of cross-appeal)

and

Trillium College Inc.

Defendant

(Appellant by way of cross-appeal)

Courtney Raphael, for the appellant Trillium College
    Inc.

Alan B. Dryer and Orly Kahane-Rapport, for the
    respondent Pickering Square Inc.

Heard:  November 24, 2015

On appeal from the judgment of Justice Graeme Mew of the Superior
    Court of Justice, dated April 29, 2014, with reasons reported at 2014 ONSC 2629,
    44 R.P.R. (5th) 251.

Huscroft J.A.:

Overview

[1]

The main question posed by this case is: When is a claim discovered for
    limitations purposes in the context of a continuing breach of contract?

[2]

Trillium College Inc. (Trillium) and Pickering Square Inc. (Pickering) were
    parties to a long-term lease of space in a shopping centre. Trillium covenanted
    not only to pay rent but also to occupy the premises and to operate its
    business as a vocational college continuously, and to restore the premises at
    the expiry of the lease.

[3]

Trillium paid rent for the duration of the lease but did not operate its
    business continuously and failed to restore the premises when the lease ended. Pickering
    brought a claim for damages for Trilliums breaches of its covenants following
    expiry of the lease.

[4]

Trillium brought a motion for summary judgment, arguing that Pickerings
    claim was brought outside the two-year limitation period under s. 4 of the
Limitations
    Act
, 2002
, S.O. 2002, c. 24, Sched. B. The motion judge held that Trilliums
    breach of the covenant to occupy the premises and operate its business continuously
was of a continuing nature, such that each day of the
    breach gave rise to a fresh cause of action. As a result, only a portion of
    Pickerings claim
against
Trillium for breach
    of its covenant  the portion concerning the breach that occurred more than two
    years prior to commencement of the action ­­
was barred by the
Limitations
    Act
.
The motion judge also held that Pickerings
    claim for damages for breach of the covenant to restore the premises was not
    time barred. (A
claim for arrears of rent was resolved prior to the
    summary judgment motion and was dismissed by the motion judge.)

[5]

Pickering appealed against the judgment but did
    not pursue its appeal
. At the hearing, Trillium abandoned its
    cross-appeal of an award of costs in favour of Pickering arising out of the
    dismissal of its claim for arrears of rent. As a result, this case is concerned
    solely with Trilliums cross-appeal of the partial summary judgment.

[6]

Trillium raises two issues on appeal:

1.

Did the motion
    judge err by finding a continuing breach of the agreement giving rise to a new
    cause of action and a new limitation period each day that Trillium failed to
    carry on business at the leased premises?

2.

Did the motion
    judge err by finding that the repair claim was not statute- barred because it
    concerned repairs at the end of the lease rather than during its term?

[7]

I would dismiss Trilliums cross-appeal for the reasons that follow.

Facts

[8]

Pickering entered into an agreement with Trillium to lease commercial
    space at a shopping centre for a five-year term, from June 1, 2006 to May 31,
    2011. The agreement required Trillium to pay monthly rent and included
    covenants requiring Trillium to operate its vocational college business
    continuously, to maintain the premises throughout the term of the lease, and to
    restore the premises following the expiry of the lease. The relevant covenants are
    set out in Appendix A.

[9]

Trillium gave notice to Pickering and vacated the leased premises in December
    2007. In June 2008, Pickering sued the appellant for rent arrears and payment
    under s. 16.08 of the lease for failing to occupy the premises and to conduct its
    business continuously. The suit was settled in August 2008 with Trillium agreeing
    to resume occupation of the leased premises by October 1, 2008 in accordance
    with the terms of the lease.

[10]

Although
    Trillium paid the rent for the remainder of the lease (with two deficiencies
    not relevant here), it failed to conduct its business continuously at the
    leased premises as required by the covenant.

[11]

The
    lease expired on May 31, 2011 and Pickering brought an action against Trillium on
    February 16, 2012 for arrears of rent; for failure to occupy the premises and conduct
    its business continuously from October 1, 2008 to May 31, 2011; and for breach
    of the covenant to restore the premises.

[12]

As
    noted earlier, Trillium brought a motion for summary judgment, arguing that Pickerings
    claims were time-barred. The parties agreed that this was an appropriate case
    for summary judgment under the principles enunciated in
Hryniak v. Mauldin
,
    2014 SCC 7, [2014] 1 S.C.R. 87.

The motion judges decision

[13]

The
    motion judge concluded that the two-year limitation period under the
Limitations
    Act
applied to Pickerings claim against Trillium for breach of the
    covenant to operate its business continuously. He rejected Pickerings argument
    that the longer limitation periods under the
Real
Property
    Limitations Act
, R.S.O. 1990, c. L.15
,
applied.
The
    motion judge found that Pickering discovered its claim once Trillium did not
    resume occupation of the leased premises on October 1, 2008. Thus, well before
    the lease expired, Pickering knew that it had suffered damage and knew that it
    could pursue a remedy in a legal proceeding (as it had done in 2008).

[14]

However,
    the motion judge also found that Trilliums failure to resume occupation of the
    premises and to carry on its business continuously from October 1, 2008 gave rise
    to a series of breaches rather than a single breach. Accordingly, Pickering acquired
    a new cause of action every day Trillium failed to operate its business in
    accordance with the covenant until expiration of the lease on May 31, 2011.

[15]

Pickering
    brought its action on February 16, 2012. The motion judge found that Pickerings
    claim for the period from October 1, 2008 to February 16, 2010 was statute-barred,
    but its claim for the period from February 16, 2010 to the expiry of the lease
    on May 31, 2011 was not.

[16]

The
    motion judge found, further, that Pickering sought to recover only for breach
    of the covenant to repair and restore the premises at the end of the lease (and
    not during its term). Accordingly, it was not necessary to determine whether
    the limitation period under the
Real Property Limitations Act
or the
Limitations
    Act
applied because the obligation to restore arose when the lease expired
    on May 31, 2011, and Pickerings February 16, 2012 action was brought within
    the two-year period under the
Limitations Act
 the shortest of the possible
    limitation periods under the two statutes.

Analysis

(1)

The standard of review

[17]

The
    interpretation of the lease and application of the principles of contract law involve
    issues of mixed law and fact and the motion judges decision is to be reviewed
    on a deferential basis:
Sattva Capital Corp. v. Creston Moly Corp
.,
2014 SCC 53, [2014] 2 S.C.R. 633. In the absence of an extricable question of
    law, which attracts the correctness standard, the decision of the motion judge
    is reviewable on the standard of palpable and overriding error.

(2)

When does the limitation period run in the context of a continuing
    breach?

[18]

Trillium
    argues that its breach of the covenant to operate its business continuously was
    complete on October 1, 2008, the first day it failed to resume occupation of
    the leased premises and operate its business, and that each subsequent day that
    it failed to operate its business was not a separate breach but, instead, an instance
    of additional damages.

[19]

Trillium
    submits that a continuing breach of contract requires a succession or
    repetition of separate acts, whereas this is a case of a single act with
    continuing consequences. Although s. 16.08 of the lease quantifies the damages
    payable for every day Trillium failed to carry on business, it does not give
    rise to a separate cause of action each and every day the failure continued.
    Consequently, Pickerings claim is statute-barred because it should have been brought
    within two years of the October 1, 2008 breach  on or before October 1, 2010.

[20]

I
    would reject this submission.

[21]

For
    purposes of s. 5(1) of the
Limitations Act
,
a claim is discovered once a plaintiff knew or ought to
    have known of sufficient facts on which to base the claim. Under s. 5(2), a
    claimant is presumed to discover his or her claim on the day the act or
    omission giving rise to the claim occurs, unless the contrary is proven.

[22]

In
    order to determine the discovery date for the claim, the nature of the breach
    must first be determined.

[23]

Breaches
    of contract commonly involve a failure to perform a single obligation due at a
    specific time. This sort of breach is sometimes called a once-and-for-all
    breach: it occurs once and ordinarily gives rise to a claim from the date of
    the breach  the date performance of the obligation was due. Trilliums breach
    of s. 16.08 does not fall into this category because its obligation to operate
    its business was ongoing rather than single and time-specific.

[24]

A
    second form of breach of contract involves a failure to perform an obligation scheduled
    to be performed periodically  for example, a requirement to make quarterly
    deliveries or payments. A failure to perform any such obligation ordinarily
    gives rise to a breach and a claim as from the date of each individual breach: see
    e.g.
Smith v. Empire Life Insurance Co
.
(1996),

19 CCEL (2d) 171 (Ont.
    Gen. Div.), leave to appeal refused, [1996] O.J. No. 3113 (C.A.). That is not
    this case.

[25]

As
    the motion judge found, this case falls into a third category of breach: breach
    of a continuing obligation under a contract. Trillium breached its covenant to
    operate its business continuously
 at all times 
for
    the duration of the lease.

[26]

The
    concept of a continuing breach is not novel. It was outlined by Dixon J. (as he
    then was) in
Larking v. Great Western (Nepean) Gravel Ltd. (in Liquidation)
(1940), 64 C.L.R. 221 (HCA), at p. 236:

If a covenantor undertakes that he will do a
    definite act and omits to do it within the time allowed for the purpose, he has
    broken his covenant finally and his continued failure to do the act is nothing
    but a failure to remedy his past breach and not the commission of any further
    breach of his covenant. His duty is not considered as persisting and, so to
    speak, being for ever renewed until he actually does that which he promised. On
    the other hand, if his covenant is to maintain a state or condition of affairs,
    as, for instance, maintaining a building in repair, keeping the insurance of a
    life on foot, or affording a particular kind of lateral or vertical support to
    a tenement, then a further breach arises in every successive moment of time
    during which the state or condition is not as promised, during which, to pursue
    the examples, the building is out of repair, the life uninsured, or the
    particular support unprovided.

The distinction may be difficult of
    application in a given case, but it must be regarded as one depending upon the
    meaning of the covenant. It is well illustrated by the construction given to
    the ordinary covenant that premises will be insured and kept insured against
    fire. Such a covenant is interpreted as imposing a continuing obligation to see
    that the premises are insured, so that the covenant cannot be broken once for
    all, but, on the contrary, failure to insure involves a continuing breach until
    the omission is made good.

See the discussion in J.W. Carter,
Carters
Breach of Contract

(Lexis Nexis-Butterworths 2011), at ch. 11-64. See
    also
Bridgesoft Systems Corp. v. British Columbia
, 2000 BCCA 313, 74 B.C.L.R. (3d) 212.

[27]

Trilliums argument that breach of its covenant to operate its
    business continuously established a complete cause of action as of
October 1, 2008 overlooks the consequences of its breach. In the face of Trilliums
    action  a serious breach or repudiation of the lease  Pickering had an option.
    It could either cancel the lease or affirm it and require performance: see
Highway
    Properties Ltd. v. Kelly, Douglas & Co. Ltd
., [1971] S.C.R. 562, at p.
    570;
TNG Acquisition Inc. (Re)
, 2011 ONCA 535, 107 O.R. (3d) 304, at
    para. 33.

[28]

The
    election to cancel a contract as a result of a serious breach or repudiation
    brings a contract to an end and relieves the parties of any further obligations
    under it. The contract is not void
ab initio
: the innocent party may
    sue for damages for breach of the contract.

[29]

By
    contrast, if the innocent party elects to affirm the contract despite the serious
    breach or repudiation, the contract remains in effect and the parties are
    required to perform their obligations under it. The innocent party retains the
    right to sue for past and future breaches:
Guarantee Co. of North America
    v. Gordon Capital Corp
., [1999] 3 S.C.R. 423, at para.
    40.

[30]

Pickering
    elected not to cancel the lease following Trilliums October 1, 2008 breach. It
    affirmed the lease and, as a result, the parties were required to perform their
    obligations under it as they fell due.

[31]

Trillium
    could have resumed performance of its obligations at any time prior to the end
    of the term of the lease by carrying on its business at the leased premises in
    accordance with the terms of the covenant. Had it done so, Pickering would have
    been required to accept Trilliums performance and would have been unable to terminate
    the lease in the absence of a further serious breach or repudiation. Trillium
    would have been liable for damages from the date of its October 1, 2008 breach
    until the date it resumed the performance of its covenant obligations, but
    would not have incurred liability for breach of the lease beyond that date.

[32]

Trillium
    chose not to resume its obligations at any point prior to the expiry of the
    lease. In these circumstances, when did the two-year limitation period begin to
    run?

[33]

It
    is clear that a cause of action accrues once damage has been incurred, even if
    the nature or the extent of the damages is not known:
Peixeiro v. Haberman
, [1997] 3 S.C.R. 549, at para. 18;
Hamilton (City) v.
    Metcalfe & Mansfield Capital Corporation
, 2012 ONCA 156, 347 D.L.R. (4th)
    657, at para. 61.

[34]

But
    accrual of a cause of action is not determinative for limitation purposes in
    the context of a continuing breach of contract and an election by the innocent
    party to affirm the contract. The motion judge properly concluded that a fresh
    cause of action accrued every day that breach continued  every day that
    Trillium failed to carry on its business in accordance with the covenant.

[35]

Nothing
    in
Highway Properties

precludes this approach.
    Laskin J.s statement, at p. 576, that 
the election to
    insist on the lease or to refuse further performance (and thus bring it to an
    end) goes simply to the measure and range of damages does not speak to a situation
    of continuing breach or the application of the
Limitations Act
.

[36]

I
    agree with the motion judge that the proper approach to the calculation of the
    limitation period in the context of a continuing breach is set out in H.G.
    Beale, ed.,
Chitty on Contracts
, 29
th
edn. (London, UK:
    Sweet & Maxwell, 2004), at para. 28-035 (the position is unchanged in the
    32
nd
edition):

[T]he breach may be a continuing one, e.g. of a covenant to
    keep in repair. In such a case the claimant will succeed in respect of so much
    of the series of breaches or the continuing breach as occurred within the
    [relevant limitation period] before action brought. If the breach consists in a
    failure to act, it may be held to continue
die in diem
until the
    obligation is performed or becomes impossible of performance
or
    until the innocent part elects to treat the continued non-performance as a
    repudiation of the contract.

[Footnotes
    omitted.]

[37]

The
    accrual of fresh causes of action has consequences for the innocent party as
    well as the party in breach of the contract. It sets the clock running for a
    new two-year limitation period. Pickerings election to affirm rather than
    cancel the lease does not have the effect of postponing the date for discovery
    of the breach until expiry of the lease.

[38]

The
    limitation period in this case applied on a rolling basis, a concept
    discussed in
Goorbarry v. Bank of Nova Scotia
, 2011 ONCA 793 at paras.
    11-13 and
Wilsons Truck Lines Ltd. v. Pilot Insurance Co
.
(1996), 31 O.R. (3d) 127 (C.A.) at
    para 58.

The two-year limitation period commenced
    each day a fresh cause of action accrued and ran two years from that date.
    Thus, Pickering was entitled to claim damages for breach of the covenant for
    the period going back two years from the commencement of its action on February
    16, 2012  the period that ran from February 16, 2010 until the lease expired
    on May 31, 2011.

(3)

Was the repair claim statute barred?

[39]

Trillium
    submits that Pickerings restoration claim was related to obligations during
    the lease rather than at its expiry. This claim was therefore discoverable as
    of October 1, 2008 and, as a result, is barred by the two-year limitation
    period under s. 4 of the
Limitations Act
.
Trillium submits,
    further, that if Pickerings claim related to obligations at expiry of the lease,
    it failed to give notice under the lease that repairs were required.

[40]

This argument must also be rejected.

[41]

The motion judge was entitled to find that the respondent was claiming
    only for the breach of the covenant to repair and restore at the end of the
    lease. From this finding it followed that the limitation period for the claim began
    to run on May 31, 2011, and as a result the action was commenced within two
    years of discovery of the claim.
Whether notice was
    provided was irrelevant to the nature of the claim and the
Limitations
    Act
issue.

Disposition

[42]

Accordingly,
    I would dismiss the cross-appeal.

[43]

I
    would order the appellant to pay the respondent costs fixed by agreement at
    $20,000, inclusive of disbursements and all applicable taxes.

Released:  March 3, 2016 GRS"

Grant
    Huscroft J.A.

I
    agree G.R. Strathy C.J.O.

I
    agree H.S. LaForme J.A.

Appendix A

Section 16.08        Failure of the Tenant to Carry on Business

(a)     The Tenant shall take possession of the Leased Premises
    upon the Commencement Date, and shall open the whole of the Leased Premises for
    business, fully fixtured, stocked and staffed upon the Commencement Date (but
    in no event prior to the Opening Date), and thereafter throughout the Term
    conduct its business operations continuously, diligently and actively on the
    whole of the Leased Premises at all times, duly and strictly in accordance with
    the terms, covenants and conditions of this Lease.

(b)     If the Tenant fails to take possession of and to open
    or to reopen the Leased Premises for business, fully fixtured, stocked and
    staffed within the times and in the manner required pursuant to this Lease or
    to carry on business at all times during the Term duly and strictly in
    accordance with the terms, covenants and conditions contained in this Lease,
    the Landlord shall be entitled (i) to collect (in addition to the Minimum Rent,
    Additional Rent and all other charges payable hereunder), an additional charge
    at a daily rate of Ten Cents ($0.10) per square foot ($1.08 per square metre)
    of the Rentable Area of the Leased Premises or One Hundred Dollars ($100.00),
    whichever is the greater, for each and every day that the Tenant fails to
    commence to do or to carry on business as herein provided, the additional charge
    being a liquidated sum representing the minimum damages which the Landlord is
    deemed to have suffered as a result of the Tenants default, and is without
    prejudice to the Landlords right to claim a greater sum of damages; and (ii)
    to avail itself of any other remedies for the Tenants breach hereunder,
    including obtaining an injunction or an order for specific performance in a
    court of competent jurisdiction to restrain the Tenant from breaching any of
    the provisions of this Section 16.08 and to compel the Tenant to comply with
    its obligations under this Section 16.08

Section 11.05        Surrender of the Leased Premises

At the expiration or earlier termination of the Term, the
    Tenant shall peaceably surrender and yield up the Leased Premises to the
    Landlord in as good condition and repair as the Tenant is required to maintain
    the Leased Premises throughout the Term The Tenant shall, however, remove all
    its trade fixtures and any alterations or improvements if requested by the
    Landlord as provided in Section 11.09 before surrendering the Leased Premises,
    and shall forthwith repair any damages to the Leased Premises caused by their
    installation or removal. The Tenants obligation to observe and perform this
    covenant shall survive the expiration of the Term or earlier termination of
    this Lease.

Section 11.09        Removal and Restoration by the Tenant

[T]he Tenant shall, at the expiration of the Term, at its own
    cost, remove all its trade fixtures and such of its leasehold improvements and
    fixtures installed in the Leased Premises as the Landlord requires to be
    removed.


