



COURT OF APPEAL FOR ONTARIO

CITATION: 410784 Ontario Limited v. Little Zinger Inc. (Corktown
    Esso), 2016 ONCA 90

DATE: 20160202

DOCKET: C58937

Gillese, MacFarland and van Rensburg JJ.A.

BETWEEN

410784 Ontario Limited

Plaintiff by Counterclaim (Appellant)

and

Little
    Zinger Inc. carrying on business as Corktown Esso,

Zafar
    Khokhar, James Stonley and

Jet
    Transportation Limited

Defendants to the Counterclaim (Respondents)

P. James Zibarras and Adam N. Weissman, for the
    appellant

Wendy Greenspoon-Soer, for the respondents

Heard:  January 19, 2016

On appeal from the judgment of Justice Victoria R. Chiappetta
    of the Superior Court of Justice, dated May 16, 2014, with reasons reported at
    2014 ONSC 2510.

MacFarland J.A.:

[1]

The appellant appeals from the judgment of Chiappetta J. dismissing its
    counterclaim with costs on the basis that the appellants claims were statute
    barred. For the reasons that follow, I would dismiss the appeal.

BACKGROUND IN BRIEF

[2]

The appellant, referred to throughout these proceedings as City Gas,
    operated a gasoline station from leased premises at 176 Front Street East in
    Toronto for a number of years.

[3]

City Gas leased the premises on which it operated the gas station from
    the respondent Jet Transportation Limited (Jet), the owner of the property.
    Other parts of the property were leased to other tenants, including a hair
    salon and a framing business.

[4]

On November 7, 2004 the lease for City Gas expired. At this point in
    time and for a number of years before, the daily operations of City Gas had
    been run by the respondents Khokhar and Stonley, both long time trusted
    employees of City Gas. The principal of City Gas, Selby Wemyss, was getting
    older and was in poor health.

[5]

Selbys efforts to renew the lease were sporadic and not urgent. He
    first discussed renewal of the lease with Mr. Winch, Jets solicitor, in or
    around November 2004. Winch advised him that the lease had expired on November
    7, 2004. Selby indicated that he wanted a five year renewal on the same terms
    as the expired lease. Winch told him that Jet was looking for a head tenant to
    lease the entire building and for a significant increase in the base rent. The principals
    of Jet, Leonard Nefsky and Sam Wagman, were also getting older and their
    companys offices had moved to a different location. They wanted a head lease
    so that the head tenant would be responsible for the care and maintenance of
    the property and to deal with the other tenants. At the time Leonard Nefskys
    son, Neal, was looking after the property for his father.

[6]

At a subsequent meeting at Jets offices among Neal and Leonard Nefsky,
    Sam Wagman and Selby Wemyss, Neal offered to renew the lease if Selby would
    agree to a significant increase in base rent and a head lease for the premises
     the same terms which had been earlier conveyed. Selby Wemyss turned down the
    offer  he refused to take on a head lease and said he couldnt afford a rent
    increase. The parties agreed to continue the tenancy on a month to month basis.

[7]

Selby again attempted to renew the lease in May 2005. He called Winch
    and offered a five percent increase in base rent, all other terms to remain the
    same. Jet rejected the offer and made no counteroffer.

[8]

Stonley was aware in 2005 that the tenancy of his employer was month to
    month from conversations he had with Selby.

[9]

On November 22, 2005 Dorothy Wemyss (Selbys wife), in the presence of
    her husband, told Stonley and Khokhar that City Gas had a 10-year lease for the
    premises and that they should buy the business for $500,000. Selby agreed.

[10]

Dorothys
    assertion that they had a ten-year lease did not ring true.

[11]

Stonley,
    from his discussions with Selby, thought that the tenancy was month to month. Stonley
    and Khokhar called Neal Nefsky and told him about their conversation with
    Dorothy. Neal told them that City Gas did not have a ten-year lease and that
    the tenancy was month to month. In the words of the trial judge, Neal
    sarcastically said why dont you give me $500,000 and I will sell you the
    business. He also told Stonley and Khokhar that Jet would not renew the lease
    with City Gas because Selbys health was poor, he didnt know Dorothy and did
    not wish to deal with Stephanie Silver (Selbys daughter). Neal further
    explained that Jet was seeking a head tenant and the reasons why. He asked Stonley
    and Khokhar to make Jet an offer to lease the premises as head tenant.

[12]

Stonley
    and Khokhar consulted with their lawyer and in December 2005 sent an offer to
    Winch to lease the premises as head tenant. Stonley and Khokhar had in
    September 2004 incorporated Little Zinger Inc., a company in which they each
    had a fifty percent interest. The offer was from Little Zinger to Jet.

[13]

Also
    in December 2005, Silver became involved in the lease negotiations on her
    fathers behalf and spoke with Winch about renewing the lease. The trial judge
    accepted Winchs evidence that Silver called him and offered to renew the
    expired lease on primarily the same terms but with a twenty-five per cent
    increase in the base rent and that he told her the offer was not acceptable to
    Jet.

[14]

Winch
    responded to Little Zingers offer on February 7, 2006. After some negotiations,
    the lease between Jet and Little Zinger was finalized on February 28, 2006.

[15]

Meanwhile,
    on February 24, 2006, Jet served City Gas with a Notice to Vacate, giving the
    company a little over 60 days notice to vacate the premises.

[16]

On
    February 27, 2006 Silver, on behalf of City Gas, fired all employees of City
    Gas and paid severance to all employees except Khokhar and Stonley. Silver
    testified that they were not paid severance because she fired them with cause
    for stealing. On their records of employment the cause for Khokhars and
    Stonleys dismissal was noted as misconduct. The notation caused them to be
    unable to collect EI benefits.
[1]


[17]

The
    evidence of Silver about how the terminations of Khokhar and Stonley came about
    that day is very different from their version of what happened.

[18]

The
    trial judge rejected Silvers evidence finding it to be incredible. She
    accepted the evidence of Khokhar and Stonley that on February 27, 2006 Silver
    said to them both words to the effect:

You guys went behind my fathers back and got yourselves a
    sweet deal  youre out of here.

[19]

She
    then told them to turn in their keys and credit cards and leave.

[20]

The
    trial judge accepted that evidence and found that Silver/City Gas knew on
    February 27 that it was Khokhar and Stonley who had replaced them as tenants of
    the premises and concluded:

It can be reasonably inferred therefrom that as of February 28,
    2006, the Plaintiff knew that Stonley and Khokhar had acquired the lease with
    Jet for the premises and this was the reason for their termination.

[21]

However,
    City Gas, despite its knowledge that its two trusted senior long-time employees
    had gone behind its back and obtained a lease from Jet, did nothing about it.
    It fired all its employees and vacated the premises within 30 days. In the
    course of closing out the station, it removed the gas tanks and pumps as well
    as a canopy.

[22]

After
    City Gas had vacated and in the course of preparations to re-open, Little Zinger
    learned that there were contamination issues with the site and remediation
    would be necessary. The re-opening of the station was delayed for over a year
    and on February 26, 2009 Little Zinger sued City Gas, Silver and Dorothy
    Wemyss. Selby Wemyss had died by this time. On March 27, 2009, City Gas
    counterclaimed against Little Zinger, Jet, Khokhar and Stonley advancing the
    claims that are the subject of this appeal.

[23]

Little
    Zinger subsequently agreed to dismiss/discontinue its action. The counterclaim
    proceeded to trial.

[24]

The
    trial judge dismissed the claims of City Gas as against all the defendants on
    the basis that they were statute barred. She went on to analyze the various
    claims, in the event that her conclusion regarding the limitation period was
    wrong. She would have found that City Gas had proven its claim against Stonley
    and Khokhar for breach of fiduciary duties and would have awarded $150,000 in
    damages. She would have dismissed the other claims.

ANALYSIS

The limitations period and the claim that Jet induced Stonley
    and Khokhar to breach their employment contract with and fiduciary duty to City
    Gas

[25]

The
    appellant submits that in concluding that its claims were statute barred the
    trial judge erred in law and made palpable and overriding errors in her
    underlying factual determination.

[26]

After
    reviewing the evidence and making her findings of fact the trial judge
    concluded that the appellant knew that Stonley and Khokhar had entered into a
    lease with Jet prior to March 2007.

[27]

She
    then considered s. 5 of the
Limitations Act
, S.O. 2002, c. 24, Sch. B,
in the face of the appellants
    argument that it did not discover its cause of action until February 26, 2009
    when Little Zingers statement of claim was served on it.

[28]

The
    appellants statement of defence and counterclaim was issued March 27, 2009.
    The argument the appellant advanced at trial and in this court was that because
    the negotiations between Stonley and Khokhar and Jet were conducted in secret,
    the appellant could not have known it had a claim until the process was served.

[29]

The
    trial judge rejected this argument. She found that City Gas knew before March
    2007 that it was Stonley and Khokhar who had entered into a lease with Jet and
    accordingly its claims against those individuals were statute barred.

[30]

The
    appellant says that in doing so the trial judge made an inference based on
    pure speculation that was not supported by any evidence.

[31]

In
    my view, the trial judges finding is amply supported in the record. Both
    Khokar and Stonley testified that they had a conversation with Silver on
    February 27, 2006, in which she said words to the effect of you went behind my
    fathers back, looks like you guys got a lease and you got yourselves a
    sweet deal. The trial judge accepted this evidence and rejected Silvers
    evidence as incredible. Her finding is entitled to deference in this court and I
    would not interfere with it. Accordingly, I reject this ground of appeal.

[32]

This
    was a difficult trial in the sense that there were directly contradictory
    versions of the events that had occurred among the witnesses. Selby Wemyss had
    died and his wife Dorothy was unable to attend the trial.

[33]

Mr.
    Zibarras, counsel to the appellant, had also been its solicitor during the
    negotiations about the lease. He was unavailable as a witness and
    cross-examination in the circumstances was made more difficult. In addition,
    all of the respondents were represented by the same lawyer.

[34]

The
    appellant further submits that the trial judge erred in law by dismissing the
    appellants claims for inducing breach of contract against Jet as statute
    barred without engaging in any independent analysis of that claim.

[35]

At
    the conclusion of the evidence, the trial judge asked counsel to settle a list
    of the legal and factual issues she had to decide and they did so. At para. 37
    of her reasons she set out in full the agreed legal and factual issues. She
    stated the first issue as follows:

1.       Is the
    claim brought by City Gas barred by the Act?

(a)
When did City Gas know that Stonley and
    Khokhar had entered into a lease with Jet, that City Gas had suffered damages,
    and that a proceeding was the appropriate means to remedy it?

(b)
When ought City Gas to have known that
    Stonley and Khokhar had entered into a lease with Jet, that City Gas had
    suffered damages, and that a proceeding was the appropriate means to remedy it
?

[36]

Although
    the agreed list of issues is some two and one-half pages in length, there is no
    question or issue specifically set out that asks whether the claim for inducing
    breach of contract or any of the other claims against Jet were statute barred.

[37]

It
    is apparent from the record, the reasons of the trial judge and from how the
    appeal was argued in this court that the focus of the appellants claim was on
    Stonley and Khokhar and their secret negotiations to obtain the lease for the
    premises.

[38]

In
    the circumstances, the trial judge can be forgiven for not specifically dealing
    with whether the claim against Jet for inducing breach of contract was statute barred.

[39]

In
    this court almost the entirety of the appellants argument focused on the
    actions of Stonley and Khokhar and why the trial judges credibility findings
    should be set aside. Comparatively little time was spent on the inducing breach
    of contract claim either on the merits of the claim or the related limitation
    issue.

[40]

That
    said, counsel agree that the point was argued and the trial judge did not deal
    with it. To properly determine the limitation issue would involve an
    evidentiary review of conflicting evidence and related fact finding. An exercise
    this court is not equipped to make. However, in this case, in my view, it is
    unnecessary.

[41]

Assuming
    for present purposes that the claim was not statute barred, the trial judge
    concluded that Jet did not induce Stonley and Khokhar to breach their fiduciary
    duties to City Gas. The trial judge reviewed the evidence related to the timing
    of the negotiations between Stonley, Khokhar and Jet and concluded that Jets
    interference was neither intentional nor deliberate. At paras. 180-181 of her
    reasons she noted:

[180]
On November
    22, 2005, [Neal] Nefsky invited Stonley and Khokhar to make Jet an offer to
    lease the premises. The Defendants submit that [Neals] invitation should be
    excused as he was only contacted by Stonley and Khokhar after Dorothy offered
    to sell them the business. It was [Neals] invitation, however, on November 22,
    2005 that was the first step of a dance that ultimately ended in the
    Plaintiffs eviction
.

[181]
Having said
    that, I am unable to conclude that Jets interference was deliberate and
    intentional. In inviting the trusted employees to make an offer for a head
    lease, [Neal] was pursuing the interests of Jet. Jet wanted a head lease on the
    premises and [Neal] exploited an opportunity presented to him to secure it. He
    could not have known, at the time he invited the offer, however, that Stonley
    and Khokhar would choose to pursue the opportunity without disclosing it to
    their employer or without receiving their employers consent. The evidence does
    not demonstrate that at the time of the invitation, [Neal] was or could be
    certain that a head lease of the sort he proposed would inevitably result in
    the Plaintiffs eviction. It cannot be said therefore that Jet intended the
    breach
.

[42]

In
    addition it will be remembered that City Gas had been a month to month tenant
    since November 2004. It had made a couple of sporadic efforts to renew the
    lease since that time but no sustained effort to do so. Its last offer to the
    landlord Jet had been rejected in December 2005. Jet was insisting on a head
    lease and City Gas was refusing that term. Dorothy and Selby Wemyss had offered
    to sell the business to Stonley and Khokhar for $500,000 on the representation
    (untrue though it was) that City Gas had a ten-year lease. It was due to their
    interest in determining whether a lease in fact existed that Stonley and
    Khokhar came into contact with Jet who was looking for a head tenant. From
    Jets perspective, City Gas was trying to sell the business and was not
    interested in a head lease. In all the circumstances, the trial judges finding
    of a lack of the necessary intention element of the tort is supported by the
    evidence.

[43]

Thus,
    it is unnecessary to deal with whether this claim was statute barred because it
    fails on the merits in any event. This ground of appeal is rejected.

Damages

[44]

The
    appellant argues that the trial judge got the damages wrong when she rejected
    the evidence of the appellants expert.

[45]

There
    were serious problems with the two scenarios underlying the calculations
    advanced by Mr. Kerztman, the expert witness called by the appellant, and the
    trial judge rejected both of them. She properly instructed herself on the law
    in relation to the calculation of damages for breach of fiduciary duty and
    relied on
GasTOPS Ltd. v. Forsyth
,
    2009 CanLII 66153 (Ont. S.C.), at para. 1479, affd 2012 ONCA 134, for the
    proposition that:

A precise calculation, therefore, is not required. Rather an
    estimate of what may have been lost by the plaintiff due to the defendants
    breach, subject to a reduction for contingencies, is the proper approach  .

[46]

The
    trial judge considered the evidence before her and particularly the evidence that
    Dorothy and Selby Wemyss had offered to sell the business to Stonley and
    Khokhar for $500,000, which price was represented to include a ten-year lease.

[47]

She
    concluded that $450,000 would be a reasonable price and from that deducted
    usual costs that would be associated with a sale and fixed damages for breach
    of fiduciary duty at $400,000. I see no error in this conclusion.

Mitigation

[48]

The
    trial judge concluded that City Gas had failed to mitigate its damages. Professor
    Waddams in
The

Law of Contracts
,
6th ed. (Aurora, Ontario: Canada Law Book, 2010), at
    para. 753 notes:

A further restriction on recoverable damages lies in the
    principle that a plaintiff cannot recover for losses that could reasonably have
    been avoided.

[49]

The
    trial judge concluded that the appellant failed to take reasonable steps to
    mitigate and set out in some detail her reasons for doing so.

[50]

In
    coming to her conclusion the trial judge relied on four factors:

1.

The appellant vacated the property within 30 days rather than waiting a
    further 30 days (as it would have been permitted to do). Thus, it forfeited 30
    days of revenue as there was evidence that the monthly revenue exceeded the
    base monthly rent.

2.

The appellant failed to respond to an email from Little Zingers lawyer,
    Korman, offering to sublet the premises to the appellant or buy its equipment.

3.

Kormans file disclosed that Little Zinger would start negotiations to
    buy the equipment at $100,000 or go up to $250,000.

4.

Silvers own evidence that she ignored offers from many others that
    called her and attempted to buy the equipment.

[51]

A
    trial judges finding that a party has or has not taken reasonable steps to
    mitigate is entitled to deference in this court absent a finding of palpable
    and overriding error: see
Hav-A-Kar Leasing Ltd. v. Vekselshtein
, 2012
    ONCA 826, at para. 57.

[52]

Misapprehension
    of evidence amounts to a palpable and overriding error and in my view the trial
    judge did misapprehend the evidence on the four points she relied upon.

[53]

Firstly,
    the fact that the monthly revenue exceeded the base rent proves nothing. There were
    expenses the business would incur in addition to the base rent.

[54]

Secondly,
    the failure of the appellant to respond to Kormans email cannot be considered
    a failure to mitigate in light of the evidence that City Gas was moving the
    equipment to another of its properties for the purpose of selling the
    equipment.

[55]

Thirdly,
    there is no evidence that the appellant had any idea at the time that Little
    Zinger was prepared to pay between $100,000 and $250,000 for the equipment.

[56]

Fourthly,
    Silvers evidence was that the many other offers she refused were ones that
    offered only rock bottom prices.

[57]

I
    would set aside the trial judges finding that the appellant failed to mitigate
    its damages. In the circumstances, however, where the appeal is otherwise
    dismissed, it makes no difference, unless this matter were to go further.

DISPOSITION

[58]

For
    all these reasons the appeal is dismissed.

[59]

Costs
    to the respondents fixed in the sum of $14,000 inclusive of disbursements and
    HST.

[60]

Funds
    are standing in court to the credit of this matter pursuant to an order of this
    court.  I would direct that those monies be paid out to the respondents so far
    as necessary to satisfy this costs award.

Released:  February 2, 2016 EEG

J.
    MacFarland J.A.

I
    agree E.E. Gillese J.A.

I
    agree K. van Rensburg J.A.





[1]
Although all employees were fired on that day, every other employee, including
    Helen, who was alleged along with Khokhar and Stonley to have been robbing City
    Gas blind for years, were paid their separation benefits. Only Stonley and
    Khokhar were not.


