



COURT OF APPEAL FOR ONTARIO

CITATION: Northridge Property Management Inc. v. Champion
    Products Corp., 2017 ONCA 249

DATE: 20170327

DOCKET: C62151

Epstein, Benotto and Trotter JJ.A.

BETWEEN

Northridge Property Management Inc.

Plaintiff (Respondent)

and

Champion Products Corp.

Defendant (Appellant)

Harpreet Khukh, for the appellant

Danielle Landry, for the respondent

Heard: March 14, 2017

On appeal from the judgment of Justice William M. Le May of
    the Superior Court of Justice, dated April 25, 2016, with reasons reported at
    2016 ONSC 2715.

Epstein J.A.:

[1]

The respondent, Northridge Property Management Inc., claims damages
    against the appellant, Champion Products Corp., for breach of an Offer to Lease
    (OTL). Pursuant to the OTL, Champion moved into Northridges rental property,
    only to move out three weeks later. Champion argued it owed no damages because
    either there was no contract, or, if a contract existed, Northridge had
    fundamentally breached it.

[2]

The trial judge allowed Northridges action. He awarded Northridge
    $233,146.30 in damages with an interest rate of 12% per annum, compounded
    monthly. Champion appeals.

[3]

For the reasons that follow, I would dismiss the appeal.

Background

[4]

Under the OTL, signed by the parties in September 2011, Northridge
    agreed to renovate parts of the leased premises. The relevant clause reads:

Condition of Premises/Landlords Work

The Tenant shall accept the Premise in an as is, where is
    condition except that the Landlord shall complete the scope of work as outlined
    in Schedule B.

[5]

Schedule B, attached to the OTL, set out specific renovations Northridge
    agreed to undertake.

[6]

Paragraph 7 of the OTL provided that Champion shall execute a standard
    form of lease, attached as Schedule C. In that paragraph, Northridge agreed
    to negotiate reasonable non-financial changes to the parties agreement. Any
    dispute would be resolved by binding arbitration.

[7]

Amit Sood, the son of Champions owner, Ashok Sood (Mr. Sood), sent
    two emails to Northridge, dated October 31 and November 9, 2011, listing
    various outstanding repairs. Trevor Heathers, an executive at Northridge,
    replied, assuring Amit Sood that the bulk of the repairs would be complete the
    following week. On November 19, 2011, John Smith, the president of Northridge,
    emailed Mr. Sood, indicating he (Mr. Sood) was good to open the store.

[8]

Champion moved into the building. Shortly thereafter, Champion took the
    position that it could not operate out of the space, and left.

[9]

Northridges claim amounted to loss of rent (taking into account the net
    impact of Northridges successful mitigation effort), the costs Northridge
    expended to fix up the premises as set out in Schedule B, and interest on
    these amounts.

Trial Judges Decision

[10]

The trial judge found that Mr. Sood and Mr. Heathers had pre-agreement
    discussions, and then formalized those discussions into the OTL.

[11]

The trial judge rejected Mr. Soods evidence that he did not see the
    schedules before signing the OTL. He found that all three schedules were
    attached to the OTL that Mr. Sood had signed and returned to Northridge.

[12]

The trial judge then reviewed the controlling case law on the difference
    between an agreement and an agreement to agree. He found the OTL to be a
    complete agreement. It contained the essential elements of a lease. It also
    contained an arbitration provision allowing the parties to resolve any disputes
    over non-monetary items.

[13]

As well, the parties had conducted themselves as if an agreement
    existed. Northridge spent money upgrading the premises to suit Champions specific
    needs, as set out in Schedule B. Champion took possession.

[14]

The trial judge then turned to the issue of whether there was a
    fundamental breach on the basis that: (1) Champion could not use the property
    for its business because the property was zoned for industrial use; or (2) the
    property was unusable when Champion moved in because of a number of uncompleted
    renovations.

[15]

The trial judge rejected both arguments.

[16]

With respect to zoning, he found that the property was clearly suitable
    for one of the businesses that Champion intended to operate out of the premises,
    and was likely suitable for the other. Furthermore, the parties had discussed
    zoning. Mr. Heathers knew Champions old facility had the same zoning as the new
    one. Additionally, Champion had not raised any concerns over the zoning until
    the litigation began.

[17]

The trial judge similarly found that none of the property deficiencies
    Champion relied on amounted to a fundamental breach. First, Champion had not
    behaved as if the agreement was fundamentally breached. Second, the complaints
    in Amit Soods November 9, 2011 email had been addressed by Mr. Heathers in his
    November 11 email. Third, the repairs would have cost about $25,000  a
    relatively insignificant amount given the value of the lease. Fourth, many of
    Champions complaints related to items for which Northridge had not agreed to
    be responsible.

[18]

The trial judge then considered the interest rate Champion should have
    to pay on the damages. He held that he had residual discretion under s. 130 of
    the
Courts of Justice Act
, R.S.O.
    1990, c. C. 43 (the 
CJA
),
when assessing prejudgment interest. He exercised his discretion and imposed an
    interest rate of 12% because this was the rate contemplated by the parties 
    both sophisticated commercial entities  when they entered into the OTL.

ANALYSIS

A.

Liability

(1)

Did the trial judge err in finding the OTL was a binding
    agreement?

[19]

Champion submits that the trial judge made a number of errors.

[20]

First, the trial judge erred in relying on
U
pper Room Alliance
    Group Ltd. v. John Volken Foundation
,
    2008 CarswellOnt 5980 (S.C.)
. That case, says Champion, is
    distinguishable because the offer to lease in issue had a clause stating it was
    binding until a lease was executed, and the court found the parties carefully
    negotiated the offer to lease. In contrast, the OTL contains no similar clause,
    and was negotiated at one meeting in August 2011.

[21]

Second, the trial judge erred by preferring Mr. Heathers evidence over
    Mr. Soods. Mr. Sood testified that Mr. Smith visited Champions previous
    location and promised Mr. Sood a new location that was the same or better, a
    promise that induced Mr. Sood into agreeing to lease the new space. But the new
    location needed renovations, which Northridge would not undertake until Mr.
    Sood signed the OTL. Mr. Sood thought he was signing an agreement to agree so
    that the renovations could be done. Mr. Smith did not testify. Therefore the
    trial judge erred in rejecting Mr. Soods evidence on this point despite it
    being the best evidence.

[22]

Third, the trial judge improperly weighed Mr. Soods evidence on whether
    he reviewed and agreed to Schedule B. There was no evidence to suggest Mr.
    Sood reviewed Schedule B. Mr. Heathers did not resend Schedule B when Mr.
    Sood asked for the three schedules. Furthermore, Amit Sood would not have
    listed the grade level door in his November 9, 2011 email if he knew about
    Schedule B, which indicated that renovation would be completed as is
    practical. Additionally, the paved parking lot was important to Champion. It
    did not appear in Schedule B. If Mr. Sood had reviewed Schedule B, he would
    have negotiated the parking lots inclusion in the list of renovations.
    Champions position is that Schedule B was not settled.

[23]

Finally, rent was not agreed upon, as evidenced by Mr. Smiths November
    19 email in which he advised Mr. Sood that the ceiling could be repaired for a
    $175 per month increase in rent.

[24]

I would not give effect to Champions arguments in support of its
    position that there was no agreement between the parties.

[25]

First, and most significantly, Champion pleaded that the OTL was an
    agreement the parties entered into. I disagree with Champions argument that
Upper
    Room
is distinguishable. As noted, the OTL contained a term that required Champion
    to sign the lease attached as Schedule C, which document contained a
    mechanism by which non-financial issues could be resolved. Additionally, the
    parties were sophisticated corporate entities that discussed the terms of their
    bargain, reduced those terms to writing, and signed the document reflecting
    those terms.

[26]

Second, I do not place any significance on Champions assertion that
    Northridge promised Champion a location that was the same or better. The
    alleged assertion was not a term of the OTL. It was not pleaded as a
    representation that induced Champion to enter into the OTL. In my view, if it
    was made at all, the assertion does not alter Northridges obligations to
    Champion.

[27]

Third, the trial judges finding that Champion agreed to the OTL,
    including Schedule B, was amply supported by the evidence. The fact that Mr.
    Sood wanted extra work done in no way changed the fact that Champion was bound
    by the OTL, nor the scope of work Northridge had to do under Schedule B. Mr.
    Sood saw Schedule B before he signed the OTL. Schedule B was referred to in
    the OTL. Champion is bound by it.

[28]

In my view, the November 19 email in which Mr. Smith asked for more
    money to do work outside the scope of Schedule B does not assist Champion.
    Rather, it suggests the extra work was not part of the original deal. That
    email also confirms the rent was, in fact, settled. It was only subject to
    change if Champion wanted more work done.

[29]

I would not give effect to this ground of appeal.

(2)

If the OTL was a binding agreement, did the trial judge err in
    finding Northridge did not fundamentally breach the agreement?

[30]

Champion submits that it entered into the lease because it was promised
    a location that was equal to, if not better, than its previous location. It did
    not get such a location. This breach was fundamental. The trial judge erred by
    finding that Champion should have simply finished the renovation work itself. This
    was work Northridge promised to undertake on Champions behalf.

[31]

I do not agree with Champions position on this issue. The trial judges
    finding that Northridge did not breach the OTL is unassailable.

[32]

The complaints asserted by Champion at trial, essentially aesthetic,
    were only raised after it left the premises. Champions assertion of such work
    being not only a part of the OTL, but also an important part, lacks
    credibility. In any event, even if Northridge had to perform the repairs
    Champion requested, failure to do so did not deprive Champion of essentially
    the whole benefit of the contract.

[33]

I would not give effect to this ground of appeal.

Conclusion regarding Liability

[34]

The trial judge considered the evidence. He made credibility findings
    that were open to him. His clear findings of fact based on the evidence he did
    accept established that the parties entered into a binding lease agreement and
    that Champion, not Northridge, breached it.

B.

Damages

(3)

Did the trial judge err in awarding 12% interest on his damages
    award, compounding monthly?

[35]

Champion argues that the trial judge made several errors; most notably
    failing to analyze the factors in s. 130(2) of the
CJA
and failing to
    provide sufficient reasons why the circumstances warranted departure from the
    standard interest rate. This case does not warrant departure from the usual
CJA
rate. Furthermore, says Champion, it took positive actions towards
    amicable resolution of the outstanding issues. Northridge did not. Champion does
    not deserve to be punished by this excessive interest rate.

[36]

I see no reason to interfere with the trial judges exercise of his
    discretion under s. 130(2) of the
CJA
.


[37]

Schedule C of the OTL provided for an interest rate on rent arrears of
    twelve percent, 24% and calculated monthly at two per cent. Northridge
    gave Champion the benefit of the doubt and requested interest be charged at 12%
    per year, compounded monthly. The trial judge accepted this submission because
    the OTL stipulated a higher interest rate than the standard
CJA
rate,
    and because the parties were sophisticated commercial entities.

[38]

Furthermore, Champion took no positive actions towards amicable
    resolution of the renovation issue because (1) there was no renovation issue,
    and (2) Champion relied on a contrived renovation issue to vacate the premises.
    Nor was Northridge guilty of willful default for asking to be paid for work
    outside the scope of Schedule B.

[39]

The discretionary award of pre-judgment interest can only be interfered
    with if this court finds the trial judge wrongfully exercised his discretion or
    gave insufficient weight to relevant considerations. The trial judge explained
    the interest awarded on the basis that it was set out in the OTL as part of
    Schedule C. The OTL provided that Champion was required to sign a lease in
    the form contained in Schedule C. The only leeway was that the parties could
    negotiate non-financial terms  a category into which the rate of interest does
    not fall.

[40]

I would not give effect to this ground of appeal.

DISPOSITION

[41]

For these reasons, I would dismiss the appeal, with costs awarded to the
    respondent, fixed at the amount agreed upon by counsel; namely, $10,000
    inclusive of disbursements and applicable taxes.

Released: March 27, 2017 ("MLB")

"Gloria Epstein
    J.A."

"M.L. Benotto
    J.A."

"G.T.
    Trotter J.A."


