



COURT OF APPEAL FOR ONTARIO

CITATION: Lundy's Regency Arms Corp. v. Niagara Hospitality
    Hotels Inc., 2017 ONCA 507

DATE: 20170619

DOCKET: C62091

MacPherson, Blair and MacFarland JJ.A.

BETWEEN

Lundy's Regency Arms Corp., 1498611 Ontario Inc.
    and 1519481 Ontario Inc.

Plaintiffs (Respondents)

and

Niagara Hospitality Hotels Inc. and Kerrio
    Corporation

Defendants (Appellants)

J. Ross Macfarlane and Clark Peddle, for the appellants

Peter A. Mahoney, for the respondents

Heard: June 14, 2017

On appeal from the judgment of Justice Richard Lococo of
    the Superior Court of Justice, dated April 4, 2016.

REASONS FOR DECISION

[1]

The appellants, Niagara Hospitality Inc., as tenant, and Kerrio
    Corporation, as guarantor, appeal from the judgment of Lococo J. of the
    Superior Court of Justice ordering them to pay $4,247,467.43 in damages and pre-
    and post-judgment interest to the respondents Lundys Regency Arms Corp., as
    landlord, and two related numbered companies.

[2]

The basis of the trial judges award was his conclusion that the
    appellant tenant had breached the repair and maintenance provisions of the
    governing lease. The damages that flowed from this breach were assessed at
    $1,734,107.

[3]

The appellants advance two grounds of appeal.

[4]

First, the appellants contend that the trial judge erred by saying that
    the lease imposed an obligation on them to maintain the premises to an
    enhanced standard of repair.

[5]

We see no error in this formulation. The trial judge referred to several
    sets of words and phrases in the lease  careful owner, good and substantial
    repair, responsibility for repair of inherent structural defect  and to the
    underlying use of the leased premises  commercial hotel and restaurant
    businesses  to support this conclusion. On this issue, we think that the trial
    judges reasoning was sound.

[6]

Second, the appellants submit that the respondents presented no evidence
    of the premises state of repair at the commencement of the lease term. Hence
    there was no baseline against which to assess whether the appellants breached
    the repair and maintenance provisions of the lease.

[7]

We do not accept this submission. The trial judge explicitly addressed
    the absence of a baseline argument advanced by the appellants. He candidly
    stated:

I acknowledge that from an evidentiary standpoint, a detailed
    assessment of the condition of the leased property at the time of the sale and
    leaseback would have provided a more definitive basis for establishing the
    extent to which the defendants complied with the repair and maintenance
    provisions of the lease.

[8]

However, the trial judge held that there was sufficient evidence to
    establish a basis for comparing the state of the leased premises at the
    beginning and end of the lease. The evidence included: (1) the tenants/sellers
    representations and warranties in the purchasing agreement; (2) the 2004 report
    entitled
Days Inn Lundys Lane-Simple Assessment
prepared by employees
    of the respondents following an inspection of the hotel premises approximately 18
    months after the commencement of the lease; (3) the testimony of William Stark,
    the respondents vice-president and his communication with the appellants
    concerning the 2004 report; (4) Vererino Panicis report and testimony about
    the moisture leakage and failure to maintain the dehumidification equipment
    that resulted in significant damage over time; and (5) the appellants
    unwillingness to undertake the significant repairs that would have been
    required to maintain their franchises with Days Inn hotel and Dennys
    restaurant.

[9]

In our view, the trial judge was entitled to rely on this evidence and
    invoke it to support his factual conclusion that there was significant
    deterioration to the state of the leased property, including the premises and
    equipment beyond that indicated in the 2004 assessment report.

[10]

The appeal is dismissed. The respondents are entitled to their costs of
    the appeal fixed at $17,000, inclusive of disbursements and HST.

J.C. MacPherson J.A.

R.A. Blair J.A.

J. MacFarland J.A.


