235049 Alberta Ltd. et al. v. 1102440 Alberta Ltd. et al., (2011) 529 A.R. 229 (QB)

• Judge: Macleod, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: November 23, 2011
• Citations: (2011), 529 A.R. 229 (QB);2011 ABQB 720

235049 Alta. Ltd. v. 1102440 Alta. Ltd. (2011), 529 A.R. 229 (QB)

MLB headnote and full text

Temp. Cite: [2011] A.R. TBEd. DE.029

235049 Alberta Ltd. and 1198816 Alberta Ltd. (plaintiffs) v. 1102440 Alberta Ltd., Paul Virk, Alnoor Mitha, Prohibited Industries Inc. and Youssef Abouarabi (defendants)

(0701 11215; 2011 ABQB 720)

Indexed As: 235049 Alberta Ltd. et al. v. 1102440 Alberta Ltd. et al.

Alberta Court of Queen's Bench

Judicial District of Calgary

Macleod, J.

November 23, 2011.

Summary:

A dispute arose over a lease of commercial premises. The new landlord alleged that the lease terms had not been complied with in numerous respects, including the payment of all rent owing. The tenant alleged that the rent agreed to between the previous landlord and previous tenant, as well as what he paid to the previous landlord, was less than what was stipulated in the written lease agreement. The tenant tendered the reduced amount each month. At first the landlord accepted these payments, but stated from the outset that the actual rent was higher and requested the shortfall. The landlord sought, inter alia, the termination of the lease.

The Alberta Court of Queen's Bench, in a decision reported at 458 A.R. 1, held that the terms of the written lease prevailed. There was no contractually binding variation to the lease and no conduct by the landlord which grounded a case in estoppel or waiver. Further, any equities or estoppel which might have arisen between the old landlord and the tenant did not alter their legal relationship and did not bind the landlord. Alternatively, if an estoppel arose, the landlord reinstated the strict legal terms of the written lease. The tenant's failure to pay the stipulated rents, especially after they were demanded, was a default and fundamental breach of the contract giving rise to the termination of the lease. The court declined to grant relief against forfeiture as the tenant had not come to court with the requisite clean hands. The landlord was unsuccessful in executing on the judgment.

The plaintiffs (the landlord and a related company) sued the defendants (former landlord, principals of the former landlord, former tenant) seeking recovery of the judgment against defendants as well as the plaintiffs' costs of all litigation and punitive damages. Damages were also sought for lost opportunity as a result of the failure to disclose certain information to the plaintiffs during the sale of the shopping centre.

The Alberta Court of Queen's Bench allowed the action in part.

Damage Awards - Topic 706

Torts - Injury to economic or business relations - Inducing or causing breach of contract (incl. interference with) - A shopping centre landlord obtained a judgment against a tenant (Bourbon) respecting, inter alia, unpaid rent - The landlord was unsuccessful in executing on the judgment - It sued several defendants including the former owner/landlord and Virk, a principal and director of the former landlord - It claimed, inter alia, the cost of the Bourbon litigation in the amount of $200,000 - The Alberta Court of Queen's Bench held that Virk and his company were liable for negligent misrepresentation and deceit and of wrongful interference with contractual rights - Virk deliberately did not disclose the true state of affairs respecting Bourbon's lease - His actions harmed the landlord's contractual relations with Bourbon - The court assessed the damages payable by Virk and his company at $75,000 - At least $75,000 of the legal fees incurred by the landlord in the Bourbon action were as a result of the additional complications posed by Virk's conduct - The court also ordered Virk to pay punitive damages of $75,000 - Virk's conduct represented a marked departure from the ordinary standards of commercial behaviour - He acted in bad faith throughout the entirety of the negotiations and following the close of the purchase of the shopping centre - A vendor/landlord could not tell the purchaser one version of a tenant's rental obligations while actively assisting that tenant in denying those obligations - Parties ought not to make representations without any regard to their veracity or consistency - It was important to send a clear message that commercially outrageous behaviour would not be tolerated - See paragraphs 90 to 97.

Damage Awards - Topic 766

Torts - Fraud and misrepresentation - Negligent misrepresentation - [See Damage Awards - Topic 706 ].

Damage Awards - Topic 767

Torts - Fraud and misrepresentation - Fraudulent misrepresentation - [See Damage Awards - Topic 706 ].

Damage Awards - Topic 2027.4

Exemplary or punitive damages - Deceit or misrepresentation - [See Damage Awards - Topic 706 ].

Damage Awards - Topic 2030.2

Exemplary or punitive damages - Inducing or causing breach of contract (incl. interference with) - [See Damage Awards - Topic 706 ].

Damages - Topic 1301.5

Exemplary or punitive damages - Deceit or misrepresentation - [See Damage Awards - Topic 706 ].

Damages - Topic 1306.1

Exemplary or punitive damages - Interference with contractual rights - [See Damage Awards - Topic 706 ].

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - What constitutes - A shopping centre landlord obtained a judgment against a tenant (Bourbon) respecting, inter alia, unpaid rent - The landlord was unsuccessful in executing on the judgment - It sued several defendants including the former owner/landlord and Virk, a principal and director of the former landlord - The Alberta Court of Queen's Bench held that Virk was liable for negligent misrepresentation and deceit - He deliberately did not disclose the true state of affairs respecting Bourbon's lease - His representations as to the state of the lease and rent payable were knowingly untrue, inaccurate or misleading and amounted to gross negligence - Alternatively, the representations were made with reckless disregard for whether they were true or false - A special relationship existed between Virk and the landlord - Virk had a direct financial interest in the purchase of the shopping centre - When the landlord expressed a concern as to the state of the lease, he sought clarification directly from Virk - He knew that the landlord would rely on the information given in response to specific queries made regarding rent payable under the lease - As such, he owed the landlord a duty of care - The representations caused the landlord to suffer damages - The representations materially induced the landlord to close the purchase deal and later put it to great expense to terminate the lease and collect the rental arrears - The time and expense required to have the lease declared terminated was greatly increased - See paragraphs 65 to 85.

Fraud and Misrepresentation - Topic 2533

Misrepresentation - Elements - Special relationship - [See Fraud and Misrepresentation - Topic 6 ].

Fraud and Misrepresentation - Topic 2703

Misrepresentation - What constitutes misrepresentation - Falsity - General - [See Fraud and Misrepresentation - Topic 6 ].

Practice - Topic 666

Parties - Adding or substituting parties - Adding or substituting defendants - Application of limitation periods - A commercial landlord obtained a judgment against a tenant (Bourbon) respecting, inter alia, unpaid rent - The landlord sued two of the defendants, arguing that they were liable to it for the rent as assignors under the terms of an assignment of lease - The defendants raised a limitation defence under s. 3(1) of the Limitations Act - They argued that they ought to have been named in the original action against Bourbon and by the time they were added to the current action the limitation period had expired - The Alberta Court of Queen's Bench rejected the argument - Section 6 of the Act applied and removed the defendants' entitlement to immunity from liability - The claim for arrears of rent and any deficiency claimed as a result of the failure of Bourbon to honour its lease obligations was related to the conduct, transaction or events described in both the original action against Bourbon and this action - Further, the two defendants were fully aware of what was transpiring - See paragraphs 38 to 44.

Practice - Topic 712

Parties - Adding or substituting parties - Notwithstanding limitation period - Statutory authorization - [See Practice - Topic 666 ].

Practice - Topic 2111

Pleadings - Amendment of pleadings - Prohibition against adding new action which is statute barred - [See Practice - Topic 666 ].

Torts - Topic 5210

Interference with economic relations - Contracts - Interference with contractual rights - A shopping centre landlord obtained a judgment against a tenant (Bourbon) respecting, inter alia, unpaid rent - The landlord was unsuccessful in executing on the judgment - It sued several defendants including the former owner/landlord and Virk, a principal and director of the former landlord - The Alberta Court of Queen's Bench held that Virk committed the tort of wrongful interference with contractual relations - His conduct was "commercially outrageous" - He deliberately did not disclose the true state of affairs respecting Bourbon's lease - His actions harmed the landlord's contractual relations with Bourbon - He actively encouraged Bourbon to disregard its legal obligations by, in essence, "backing" Bourbon after he had assured the landlord as to the state of the lease - With Virk's support, Bourbon was better situated to maintain its position as to rent payable - He employed unlawful means in his interference - He misrepresented the state of affairs prior to the deal closing and executed a lease amending agreement after he had any authority to do so and then indicated that the agreement was in existence prior to closing - Bourbon then relied on this document to enhance his claim that rent payable under the lease had been permanently reduced - He then swore a false affidavit respecting the rent payable - See paragraphs 54 to 62.

Cases Noticed:

1198816 Alberta Ltd. v. Bourbon Lounge Inc. (2008), 458 A.R. 1; 2008 ABQB 600, refd to. [para. 2].

British Columbia (Attorney General) v. Malik et al., [2011] 1 S.C.R. 657; 414 N.R. 332; 303 B.C.A.C. 1; 512 W.A.C. 1; 2011 SCC 18, refd to. [para. 5].

Douziech v. Petra Corp. et al. (2009), 480 A.R. 138; 2009 ABQB 437, refd to. [para. 34].

Athan Holdings Ltd. v. Merchant Holdings Ltd., Verma and Chaudry (1982), 40 A.R. 199 (Q.B. Master), refd to. [para. 36].

Hum v. Mosher and Atlantic Pizza Delight Franchise (1968) Ltd. (1977), 33 N.S.R.(2d) 135; 57 A.P.R. 135 (Co. Ct.), refd to. [para. 37].

Alberta Financial Consultants and Ramco Development v. Cuthbert and Little Bob's Sausage House (1984), 55 A.R. 147 (Q.B.), dist. [para. 37].

Royal Trust Corp. of Canada v. Lodge at Waterton Lakes Inc. et al. (2005), 389 A.R. 391; 2005 ABQB 775 (Master), refd to. [para. 42].

Stolk v. 382779 Alberta Inc. et al. (2005), 383 A.R. 203; 2005 ABQB 440, refd to. [para. 42].

Greentree et al. v. Martin et al. (2004), 369 A.R. 263; 2004 ABQB 365, refd to. [para. 42].

Condominium Corp. No. 022 5840 v. Executive Loft Inc. et al. (2010), 491 A.R. 281; 2010 ABQB 232 (Master), refd to. [para. 42].

Miller (Ed) Sales and Rentals Ltd. v. Caterpillar Tractor Co. et al. (1994), 151 A.R. 1 (Q.B.), revd. in part (1996), 187 A.R. 81; 127 W.A.C. 81 (C.A.), leave to appeal dismissed (1997), 215 N.R. 159; 209 A.R. 400; 160 W.A.C. 400 (S.C.C.), refd to. [para. 56].

Hunt Oil Co. of Canada Inc. v. Galleon Energy Inc. (2010), 489 A.R. 326; 2010 ABQB 212, refd to. [para. 56].

Colborne Capital Corp. et al. v. 542775 Alberta Ltd. et al. (1995), 171 A.R. 241 (Q.B.), revd. in part (1999), 228 A.R. 201; 188 W.A.C. 201; 1999 ABCA 14, refd to. [para. 57].

Paragon Properties (Finance) Ltd. v. Swan (Del) Trucking Inc. (1998), 233 A.R. 221; 1998 ABQB 803, refd to. [para. 60].

Polar Ice Express Inc. v. Arctic Glacier Inc. (2007), 434 A.R. 261; 2007 ABQB 717, affd. (2009), 446 A.R. 295; 442 W.A.C. 295; 2009 ABCA 20, refd to. [para. 60].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 66].

Kelly v. Lundgard et al. (2001), 286 A.R. 1; 253 W.A.C. 1; 2001 ABCA 185, refd to. [para. 66].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [para. 67].

TWT Enterprises Ltd. et al. v. Westgreen Developments (North) Ltd. et al. (1992), 127 A.R. 353; 20 W.A.C. 353 (C.A.), refd to. [para. 74].

473759 Alberta Ltd. et al. v. Heidelberg Canada Graphic Equipment Ltd. (1995), 168 A.R. 112 (Q.B.), refd to. [para. 74].

Village on the Park and Greenwood Acres, Re (2009), 472 A.R. 230; 2009 ABQB 497, refd to. [para. 77].

Petrie v. Guelph Lumber Co. (1886), 11 S.C.R. 450, refd to. [para. 80].

Opron Construction Co. v. Alberta (1994), 151 A.R. 241 (Q.B.), refd to. [para. 80].

McLaughlin v. Colvin, [1941] 4 D.L.R. 568 (Ont. C.A.), affd. [1942] 3 D.L.R. 292 (S.C.C.), refd to. [para. 82].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 93].

Keays v. Honda Canada Inc., [2008] 2 S.C.R. 362; 376 N.R. 196; 239 O.A.C. 299; 2008 SCC 39, refd to. [para. 93].

Elgert v. Home Hardware Stores Ltd. et al. (2011), 510 A.R. 1; 527 W.A.C. 1; 2011 ABCA 112, refd to. [para. 95].

Authors and Works Noticed:

Fridman, Gerald Henry Louis, The Law of Torts in Canada (3rd Ed. 2010), pp. 709 [para. 77]; 767 [para. 56].

Klar, Lewis N., Tort Law (4th Ed. 2008), p. 669 [para. 77].

Williams and Rhodes, Canadian Law of Landlord and Tenant (6th Ed. 1988) (Looseleaf), para. 15:3:6 [para. 37].

Counsel:

Grant N. Stapon, Q.C. (Bennett Jones LLP), for the plaintiffs;

Navdeep Virk (Virk Law), for the defendants.

This action was heard on May 2-9, 2011, by Macleod, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for judgment on November 23, 2011.