Stellarbridge Mgt. Inc. v. Magna Intl., (2004) 187 O.A.C. 78 (CA)

• Judge: MacPherson, Cronk and Armstrong, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: May 25, 2004
• Jurisdiction: Ontario
• Citations: (2004), 187 O.A.C. 78 (CA);2004 CanLII 9852 (ON CA);71 OR (3d) 263;[2004] CarswellOnt 2065;[2004] OJ No 2102 (QL);187 OAC 78

Stellarbridge Mgt. Inc. v. Magna Intl. (2004), 187 O.A.C. 78 (CA)

MLB headnote and full text

Temp. Cite: [2004] O.A.C. TBEd. MY.074

Stellarbridge Management Inc. (plaintiff/appellant/respondent by cross-appeal) v. Magna International (Canada) Inc. and Tesma International Inc. (defendants/respondents/appellants by cross-appeal)

(C38064)

Indexed As: Stellarbridge Management Inc. v. Magna International (Canada) Inc. et al.

Ontario Court of Appeal

MacPherson, Cronk and Armstrong, JJ.A.

May 25, 2004.

Summary:

The lessor sued the lessee for damages for breach of the lessee's covenants to restore and repair an industrial building during the term and upon the termination of a ten-year commercial lease. The trial involved the assessment of damages only, liability having been admitted by the lessee. The lessor repaired the roof, did some cosmetic work and relet the premises eight months after the lease ended.

The Ontario Superior Court, in a decision reported [2002] O.T.C. 209, and in supplementary reasons reported [2002] O.T.C. Uned. 775, awarded $191,432.25 for lost rents corresponding to a three-month restoration and repair period, $648,523.57 for restoration costs, $97,482.72 for repair costs and $52,220.44 for a management fee, for a total of $989,658.98. The court applied a 35% "betterment discount" to the restoration, repair and management fee awards and reduced those awards by $279,379.36. The court also awarded the lessor pre- and post- judgment interest at the rate of 5% above the applicable prime rate of the Canadian Imperial Bank of Commerce as provided under paragraph 13 of the lease. However, the court declined to award pre-judgment interest respecting the three-month restoration and repair period. The court awarded the lessor costs on a partial indemnity basis in the total amount of $107,859.95. In doing so, the court accepted hourly billing rates of $350 and $300 for the lessor's two trial counsel, although the lessor was billed at hourly rates of $375 and $225, respectively. The parties appealed and cross-appealed respectively, arguing that the trial judge erred in the following ways: (a) in her application of the betterment discount to various heads of damages; (b) in granting the lost rents award or, in the alternative, in failing to apply the betterment discount to the lost rents award; (c) in declining to award prejudgment interest for the restoration and repair period; (d) in fixing the rate of pre- and post- judgment interest at the lease rate of interest; and (e) in her approach to awarding costs in favour of the lessor.

The Ontario Court of Appeal allowed the appeal in part. The court eliminated the betterment discount, thus increasing the damage award by $279,379.36 to $989,658.98. The court allowed the cross-appeal in part. The lessor was entitled to recover pre- and post- judgment interest at the lease rate on the $35,618.40 worth of restoration and repairs actually done and at the rate of 5.3% on all other sums awarded to the lessor at trial. The costs award was reduced to $73,484.80 plus $4,366 for disbursements plus GST. The appeal and cross-appeal were dismissed in all other respects.

Interest - Topic 5008

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Entitlement - The lessor sued the lessee for damages for breach of the lessee's covenants to restore and repair an industrial building - Liability was admitted - The lessor repaired the roof, did some cosmetic work and relet the premises eight months after the lease ended - The trial judge made an award for lost rents corresponding to a three-month restoration and repair period - The trial judge declined to award pre-judgment interest on the lost rents award - The Ontario Court of Appeal affirmed the decision - The lost rents award was intended to keep the lessor "whole" financially for the period when restorations and repairs were carried out, had they been undertaken by the lessor - To have awarded pre-judgment interest for the three month restoration and repair period would have had the effect of compensating the lessor out of proportion to its loss - See paragraphs 79 to 81.

Interest - Topic 5009

Interest as damages (prejudgment interest) - General principles - Prejudgment interest - Calculation of (incl. rate) - The lessor sued the lessee for damages for breach of the lessee's covenants to restore and repair an industrial building - Liability was admitted - The lessor repaired the roof, did some cosmetic work and relet the premises eight months after the lease ended - The trial judge made an award for restoration costs, repair costs and a management fee - The court also awarded the lessor pre- and post- judgment interest at the rate of 5% above the applicable prime rate of the Canadian Imperial Bank of Commerce as provided under paragraph 13 of the lease - The Ontario Court of Appeal modified the interest rate and applied the 5.3% rate provided by the Courts of Justice Act where the conditions required by paragraph 13 of the lease were not fulfilled in that the lessor did not perform the required restorations and repair work except for the roof repairs - See paragraphs 82 to 92.

Landlord and Tenant - Topic 1212

The premises - Repairs - By tenant - Where reasonable wear and tear excepted - The lessee covenanted under a commercial lease to repair and maintain the leased premises during the term of the lease, subject to reasonable wear and tear; to surrender the premises at the end of the lease "in a good state of repair and maintenance", subject to "the exceptions herein provided"; and to restore the interior of the leased premises "to its former condition" immediately prior to the installation of fixtures, alterations or changes to the interior, reasonable wear and tear excepted - The lessee breached its covenant - The lessor made some repairs and sued - At issue was whether the lessee was entitled to a "betterment discount" - The parties agreeing that "betterment" referred to the "reasonable wear and tear" exceptions in the lease and, thus, to the deterioration of the leased premises over the term of the lease - The Ontario Court of Appeal ruled that the lessee was entitled to a "betterment discount" where there was an express wear and tear exception in the lease and where the lease did not require the lessee to return the premises into the same condition as that of a "pristine, new building" - However, the court declined to award a "betterment discount" where the lessee failed to discharge its evidential burden to establish the appropriate discount rate under the reasonable wear and tear exceptions in the lease - See paragraphs 25 to 69.

Landlord and Tenant - Topic 1213

The premises - Repairs - By tenant - Extent of obligation - The lessor sued the lessee for damages for breach of the lessee's covenants to restore and repair an industrial building during the term and upon the termination of a ten-year commercial lease - Liability was admitted - The lessor repaired the roof, did some cosmetic work and relet the premises eight months after the lease ended - The trial judge awarded damages for lost rents corresponding to a three-month restoration and repair period - The lessee appealed, arguing: (1) the lease did not entitle the lessor to compensation for lost rents for the repair period; (2) since the lessor was able to let the premises to a new tenant after carrying out only roof repairs and cosmetic improvements, it suffered no loss on account of the repair period; and (3) in the alternative, a "betterment discount" respecting reasonable wear and tear should have been applied to the lost rents award - The Ontario Court of Appeal did not give effect to these submissions - See paragraphs 70 to 77.

Practice - Topic 7020.1

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Quantum - The Ontario Court of Appeal set aside the quantum of a costs award where the award had the effect of awarding to the successful plaintiff costs considerably in excess of the amounts, when calculated on a partial indemnity basis, actually charged to it by its counsel - The court stated that in arriving at an amount that was a fair and reasonable amount to be paid by an unsuccessful litigant on the partial indemnity scale, the hourly billing rates actually charged and the fees actually billed to the successful litigant were relevant considerations - In this case, information concerning those rates and fees was before the trial judge and should have been taken into account - See paragraphs 93 to 100.

Cases Noticed:

Joyner v. Weeks, [1891] 2 Q.B. 31 (C.A.), consd. [para. 40].

Haskell v. Marlow, [1928] 2 K.B. 45 (C.A.), consd. [para. 41].

Regis Property Co. v. Dudley, [1959] A.C. 370 (H.L.), refd to. [para. 42].

Norbury Sudbury Ltd. v. Noront Steel (1981) Ltd. (1984), 47 O.R.(2d) 548 (H.C.), refd to. [para. 42].

Buscombe v. Stark (James) & Sons Ltd. (1916), 30 D.L.R. 736; 23 B.C.R. 155 (C.A.), refd to. [para. 44].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1, refd to. [para. 58].

Equity Waste Management of Canada et al. v. Halton Hills (Town) (1997), 103 O.A.C. 324; 35 O.R.(3d) 321 (C.A.), refd to. [para. 58].

Pleet v. Canadian Northern Quebec Railway Co. (1921), 50 O.L.R. 223 (C.A.), consd. [para. 60].

Levesque v. Clark (J.) & Son Ltd. (1972), 7 N.B.R.(2d) 478 (Q.B.), consd. [para. 61].

Dunlop Construction Products Inc. (Bankrupt) v. Flavelle Holdings Inc. et al. (1996), 94 O.A.C. 348; 31 O.R.(3d) 58 (C.A.), refd to. [para. 62].

Snell v. Farrell, [1990] 2 S.C.R. 311; 110 N.R. 200; 107 N.B.R.(2d) 94; 267 A.P.R. 94, consd. [para. 63].

Blatch v. Archer (1774), 1 Cowp. 63; 98 E.R. 969, refd to. [para. 63].

Friends of the Oldman River Society v. Canada (Minister of Transport and Minister of Fisheries and Oceans), [1992] 1 S.C.R. 3; 132 N.R. 321, refd to. [para. 85].

Harelkin v. University of Regina, [1979] 2 S.C.R. 561; 26 N.R. 364, refd to. [para. 85].

Bank of America Canada v. Mutual Trust Co. et al., [2002] 2 S.C.R. 601; 287 N.R. 171; 159 O.A.C. 1, refd to. [para. 88].

Zesta Engineering Ltd. v. Cloutier et al., [2002] O.A.C. Uned. 288 (C.A.), refd to. [para. 97].

Lawyers' Professional Indemnity Co. et al. v. Geto Investments Ltd. et al., [2002] O.T.C. 78 (Sup. Ct.), refd to. [para. 99].

TransCanada Pipelines Ltd. v. Potter Station Power Limited Partnership et al. (2003), 172 O.A.C. 379 (C.A.), refd to. [para. 99].

Counsel:

Ronald B. Moldaver, Q.C., for the appellant/respondent by cross-appeal;

Gordon A. Meiklejohn, for the respondents/appellants by cross-appeal.

This appeal and cross-appeal were heard on December 16, 2003, by MacPherson, Cronk and Armstrong, JJ.A., of the Ontario Court of Appeal.

The decision of the Court of Appeal was delivered by Cronk, J.A., and released on May 25, 2004.