235049 Alberta Ltd. v. 1198816 Alberta, 2011 ABQB 720

Court of Queen ’ s Bench of Alberta Citation: 235049 Alberta Ltd. v. 1102440 Alberta Ltd., 2011 ABQB 720 Date: 20111123 Docket: 0701 11215 Registry: Calgary Between: 235049 Alberta Ltd. and 1198816 Alberta Ltd. Plaintiffs - and - 1102440 Alberta Ltd., Paul Virk, Alnoor Mitha, Prohibited Industries Inc., and Youssef Abouarabi Defendants _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice A.D.

Macleod _______________________________________________________ [ 1 ] Karim Lalani is an experienced Calgary realtor and the principal of 1198816 Alberta Ltd. (Lalani’s company). In the Fall of 2005 Lalani’s company purchased the Glencrest Shopping Centre, a strip mall in Northeast Calgary, from 1102440 Alberta Ltd., a company owned by Paul Virk, Alnoor Mitha and their respective spouses. Messrs. Virk and Mitha are mechanics who operate a business, Quality Transmission, in northeast Calgary.

They are the two directors of 1102440 Alberta Ltd. which I will refer to as V and M’s company. [ 2 ] Following the purchase, Lalani’s company became embroiled in a protracted dispute with the major tenant of the shopping

[ 2 ] Following the purchase, Lalani’s company became embroiled in a protracted dispute with the major tenant of the shopping centre, Bourbon Lounge Inc. (Bourbon), a company owned by Omar Seifeddine. Seifeddine had just purchased, through Bourbon, the lounge business from Youssef Abouarabi and his company Prohibited Industries Inc. (Industries). The dispute involved the amount of rent payable, alleged violations of the lease agreement and other collateral issues. There was a 12 day trial of a number of issues before this Court resulting in Reasons for Judgment in 1198816 Alberta Ltd. v.

Bourbon Lounge Inc. , 2008 ABQB 600 , 458 A.R. 1. After the trial this Court gave an order for possession in favour of Lalani’s company and judgment for loss of rent plus costs against Bourbon. Lalani’s company was unsuccessful in executing on the judgment. [ 3 ] It now seeks recovery of the judgment against these Defendants as well as the Plaintiffs’ costs of all litigation and punitive damages. Damages are 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. [ 4 ] Three witnesses were called at trial: Mr.

Lalani, his son Aly Khan Lalani, and Mr. Virk. All testified in the previous trial before Martin J. (Tenant Action). Exhibit 1 is a binder of agreed upon exhibits and they will be referred to by their tab numbers. [ 5 ] There is a significant overlap among the issues in this case and those in the Tenant Action. As to the findings of fact and the conclusions at law reached by my colleague, I believe it is appropriate to defer to the previous decision of Martin J. I have been referred to the recent decision of the Supreme Court of Canada in British Columbia (Attorney General) v.

Malik , 2011 SCC 18 , [2011] 1 S.C.R. 657. The judgment of Martin J. is obviously relevant and I may consider the findings and conclusions reached in that case as the parties and issues are closely connected. The Court in Malik emphasized the strong public interest in the avoidance of an unnecessary multiplicity of proceedings and the potential risk of inconsistent results. Inefficient procedures are to be discouraged. [ 6 ] Therefore, unless there is a very good reason, such as new evidence, I will not depart from the findings and conclusions of Martin J in the Tenant Action.

Not surprisingly, however, I take the same view of the evidence which was before her. Chronology [ 7 ] In the spring of 2004, V and M’s company purchased the Glencrest Shopping Centre for $2.31 million. In the summer of the following year, Mr. Lalani contacted Messrs. Virk and Mitha, introduced himself as a realtor and expressed an interest on behalf of a client in the property. Messrs. Mitha and Virk expressed an interest in selling if the price was right and provided Lalani with some lease information (Tabs 1 and 2).

A letter of intent (Tab 3) was entered into on August 4 and an offer to purchase (Tab 5) was submitted and executed on August 6. At that time, it was understood that the purchaser was in fact a company owned by Lalani. [ 8 ] It was agreed that the vendor would not enter into any lease agreements without the written consent of the purchaser and indeed, Lalani made it very clear that he did not want anyone other than himself to deal with the tenants with respect to any matters which might impact upon the landlord tenant relationship post-closing.

The vendor was to provide the purchaser with original copies of all leases and the purchaser had 60 business days within which to conduct due diligence with respect to the leases, encumbrances and the condition of the property. Both parties to the transaction were represented by counsel. [ 9 ] The principal tenant in the mall occupied the lounge space which was by far the largest space in the mall.

While the purchaser had not received an executed original or copy of a lease between the lounge tenant and the landlord, it had received an unsigned lease and information to the effect that the rent being paid was $11,000.00 per month plus GST in the amount of $770.00 (the Unsigned Lease). Following the waiver of purchaser’s conditions the closing documents were forwarded to the purchaser’s counsel who held the cash to close in its trust account.

One of the closing documents, the Statement of Adjustments, disclosed that contrary to previous information the lease of the lounge premises was actually month-to-month at a rate of $10,000.00 per month all inclusive. The Statement of Adjustments also provided that there was no security deposit, which was also contrary to previous information. At the same time information was disclosed that the lease was in arrears and the security deposit had been used to satisfy the rent obligation. All of this was confirmed by Mr. Virk to Mr.

Lalani. [ 10 ] Needless to say, this information caused a small panic in the purchaser’s camp and an immediate meeting was arranged at the bar premises. In attendance were Mr. Lalani and his son, Mr. Virk, Mr. Abouarabi, Mr. Seifeddine and two others. Mr. Abouarabi had or was in the process of selling the business to Bourbon. A common front was put forward at the meeting by Virk, Abouarabi and Seifeddine that there was no lease in place and there was no agreement on the rent. In reality, these individuals would have been aware of the existence of the lease.

It is clear that by way of oral agreement, the tenant had been given a temporary break and was only paying $10,000.00 per month until business improved. Extensive renovations had been made by Mr. Abouarabi and the bar had recently

reopened. [ 11 ] Mr. Lalani explained that he wanted the lounge tenant to be a long term tenant and he would make a proposal on the rent to be paid. A proposal was made on or about November 8 and it proposed an initial rent of less than $11,000.00 which gradually went up to $14,000.00 per month. This proposed graduated payment scheme was higher than that contained in the Unsigned Lease originally provided to Lalani, and higher than the rents contained in a version of the lease which contained the handwritten notations of Virk and Abouarabi. [ 12 ] No doubt because Mr.

Seifeddine viewed this as too high, he informed Lalani that there was in fact a signed lease as between Abouarabi and Virk, being the lease with the handwritten notations. Upon request from Lalani, Virk produced this lease through his lawyer which was ultimately found by Martin J. to be the lease binding on V and M’s company, Industries and Mr. Abouarabi (Written Lease). Virk, Abouarabi and Seifeddine must have known about the Written Lease all along. They had just executed an assignment of it around the end of September or the first part of October.

That it was not disclosed to Lalani earlier was because Seifeddine hoped for a lower proposal from Lalani. [ 13 ] When Mr. Lalani received a copy of the Written Lease on November 14, 2005 he had a number of concerns including the assignment of which he had not had previous notice. In addition, the handwritten notations indicated that the monthly rent for the second through fifth years was $500.00 per month less than that shown in the Unsigned Lease which had been provided by Mr. Virk to Mr. Lalani in the first instance. [ 14 ] As a result of concerns expressed by Mr. Lalani, Mr. Virk provided Mr.

Lalani with a memorandum dated November 16, 2005 in which he confirmed that the only amendments that he had agreed to in the Written Lease were the amendments to clause 3 (the rental amounts) evidenced by his initials. [ 15 ] It is common ground that prior to closing, Lalani was aware that the lease with Industries had been assigned to Seifeddine’s company Bourbon which company was purchasing the lounge from Mr. Abouarabi’s company.

What is not common ground is whether Lalani knew that the assignment had been effected after Lalani’s agreement to purchase the shopping centre. [ 16 ] Disputes arose between Lalani and Seifeddine who retained a lawyer, Mr. Dartnell. Mr. Lalani and Mr. Dartnell exchanged correspondence. Whereas Lalani took the position that he had been assured by Mr. Virk that the only amendments to the Written Lease which had been agreed upon were the ones initialled and not the other un-initialled handwritten changes, Mr.

Seifeddine, through Dartnell, took the position that all of the alterations formed part of the Written Lease. [ 17 ] Suddenly on April 24, 2006 yet another agreement (not previously disclosed) described as a Lease Amending Agreement was enclosed with Dartnell’s letter to Lalani of the same date. The letter, at Tab 88, said in part: This amendment to the Lease is evidenced in the enclosed Lease Amending Agreement. Since the Assignment of Lease effective October 1, 2005 nothing has changed. The Lease Amending Agreement attached to his letter is executed and the date is December, 2004.

The Lease Amending Agreement purported to reduce the rent to $10,000.00 per month effective October 1, 2004. [ 18 ] Somewhat taken aback, Mr. Lalani forwarded it on to Mr. Virk and asked for an explanation because this information had not been provided previously. A meeting was held involving Mr. Lalani, his son and Mr. Virk at the latter’s office at Quality Transmission. According to Mr. Lalani and his son, Mr. Virk would not talk about the new document except to acknowledge its existence and to say that it is what it is and that you should do what you have to do. When Mr. Lalani tried to impress upon Mr.

Virk the seriousness of this document and its consequences Mr. Virk’s response was “you should be more concerned about your health than the extra $1,000.00 in rent” and he warned them that the tenants had indicated they would beat Mr. Lalani up and break his son’s legs. This development came as a shock to Mr. Lalani and his son because they had never been exposed to this sort of threat before. I agree with Martin J. that the threats were made and I accept her finding that the evidence does not support that the threats originated from Seifeddine, although that makes no difference to these proceedings.

[ 19 ] Following this, Lalani’s relationship with Seifeddine and Bourbon deteriorated further and after physical threats to Mr. Lalani he sought the removal of Bourbon as a tenant. The state of affairs is perhaps best encapsuled in a letter from Mr. Stapon of Bennett Jones LLP on behalf of Mr. Lalani dated August 25, 2006 (Tab 95). In addition to itemizing Lalani’s complaints the letter demands vacant possession of the premises effective August 30, 2006. [ 20 ] Attempts to resolve matters between Lalani and Seifeddine failed and indeed the number and intensity of the disagreements increased.

On January 27, 2006 Mr. Seifeddine filed a caveat claiming a charge against the shopping centre land “pursuant to a lease agreement dated October 1, 2005, a Lease Amending the Agreement dated effective October 1, 2004 and the Assignment of Lease dated effective October 1, 2005 between 1198816 Alberta Ltd. as landlord and Bourbon Lounge Inc. as tenant.” A second caveat was filed by Mr. Seifeddine on April 21, 2006 based on another version of the Lease Amending the Agreement (see Reasons for Judgment of Martin J. supra, at para. 65). [ 21 ] Lalani’s company brought an Originating Notice of Motion in March 2007 for:

(1) Declaration that the tenancy of Bourbon Lounge Inc., was terminated;

(2) Vacant possession;

(3) Discharge of caveats;

(4) Payment of rental arrears; and

(5) Damages and costs. [ 22 ] The Originating Notice of Motion requested that the matter be heard by way of a Special Application. In April of 2007 Messrs. Virk and Abouarabi swore affidavits in support of the position of Bourbon Lounge Inc. Both affidavits were sworn before Seifeddine’s lawyer Mr. Dartnell. (Tabs 111 and 112) [ 23 ] The affidavits were in support of Bourbon’s claim that the rent to be paid was $10,000.00 per month as per the term of the lease.

The affidavits attached copies of the Written Lease, the Lease Assignment Agreement and the Lease Amending Agreement. [ 24 ] Largely on the strength of the affidavits filed by Messrs. Virk and Abouarabi, the Court directed the Tenant Action to trial. The issues are largely defined by the Statement of Claim of the Applicant filed at Tab 114 on April 11, 2008. The trial was held in 2008 and Reasons for Judgment were issued on September 29, 2008. Key Findings in the Tenant Action [ 25 ] Martin J. found that the Written Lease attached as Exhibit “A” to the affidavits of Messrs.

Virk and Abouarabi was binding on the parties and that the rent payable for the first and second year was $11,000.00 per month, $11,500.00 per month in the third year and $12,000.00 per month for the fourth and $12,500.00 per month for the fifth year. GST was additional and while there was an oral agreement to reduce the rent for three months to $10,000.00 per month, this did not have any effect beyond that period. [ 26 ] As to the chronology, Martin J. found that by June 2005, Mr. Seifeddine and Mr. Abouarabi agreed that the former would buy the bar from the latter. Mr. Seifeddine hired Mr.

Dartnell to incorporate a numbered company that would eventually purchase the bar. The documents show a written purchase agreement for the sale of the bar between Mr. Seifeddine and Mr. Abouarabi dated January 2, 2006 but Mr. Seifeddine took over the business well before that. (paragraph 33)

[ 27 ] Martin J. goes on to find at para. 36 that by the end of September 2005 (after execution of the Offer to Purchase), Mr. Seifeddine sought his own liquor license and Mr. Dartnell was retained on an urgent basis to prepare an Assignment of the Lease from Mr. Abouarabi to Mr. Seifeddine. Such an assignment requires the consent of the landlord, and Mr. Virk permitted the assignment even though Lalani had made it clear in the Letter of Intent and Offer to Purchase and other correspondence that Mr. Virk was not to enter into or change any lease agreements unilaterally. [ 28 ] As to the reliability of Messrs.

Virk and Abouarabi as witnesses, Martin J. indicated beginning at paragraphs 169 and 170 of her Judgment: In the proceedings before me the testimony of Mr. Virk was generally unreliable and can be given little or no weight. He tried to avoid saying anything and was remarkably successful. There was no quality of his perception of the events and his memory was selective and deficient. He was often evasive and defensive, preferring to rant instead of responding. His pattern of behaviour suggested he was willing to sign whatever documents or make whatever statement suited his needs at the time.

The viva voce evidence of Mr. Virk and Mr. Abouarabi is such that it cannot be relied upon to establish a contractually binding variation of the lease. Further their evidence is at odds with what could be expected in the circumstances. [ 29 ] Martin J. further found at paragraphs 183 and 184: The evidence indicates that Mr. Lalani knew Mr. Seifeddine was paying $10,000.00 per month before he purchased the shopping centre and was assigned the Lease. Mr.

Lalani stated that he knew that the rent being paid was $10,000.00 but understood that this was a temporary indulgence extended to the tenants while they were having financial difficulties. He says he was never informed that the terms of the Written Lease he had been given by Mr. Virk had been changed, except to the extent that Mr. Virk confirmed in his November letter. Mr. Lalani’s knowledge existed as one part only of a shifting informational landscape. Before the closing of the sale of the shopping centre, Mr. Lalani first received an unmarked and unsigned lease with certain rents stipulated.

He then was told by Mr. Virk, and this was confirmed by Mr. Virk’s lawyer, that there was a month-to-month tenancy and the rent paid was $10,000.00. He proposed new rents to Mr. Seifeddine and was only then told there was a signed Written Lease. He had difficulty getting a copy of that lease from Mr. Virk or Mr. Seifeddine. When he got a copy, it was confusing and contained much handwriting and scribbling. Mr. Virk gave a letter saying he agreed to only part of the changes, but said nothing about rent at $10,000.00 per month. Mr. Lalani was given two contradictory rent rolls.

He was told that a security deposit had been paid, that it had not been paid, and that it had been taken by Mr. Virk because, again fresh information, the major tenants were behind in their rent and did not pay for September and October. Mr. Lalani had a General Assignment of Lease from Mr. Virk saying there were no undisclosed amendments, changes or variations to any leases. He had an Estoppel Certificate signed by Mr. Seifeddine, which even if not binding at law, nevertheless contributed to Mr. Lalani’s state of mind. Mr. Lalani is a careful person who took written documents and due diligence seriously.

He was provided with changing and contradictory information and incomplete, sloppy documents. Trying to get a hold of the true situation was like grabbing water. [ 30 ] While Mr. Abouarabi did not testify in the proceedings before me, I have no reason to differ from Justice Martin’s findings. I not only accept but I agree with Justice Martin’s findings with respect to Mr. Virk. His statements both before the court and in previous testimony and previous written evidence are generally unreliable and can be given little or no weight.

His differing versions of events reflected his continuing promotion of his self-interest at any particular time. He feels apparently unfettered by any need to demonstrate consistency and he appeared willing to sign any document at the behest of Seifeddine or his lawyer without regard to whether it truly reflected a transaction. As to Lalani, I accept his evidence as did Martin J. The Plaintiffs’ Claim [ 31 ] In their Amended Statement of Claim, Lalani’s companies have sued V and M’s company, Messrs. Virk and Mitha, Prohibited Industries and Mr. Abouarabi.

Although 235049 Alberta Ltd. was named in the offer, it is clear that the parties understood that Lalani’s company (1198816) was the purchaser. [ 32 ] This litigation was outstanding at the time of the Tenant Action but given Justice Martin’s judgment in favour of Lalani’s company against Bourbon Lounge Inc., and that Lalani’s company has been unable to realize upon that judgment, the Plaintiffs claim as

follows:

(1) Lalani’s company claims that Mr. Abouarabi and his company Industries are liable to it under the terms of the Assignment of Lease, which provides “that the assignor and the guarantor hereby acknowledges and agrees that it remains fully liable under the said lease to the landlord and that nothing herein shall relieve them from any present or future liabilities or obligations under the lease.” Mr. Abouarabi and his company Industries were the assignors. Mr. Abouarabi is also sued as a guarantor under the terms of the original lease.

(2) Lalani’s company further says that had it known that the lease was being assigned to what eventually became Bourbon, Lalani would have sought a guarantee from Mr. Seifeddine. He was deprived of this opportunity by breach of contract of V and M’s company and by the withholding of the assignment information by Messrs. Virk and Mitha, notwithstanding that the assignment was effected following the entering into the Offer to Purchase.

(3) Lalani’s company further alleges that but for the interference by Messrs. Virk and Abouarabi in support of Bourbon, litigation would have been, in large part, unnecessary and Lalani’s company claims the cost of litigation in the approximate amount of $200,000.00.

(4) Lalani’s company claims as against Messrs. Virk, Abouarabi and Mitha and their companies punitive damages and damages for interference with contractual relations.

(5) The Plaintiffs also seek costs of this action on a solicitor/client basis. Rental Arrears [ 33 ] Under the terms of the Assignment of Lease from Industries and Mr. Abouarabi to Bourbon’s predecessor, the assignor and the guarantor acknowledged and agreed to remain fully liable under the lease to the landlord. Mr. Abouarabi and Industries agreed that the assignment would not relieve the assignor or guarantor from any of the covenants, agreements, obligations or liabilities on their

part contained in the Written Lease. The Written Lease (tab 39) was between V and M’s company as lessor, and Industries and Mr. Abouarabi jointly as lessee. At tab 41 is an un-executed document which purports to be the personal guarantee of Mr. Abouarabi in favour of V and M’s company. The document appears to contemplate a lease between V and M’s company and Industries whereas the actual Written Lease included both Industries and Mr. Abouarabi personally. [ 34 ] Given that Mr. Abouarabi was a party to the lease his personal guarantee of Industries was superfluous.

If a plaintiff looking to enforce a guarantee cannot prove compliance with the Guarantees Acknowledgement Act , R.S.A. 2000, c. G-11 , the guarantee is of no force and effect: Douziech v. Petra Corp ., 2009 ABQB 437 at para. 59 , 480 A.R. 138. In the case at bar, in the absence of evidence of an executed guarantee and other evidence of compliance with the Act , I am unable to conclude that there was a guarantee in existence. Moreover, no guarantee is pleaded in the Amended Statement of Claim which added Industries and Mr. Abouarabi. [ 35 ] Nevertheless, Mr.

Abouarabi and Industries remain liable to the original lease by virtue of the terms of the assignment. Paragraphs 4 and 5 of the Assignment of Lease (at tab 39) read as follows: 4. Each of the Assignor and the Guarantor hereby acknowledges and agrees that it remains fully liable under said Lease to the Landlord and that nothing herein shall relieve them from any present or future liabilities or obligations under the Lease. 5. The Landlord hereby consents to the Assignment on the following conditions: [...] (

b) neither the within Assignment nor the Landlord’s consent shall relieve the Assignor or Guarantor from any of the covenants, agreements, obligations or liabilities on their

part contained in the Lease.

[36] The above-mentioned obligations include the payment of rent. An original lessor cannot, through an assignment shed itself ofits liabilities under the lease, including the liability on the covenant to pay rent, as privity of contract with the lessee remains: AthanHoldings Ltd. v. Merchant Holdings Ltd. (1982), 40 A.R. 200 (ABQB - Master) at para. 12. [37] As the Court in Hum v. Mosher (1977), (NS SC), 33 N.S.R. (2d) 135 (N.S.C.

C) summarized at p. 142-143: An assignment, however, does not prejudice the personal contract between the tenant and the landlord and, accordingly, the tenantremains liable on the covenant for payment of rent and the other covenants on his

part contained in the lease, unless the lease otherwiseprovides: see 23 Halsbury (3d) 651 para. 1367; E.K. Williams, Canadian Law of Landlord and Tenant (3rd. Ed. 1957), p.669 and thecases there cited.

See also Williams & Rhodes, Canadian Law of Landlord and Tenant, looseleaf, 6th ed. (Ont: Carswell, 1988) at 15:3:6: Where a lessee assigns his term, the assignment destroys the privity of estate between him and the lessor, but not the privity of contract,so that the lessee remains liable upon the express covenants in the lease...Thus an action will lie against the lessee or his executors on acovenant to pay rent, although he has assigned the term and the lessor has accepted rent from the assignee...

Clause 5.8 of the Written Lease states that the lessee cannot assign the lease without prior written consent of the lessor. It is clear in thisinstance that V and M’s company was only able to agree to the assignment in writing. It is also clear that V and M’s company was notwilling to permit the assignment without assuring itself that Abouarabi and Prohibited remained liable under the lease, as expresslyprovided for by the Assignment of Lease. Participation in the Assignment of Lease by V and M’s company as a party of the third partwas required under the original Written Lease.

As such, Justice Veit’s reasoning in Alberta Financial Consultants Ltd. v. Cuthbert(1984), 55 A.R. 147 (Q.B.) is not applicable. Limitations defence [38] Counsel on behalf of Mr. Abouarabi and Industries, argues that Mr. Abouarabi and Industries ought to have been named in theoriginal action against Bourbon and that it was not until February 27, 2009 that Industries and Mr. Abouarabi were added to the claimpresently before me. The action against Bourbon was commenced by way of Originating Notice of Motion in March 2007. TheStatement of Claim in the Bourbon action was filed in April of 2008.

The original Statement of Claim in the action against Virk, Mithaand V and M’s company was filed on October 31, 2007 and the Amended Statement of Claim - which added Industries and Abouarabi -was filed on February 27, 2009. [39] It is argued that insofar as any of the Plaintiffs’ claim arose prior to February 27, 2007 the Plaintiffs are out of time by virtueof s. 3(1) of the Limitations Act, R.S.A. 2000, c. L-12. [40] Mr. Stapon argues that s. 6 of the Limitations Act, applies. This

section provides that the Defendants in this case are notentitled to immunity from liability “in respect of the added claim if the requirements of subsection (2), (3), or (4) are satisfied.” [41] Sub-section 4 provides that: When the added claim adds or substitutes a defendant... (

a) the added claim must be related to the conduct, transaction or events described in the original pleading in the proceeding, and (

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for

(

b) the defendant must have received, within the limitation period applicable to the added claim plus the time provided by law for the service of process, a sufficient knowledge of the added claim that the defendant will not be prejudiced in maintaining a defence to it on the merits. Under s.6(5) the plaintiff has the burden of proving that the added claim is related and the defendant has the burden of proving that the requirement of s. 4(

b) has not been satisfied. [ 42 ] This Court has found the "relational" requirement in s. 6(4)(

a) to be a low threshold: Royal Trust Corporation of Canada v. Lodge at Waterton Lakes Inc. , 2005 ABQB 775 at paras. 36-38 , 389 A.R. 391; Stolk v. 382779 Alberta Inc ., 2005 ABQB 440 at para. 36 , 383 A.R. 203; Greentree v. Martin , 2004 ABQB 365 at para. 13 , 368 A.R. 263; Condominium Corp. No. 022 5840 v. Executive Loft Inc., 2010 ABQB 232 at paras. 31-32 , 491 A.R. 281.

I am satisfied that the claim for arrears of rent and any deficiency claimed as a result of the failure of Bourbon to honour its lease obligations is related to the conduct, transaction or events described in both the action against Bourbon and this action. [ 43 ] Moreover, Mr. Abouarabi and Industries were fully aware of what was transpiring and indeed had participated in the creation of the infamous Lease Amending Agreement. Accordingly, I agree that the immunity under s.3 is not available and Mr.

Abouarabi and Industries are liable for any lease payments found to be due and owing by Martin J. jointly and severally with Bourbon. [ 44 ] Martin J. awarded judgment in the amount of $97,514.20 as of October 2, 2008 against Bourbon and accordingly Abouarabi and Industries are jointly and severally liable for that amount plus accrued interest. Lost opportunity re: personal guarantee for Bourbon’s obligations [ 45 ] As found by Martin J., V and M’s company and Mr. Virk acted in blatant disregard of V and M’s company’s contractual obligations when it executed an assignment in favour of Bourbon’s predecessor. Mr.

Mitha understood that Mr. Virk was handling these matters on behalf of V and M’s company. Mr. Virk not only intentionally executed the assignment without Mr. Lalani’s approval but he attempted to mislead Mr. Lalani that it had been done prior to Mr. Lalani’s involvement in the purchase of the shopping centre. In acting in such bad faith Mr. Virk is also personally liable for inducing breach of contract by V and M’s company. [ 46 ] The real question is what flows from this? Mr. Lalani said he would have insisted on a personal guarantee from Omar Seifeddine.

My assessment of the evidence is such that I do not believe Mr. Seifeddine would have agreed to give his guarantee. Moreover, I believe that Mr. Lalani was very keen to acquire the shopping centre and he would have done so in the face of Mr. Seifeddine’s refusal to provide a guarantee on the basis that both Mr. Abouarabi and Industries were still on the hook for the lease obligations. Accordingly, no damages flow from this lost opportunity.

Liability of Virk [ 47 ] It was argued by the Defendants that the individual defendants did not commit conduct which would render them liable personally, and that they acted within the corporate authority of their companies. That argument is no answer to the allegations that the personal defendants wrongfully interfered with contractual relations or made negligent or fraudulent misrepresentations. [ 48 ] When Mr. Lalani was first introduced to the shopping centre in August, Mr.

Virk actively encouraged him to believe that the lounge space realized rental revenue in the amount of $11,000.00 plus GST per month and that there was a five year lease during which period the rent increased. In November before the closing Mr. Virk actively encouraged Mr. Lalani to believe that there was no written lease and that the agreement was month-to-month and the rent being paid was $10,000.00 per month. This was the united front taken at the November 3 meeting by Mr. Virk, Mr. Abouarabi and Mr. Seifeddine. [ 49 ] Subsequently, but still before closing, Mr.

Virk through V and M’s company’s lawyer informed Mr. Lalani's lawyer that there was a signed lease agreement, being the Written Lease. When Mr. Lalani was having difficulty with Bourbon as assignee of the lease agreement Mr. Virk, in cooperation with Seifeddine, Abouarabi and Seifeddine's lawyer, Mr. Dartnell, sided with Bourbon notwithstanding that he had assured Mr. Lalani on November 16, 2005 that the rent owing was as per the Written Lease. As a result,

Bourbon filed a caveat against the property based upon the Lease Amending Agreement and Assignment of Lease. [ 50 ] The Lease Amending Agreement had been drafted by Mr. Dartnell and there were three versions of it in existence as found by Martin J. According to one version it was executed as effective from the beginning of the lease and in other versions it was executed as being effective October 2005. When Mr. Lalani and his son confronted Mr. Virk with this document in April 2006, Mr. Virk acknowledged its existence and that it was effective. He did not tell Mr.

Lalani that in fact it had been put in place between December 2005 and January 2006, as found by Martin J. It was entered into by Mr. Virk and Mr. Abouarabi at a time when neither they nor their companies had any interest in the subject matter of the transaction. In legal proceedings between Mr. Lalani's company and Bourbon both Mr. Virk and Mr. Abouarabi took the position that rent payable for the space occupied by Bourbon was $10,000.00 per month all inclusive. They further took the position that Mr. Lalani was aware of this at all times.

Although their evidence was not entirely consistent throughout this was the gist of it throughout the Tenant Action and indeed all of the litigation. [ 51 ] Of the two, Mr. Virk is the most blameworthy. He was a principal of V and M's company which had agreed to sell the shopping centre to Mr. Lalani's company. He had an obligation to act in good faith and to disclose the true state of affairs relating to the lease of all the space in the shopping centre. His conduct can only be described as commercially outrageous.

After the close of the sale of the shopping centre he did everything he could to adversely affect the rights of Mr. Lalani's company acquired under the sale agreement. His participation with Mr. Seifeddine and his lawyer in the execution of the Lease Amending Agreement and the swearing of the affidavit in support of Bourbon were intentional acts calculated to deprive Mr. Lalani's company of its contractual rights which it had purchased under the sale agreement. [ 52 ] After the Written Lease was produced through the vendor's lawyer, Mr. Lalani sought confirmation from Mr.

Virk as to exactly what portion of the hand written changes in that lease had been agreed to by Mr. Virk. The result was a letter dated November 16, 2005 and signed by Mr. Virk. His evidence was that he did not strike out the words "to the best of my recollection" and initial the change. It is clear from Mr. Virk's file copy of the document that he did indeed do both of those things. After the closing, however, he resiled from the Written Lease and executed a "Lease Amending Agreement" which indicates that the rental payable for the entire term of the lease is $10,000.00 a month inclusive of G.S.T.

He did not explain to Mr. Lalani upon questioning that this document was executed strictly for evidentiary purposes and after the parties to it had no interest in the premises. Instead he told Mr. Lalani that it was an effective document and that he and his son ought to be worried about their physical health which he indicated was under threat by Mr. Seifeddine. [ 53 ] From the commencement of negotiations regarding the purchase of the Glencrest Shopping Centre until closing (and indeed, continuing on after close), Mr. Virk embarked upon a path more or less designed to ensure that Mr.

Lalani would end up unable to collect full rent from Bourbon, notwithstanding Mr. Virk’s assurances as to rent payable under the Written Lease. At the end of the day we have Mr. Virk making inconsistent statements to Mr. Lalani as to whether there in fact was a lease, and if so, what rent was payable under its terms. When finally pinned down on this issue, Mr. Virk assured Mr. Lalani that Bourbon’s rent was $11,000 per month. Mr. Lalani closed the purchase on the basis of this representation. Shortly thereafter, Mr.

Virk entered into the Lease Amending Agreement which indicated that rent payable by Bourbon was amended to be $10,000 per month. Mr. Seifeddine relied upon Mr. Virk’s support in this regard to continue maintaining his position that he was justified in tendering $10,000 per month, inclusive of GST, for rent. Seifeddine also utilized the affidavit subsequently sworn by Virk to oppose the initial motion for termination of the tenancy with Bourbon.

Wrongful interference with economic or contractual relations [ 54 ] Although it is not entirely clear from the pleadings, the Plaintiffs allege that the Defendants have committed the tort of wrongful interference with contractual relations. I find that the this tort has been made out against Virk on the facts before me. In the alternative, I find that Virk misrepresented the state of affairs respecting the lease and that Lalani relied on this misrepresentation to his detriment. [ 55 ] Primary liability in this case sounds in the claim for wrongful interference with economic or contractual relations.

Virk clearly interfered with Lalani’s contractual and business interests by providing Seifeddine with a continued basis for arguing that rent payable under the Written Lease was only $10,000. This impeded Lalani’s ability to assert his contractual right to payment under the lease. [ 56 ] In The Law of Torts in Canada , 3 rd ed. (Carswell: Ont, 2010) Fridman states that the “wrongful interference” torts are differentiated from the tort of inducing breach of contract in that there is no need to show that the defendant has procured a breach as

long as the plaintiff can establish (

a) interference with his trade or business; (

b) the use of unlawful means; (

c) the intent to injure theplaintiff; and (

d) resultant damage: at p. 767. See also Ed Miller Sales and Rentals Ltd. v. Caterpillar Tractor Co. (1994), (AB KB), 151 A.R. 1 at para. 301; rev’d on other grounds: (1996) 1996 ABCA 275 , 187 A.R. 81; leave to appealdismissed [1996] S.C.C.A. No. 511; Hunt Oil Co. Of Canada Inc. v.

Galleon Energy Inc., 2010 ABQB 212, at para. 43, 489 A.R. 326. [57] The nature of this tort is discussed in Colborne Capital Corp. v. 542775 Alberta Ltd. (1995), (AB KB), 171A.R. 241 at paras. 333-335,; rev’d on other grounds: 1999 ABCA 14, 228 A.R. 201: Unlawful interference with another's economic interests is still an emerging tort in Canada. Lewis N.

Klar, in Tort Law, 1991, at p. 454discusses the topic under the heading "Interference with economic interests by unlawful means" and has this to say: The above discussion illustrates that when defendants engage in unlawful acts, with the intention of damaging another party's economicinterests, and damage does result, this will, in some circumstances, constitute a tort. As we have seen, to threaten a person with unlawfulacts constitutes the tort of intimidation.

To conspire with others in the use of unlawful means constitutes the tort of conspiracy, and to useunlawful means to indirectly interfere with contractual relations is also tortious. The question has been raised whether there exists ageneral principle of tort liability which subsumes these nominate torts, whereby any use of unlawful means by an individual with theintention of causing injury to another, without justification, can be considered to be tortious. Is there a tort of interference with economicinterests by unlawful means?

Dicta in a few Canadian and Commonwealth cases suggest that such a tort is emerging ... Berger J. in Ed Miller Sales and Rentals (supra), accepts the proposition that there is now, in Canada, a recognized tort of unlawfulinterference with economic interests short of an actual contract, and, with respect, I concur. I adopt the view of Professor Klar that the tort is founded upon proof of unlawful conduct.

In International Brotherhood of Teamsters v.Therien (1960), (SCC), 22 D.L.R. (2d) 1 (S.C.C.) Locke J. speaking for the majority stated at p. 13: "... (Y)ou are not entitled to interfere with another man's method of gaining his living by illegal means." [58] I agree with the Plaintiffs that Virk’s actions harmed Lalani’s contractual relations with Bourbon. Virk interfered with Lalani’sbusiness of acting as landlord over the shopping centre. He actively encouraged Bourbon to disregard its legal obligations by, in essence,“backing” Bourbon after he had assured Lalani as to the state of the lease.

With Virk’s support, Bourbon was better situated to maintainits position as to rent payable. [59] I also find that Virk employed unlawful means in so interfering with the Plaintiffs’ economic and contractual interests. Virkmisrepresented the state of affairs prior to the deal closing. Moreover, he executed the Lease Amending Agreement after he had anyauthority to do so and then indicated that the agreement was in existence prior to closing. Seifeddine then relied on this document toenhance his claim that rent payable under the lease had been permanently reduced.

Worse still, Virk swore an affidavit stating thatnotwithstanding the Written Lease, rent payable was $10,000, and that as such, that the obligations which Lalani’s company wasattempting to enforce were not valid obligations. [60] In Paragon Properties (Finance) Ltd. v. Del Swan Trucking Inc., 1998 ABQB 803, 233 A.R. 221 this Court held that an actioncan be unlawful notwithstanding that it was effected through the judicial process. In Paragon the Court held that swearing a falseaffidavit to knowingly support the making of a false claim over secured goods amounted to wrongful or unlawful interference.

I find thatin executing the Lease Amending Agreement after he had no authority to do so (and yet representing that it was signed prior to closing)and in deposing as true in an affidavit facts which were not, Virk committed a series of acts which he “was not at liberty to commit”, thussatisfying this element of the tort: Hunt Oil at paras. 45-48; Polar Ice Express Inc. v.

Arctic Glacier Inc., 2007 ABQB 717, at paras. 88-89, 434 A.R. 261; aff’d, 2009 ABCA 20, 446 A.R. 295. [61] I further find that in executing the Lease Amending Agreement after the deal had closed and in swearing the affidavit, Virkappreciated that he had embarked upon a course of conduct with certain probable consequences to the plaintiffs. In Ed Millar, this Court

accepted the following statement by Fridman, at para. 306: Thus motive was treated as irrelevant, as long as there was deliberate, that is, willful and knowing perpetration of unlawful acts by thedefendant with the realization of the probable consequences upon the plaintiff. [62] Lastly, I find that the Plaintiffs suffered damages as a result of Virk’s wrongful interference. Lalani was effectively precludedfrom collecting the full amount of rent payable under the Written Lease. Without Virk’s “backing”, Bourbon would not have had any realchance of debating the agreed upon terms contained in the Written Lease.

Moreover, when Lalani was forced to engage in the courtprocess to terminate the lease and collect outstanding rent, the matter was not resolved on the basis of the record, as is often the case.Instead, based in large part on the Lease Amending Agreement and the evidence sworn to in Virk’s affidavit, a lengthy trial was required.In addition, Seifeddine filed a caveat claiming a charge against the shopping centre, based in part upon the Lease Amending Agreement. [63] The Court in Polar Ice Express discussed damages for wrongful interference with economic interests as follows, at paras. 116-117: If the defendant's wrongful interference or the breach procured by it is such that, in the ordinary course of business, it would inflictdamage on the plaintiff, it is unnecessary for the plaintiff to prove particular damage.

When the damage can be proved or inferred, theplaintiff is entitled to recover in respect of the damage which was a consequence of the tort, if not too remote (Exchange Telegraph Co.v. Gregory, [1896] 1 Q.B. 147). According to the authors of Remedies in Tort at p. 8-35, damages for inducing breach of contract or unlawful interference with economicrelations may be awarded for all loss that flows from the tortious act. The plaintiff is not limited to what could have been recovered in anaction in contract.

The damages which may be awarded include those that were reasonably foreseeable to the defendant, including losseson other contracts which the defendant could foresee. Damages for these torts are "at large." They take into account not only theplaintiff's pecuniary loss but also non-pecuniary damages for such matters as injured feelings, loss of reputation and the nature of theconduct. [64] In Paragon Properties, the Court held that damages for additional costs incurred could be claimed in cases of interferencewith contractual relations.

In Paragon, the plaintiff claimed additional costs, including legal costs, that it considered over and above thecosts it would have normally incurred to seize certain equipment in which it had a security interest had the defendant not wrongfullyinterfered. Plaintiffs’ claim for misrepresentation [65] The Plaintiffs also claim that they suffered losses as a result of the misrepresentations made by Virk.

In the event that I haveerred in finding liability under the tort of wrongful interference with contractual relations, I find Virk liable for misrepresentation. a. negligent misrepresentation [66] The elements for a successful negligent misrepresentation action were set out by the Supreme Court of Canada in The Queenv. Cognos Inc., (SCC), [1993] 1 S.C.R. 87 at 110, as more recently approved by our Court of Appeal in Kelly v.Lundgard, 2001 ABCA 185, 286 A.R. 1, at para. 104: The elements for a successful negligent misrepresentation action are as follows... (

i) there must be a duty of care based on a "special relationship" between the representor and the representee; (ii) the representation in question must be untrue, inaccurate, or misleading; (iii) the representor must have acted negligently in making the said representation;

(iv) the representee must have relied, in a reasonable manner, on said misrepresentation; and (

v) the reliance must have been detrimental to the representee in the sense that damages resulted. [67] The first step of the test thus requires that I find a duty of care based upon a special relationship. The Supreme Court inHercules Management Ltd. v.

Ernst & Young, (SCC), [1997] 2 S.C.R. 165 examined what constitutes a "relationship ofproximity" in the context of negligent misrepresentation actions, holding, at para. 24: Thus, if "proximity" is meant to distinguish the cases where the defendant has a responsibility to take reasonable care of the plaintifffrom those where he or she has no such responsibility, then in negligent misrepresentation cases, it must pertain to some aspect of therelationship of reliance.

To my mind, proximity can be seen to inhere between a defendant-representor and a plaintiff-representee whentwo criteria relating to reliance may be said to exist on the facts: (

a) the defendant ought reasonably to foresee that the plaintiff will relyon his or her representation; and (

b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable. To use theterm employed by my colleague, Iacobucci J., in Cognos, supra, at p. 110, the plaintiff and the defendant can be said to be in a "specialrelationship" whenever these two factors inhere. [68] I find that a special relationship existed between the Plaintiffs and Virk. Virk obviously had a direct financial interest in thepurchase of the chopping centre. When Lalani expressed a concern as to the state of the lease, he sought clarification directly from Virkon this point.

Virk, of course, was in a unique position as landlord to know what amendments had been agreed to and over which timeframe. He knew that Lalani would rely on the information given in response to specific queries made regarding rent payable under thelease, and that he was in a unique position to respond to such queries.

As such, he owed Lalani a duty of care. [69] There is no policy consideration on the facts before me limiting or negativing this duty. [70] Virk's representations as to the state of the lease and rent payable thereunder were clearly untrue, inaccurate or misleading.Implicit in Virk's representation to Lalani that the Written Lease was the effective lease is the underlying representation that theagreement to pay rent between V and A's company as landlord and Bourbon as tenant was accurately reflected in the terms of thegoverning lease.

Virk could not have thought that this was accurate as he knew Bourbon was taking the position that rent was $1,000 lessa month than when was being told to Lalani. [71] Virk was wildly inconsistent throughout his dealings with Lalani; first stating that the Unsigned Lease was the governinglease, next that there was no lease, and finally, when pressed, that the Written Lease was in force. His actions were outrageous by anycommercial standards and amounted to, at best, gross negligence. [72] Lalani was clearly anxious to determine the true state of affairs prior to closing the purchase.

After noting that the Statementof Adjustments showed rent payable of $10,000 under a month-to-month lease and the absence of a security deposit, he called a meetingin an attempt to clarify the situation. He was thereafter, finally, provided with a copy of the Written Lease. When Lalani madesubsequent inquiries to clarify the handwritten notations on the Written Lease, Virk confirmed the amount of rent payable in a writtenmemorandum dated November 16, 2009.

Implicit in Virk's representations is the confirmation that the Written Lease is the operablelease and that the parties thereto were ad item as to rent payable. Lalani took a number of steps to pin Virk down on what the true state ofaffairs was respecting the lease. His reliance on Virk's ultimate representations in this regard was reasonable. [73] I find that the representations made by Virk caused Lalani to suffer damages. Virk represented that there was an agreementbetween the parties to the Written Lease that rent was $11,000 per month exclusive of GST.

However, his subsequent actions reveal thathe was simultaneously assuring Seifeddine for the lessee that payment was only $10,000. Not surprisingly, these actions set the stage foran almost immediate disagreement between Bourbon and Lalani as to outstanding rent payable, with Bourbon tendering $10,000 monthlyand Lalani repeatedly demanding the shortfall. The relationship between these two parties quickly soured and Lalani was eventually putto great expense to terminate the lease and collect the rental arrears.

Virk's actions in executing the affidavit dated April 13, 2007 (Tab111) greatly increased the time and expense required to have the lease declared terminated. As Martin J. notes in the Tenant Action,orders for possession and termination of a leasehold interest are often resolved on the basis of the record. Indeed, the Originating Noticerequested that the matter be heard by way of a Special Application. Instead, in this instance, the ‘facts' contained in Virk's affidavitdictated the need for the matter to be resolved through trial.

[74] Remedies in tortious claims generally try to place the plaintiff in the position he or she would have been in had the false orreckless statement not been relied upon. This too, is the aim in cases of misrepresentation: TWT Enterprises Ltd. v. WestgreenDevelopments (North) Ltd. (1992), 1992 ABCA 211 , 127 A.R. 353, at para. 74. In certain circumstances, consequentialdamages suffered are an appropriate award: Heidelberg Canada Graphic Equipment, supra, at para. 38.

I find that at least part of thelegal expenses incurred by Lalani represents a foreseeable loss attributable to Virk’s tortious conduct. b. fraudulent misrepresentation [75] The Plaintiffs also argued that this case sounds in fraud or deceit. Although the pleadings in this instance could have beenmore precise, I find that a cause of action in fraudulent misrepresentation or deceit was effectively pled.

The facts alleged against theDefendants in the Statement of Claim, and the particulars contained therein, were such that the Defendants would have known thatfraudulent conduct was being alleged and would not have been taken by surprise. [76] Martin J. discussed the allegations of fraud as they applied to the Lease Amending Agreement at paras. 242-254 of the TenantAction. She also addressed the standard of proof applicable to actions alleging fraud. Martin J. found that Seifeddine's actions inrequesting that Virk sign off on the Lease Amending Agreement did not amount to fraud, as each of Mr. Seifeddine and Mr.

Lalani askedMr. Virk for written confirmation of what they alleged to be the true lease terms, without the involvement of the other: para 253. MartinJ. stated that it was inappropriate and unnecessary to make any findings concerning the allegations of fraud concerning non-parties, andcorrectly refrained from doing so. However, Mr. Virk was keenly aware that he had represented to Lalani that rent was $11,000 permonth while simultaneously representing to Mr. Seifeddine that it had in fact been reduced to $10,000 per month. [77] The following elements must be established to ground an action in deceit: (

a) a false statement; (

b) knowledge of its falsity;(

c) an intent to deceive; (

d) reliance by the plaintiff; (

e) damage caused by such reliance: see G.H.L. Fridman, The Law of Torts inCanada, 3rd ed., supra, at 709; L.N. Klar, Tort Law, 4th ed. (Carswell: Ont, 2008) at 669. Our Court of Appeal affirmed these elementsin TWT Enterprises Ltd., supra. See also Re Village on the Park, 2009 ABQB 497, 472 A.R. 230. [78] The elements required to found an action in tortious deceit are present in the action at bar. [79] First, I find that Mr. Virk made a series of statements to Lalani which were either not factually true, or were made withreckless disregard as to their truth. Mr.

Virk seemed to adopt an approach whereby he was willing to represent as true whichever factualmatrix was of benefit at the moment. He first represented that there was a lease with rental payments of $11,000 per month; next thatthere was no lease and that the tenancy of Bourbon was month-to-month with monthly rental of $10,000; and later that there was a leasewith some handwritten amendments but that no additional changes had been agreed to other than those initialled (which did not indicatea rental payment of $10,000).

He subsequently resiled from this "final" position by executing the Lease Amending Agreement. [80] Such an approach is inconsistent with ethical commercial relations and cannot be adopted by commercial actors withoutconsequence.

While I find it likely that Virk made these various statements with actual knowledge that they were untrue (for example,how could he have suggested that there was no governing lease), this element of the tort may be established without the making of afalse statement with knowledge of its falsehood; it may also be established where a defendant makes a statement with reckless disregardas to whether the statements made were true or false: Petrie v. Guelph Lumber Co. (1886), 1886 CanLII 1 (SCC), 11 S.C.R. 450 (SCC);Opron Construction Co. v.

Alberta (1994), (AB KB), 151 A.R. 241 (ABQB) at para. 626; 473759 Alberta Ltd.(c.o.b. Printfast Printers) v. Heidelberg Canada Graphic Equipment Ltd. (1995), (AB KB), 168 A.R. 112 (ABQB) atpara. 37.

As Martin J. found in her reasons, "[Virk's] pattern of behaviour suggested he was willing to sign whatever document or makewhatever statement suited his needs at the time": para. 169. [81] Implicit in Virk's representation to Lalani that the Written Lease was the effective lease is the underlying representation thatthe agreement to pay rent between V and A's company as landlord and Bourbon as tenant was accurately reflected in the terms of thegoverning lease. [82] At the very least, I find that Virk made a series of statements, often conflicting, with absolutely no regard as to what the truestate of affairs was respecting rent payable under the/any lease.

Virk's actions amount to more than mere negligence and clearly fallwithin the “moral recklessness and a callous disregard” referred to by the Court in McLaughlin v. Colvin, (ON CA),[1941] 4 D.L.R. 568 (Ont. CA); aff'd (SCC), [1942] 3 D.L.R. 292 (SCC). As such, the first element of this tort has

been established. [ 83 ] Next I turn to whether the plaintiff has established that there was an intent to deceive. That is, the false statement must be made with the intent that the plaintiff believe in it and rely upon it: Opron Construction , at para. 650. I find that Virk intended to induce Lalani to rely on his representations. In the November 16 correspondence Virk asserts that the agreement between his company as lessor and Bourbon as lessee was accurately reflected in the Written Lease.

The evidence establishes a dishonest belief respecting the truth of this statement (notwithstanding the fact that Martin J. found this to actually be the operating lease agreement). Virk then took the position that the oral agreement to reduce rent on a temporary basis was actually a contractually binding variation operational from the time the oral agreement was entered into, as endorsed by his later testimony.

Virk was clearly representing a set of facts to Lalani which he either did not believe to be true or which he put forward with reckless disregard to their truth, in the hopes that Lalani would believe it and close the purchase deal. At the same time Virk was representing to Seifeddine that the rental payments were $10,000. [ 84 ] I find that Virk's representations materially induced Lalani to close the purchase deal.

As the majority of the Court of Appeal affirmed in TWT Enterprises , “the question of reliance is a question of fact to be inferred from all the circumstances of the case and all of the evidence adduced at trial.” On the facts before me the objective test of relevance and materiality is met. It is clear from the evidence that Lalani was very anxious to determine whether in fact there was a lease in place and what the rent payable thereunder was. There were numerous discussions between Virk and Lalani on this point, as well as a meeting between the parties in early November.

Correspondence of November 2, 2005 shows that Lalani was not willing to proceed to close until the status of the lease had been clarified (Tabs 32 and 33). Upon receipt of the Written Lease, Lalani sought and received clarification as to rent payable. I accept that Virk's representations as to the agreed amount of rent payable under the Written Lease materially induced Lalani to close the purchase deal.

He lead Lalani to believe that the Written Lease was the operable lease and that the parties thereto were ad idem as to rent payable. [ 85 ] I find that the representations made by Virk caused Lalani to suffer the same damages outlined above had the misrepresentations been negligent. Tortious liability of the other Defendants [ 86 ] Mr. Dartnell's role in this scenario is curious. He was third partied into this action by some of the defendants but entered into a settlement agreement with the defendants, the contents of which were not disclosed either to the plaintiffs or the court. [ 87 ] With respect to Messrs.

Abouarabi and Mitha, I have been asked to draw an adverse inference because they were not called at trial. Without setting out here the law related to this area, whether to draw an adverse inference is ultimately a matter of the trial judge's discretion. Both Mr. Mitha and Mr. Abouarabi are parties to this action and were subject to examination for discovery. Any evidence obtained on such an examination could have been read in at trial. I decline to draw an adverse inference based on the failure to call Mr. Abouarabi or Mr. Mitha. Mr. Dartnell was not called in this matter but was a witness in the Tenant Action.

I am not inclined to draw an adverse inference against Mr. Abouarabi because of the failure of the defendants to call Mr. Dartnell. [ 88 ] The case against Mr. Abouarabi is that he actively supported Bourbon's legal position. While his execution of the Lease Amending Agreement was gratuitous and probably improper, I am not satisfied that he did not believe that it reflected the agreement he had with Mr. Virk and was thus his existing obligation to Mr. Lalani's company. The case against Mr. Abouarabi for unlawful interference with the contractual relations, or for deceit is not made out.

Similarly, I am not satisfied that Mr. Mitha is liable under either of these headings. [ 89 ] As to V and M’s company, given Martin J.’s findings, with which I agree, there was no misrepresentation by the company as to the leases in effect and the evidence does not support that Virk’s reprehensible behaviour was authorized by the company. Virk alone is responsible for his sharp practice and bizarre behaviour. For What Damages is Mr. Virk Responsible? [ 90 ] In calculating damages, I agree with Mr.

Virk’s counsel that it was not just the disagreement over the amount of rent and other obligations under the lease agreement which precipitated the action by Mr. Lalani’s company to obtain vacant possession from Bourbon.

The correspondence trail from Mr. Lalani to Mr. Seifeddine and the responses to Mr. Lalani from Mr. Dartnell during 2006 reveal adeteriorating relationship which culminated in a letter dated August 25, 2006 from Bennett Jones on behalf of Mr. Lalani and hiscompany to Mr. Dartnell. This letter outlines a number of complaints and it was clear at this point that the commercial relationshipbetween Mr. Lalani or his company and Bourbon or Mr. Seifeddine was bankrupt.

On the other hand, it is also clear from a review of thejudgment of Martin J. that a significant part of the litigation was the sorting out of the lease obligations between Lalani’s company andBourbon which was made much more difficult by various positions taken by Mr. Virk.

It is virtually impossible to assess precisely howmuch of the costs related to Virk’s tortious conduct but I do not believe that absolute precision is necessary. [91] Using a conservative estimate and based upon my view of the evidence before me, I think it is fair to say that at least$75,000.00 of the legal fees incurred by Lalani’s company were as a result of the additional complications posed by the Lease AmendingAgreement and the false representations made by Mr. Virk. Accordingly, I assess damages payable by Mr. Virk and V and M’s companyin the amount of $75,000.00.

Punitive Damages [92] The Plaintiffs also claim punitive damages. [93] I appreciate that punitive damages are utilized to achieve the goals of punishment and deterrence and that punitive damagesshould be awarded only in exceptional circumstances and with caution: Whiten v. Pilot Insurance Co., 2002 SCC 18 at paras. 69 , [2002]1 S.C.R. 595; Honda Canada Inc. v. Keays, 2008 SCC 39 at para. 68, [2008] 2 S.C.R. 362.

They are restricted to advertent wrongful actsthat are so malicious and outrageous that they are deserving of punishment on their own: Honda at para. 62. [94] In Whiten, our Supreme Court undertook a comprehensive review of the law of punitive damages and outlined the principlesgoverning this type of award. It held, in part, at para. 67 that: First, the attempt to limit punitive damages by "categories" does not work and was rightly rejected in Canada in Vorvis, supra, (SCC), [1989] 1 S.C.R. 1085, at pp. 1104-6.

The control mechanism lies not in restricting the category of case but in rationallydetermining circumstances that warrant the addition of punishment to compensation in a civil action. It is in the nature of the remedy thatpunitive damages will largely be restricted to intentional torts, as in Hill, supra, (SCC), [1995] 2 S.C.R. 1130, or breachof fiduciary duty as in M. (K.) v. M. (H.), (SCC), [1992] 3 S.C.R. 6, but Vorvis itself affirmed the availability of punitivedamages in the exceptional case in contract. In Denison v.

Fawcett, (ON CA), [1958] O.R. 312, the Ontario Court ofAppeal asserted in obiter that on proper facts punitive damages would be available in negligence and nuisance as well. In Robitaille v.Vancouver Hockey Club Ltd. (1981), (BC CA), 124 D.L.R. (3d) 228, the British Columbia Court of Appeal awardedpunitive damages in a negligence case on the principle that they ought to be available whenever "the conduct of the defendant [was] suchas to merit condemnation by the [c]ourt" (p. 250).

This broader approach seems to be in line [page635] with most common lawjurisdictions apart from England. [95] In awarding punitive damages, the courts must focus on the defendant’s misconduct, as opposed to the plaintiff’s loss: Elgertv. Home Hardware Stores Ltd., 2011 ABCA 112 at para. 80. I find that Virk’s conduct in this matter was sufficiently egregious oroutrageous enough to warrant an award of punitive damages. Virk’s conduct throughout and following the purchase of the shoppingcentre represented a marked departure from the ordinary standards of commercial behaviour.

He acted in bad faith throughout theentirety of the negations and following the close of the purchase. [96] The efficacy of commercial transactions depends upon parties to them behaving in a commercially responsible manner. Avendor/landlord cannot tell the purchaser one version of a tenant’s rental obligations while actively assisting that tenant in denying thoseobligations. Parties ought not to make representations without any regard to their veracity or consistency.

It is important to send a clearmessage that commercially outrageous behaviour will not be tolerated. [97] Virk’s conduct throughout and following closing was such that an award of punitive damages is warranted. Recognizing thecompensatory award already granted as well as the need for moderation, I assess punitive damages in the amount of $75,000.00 againstVirk. Costs

[ 98 ] Mr. Lalani’s company is entitled to costs, I decline to award solicitor client costs but I award costs under double Column 5 in favour of Mr. Lalani’s company against Defendants Virk, Abouarabi and Industries, jointly and severally. It would have been unreasonable for Mr. Lalani to have instructed his counsel not to include the remaining defendants. I could grant a Bullock order but on the unique facts of this case, I award no costs in favour of Mr. Mitha or V and M’s company. Conclusion [ 99 ] In sum, this Court orders as follows: 1. Mr.

Lalani’s company shall have judgment against Industries and Abouarabi in accordance with paragraphs 43 and 44 herein. 2. Mr. Lalani’s company shall have judgment against Mr. Virk for damages in the amount of $75,000.00 plus interest in accordance with the Judgment Interest Act , R.S.A. 2000, c. J-1. 3. Mr. Lalani’s company shall have judgment against Mr. Virk for $75,000.00 in punitive damages plus interest in accordance with the Judgment Interest Act , R.S.A. 2000, c. J-1. 4. Mr. Lalani’s company shall have costs of these proceedings in accordance with double column 5 against Mr. Virk, Mr.

Abouarabi and Industries jointly and severally. 5. The claims against Mr. Mitha personally and V and M’s company are dismissed without costs. Heard May 2 - 9, 2011. Dated at the City of Calgary, Alberta this 23 rd day of November, 2011. A.D. Macleod J.C.Q.B.A. Appearances: Grant N. Stapon, Q.C. Bennett Jones LLP for the Plaintiffs Navdeep Virk Virk Law for the Defendants