First Capital (Lakeview) Corporation v Kitchen Pantry Ltd, 2016 ABQB 513

Court of Queen’s Bench of Alberta Citation: First Capital (Lakeview) Corporation v Kitchen Pantry Ltd, 2016 ABQB 513 Date: 20160916 Docket: 1501 04052 Registry: Calgary Between: First Capital (Lakeview) Corporation Plaintiff - and - The Kitchen Pantry Ltd. o/a "The Kitchen Pantry" and Kathleen Spelliscy Defendants - and - David Hall, DSH Partnership and The Kitchen Pantry Ltd. o/a "The Kitchen Pantry" Third Party Defendants _______________________________________________________ Memorandum of Decision of A. R. Robertson , Q.C., Master in Chambers _______________________________________________________ Overview

[ 1 ] A commercial landlord, First Capital (Lakeview) Corporation, leased retail premises to a corporation, and the terms of the lease were guaranteed by a principal of the corporation, Kathleen Spelliscy. The corporation’s shares were sold and the tenant changed its name to The Kitchen Pantry Ltd.

Before that occurred, the terms of her guarantee, or indemnity, to the landlord were modified: a “cap” was agreed to on her liability, limiting it to $20,000 if she honoured the guarantee promptly, by payment within 15 days of demand. (The words that created the “cap” are in dispute.) [ 2 ] She obtained an indemnity for her liability to the landlord from both DSH Partnership, the purchaser of the corporation’s shares and David Hall, a principal of DSH Partnership. [ 3 ] The Kitchen Pantry Ltd. defaulted on the lease. [ 4 ] The landlord sues Ms. Spelliscy on her indemnity, and Ms. Spelliscy claims over against Mr.

Hall and DSH Partnership on their indemnity. There are few, if any, facts in dispute. The landlord seeks

summary judgment; Ms. Spelliscy seeks

summary dismissal and, if found liable to the landlord, she seeks

summary judgment on her third party claim against David Hall and DSH Partnership. Both the landlord and Ms. Spelliscy argue that the facts are clear, the relevant documents are available for review, and the outcome does not need a trial. [ 5 ] However, several issues arise. [ 6 ] Ms. Spelliscy argues that no proper demand was ever made on her, and therefore the claim is premature. She also argues that the wording in the indemnity is confusing.

The words were crafted by the landlord, and she says that the result is that her liability is limited to $20,000 regardless of when the demand was made, or is made in the future, the extent of the landlord’s actual damages (so long as the damages equal or exceed $20,000), and regardless of whether she pays within 15 days after the date of any future demand. [ 7 ] She also says that the landlord did not account for equipment and product that remained in the premises, despite her repeated emails and telephone calls to alert the landlord to her concern about the equipment possibly being disposed of and the value lost. [ 8 ] Mr.

Hall takes alternate positions. He opposes the claim by the landlord against Ms. Spelliscy, because any liability of his begins with her liability to the landlord. But in addition, he argues that if Ms. Spelliscy is liable for the full amount claimed by the landlord, he is only liable to her for the $20,000 because he signed the indemnity after she told him her liability was limited to $20,000. He says that she did not tell him that there was a deadline to take advantage of this cap. [ 9 ] Both Ms. Spelliscy and Mr. Hall argue that the landlord’s claim for damages is, in any event, inflated.

The landlord mitigated (and deducts for mitigation from its claim) by moving into The Kitchen Pantry premises another tenant already in the building where the premises are located. That resulted in a domino-like vacancy elsewhere in the same building.

The landlord says that the cost of mitigation of its lost rent for the premises in question included the lost rent resulting from the vacancy in the other premises. [ 10 ] Eventually both premises were rented, and the landlord gives credit for both the rents received from the other tenant (who moved into the space vacated by The Kitchen Pantry) and the new tenant (who took over the premises vacated by the tenant who moved). But no information has been disclosed about the equipment, which Ms.

Spelliscy says was worth about $200,000. [ 11 ] For the reasons set out below, I have concluded that the steps taken by the landlord in mitigation were reasonable, and that the rent on the alternate space was merely a cost of mitigation when it moved the new tenant into the space previously occupied by The Kitchen Pantry. It also paid an allowance to the new tenant. There is no meaningful suggestion in the evidence that the landlord was doing anything but taking reasonable commercial steps at reducing its loss and, therefore, reducing its claim against Ms. Spelliscy and, in turn, her claim against Mr. Hall.

The only remaining is a possible adjustment for the value of the equipment. [ 12 ] As well, I have concluded that the provision setting out the $20,000 cap on Ms. Spelliscy’s indemnity is not ambiguous, was not misunderstood at the time, and she was not confused when a demand was made. Her email to Mr. Hall sent before he signed his indemnity of Ms. Spelliscy was not incorrect when she said that her exposure was limited to $20,000. Her communication was brief, and simply omitted the “fine print” which was that the $20,000 limit was only available if she actually paid it promptly.

She could have limited her exposure to $20,000 by prompt payment (and therefore her claim over against Mr. Hall) and she knew that. Furthermore, when demand was made, she confirmed her understanding of her liability, and so did her lawyer when he tried to call upon Mr. Hall to pay. [ 13 ] I have also concluded that the landlord made a proper demand on Ms. Spelliscy. The law does not set a standard of perfection for demands, and the landlord did not have an obligation to explain the terms of her liability to her. [ 14 ] Finally, I have concluded that Mr. Hall’s indemnity of Ms.

Spelliscy is for the full amount owing. Her advice to him that her exposure was limited to $20,000 was not incorrect, but the cap was subject to terms. He was a principal behind The Kitchen Pantry and although the documents acknowledged that the tenant (not he personally) had independent legal advice, his indemnity was for whatever her exposure was. He had the opportunity to look at the documents and discuss them with legal counsel, whether or not he expressly acknowledged that, and it is not reasonable to assume that he was completely relying on her brief email for this information. Ms.

Spelliscy was the vendor in a transaction where he, through a partnership, was the buyer of shares. The transaction was not a simple one. Not only were shares transferred, but resignations were required and a name change occurred. It is incorrect to conclude that he did not have independent legal advice in his personal capacity (or the opportunity to get it) simply because he did not expressly acknowledge that he did. Facts [ 15 ] The lease was initially between the landlord and Supperthyme Solutions 2006 Inc., and there was an indemnity agreement given by Ms. Spelliscy.

The tenant’s position was assigned to another corporation which eventually became known as Mise En Place (Lakeview) Inc. The lease was amended and the term extended in 2012, when the indemnity given by Ms. Spelliscy was modified by adding paragraph 19 – the clause that is the subject of debate here. DSH Partnership purchased all of the shares of Mis En Place

(Lakeview) Inc., in January, 2014. The corporation changed its name and became The Kitchen Pantry Ltd. [16] Ms. Spelliscy is a lawyer practising in Calgary. That does not necessarily hold her to a higher standard than other contractingparties generally, but perhaps it is a minor fact for consideration in light of a later exchange with the landlord’s counsel about this clauseafter the landlord demanded payment. [17] The indemnity that she signed, as amended on the sale to The Kitchen Pantry, contained a limit on her exposure.

Her liabilitywas limited to the lesser of the actual amount owing to the landlord or $20,000. However, the indemnity went on to say that if she didnot pay within 15 days then she was liable for the whole amount. The wording of that clause is one of the major points of debate. (It isquoted later in this Memorandum of Decision under the heading “The Wording of the Indemnity Agreement”.) She and the third partyDavid Hall say that it is ambiguous and internally contradictory, it was the landlord’s wording, and she and Mr. Hall should get thebenefit of the ambiguous wording. [18] Ms. Spelliscy told Mr.

Hall in an email, before the arrangements with The Kitchen Pantry were finalized, that her exposure onthe indemnity was limited to $20,000. Her email was dated January 23, 2014 and the purpose of writing was to ask if Mr. Hall wouldreplace her as indemnifier on the lease. She said: Hi Dave: I’d obviously like to make a clean break .... Are you at all willing to replace me as Indemnifier on the lease? It’s not an unlimitedindemnity anymore; it’s capped at $20K. I don’t want to hold anything up; but if there is any chance I can remove myself entirely fromeverything, I’d obviously prefer that. [19] Mr.

Hall did not replace her as indemnifier to the landlord; rather, he and the DSH Partnership indemnified her. [20] When The Kitchen Pantry acquired the business and the lease, Mr. Hall had full access to the contract documents with thelandlord, and The Kitchen Pantry Ltd. acknowledged that it had access to independent legal counsel. Whether that acknowledgementapplies to Mr. Hall is one of the issues, because he says he relied on her representation that her exposure was limited to $20,000. Therefore, he says, his indemnity was limited to $20,000.

No one told him about the “fine print” saying that she had to pay within 15days of demand being made. We are apparently to assume that he made no meaningful enquiry as to the terms of his indemnity when hesigned it. [21] His indemnity said nothing about a $20,000 cap. The operative paragraphs of his “undertaking and indemnity” dated January31, 2014 said this: (

a) I will ensure that DSH Partnership shall not sell, convey, assign or otherwise dispose of its or the Tenant’s interest in the LeasedPremises without using its best commercial efforts to obtain a release or discharge from the landlord of the Spelliscy Guarantee; (

b) In the event the Landlord will not release or otherwise discharge Spelliscy from the Spelliscy Guarantee, David Hall agrees toindemnify and save harmless Spelliscy from and against every demand, claim, cause of action, judgment and expenses and all loss anddamage arising from the Spelliscy Guarantee granted in respect of the Leased Premises. [22] Mr. Hall’s counsel argues that there was no consideration for this indemnity. However, it was given at the same time as theShare Purchase Agreement on January 31, 2014, and

section 9 of the Share Purchase Agreement provided that, “Dave Hall will resign asa director of the Company [Mise en Place (Lakeview) Inc., the previous name of The Kitchen Pantry] and will indemnify KathleenSpelliscy under the Lease.” Although Mr. Hall was not, in his personal capacity, a party to the Share Purchase Agreement, he signed onbehalf of both DSH Partnership and Mise en Place (Lakeview) Inc., and the obligation to provide that indemnity was clearly part of theconsideration for the share sale and the transfer of the business.

It was in this Share Purchase Agreement that the acknowledgement wasgiven that the parties had been independently advised by legal counsel, and that they negotiated based on equal bargaining power. Hisindemnity was one of the things given by the purchaser in the transaction. In exchange, DSH Partnership received the shares. Consideration may be given by A to B, and in return by B to C: see, e.g., Bank of Nova Scotia v. Drouillard-Potter, (AB KB), 79 A.R. 2 at para. 26-27 (M.C.) and Bank of Nova Scotia v. Hallgarth, (BC CA), 32 D.L.R. (4th) 158 at p.160. There was good consideration for Mr.

Hall’s indemnity, notwithstanding that it did not come to him personally. The Demands [23] The first demand from the landlord was not the one that is in dispute. It demanded compliance with the terms of the lease. Itwas dated December 17, 2014 and was addressed to DSH Partnership o/a The Kitchen Pantry and to Ms. Spelliscy.

It stated that that thetenant was in arrears with respect to the payment of rent due and owing the amount of $31,400.36, it gave notice of the default’s andstated that, “the landlord gives you thirteen (13) days notice to cure the above-noted defaults on or before midnight of Monday,December 29, 2014” by reopening the premises, paying the arrears plus interest and a late fee, an NSF fee, and accelerated rents of$19,834.89 provided for in the lease, unpaid legal fees associated with the proposed transfer of lease of $4,816.11, as well as providinggross revenue reports as required by the lease.

It went on to provide that failure to cure defaults by such time would result in the landlordexercising all remedies available including, holding you liable for all rent and other amounts in arrears and for all future rent and damages as a result of the landlord losing thebenefit of the lease over its unexpired term, as well as for all charges and expenses incurred by or on behalf of the landlord with respectto such default, including, without limitation, all professional and legal fees on a substantial indemnity basis. [24] The next paragraph was directed at Ms. Spelliscy.

It said: Notice of this default is also hereby given to the Indemnifier without prejudice to or limiting the Landlord’s rights and remedies againstsuch Indemnifier, all of which are hereby expressly reserved. For greater certainty and without limiting the generality of the foregoing,the Landlord shall not be bound to exercise its remedies against the Tenant or any other persons or security before first exercising its

rights against the Indemnifier. [ 25 ] On January 15, 2015, the landlord sent a “Notice of Termination” to The Kitchen Pantry Ltd. o/a The Kitchen Pantry. (No issue is raised over the change in the addressee from “DSH Partnership” to “The Kitchen Pantry Ltd.”). Apparently it was not copied to Ms. Spelliscy. [ 26 ] On February 6, 2015 a letter was sent to the registered office of The Kitchen Pantry Ltd. and a separate letter to Kathleen Spelliscy by the landlord’s in-house counsel, Mr. Chaitanya. This is the demand letter that is a focus of controversy.

This letter pointed out that the obligations under the lease had not been fulfilled, and stated that both the indemnifier and the tenant would be “held jointly and severally liable for all damages, expenses and costs incurred by the Landlord as a result of the breach of the Lease and the Indemnity Agreement.” It stated that unless the landlord was contacted within seven business days with a reasonable proposal for settlement the landlord would have no alternative but to commence legal proceedings against the tenant and the indemnifier seeking the full amount owing to the landlord without further notice.

It made no mention of the $20,000 cap on Ms. Spelliscy’s liability. The Wording of the Indemnity Agreement [ 27 ] The wording of

section 19 of Ms. Spelliscy’s indemnity agreement that created the limitation of liability requires careful review. It provided as follows: Notwithstanding anything else contained herein, it is understood and agreed that the Indemnifier’s obligation herein is limited to the amount of twenty thousand dollars ($20,000.00) (the “Indemnity Limit”) for the Term and any extensions or renewals thereof.

If the Tenant is in default under the Lease, and the Landlord sends a written demand for payment to the Indemnifier, and the Indemnifier within fifteen (15) days of such written demand, pays the landlord by certified cheque an amount equal to the lesser of the indemnity limit and the amount of the payment then outstanding, then upon Landlord’s receipt of such amount, the Indemnity Limit will be reduced by the amount so paid.

Failing the landlord’s receipt of such amount within the fifteen (15) day period, the Indemnifier’s liability will not be limited to the Indemnity Limit. [ 28 ] The debate arises because of the first words of this clause, “Notwithstanding anything else contained herein”. Ms. Spelliscy argues that those words limit the clause itself. Effectively, she argues that “herein” was a reference to both

section 19 as well as of the balance of the indemnity agreement. Therefore, she says that the balance of the clause should be disregarded. [ 29 ] The landlord argues that construing the clause this way requires a perverse reading of

section 19. It requires ignoring words that are clearly present in the section; they describe the circumstances under which the $20,000 limit applied. No Evidence of Actual Confusion [ 30 ] The words, when the clause is read in its entirety, are not confusing. Furthermore, there is no evidence of any actual confusion. To the contrary, after receiving the letter demanding payment, Ms. Spelliscy wrote an email to the landlord’s in-house counsel Mr.

Chaitanya and said this: When we negotiated the renewal, the indemnity was capped at $20,000 (see paragraph 7 of the Lease Extension and Renewal Agreement); however, I just noted that the same clause stipulates that if the FCB [the landlord] makes a demand for payment after the Tenant (The Kitchen Pantry Ltd.) defaults, the cap itself ‘expires’ 15 days from the date the demand for payment was made.

The demand for payment delivered to me is dated February 2, 2015, so by my calculations, that means the indemnity amount ($20,000.00) has to be paid on or before February 17, 2015. [ 31 ] Counsel for the landlord responded three days later by email saying that he agreed: Thank you for your email. I have now reviewed the Lease Extension and Amending Agreement dated Feb. 13, 2012 (in particular, s. 7.1), and confirm that if we receive $20,000 from you by no later than February 17, 2015 and we cannot pursue you for any further monies beyond that amount.

Please note the need for a certified cheque. [ 32 ] (The references to “paragraph 7” and “s. 7.1” are to

article 7 and

section 7.1 of the Lease Extension and Amendment Agreement that added

section 19 to the Indemnity Agreement.) [ 33 ] She said she would get back to him. [ 34 ] It is important to note that at this point in time, when she read the document she understood it to mean exactly what the landlord now says it means, and she made no suggestion that she did not understand it previously. She referred to “The demand for payment delivered to me”. She did not express any surprise to find this deadline of 15 days for payment in the document she had signed. [ 35 ] At that point, the landlord would not have been able to know precisely what the ultimate damage claim would be.

Its demand was made based upon information known at the time. The amount it claims now is different, having re-rented the premises in mitigation and quantified its claim. [ 36 ] She did not pay the money. Her lawyer told Mr. Hall of the claim, or at least he tried to, and asked him to pay it. Ms. Spelliscy’s lawyer’s letter of February 12, 2015 to Mr.

Hall said that there was a cap of $20,000, but only if the money was paid by February 17 – five days later: As you are now aware, clause 7 of the February 13, 2012 Lease Extension and Amending Agreement between the Company [The Kitchen Pantry] and the Landlord conditionally limited my client’s personal liability for damages under the lease to $20,000.00. This limited indemnity is conditional on the landlord receiving payment of that sum within 15 days of a demand. That 15 day period will

expire on February 17, 2015. After that time, the Landlord can pursue my client for an unlimited amount of damages resulting from theCompany’s breach. At this stage, we know this amount will not be less than $31,400.36, but is likely to be significantly more. [37] The letter went on to demand payment of $20,000 “such that Ms. Spelliscy can pay out the Landlord prior to the February 17,2015 deadline” to limit exposure to that amount plus her legal fees. The letter was sent by email. [38] However, Mr. Hall says that he was by then no longer using the email address that Ms.

Spelliscy and her lawyer were usingin February and March of 2015 and therefore he says he did not get them. (Actually, in his affidavit of March 28, 2016 he said, “I neverreceived the email at Exhibit ‘F’”, but he must have meant Exhibit “E” – the critical communications - because there is no Exhibit “F”to his affidavit, and the context compels this reading.) However, he acknowledges receiving a text message from Ms. Spelliscy onFebruary 11, 2015 in which she said, “Can we chat about Lakeview?

Personal liability is limited to $20k if we pay [the landlord] by Feb17.” In the text exchange, she said she would email his indemnity document to him. He was the one who had changed email addresses. He did not tell her that he had a new email address. When he did not receive anything, he did not follow up with her. [39] And it was his company that had defaulted on the lease. He knew what was going on at the time. [40] He did not pay the $20,000 either. [41] It is clear from the correspondence quoted above that both Ms. Spelliscy and later her lawyer understood that the letterdemanding payment was effective.

Her lawyer’s letter to Mr. Hall makes it clear how he understood it, and that is consistent with bothMs. Spelliscy’s understanding after she went back and looked at her obligation and wrote to in-house counsel, and it is consistent withthe response from in-house counsel. Finally, it is consistent with the arguments presented on behalf of the landlord to the Court. The “Notwithstanding” Clause [42] Counsel for Mr.

Hall argues that the rule relating to the rule of contra proferentem is applied more strictly where theagreement is a guarantee, because “Guarantors have a favoured position in the eyes of the law”, citing Manulife Bank of Canada v. Conlin, (SCC), [1996] 3 S.C.R. 415 and Hall, G.R., Canadian Contractual

Interpretation Law (2nd ed., 2012). [43] However, for the rule of contra preferentem to apply, there must be an ambiguity. The contract must be capable of being readtwo (or more) ways. Then the reading that is least favourable to the person who chose the words is to be preferred. [44] I accept that if someone only read the first few words of

section 19 they might think that the exposure of Ms. Spelliscy wouldalways be limited to $20,000. But no one should read only a few words of a contract, or a provision of a contract, and not the rest. All ofthe words must be read, and all of the words are expected to have a meaning. “Individual words and phrases must be read in the contextof the entire documents”, and “meaning must be given to all of the words in a contract”: Hall, G.R., Canadian Contractual

InterpretationLaw, supra, at p.15. If the words were not intended to have meaning, they would not be present. [45] With this in mind, I do not see any ambiguity. When all of

section 19 is read, it is clear that “anything else contained herein”is a reference to all of the other clauses of the agreement. Otherwise, the remaining words immediately following would make no sensewhatsoever. [46] With no ambiguity, the rule of contra proferentem is not in play. Mitigation of Damages [47] The landlord was successful in mitigating its claim for damages for the early termination of the tenancy.

The landlord wasable to move another tenant already occupying other smaller premises in the same building into the space formerly occupied by TheKitchen Pantry, at a higher rent, for a long (five years) term. However, that meant that the smaller space previously occupied by thatother tenant was vacant. The landlord therefore claims for the balance owing under the lease from the date of termination, plus theunpaid rent up to that date, plus costs associated with that exercise, less the rent received from the new tenant, plus they lost rent in thenew tenant’s former space.

The landlord says that one of the costs of mitigating by moving the tenant into the bigger space was that lossin its other premises. Those other premises were later rented, and it deducts from its claim the rent received from this third tenant. [48] The defendant Ms. Spelliscy and the third party Mr. Hall argue that, at most, the claim is limited to the lost rent from thepremises occupied by The Kitchen Pantry.

They argue that the claim for the resulting lost rent in the smaller premises is too remote tobe awarded his damages against them. [49] In my view, the landlord acted promptly, reasonably, and effectively at mitigating its damage claim. It was fortunate that itwas able to move another tenant into these premises, and if that very directly resulted in other, smaller, premises becoming vacant, thatworked to the benefit of both the landlord, as the primary party suffering the loss, as well as to the benefit of the tenant and theindemnifier Ms.

Spelliscy, and then indirectly to the benefit of the further indemnifier Mr. Hall. [50] Counsel for Mr. Hall argued that this approach could go on indefinitely – if the landlord had other premises somewhere else,and moved a tenant from some other building to this one, then perhaps the defendants and third party here would be liable for unpaidrent in another building entirely. I agree that that might be true, and it is not immediately obvious to me why there would be any harm inthat, if the consequence was to reduce the landlord’s exposure and the damages resulting from the tenant’s breach.

But that is not whathappened. A tenant elsewhere in the same building occupying smaller premises was moved into the larger premises, a new lease wassigned at a better rate although concessions were made, and that was the prudent business thing to do. The defendants cannot complainwhen the landlord has acted reasonably, promptly, and effectively. There is no evidence of a failure by the landlord to take reasonablesteps to mitigate.

The evidence is to the contrary. [51] The burden of proving failure to mitigate lies upon the respondent. “Where it is alleged that the plaintiff has failed tomitigate, the burden of proof is on the defendant, who needs to prove both that the plaintiff has failed to make reasonable efforts to

mitigate and that mitigation was possible”: Southcott Estates Inc. v. Toronto Catholic District School Board, 2012 SCC 51, [2012] 2S.C.R. 675 at para. 24. In opposition to a

summary judgment application, there must be some indication in the evidence that shows thata trial is required - not merely some criticism of what the plaintiff did and a suggestion that some other step might have led to a betterresult: Panarctic Oils Ltd. v. Menasco Manufacturing Copmany, 41 A.R. 451, 1983 CarswellAlta 481 (C.A.) at para. 53, quotingBanco de Portugal v. Waterlow, [1932] AC 452 (H.L.) at p. 506; and Christianson v. North Hill News, 1993 ABCA 232 , 145A.R. 58 (ABCA) 58 at para. 11. [52] Ms. Spelliscy complains she was not given an opportunity to sell the business.

The value of the equipment was lost becausethe tenant that moved into the premises operated a completely different kind of business. She suggests that she might have gotten thelandlord a better deal had she been allowed to participate. In her affidavit of March 29, 2016, she says that she asked (in an email to thelandlord’s in-house counsel Mr. Chaitanya) if the landlord was interested in selling the equipment remaining on the premises andexpressed a concern that the landlord might just send it to the “dump” and claim the costs of disposal.

He responded by email that theequipment remained on the site, he copied her email to Paul Rudolf, the representative of the landlord looking after the site, and heindicated that the landlord would look to get her a quantification of its claim within the next couple of weeks. That exchange was onFebruary 5, 2015. She deposes that she and Mr. Chaitanya spoke by telephone at least once in February and again in March, when shere-asserted that she could find a buyer of the equipment still located in the premises. Also, on February 11, 2015 she followed up with anemail to Mr.

Rudolf asking for an update on the premises and the equipment. [53] She states that Mr. Chaitanya told her she had no standing to negotiate on behalf of The Kitchen Pantry, that he would pass onher information to the landlord, and that he would make sure that she was notified before the equipment was disposed of. She believedthe equipment was worth approximately $200,000 and that she could find a buyer. She says that Mr. Chaitanya advised her that hewould ask Mr.

Rudolf to contact her about the leads she had for a new tenant in addition to the disposition of the equipment. [54] She also asserts that there was retail product on the premises that could have been sold to a store still owned by a companyshe was involved in that operated in another location as Mis en Place (Willowpark) Inc. However, she does not assert that she told Mr.Chaitanya or Mr. Rudolf about this product. [55] She was not contacted about the equipment or the product by either Mr. Rudolf or Mr.

Chaitanya despite her emails andtelephone discussions. [56] Furthermore, she asserts that the sign that the landlord had insisted the tenant install at a cost of over $5,000 was removed andthrown out despite that fact that her related company was ready willing and able to remove and re-use the sign elsewhere.

However, shedoes not provide any information that this willingness was communicated to the landlord, and at that point in time it seems clear that thesign was owned by The Kitchen Pantry, not a company she was involved with. [57] As to her ability to find a better tenant to mitigate, she is a lawyer, not a real estate agent; she had left her involvement in thebusiness; she did not put forward the names or even any clear description of anyone whom she might have put forward as a new tenantwith a resulting lower loss to the landlord; she does not do so now; and the landlord actually had a new tenant in the premises within onlya few months.

Her complaints in this regard have little “air of reality”. [58] However, as to the equipment in the premises, the landlord has not taken into account the value of the equipment. TheSupplementary Affidavit of Ron Schletz says nothing about it. We are left to assume that it ended up in the landfill. Ms. Spelliscyclaims it was worth about $200,000.

I acknowledge that she is not a qualified appraiser, but she was a principal of the company thatbought it, I assume, so she would have some valid idea of its purchase price and indirectly its potential value. [59] The equipment might not have been fixtures that became part of the leased premises, and the landlord may or may not havetaken control of it or even asserted a right to do that. In cross-examination, Mr.

Hall said he did not know if the landlord had takencontrol of it, although, “You would expect they would”: page 31 lines 14-21. [60] It is a valid concern that there is no response at all from the landlord on this topic, despite Ms. Spelliscy’s emails andtelephone calls about the equipment. Although the burden of proof lies with the defendant to show that the plaintiff has not mitigatedeffectively, that does not entitle a plaintiff to “stonewall” the opposing party on information that would likely be entirely within itsknowledge and then rely on the burden of proof resting with the opposite party on a

summary judgment application. [61] As regards the retail product, Ms. Spelliscy does not depose that she told the landlord of the opportunity to sell to anothercompany she was involved with, or the value that it might have had to her company. She cannot complain that the landlord did not try tosell the product to her company when there is no reason to think that the landlord even knew of this possibility, and without a seizure ofthe contents of the premises it is not clear that the landlord had any access to it or the right to sell it. Retail product would not havebecome fixtures.

No Obligation to Make a Demand [62] The fact that the landlord did not, at that time, draw to her attention the window of 15 days to pay only $20,000 did not havethe effect of modifying the terms of her guarantee. She still had that right. It was not the duty of the landlord to explain it to her. Furthermore, I have concluded that the fact that a response was demanded within seven days did not prevent her from simply paying the$20,000 within 15 days of the date of the demand.

Had the landlord sued before the 15 days was up, it would have a lot of resistance if itclaimed interest or costs, but there was no legal obstacle to suing right away. [63] There was a need to make a demand on the tenant, so as to turn the claim from one in debt for unpaid rent to a damage claimfor a fundamental breach of the lease.

The landlord had initially tried to compel the tenant to comply with the terms of the lease, it hadnot, and the landlord then elected to re-take possession, mitigate its claim, and sue for damages, following the process discussed by theSupreme Court of Canada in Highway Properties Ltd. v. Kelly Douglas and Co. Ltd., (SCC), [1971] SCR 562. Butthat demand would have not been required of Ms. Spelliscy, although the landlord properly kept her advised of the claims it was makingagainst the tenant.

[ 64 ] The words of her indemnity do not say that the demand is to be for $20,000. They say “If ... the Landlord sends a written demand for payment to the Indemnifier, [and the Indemnifier pays the $20,000] then upon the Landord’s receipt of such amount, the Indemnity Limit will be reduced by the amount so paid.” It is clear that the “demand” is to be for the amount owing by the tenant – which, as mentioned, could not be very specific in the moment, before the landlord had attempted to re-let. It does not say that Ms. Spelliscy would owe nothing until the 15 day period elapsed.

It does not say that there is no obligation to pay until demand has been paid and 15 days has elapsed. The full amount recoverable would remain at whatever it might eventually be, provided that it would drop to $20,000 upon actual payment within 15 days of the demand. [ 65 ] The fact that she was told that the claim was over $31,000 would have allowed her to know that her obligation was, in fact, $20,000 and not less if she paid within the 15 day period.

It told her generally what her exposure might be (based upon the information available at the time) if she did not. [ 66 ] The indemnity agreement did not require any demand before liability by Ms. Spelliscy would occur. Paragraph 2 said, in the last sentence, “the obligations of the indemnifier are as primary obligor or and not as a guarantor of the tenant’s obligations.” Paragraph 4 provided that the landlord could proceed directly against the indemnifier without taking any proceedings against the tenant.

Paragraph 8 provided, “The indemnifier shall, without limiting the generality of the foregoing, be bound by this indemnity in the same manner as though the indemnifier were the tenant named in the lease.” [ 67 ] The law relating to demands and whether a demand is a condition precedent to action is somewhat confusing. However, the law is clear that there are some “demand” obligations that do not require an actual demand; even where a demand is technically required, the Alberta Court of Appeal has in at least one case refused to dismiss an action to enforce the demand obligation: Alberta Opportunity Co. v.

Schinnour , 1990 ABCA 359 , [1990] A.J. No. 1125, leave to appeal refused, [1991] A.C.C.A. No. 67 (S.C.C.). [ 68 ] Where a demand is not a condition precedent, the statement of claim can serve as the demand: Morrow v. Alberta (Provincial Treasurer) , 1985 ABCA 120 . If a demand is a condition precedent, and if no demand was made, the creditor can discontinue the action, start a new one, and the limitation period will not have run. [ 69 ] This area of law is discussed in some detail in Skuy v. Greenhough Harbour Corporation , 2012 ONSC 6998 . [ 70 ] Ms. Spelliscy argues that the email exchange with Mr.

Chaitanya after the default, when the meaning of

section 19 was discussed, was insufficient to correct a demand, because the terms of the lease are clear that emails have no legal effect with despect to “notices, demands, requests ... under this Lease”. [ 71 ] But here, in my view there was no requirement for a demand in the first place. The existence of a demand would have triggered Ms. Spelliscy’s entitlement to pay only $20,000 – ie. , it would have triggered the deadline for the cap. And if a demand was required, the statement of claim accomplished that requirement. [ 72 ] This is the result: (

a) if no demand were ever made (not likely to have happened), then she could have tendered the $20,000 ex gratis and limited her liability despite the deadline not yet running; (

b) if no demand were made, and she did nothing, then when the landlord sued, the service of the statement of claim would have served as the demand, and she could have paid $20,000 within 15 days of service; and (

c) even if the letter from the landlord that she expressly acknowledged was a demand was not, in fact, a proper demand, then she had 15 days from service of the statement of claim to pay $20,000. But that ship has long sailed. [ 73 ] It is not uncommon for demands to be made for debts (or for damage claims) based upon the information believed to be true at the time the demand is made.

Here, no representation was made as to exactly what the claim was because it could not have been known. [ 74 ] If it later turns out that a demand was for too little, or too much, those facts are normally sorted out in later communications, negotiations, or trial.

If a demand is was grossly exaggerated and at trial the claimant could only show a proper entitlement to much less, it might be a factor in assessing costs, particularly if the debtor attempted to pay the lower amount but was rebuffed. [ 75 ] But there is no standard of perfection on demands for payment of damages, either against the original contractor in breach or against a guarantor of that liability. No one has referred to a case that says there is such a standard. Ms. Spelliscy’s counsel referred to Big Valley Collieries Ltd. v.

MacKinnon , 19155 CarswellAlta 170 , Fortune Village Inn Ltd. v. 203870 Restaurants & Catering Ltd. , 1980 CarswellAlta 409 , and Arrow Holdings Ltd. v. Lakeview Shopping Centre Ltd. , 1991 CarswellNS 180 , but those cases dealt with the possible forfeiture of leases. Here, the landlord had made a demand to comply with the lease and no one has suggested that that demand was not proper. The cases cited do not apply where the forfeiture has already occurred, the tenant has moved out, and the landlord is re-taking the premises in an effort to mitigate its damages.

Conclusion [ 76 ] Accordingly, the damages sought by the plaintiff are awarded as against the defendants are allowed, provided there must be a hearing as to the equipment that Ms. Spelliscy raised as having significant value. After the appropriate deductions for rents received in mitigation, and including the claim for the “domino-like” vacancy elsewhere in the same building, the amount is $61,656.08, subject to adjustment for the tenant’s equipment that the landlord has not accounted for or addressed at all. This further hearing may be a

summary hearing with proper evidence and argument as to the landlord’s right to sell or dispose of it, or it may require a trial. Without a proper factual foundation, I am unable to make a ruling, other than to direct that assessment to proceed by trial. [ 77 ] The application by Ms. Spelliscy as against the plaintiff for

summary dismissal is dismissed. [ 78 ] The application by Ms. Spelliscy as against the third parties is also allowed, subject to the same assessment. The application filed on her behalf asks for

summary judgment against not only Mr. Hall but also the remaining third parties, DSH Partnership and The Kitchen Pantry Ltd. o/a “The Kitchen Pantry”. (The basic liability of those other third parties was not opposed - simply the calculation of the damages and mitigation issues - and therefore they were not discussed in this Memorandum of Decision.)

[ 79 ] Costs may be spoken to. Heard on the 14 th day of July, 2016. Dated at the City of Calgary, Alberta this 15 th day of September, 2016 . A. R. Robertson, Q.C. M.C.C.Q.B.A. Appearances: Ravi Jadusingh Code Hunter LLP for the Applicant/respondent (Plaintiff) Joe D. Spelliscy Duncan & Craig LLP for the Respondent/applicant (Defendant) Kathleen Spelliscy John D. Zang For the Defendant and Third Party (Respondent), The Kitchen Pantry Ltd. and the Third Parties, Dave Hall (Respondent) and DSH Partnership