Mimi's Parlour Ltd v, 2021 ABQB 446

Court of Queen’s Bench of Alberta Citation: Mimi's Parlour Ltd v 1816112 Alberta Ltd, 2021 ABQB 446 Date: 20210607 Docket: 2003 21089 Registry: Edmonton Between: Mimi's Parlour Ltd Applicant/Cross-Respondent - and - 1816112 Alberta Ltd Respondent/Cross-Applicant _______________________________________________________ Costs Judgment of the Honourable Mr. Justice M. J. Lema _______________________________________________________ A.

Introduction [ 1 ] A landlord and a tenant each seek costs of an application deciding whether the landlord had lawfully terminated the lease and, if so, whether relief from forfeiture should be granted. [ 2 ] In Mimi’s Parlour Ltd v 1816112 Alberta Ltd , 2021 ABQB 254 , I found a lawful termination but granted forfeiture relief.

[3] Each party claims success. [4] I find that the predominant issue was forfeiture and that the tenant should receive party-and-party costs for its success on thatissue. B. Issue [5] The issue is how to gauge success, for costs purposes, where a landlord or other rights-terminating party is vindicated in its“termination appropriate” position but the tenant or other rights-forfeited party succeeds in staving off the effects of termination. C.

Legislation [6] The legislative anchor of the relief power is s 10 of the Judicature Act: Subject to appeal as in other cases, the Court has power to relieve against all penalties and forfeitures and, in granting relief, toimpose any terms as to costs, expenses, damages, compensation and all other matters that the Court sees fit. D. Costs principles in relief-from-forfeiture settings [7] Many cases have explored the “dual success” dynamic in a forfeiture-relief setting. I group some of them below, aiming toillustrate the key costs factors.

Cases where costs awarded to party obtaining relief from forfeiture [8] Some cases spotlight the tenant’s or lessee’s success in staving off forfeiture: • Scotia Centre Ltd v EBJ Investments Ltd, (1994) (AB KB), 22 Alta LR (3d) 80 (McMahon J.): tenant obtainedvarious relief including relief from forfeiture of certain building-access agreements.

McMahon J. awarded costs to the tenant forbeing “primarily successful” (para 18 and item 3 of “Relief Granted”); • Low Risk Logistics Inc v Mantella & Sons Investments Ltd, 2020 ONSC 3936 (Gans J.): In my view, the Landlord acted precipitously in trying to lock out and evict the Tenant when it asked for an accommodationbecause of a temporary financial strain precipitated by a global pandemic. The devastating effects of the Covid-19 crisis, including its impact on the economy, are well-documented.

Calling the bailiff toevict the Tenant was an unnecessary act by the Landlord that left the Tenant with no choice but to commence an application forrelief from forfeiture on an urgent basis. Prior to the date set for the return of motion, I urged the parties to settle and intimated to them during our several case conferencesleading up to that date that based on the recent case law and the facts as I understood them this was an appropriate case for relief fromforfeiture.

I made it very clear that the asserted past breaches by the Tenant, which in the main focused on disputes arising from theallocation and timely payment of common area expenses, were either waived by the Landlord or were not of such magnitude asto warrant the Landlord’s attempt to lock the Tenant out of the premises, even for a default in the payment of the April rent. The parties had a 15-year relationship that the Landlord could not terminate easily. In the circumstances, the Tenant’s requests for anaccommodation prior to the April rent obligation and relief from forfeiture were not unreasonable.

Imposing substantialindemnity costs on Low Risk [i.e. the Tenant] would be unduly onerous and unfair. Even though Low Risk had some success, it should be awarded costs only on a partial indemnity basis. Low Risk should haveoffered security in its with prejudice offers in the form of an assignment of the VersaPet sublease to secure a continued tenancy, whichwas only ‘offered’ in the wake of my observations in our last conference call. [footnote omitted] … Furthermore, although the Landlord’s conduct was short-sighted, it was not worthy of a substantial indemnity cost award.

Substantial indemnity costs are usually resorted to when the Court wishes to express its disapproval of the conduct of a party tothe litigation, for example, where the unsuccessful party has engaged in “reprehensible, scandalous or outrageous” conduct.[4] While the Landlord contributed to the need for litigation, the Landlord’s conduct leading up to and during the proceedingsfalls short of that sanction.

Having regard to all of the factors set out in rule 57.01 of the Rules of Civil Procedure, and the principles articulated above, I award coststo the Applicant only on a partial indemnity basis. [paras 21-26 and 30-31] [emphasis added]; • Elias Restaurant v Sheppard Keele Plaza, 2020 ONSC 5870 (E.M. Morgan J.): … I granted relief from forfeiture to the [tenant] and enjoined the [landlord] from terminating the [tenant’s] tenancy: Elias Restaurant v

Keele Sheppard Plaza Inc, 2020 ONSC 5457. The [tenant] was successful in obtaining the [forfeiture] relief it sought, and thereforedeserves the costs of the Application. [para 1]; • Dragona Carpet Supplies Ltd v Earl O’Neil Electric Supply Ltd, 2016 ONSC 162 (Hood J.) (affd 2016 ONCA 783): Being successful on the application, DC [tenant] is presumptively entitled to its costs. O’Neil [landlord] argues, based on Vanek,where the court while granting relief from forfeiture ordered the subtenant to pay the costs of the application, that DC should payO’Neil’s costs. I do not agree.

O’Neil sought to terminate the lease. They were unsuccessful. O’Neil’s first notice was bad. Withrespect to the second, the found breach was minor and DC is prepared to move the material owned by DF out of the Premises. Themajority of time and effort was spent on the issue of illegal activity. Having found this to be unproven against DC and itsprincipals, I see no basis to have DC pay costs to O’Neil.

Accordingly, O’Neil is to pay costs for both the motion and application.[para 24] [emphasis added]; • 2043391 Ontario Inc v Kovachisi, (ONSC – Swinton J.): The [tenants] seek their costs of the application in the amount of $11,181.78. While they acknowledge that they were not completelysuccessful in this proceeding, nevertheless they obtained significant relief in that the tenancy was restored. The balance of the reliefsought is to be determined in a trial of an issue with respect to liability and damages.

The [landlords] submit that there should be no costs to the applicants or, in the alternative, that the applicants receive one quarter of theirpartial indemnity costs and the respondents receive three-quarters of their partial indemnity costs. In my view, the applicant tenant is entitled to costs in respect of the appearance before me, as it succeeded in obtaining relief fromforfeiture, which was significant relief for it. It was reasonable for the tenant to commence this proceeding as an application,given the urgency of the situation. [paras 1-3] [emphasis added]; • Monacelli-Gnocchi v Torgerson, (BCSC -- E.R.A.

Edwards J.): Implicit in my order granting relief from forfeiture was a conclusion that the [secured creditor’s] desire to operate the restaurant was nota proper basis on which to deny relief from forfeiture.

Accordingly it follows that the [secured creditor] … is not entitled to the costs of the application for relief from forfeiture and thatthe costs of that application … should follow the event in the normal course … [i.e. be awarded to the forfeiture-relief-receivingparty]”; • Re Clark and Mihailescu, (1974) (ON SC), 50 DLR (3d) 11 (Ont HC – Stark J.): costs awarded to theforfeiture-relief-receiving tenant (page 14 -- last paragraph of judgment); • Altius Centre Ltd v BMP Energy Systems Ltd, (1997) (AB KB), 43 Alta LR (3d) 209 (Medhurst J.): alandlord which had failed to make an incentive payment to the tenant on time obtained relief from forfeiture (i.e. blocking the tenantfrom terminating the lease for that reason).

Medhurst J. allowed the landlord to cure its breach (by making the required payment) andawarded costs to the landlord, despite its initial breach; and • 116531 Canada Inc v 569562 Ontario Inc, 1995 CarswellOnt 3750 (ONSC – Rutherford J.): tenant and landlord each succeededon various issues, but tenant viewed as the more successful party (including obtaining relief from forfeiture), and defendant tagged asmore responsible “for this case not being resolved and going through a trial” (para 7). Tenant received party-and-party costs (para 9).

Cases where forfeiture-relief-receiving party ordered to pay costs [9] Other cases emphasize the tenant’s breach(es) as the root cause of the litigation, for example: • Canpar Holdings Ltd v Petrobank Energy and Resources Ltd, 2011 ABCA 62 (natural-gas lease): We conclude that because the Appellant’s misconduct was “somewhat reasonable”, the breaches themselves were relatively minor, andthe Lessors received compensation by way of damages and disgorgement of profits in amounts totally out of proportion to the arrears thetrial judge found it to owe by failing to obtain relief from forfeiture, that relief [from forfeiture] should have been granted, on termsas permitted by

section 10 of the Judicature Act.

Those terms are: a. that, notwithstanding the Appellant’s [i.e. lessee’s] ultimate success on this appeal, it is denied its costs here and below as areflection of the fact that it was in breach of the lease and could, indeed, have avoided the risk of forfeiture altogether by makingtimely royalty payments on the basis sought by the Lessors, a rate to which they have found to be entitled; …. [para 49] [emphasisadded]; • Alwell Mechanical Ltd v Royal Bank of Canada, 1985 ABCA 193: We are all of the view that if the termination of the lease is permitted to stand, the apparent windfall to the respondent is so out ofproportion to the amount of arrears that a court of equity ought to intervene subject to terms which make the respondent whole for themoneys wrongfully withheld.

Consequently, we allow the appeal and substitute for the order made an order relieving against theforfeiture of the lease. This order will be subject to the following terms: 1. That the appellant will by December 31st, 1985 pay all arrears including interest in the amounts provided by the lease, so that as atthat date the lease payments will be completely current. During the period until December 31st a minimum of $15,000.00 will be paid onthe first day of each month with the balance due by December 31st.

2. The appellant [tenant] will by December 31st, 1985 pay to the respondent solicitor and client costs of the application in thecourt below and of this appeal. If the appellant fails to abide by the terms stipulated the respondent will be entitled to an order declaring the lease terminated and to awrit of possession effective immediately thereafter. [para 3] [emphasis added]; • Jungle Lion Management Inc v London Life Ins Co, 2020 ONSC 165 (E. M. Morgan J.): The Landlord deserves full indemnity costs. Relief from forfeiture is a remedy which invokes equity in order to overridethe Landlord’s legal rights.

The Plaintiff may appear to be successful if it salvages its tenancy, but that does not mean thatthe Landlord was not actually ‘right’. [para 25] [emphasis added]; • Owners, Strata Plan VIS2030 v Ocean Park Towers Ltd, 2015 BCSC 146 (Dorgan J.): I am of the view that in these particular circumstances, use of the special costs vehicle as a condition of relief from forfeiture isinappropriate. Special costs are ordered when a party is found to have acted in bad faith, outrageously or reprehensibly. Such afinding would be inconsistent with a finding that the same party is entitled to equitable relief.

At the same time, the Strata [landlord] did incur legal expenses (fees, disbursements and taxes) as a result of Ocean Park’sbreach. Ocean Park, as a condition of the relief granted to it, must compensate the Strata in that regard.

Fairness requiresOcean Park to pay the Strata 75% of its legal expenses which remain outstanding after assessment or agreement of the amountof ordinary costs. [paras 32 and 33] [emphasis added]; • 1546273 Ontario Inc v Rosestone Developments Ltd, (ONSC) (Morawetz J): On the subject of costs, although the tenant was successful in obtaining relief from forfeiture, such relief was granted in order toprovide the tenant with one last opportunity to demonstrate that it is serious in its desire to continue in business. This is not asituation where it is appropriate to award costs in favor of the tenant.

Quite the contrary, it is the landlord who should beawarded costs, which after taking into account the factors contained in Rule 57, I fix at $5,000 inclusive of disbursements and GSTpayable by the tenant forthwith. [para 18] [emphasis added]; • Canada (AG) v Wang, 2001 BCSC 422 (Melnick J.): The results of this application have been mixed. The Crown was successful in having some allegations in the statement of claimstruck although not all. The Crown was successful in obtaining judgment for arrears of rent although thetenants were successful in obtaining relief from forfeiture, but upon conditions.

In the circumstances, I conclude that a just result isto award the Crown one-half of its costs on Scale 3 on each of these applications.

Of course, the Crown is entitled to only one set ofcosts on applications that were heard together. [para 38] [emphasis added]; and • Agricultural Development Board (NB) v Great Tantramar Cattle Co, (NBQB – McIntyre J.): Upon payment of the rent in full, together with interest and costs within 30 days, the notice of cancellation is ordered rescinded andthe lease shall remain in full force and effect. … Costs will be in the amount of $2,000, considering these proceedings becamenecessary when the respondent failed to pay the rent on time and willfully chose to disregard the [lessor’s] demands of January 6,1997. [para 18] [emphasis added] [With respect, I question this approach, since the tenant tendered post-dated cheques, which thelessor had accepted in previous years, for the full amount of the outstanding rent before the lessor filed court proceedings (paras 3-8) i.e.the proceedings were apparently not necessary, at least not to spark full payment of the outstanding arrears].

Cases where parties ordered to bear their own costs [10] Other cases see the “dual success” as warranting a “bear own costs” direction: • Lakshmi Enterprises Ltd v Edleun, 2014 ABQB 610 (Master Schlosser): Tenants should not be encouraged to breach their leases.

Even though relief from forfeiture was granted each side will bear itsown costs. … [para 24] [emphasis added]; • Bee Eye & Gee Oh Inc v Delta Bingo Inc, 2014 ONSC 2762 (Broad J.): The principle that a successful party is entitled to its costs is of long-standing, and should not be departed from except for very goodreasons (see Orkin The Law of Costs at para. 205). It has been held that a successful party may be deprived of its costs where it was responsible for the litigation through the carelesshandling of its own affairs (see Orkin at para. 205 and Luk v.

Cypress (Municipal District) (1999) 1999 ABCA 98 , 232 A.R.306 (Alta C.A.)). In this case the litigation was caused by Bee Eye’s [i.e. tenant’s] breach under its lease with Delta. It was acknowledged by Bee Eyethat Delta had the contractual right to terminate the lease. Bee Eye’s claim for an injunction was dismissed on the basis that no breach orfault on the part of Delta had been shown to have been committed or threatened.

Relief from forfeiture was not granted due to anyfault or breach on Delta's part, but rather to permit the Proposal process under the Bankruptcy and Insolvency Act to proceed.Moreover, relief from forfeiture was granted conditional upon Bee Eye paying Delta the arrears owing under the lease. Thatpayment was not made and accordingly, the condition was not satisfied. In the circumstances, it is appropriate to deprive Bee Eye of its costs notwithstanding that it may, at least on the surface, be

considered to have been successful on the application. In my view, it is not appropriate to award costs against Bee Eye in favor of Delta. There is nothing improper or unreasonable inthe conduct of the application on the part of Bee Eye. Bee Eye was entitled to apply for relief from forfeiture and wassuccessful in obtaining relief, albeit conditional, to permit its proposal to be presented to its creditors. [paras 10-14] [emphasisadded]; • 2454 Bloor Street West Ltd v Moksha Yoga Studio, 2014 ONSC 1029 (E. M.

Morgan J.): “Given the mixed results of this motionand cross-motion [parties owing each other various amounts, with forfeiture relief granted (para 29)], there will be no costs ordered foror against any party” (para 30); • 1152030 Ontario Inc v 2051187 Ontario Inc, (ONSC – Ducharme J.): Given that success at trial was divided, it is appropriate that the parties bear their own costs.

In this regard, I note that althoughthe Tenant was successful in obtaining relief from forfeiture, much of the evidence called by the Tenant was irrelevant to thedisposition of the case and the Tenant was unsuccessful in almost all of its claims for a setoff. This evidence consumed aconsiderable portion of the time at trial.

Equally, the Landlord was unsuccessful both with respect to the granting of relief fromforfeiture, in seeking further conditions on the Tenant and in resisting the suggestion that the Tenant had any legitimate claimswith respect to GST. [para 12] [emphasis added]; • Dennaoui v Green Gables Fine Foods Ltd, (NSSC) (Jones J.): It is normally the practice to grant the plaintiff [landlord] costs of the action as a condition for granting relief from forfeiture. In thisinstance the plaintiff issued the summons before contacting the defendant [tenant] concerning the rent.

He persisted in the actioneven when it became apparent that the defendant was prepared to remedy the breach of the covenant. On the other hand, thedefendant was responsible for the action in failing to pay the rent on time. In the circumstances there will be no order for costs toeither party. [page 615 – last paragraph of judgment] [emphasis added]. Impact of lease term(

s) as to tenant’s responsibility for landlord’s legal expenses [11] Leases frequently include terms requiring the tenant to pay the landlord’s legal expenses in defined circumstances. [12] The cases below illustrate the distinction between such contractual obligation and costs awarded under the Rules of Court,plus the impact (if any) of the former obligation on costs. [13] In Low Risk Logistics Inc v Mantella & Sons Investments Ltd (cited above), Gans J. looked past the lease’s costs clause,explaining: The general principles applicable to this case are settled and agreed upon by the parties.

Section 131(1) of the Courts of Justice Act,R.S.O. 1990, c. C.43, and Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, govern this matter and afford this Courtwith a wide discretion when awarding costs. In my opinion, the costs clause in the Lease cannot and should not be permitted to oust the Court’s jurisdiction and discretion inrespect of costs.

While the Court will generally exercise its discretion so as to reflect a contractual right to costs, it is open to the Court to exercise its inherent discretion contrary where there is “good reason for so doing”.[1] This includes the presence of inequitable conduct or special circumstances that would make the imposition of these costs unfair or unduly onerous.[2] Hence, the Landlord’scontractual right to substantial indemnity costs found in s. 7.1(

d) of the Lease is not determinative of the issue. Based on the conduct of the parties and the unique circumstances surrounding the events in question, I am not inclined to exercise mydiscretion to enforce s. 7.1(d). [paragraphs 17-20] [emphasis added] [14] In Dr K Ansarian Dentistry Professional Corp v Dr A Mohajeri Dentistry Professional Corp, 2013 ONSC 3269, D.

M.Brown J. examined and applied a lease term on costs: Under sections 9.07 and 14.04 of the Lease, the Tenant is required to pay the Landlord solicitor and client costs, by way ofindemnity, for any claim “arising from or out of the occupancy or use by the Tenant of the Premises or any other part of theDevelopment or occasioned wholly or in part by any act or omission of the Tenant”. In my view, Ansarian’s claim againstthe Landlord fell into that obligation to indemnify.

While I am not bound by that contractual term, I conclude that it is fair andreasonable to follow the principle of indemnification contained in that clause, not only because of the contractual bargainbetween Landlord and Tenant, but because Ansarian’s conduct in roping the Landlord into its fight with its co-venturerconstituted reprehensible litigation conduct which merited, in its own right, an award of elevated costs against Ansarian. Thatthe contractual clause required indemnification from the Tenant, which is both Ansarian and Mohajeri, is neither here nor there.

First,my award of substantial indemnity costs is based on this court’s overall discretion to award costs.

Second, Ansarian draggedthe Landlord unnecessarily into its fight with Mohajeri, so Ansarian alone will foot the bill for its litigation decision. [para 14] [emphasisadded] [15] So did Tindale J. in Rai v Can-Pacific Farms and Packers Ltd, 2014 BCSC 957, tagging a forfeiture-relief-receiving tenantwith full-indemnity costs, in line with this lease provision: 6.1 All sums paid or expenses incurred by the Lessor, which ought to have been paid or incurred by the Lessee, or for which the Lessorhereunder is entitled to reimbursement from the Lessee may be recovered by the Lessor as additional rental by any and all remedies

available to it for the recovery of rent in arrears.

In the event that it shall be necessary for the Lessor to retain the services of a solicitor or any other person for the purpose of assisting the Lessor in enforcing any of its rights hereunder in the event of default on the part of the Lessee it shall be entitled to collect from the Lessee the reasonable cost of all such services as if the same were rent reserved and in arrears under this Lease . [emphasis added] [part of para 14 of the judgment] [ 16 ] The tenants argued that: … because they were successful in obtaining relief from forfeiture ; they did not consume the court's time with the irrelevant evidence; the lease as noted above does not specifically provide for solicitor–client costs and the plaintiffs did not pursue their allegation at the hearing that the defendants violated the lease by subleasing parts of the farm, … each party should bear its own costs .

In that regard they rely on the decision of the Ontario Superior Court of Justice in 1152030 Ontario Inc. v 2051187 Ontario Inc. , [2006] O.J. No. 5153 (S.C.J.) [para 21]. [ 17 ] However, Tindale J. found:

Section 6.1 of the lease clearly allows the plaintiffs to seek reimbursement for the reasonable costs of the solicitor or any other person they may have to retain to enforce their rights under the lease. [reference to “distinction ... between costs and legal (and other) expenses” discussion in Canadian Petcetera ( 2010 BCCA 469 ) – see below for full excerpt] Parties cannot by agreement fetter the discretion of the courts with respect to costs : 1152030 Ontario Inc. v. 2051187 Ontario Inc. , [2006] O.J. No. 5153 (S.C.J.) . They can however contract for reimbursement for their actual legal expenses.

In my view, because the parties have agreed to a comprehensive lease which provides for reimbursement for their legal costs, the plaintiffs are entitled to rely on the lease with respect to their legal costs .

Section 6.1 of the lease … allows for the plaintiffs to collect from Can-Pacific the costs incurred by the plaintiffs in retaining a solicitor or any other person for the purpose of assisting them in enforcing any of their rights under the lease in the event of a default and they shall be entitled to collect "the reasonable cost of all such services". [paras 59, 61, 62 and 65] [emphasis added] [ 18 ] In Canadian Petcetera Limited Partnership , 2009 BCSC 1135 , Burnyeat J. found that the following lease term as to costs did not apply, with the landlord having improperly terminated the lease: If at any time an action is brought or the Landlord is otherwise required to employ the services of a bailiff, an agent, or its solicitors for recovery of possession of the Premises, recovery of Rental or any part thereof, or because of a breach by act or omission of any covenant herein contained on the part of the Tenant, the Tenant shall pay to the Landlord all expenses incurred by the Landlord in the enforcement of its rights and remedies hereunder (including the Landlord’s administrative costs in connection therewith) together with interest thereon at the rate equal to six percent (6%) per annum above the prevailing prime rate, from the date such expenses are incurred until paid, whether or not any formal proceedings in or before any court, arbitrator, or other tribunal shall have been initiated. [quoted at para 57 of the judgment] [ 19 ] However, he held provisionally that the provision would have been engaged (in the landlord’s favour) if the lease had been properly terminated but relief from forfeiture had been granted : If the Lease had been properly terminated, the Landlord would be entitled to reimbursement for its costs and expenses.

However, I have found that the Lease was not properly terminated. In those circumstances, the Landlord is not in a position to resort to the provisions of paragraph 25(

a) of the Lease. As relief from forfeiture has only been granted in the alternative, I am satisfied that costs should follow the event and that Petcetera [i.e. the tenant] is entitled to its costs in this Action on a Party and Party (Scale “B”) basis.

Those costs will be payable forthwith after assessment. [para 58] [ 20 ] On appeal ( 2010 BCCA 469 ), the BC Court of Appeal found that the lease had been validly terminated but that relief from forfeiture would have been available . (Before the appeal, the lease had terminated for other reasons.) On the subject of costs, the Court of Appeal observed (as echoed in Rai above): A distinction must be made between costs and legal (and other) expenses. Costs are awarded pursuant to the Rules of Court .

They are normally granted on a party and party basis in accordance with a tariff contained in the Rules of Court , and they amount to only a portion of the party’s actual legal expenses. By contrast, it is open to the parties to a contract to include a provision for reimburse​ment by one party to the other party for its actual legal and other expenses in certain circumstances . These are sometimes referred to as indemnity costs or contractual costs. Para. 25(

a) of the Lease is a provision for indemnity costs. Another provision of the Lease, para. 35, provides that in the event of a suit between the parties, the prevailing party is entitled to recover from the losing party all costs and expenses, including attorney’s fees. The Landlord says it is common practice to award the costs of the action to the landlord when relief from forfeiture is granted, even though the landlord has been unsuccessful in resisting the relief .

Although s. 24 of the Law and Equity Act does expressly give the court authorization to impose terms as to costs, my review of the jurisprudence does not disclose a common practice to award costs to landlords. The court has the discretion to award costs to either party or make no order as to costs . I am not prepared to speculate on what the

summary trial judge would have done with respect to the costs of the action if he had granted relief from forfeiture. The breaches giving rise to the forfeiture were relatively minor; it was understand​able for there to have been uncertainty with respect to the obligation to pay the pro rata rent for the period from March 21 to 31, and the cheque for the April rent was mailed two days before the due date and was received on the same day the Landlord terminated the Lease.

The [tenant’s] Trustee was successful on the alternate ground of relief and, in these circumstances, I would not be prepared to disturb the judge’s order with respect to the costs of the action . [i.e. award of costs to tenant upheld]. …

… Petco could potentially be liable to the Landlord for expenses under para. 25(

a) of the Lease, but the Landlord’s counterclaimwas not being tried at the

summary trial. The

summary trial judge may have imposed a condition regarding reimbursement ofthe Landlord’s expenses had he granted relief from forfeiture, but the counterclaim was not before him and he could not haveproperly granted judgment against Petco in respect of the expenses. In my view, the issue of legal expenses payable under paras.25(

a) and 35 of the Lease should be left to the trial of the Landlord’s counterclaim.

If the Landlord wishes to pursue its claim forexpenses against Petcetera’s bankruptcy estate, it can file the claim in the bankruptcy proceedings. [paras 42-44 and 46] [emphasisadded] [21] In CVL Properties Ltd v 662470 BC Ltd, 2008 BCSC 1743, Butler J. found that the landlord had effectively waived its right toseek lease-based costs: Both parties made submissions on a related issue: whether CVL [the landlord] is entitled to claim enforcement costs under theprovision in the lease which would allow it to claim its legal costs as additional rent.

In its notice of motion in the Second Petition,the Tenant sought an order denying enforcement costs to CVL. CVL takes the position that it never sought such costs and is not, as amatter of law, able to do so in this proceeding. For that proposition it relies upon the decision in P & T Shopping Centre HoldingsLtd. v. Cineplex Odeon Corp. (1995), (BC CA), 3 B.C.L.R. (3d) 309 (C.A.). In P & T Shopping Centre, Southin J.A.rejected the landlord’s claim for special costs but would have permitted an order for party and party costs.

She found that ifthe landlord wanted to pursue its contractual right to recover legal costs, it would have to do so in a separate proceeding. Shestated as follows at para. 23: If the Court ought not to order special costs, and I do not think it should, should the Court make any order as to costs? Again, my answeris “no”. The respondent has its contractual remedy. It has no need of assistance from this Court. If the respondent, however,wishes to abandon its rights under the covenant, it would be entitled to the usual order for the party and party costs awarded to asuccessful respondent.

Here, CVL was seeking party and party costs of the Second Petition. I have found against it on that issue. However, it could onlyhave pursued those costs if it abandoned any right to claim its enforcement costs. Accordingly, I find that CVL abandoned itsclaim for enforcement costs. The Tenant is entitled to an order that CVL is not entitled to recover legal fees, disbursements or taxesthat it has incurred concerning the subject matter of the Second Petition. [paras 24 and 25] [emphasis added] E.

Application of those principles here [22] The key factors here are: • the core issue turned out to be relief from forfeiture. While the tenant made various arguments disputing or at least trying tojustify its rent-payment defaults, it effectively acknowledged those defaults by tendering the total rental arrears (approximately$15,000) immediately after the landlord acted on the lease termination. Granted, the arrears tender was made conditionally i.e. on thebasis that the lease would be re-instated. But that became the heart of the matter: with arrears being cleared up, should relief fromforfeiture be granted?

In the end the application was not really needed to vindicate the landlord’s “termination lawful” position: we wereeffectively already downstream of that issue. The tenant (effectively) was saying: “Okay, you’re right … we owe these arrears … herethey are … the lease now needs to be reinstated”, and the fight on that issue was on. This was not, in the end, a mixed-successoutcome.

Quoting from Jungle Lion, the tenant was actually “right” on the central question (forfeiture); • I acknowledge Master Schlosser’s observation in Lakshmi Enterprises about not wishing to encourage tenants to break theirleases, but even the tenant here does not seek full reimbursement of its legal costs (instead “party-party, taxable” costs). In any case, Idoubt that Mimi’s Parlour sees its successful rescue efforts here, even if accompanied with costs, as somehow “encouragement”(retroactive or otherwise) to breach its lease.

As I see it, Mimi’s Parlour ends up paying a price for its lease breaches, in the sense of thedisruption to its business flowing from the (short-term) ouster from the premises, having to retain a lawyer to obtain the interiminjunction getting it back into the premises and then tussle over the forfeiture issue, all aside from the uncertainty over the fate ofthe lease while those proceedings played out.

All to say: I do not see a party-party costs award in the tenant’s favour as creating(even after the fact) an inducement to lease-breaching behaviour; • as seen above, many cases have emphasized a forfeiture-relief win as deserving of costs; • as for the “tenant’s fault” emphasis of some of the tenants-pay-costs cases, I emphasize here that (as explained in the mainjudgment) the landlord tolerated the tenant’s frequently-behind-schedule rent payments for long periods.

As for the defaults duringthe last 1.25 years (i.e. the Covid-19 era), and also as the main judgment describes, the tenant initially understood that rent-relief wasbeing pursued (apparently justifying reduced rent payments), and the later (fall 2020) arrears were explained as flowing fromunderstandable Covid-19-driven revenue losses for this restaurant.

In the end, the tenant here was not an indifferent or cavalierrent-payer, or at least one that the landlord did not initially live with, and its later defaults were the products of harsh businesscircumstances; • in any case, tendering the rental arrears effectively erased the tenant’s defaults relied on by the landlord, neutralizing theirimpact; • the “bear own costs” cases seem to turn largely on mixed success, which we do not actually have here (as explained above); and • the landlord invoked the lease’s indemnification provision, which states: INDEMNIFICATION: The Lessee covenants and agrees to save, defend, hold harmless and indemnity the Lessor against any and all

suits, claims, actions or demands of any nature or kind to which the Lessor shall or may become liable for or suffer by reason of any breach, violation or non-performance by the Lessee of any covenants, term or provision hereof or by reason of any injury occasioned to or suffered by any person or persons or any property resulting from any wrongful act, neglect or default on the part of the Lessee or any of the Lessee’s employees, agent, invitees or licensees or arising out of the use and occupation by the Lessee of the demised premises and the business conducted thereon.

I do not see the indemnification provision as applying here. It seems to contemplate the landlord’s exposure to other (non-tenant) parties , which the tenant agreed to cover. This reading is reinforced by the existence of a separate “ADDITIONAL EXPENSES CAUSED BY LESSEE” clause (4.05), which covers (in part) “all reasonable professional fees incurred by the Lessor in the enforcement of the Lessee’s covenants under this Lease …”. The landlord did not invoke this provision in its costs argument. Even if the landlord had invoked para 4.05, it likely would not have applied here.

It is not clear that it was reasonable for the landlord to dig in on the forfeiture issue . As explained in the main judgment, the tenant had invested upwards of $900,000 in leasehold improvements, which the parties contemplated would be recovered, in large part, by below-market rent over the twelve years of the lease (with an option for a further ten). The tenancy was only approximately three years old when the landlord terminated the lease, for rental arrears.

Once those arrears were tendered, and the focus shifted to forfeiture relief, the landlord had to make a calculation of its odds of succeeding in enforcing forfeiture. As I see it, and as explained more fully in the main judgment, the relief-from-forfeiture factors all favoured the tenant, and strongly so . Especially the proportionality factor, with the tenant’s massive leasehold improvements and the lease only three years in. As I see it, it was not reasonable for the landlord, in the circumstances here, to press for forfeiture.

Even if either lease provision applied here, I would not see them as covering any legal expenses incurred after the rental arrears were tendered i.e. they would likely not capture the vast bulk of the landlord’s legal expenses here, with forfeiture a very unlikely outcome here.

In any case, with the landlord not actually applying for lease-terms-based coverage of some or all of its legal expenses (i.e. beyond simply referring to the existence of the one provision as a costs factor), the engagement, or not, of one or both of these provisions is not actually in issue here. (I invoke the BCCA analysis on this point in Canadian Petcetera – see above.) All to say: the lease provisions here are not actually engaged here and, if they had been, likely would not take the landlord very far . F.

Conclusion [ 23 ] For these reasons, I award Mimi’s Parlour party-and-party costs of the application yielding relief from forfeiture for its benefit. [ 24 ] I thank the parties for their costs submissions. Heard by way of written submissions received on the 30 th day of April, 2021. Dated at the City of Edmonton, Alberta this 7 th day of June, 2021. M. J. Lema J.C.Q.B.A. Appearances: Robert W. Hladun, Q.C. Hladun & Company Barristers & Solicitors for the Applicant/Cross-Respondent Tenant

Craig W. Brusnyk DLA Piper (Canada) LLP for the Respondent/Cross-Applicant Landlord