Buckerfields v. Abbotsford Tractor and Equipment Date:, 2017 BCPC 185

Citation: Buckerfields v. Abbotsford Tractor and Equipment Date: 20170622 2017 BCPC 185 File No: 22489 Registry: Abbotsford IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Small Claims BETWEEN: BUCKERFIELDS LTD. CLAIMANT AND: ABBOTSFORD TRACTOR AND EQUIPMENT LTD. DEFENDANT REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE K. D. SKILNICK Counsel for the Claimant: A. G. LaCroix and B. L. Read Counsel for the Defendant: P. D. Loewen Place of Hearing: Abbotsford , B.C.

Dates of Hearing: April 10, 11, 12, 13, 2017 Date of Judgment: June 22, 2017 Introduction [1] This case concerns a damage deposit of $23,540 held on behalf of a commercial tenant (the Claimant) by its landlord (theDefendant) for commercial premises that the Claimant operated a store out of. The Claimant vacated the premises, with proper notice,but the parties disagree on the question of who is entitled to most of the damage deposit.

The Claimant says that it was obliged to returnthe premises “in good order and repair, except for reasonable wear and tear”, and that it complied with its agreement, so it should get allof the damage deposit back. [2] The Defendant sees things differently. It is of the opinion that it is entitled to deduct from the damage deposit the sum of$17,373.24 for costs owing to it by the Claimant under the lease. This sum has been broken down in the Defendant’s reply as follows: (

a) Yard clean-up costs: $6,169.74 (

b) Replacement of a dock leveller: $4,457.25 (

c) Inspection and testing of a heater: $393.75 (

d) Supply and installation of a new heater: $2,251.50 (

e) Legal fees incurred for an environmental matter: $3,465.00 (

f) The Defendant’s time and effort for arranging the repairs: $336.00 [3] Seven witnesses testified on behalf of the Claimant and four witnesses testified on behalf of the Defendant. In submissions,counsel made some reference to issues of credibility, but in my view this is not a case that turns on anyone’s credibility. As the partieswere told at the conclusion of submissions, I believe that all of the witnesses who testified were honest, and nothing in the evidencesuggested that either of the companies involved in this litigation were anything other than reputable.

Unfortunately, commercial leases ofthis nature involve complex language that keeps commercial lawyers and civil courts busy. Their subject matter of this dispute is suchthat reasonable people can come to opposite conclusions, even with the benefit of legal advice. In some cases parties were trying theirbest to recall things as they were over a decade ago, at a time when the details that they are now struggling to remember may not havebeen seen as important or significant, so it is understandable that two people may have a different memory about something. [4] Following is a

summary of the law to be applied to this case, a

summary of the facts as presented in the evidence heard, and myreasons for reaching the order made in this action. 1.

Summary of the Law (

a) The Burden of Proof [5] Generally speaking, the burden of proof in a civil case is on the party who alleges a fact to prove that fact on a balance ofprobabilities. In a case of this nature, involving an allegation that a tenant is in breach of a covenant to return the premises in a fit state ofrepair, the burden first rests on the landlord to show that the premises were not in as good repair and condition at the end of the leasecompared to with the beginning of the lease. Griffin Holding Corporation v.

Raydon Rentals Ltd., 2016 BCSC 2013, at para. [28]. [6] When, as in this case, the lease agreement contains a provision that makes an exception for “reasonable wear and tear”, theburden of proof then shifts to the tenant to show, on a balance of probabilities that any deterioration in the condition of the premisescomes within this exception. Kreeft v. Pioneer Steel Ltd., [1978] 8 B.C.L.R. 138 (B.C. Co. Ct.); Griffin Holding Corporation v. RaydonRentals Ltd., supra; Levesque v. J. Clark & Sons Ltd., (NB KB), [1972] N.B.J. No. 206 (N.B.Q.B.); 3031632Manitoba Inc. v. Manitoba Lotteries Corp., 2004 MBQC 106 (

b) What is “Reasonable Wear and Tear”? [7] One of the issues dividing the parties in this case is their understanding of what is meant by the phrase “except for reasonablewear and tear”. That phrase presents problems because a landlord and a tenant of commercial premises may not always see eye to eye onwhat is reasonable. The phrase “reasonable wear and tear” presents some difficulty because it cannot be precisely defined and is usuallyfact specific. Case law offers some guidance on the question, but not enough to provide a clear answer in most cases. For example, inGriffin Holding Corporation v.

Raydon Rentals Ltd., 2016 BCSC 2013, Justice MacNaughton of the British Columbia Supreme Court wrote (at paragraph [28]): What will amount to reasonable wear and tear is to be considered in light of the purpose for which the premises were leased, the natureof the business carried out thereon, the age of the building, and the length of the lease. [8] In Levesque v. J.

Clark & Sons Ltd., supra, Justice Dickson also discussed what “reasonable wear and tear” meant, at para. 13: In considering what wear and tear is reasonable, regard must of course be had for the age and nature of use of a building, the duration ofthe tenancy and the nature of the use for which it was intended and to which it was put during the tenancy.

The law of course hardlycontemplates that a leased premises, particularly a commercial structure occupied for a considerable period of time and subjected even innormal usage to relatively hard wear and tear, will be left by a tenant in the same state of decorative repair and with its mechanical doors,locks, communication systems, etc. in precisely the same condition as when he took it.

(

c) Lease Renewal or New Lease? [ 9 ] Counsel for the Claimant takes the position that some of the issues in this case turn on the distinction between a lease renewal and the execution of a new lease agreement between the same parties. This distinction was considered by the British Columbia Supreme Court in Porte Development (Main) Ltd. v. Janus Production Inc. , 2007 BCSC 670 . In that case, Justice Slade wrote that the first step in this analysis is to ascertain the intention of the parties from the language of the lease.

The court adopted the following statement of the law: Where a lease contains an option to renew the lease, the exercise of the option will ordinarily involve the creation of a new lease… [ 10 ] The court held that where language in a lease is used which suggests that it is the intention of the parties to renew a lease on the same terms, the result is to create a new lease. In Porte Development , this was significant, because it meant that the landlord could not rely on a breach of covenant in the first lease to terminate the renewal lease. In this case, counsel for the Claimant says that this

interpretation is also significant, because it means that the Defendant has the burden of proving that the Claimant left the premises in worse condition at the end of the tenancy compared to how they existed at the commencement of the renewal term. [ 11 ] In Vancouver City Savings Credit Union v. New Town Investments Inc. , 2008 BCSC 1617 , the court distinguished between a renewal of a lease and an extension of a lease. This is an important distinction. The court described an extension as being the continuation of the same contract for a specified period.

A renewal on the other hand is “the re-creation of a legal relationship or the replacement of an old contract with a new contract, as opposed to the mere extension of a previous relationship or contract.” In the facts on that case, the court found that the parties had signed an extension agreement. There the agreement simply provided: “The term of the lease shall be extended to and shall end on January 31 st , 2008.” [ 12 ] Both of these cases come to different conclusions, but stand for the same principle.

A court must determine, from a consideration of the language used, whether the parties intended to create a renewal (in which case the clock resets when it comes to consideration of the condition of the premises) or for an extension (in which case it does not). The distinction seems to be that a renewal replaces the old terms of occupancy with some new ones, while an extension changes nothing other than the length of time for the tenant’s occupancy.

Summary of the Evidence 1. The History of this Lease [ 13 ] This litigation concerns a five acre parcel of property located in Abbotsford, south or the number one highway, and just north of the Huntingdon Border Crossing at the northwest corner of Sumas Way and Vye Road. This property is owned by the Defendant. In October of 1995 the property was leased to Beaver Lumber Company Limited for a term of ten years. Beaver Lumber assigned its interest as tenant to a company known as 3022524 Nova Scotia Company in October of 1998.

That company later changed its name to Del’s Farm Supply Canada Co. (“Del’s”) and in September of 2005, Del’s exercised an option contained in the original lease to extend the lease for a further term of five years from September 1, 2005 to August 31, 2010. [ 14 ] The original lease made between the Defendant and Beaver Lumber was for a term from September 1, 1995 until August 31, 2005. Clause 6.1 of the original lease required the tenant to “repair and keep the Leased Premises in good order and repair, except for reasonable wear and tear and except for those repairs to be made by the Landlord”.

The tenant was required to allow the landlord to inspect the premises on reasonable notice and to “make any needed repairs or replacements as the Landlord may reasonably request in writing.” [ 15 ] In clause 12.3 of the original lease, the parties agreed as follows: If at any time the landlord brings an action for recovery of possession of the Leased Premises, for the recovery of rental or any other amount due under the provisions of this Lease, or because of

an act or omission of any other covenant herein contained on the part of the Tenant, and the Landlord succeeds, the Tenant shall pay to the Landlord all expenses incurred therefor, including without limitation, solicitor and client costs incurred therewith. [ 16 ] The lease gave the tenant a “First Renewal Option”, contained in paragraph 16.1, and a “Second Renewal Option” contained in paragraph 16.1. The First Renewal Option was exercised by Del’s in 2005. The Claimant extended the Second Renewal Option in 2010, extending its tenancy to August 31, 2015. The language used in clause 16.2 is as follows: Upon the expiration of the renewal term referred to in

section 16.1 hereof (the “First Renewal Term”) and provided that the Tenant has performed all of the covenants, provisos, stipulations and terms of this lease during the First Renewal Term, and is not in default with respect to any of the terms, covenants, provisos and stipulations contained in this Lease, the Tenant shall have the right and option at its election to renew this lease for an additional term of five (5) years beyond the First Renewal Term upon the same terms and conditions as are contained in this lease save with respect to the Rent or any further right of renewal.

Such renewal terms shall commence on the day immediately succeeding the expiration of the First Renewal Term and shall end at midnight on the 31 st day of August, 2015 (the “Second Renewal term”). The Tenant shall exercise its option to renew this lease by giving notice in writing to the Landlord not less than six (6) months prior to the expiration of the First Renewal Term.

The Rent payable during the Second Renewal Term shall be such rent as is mutually agreed upon and in the event such rent is not so agreed three (3) months before the expiration of the First Renewal term, the Rent shall be the then current fair market rent as determined by arbitration pursuant to the Commercial Arbitration Act of British Columbia, however such rent shall not be less than the Basic Rent together with the additional rent payable during the last year of the First Renewal Term.

In the event that the Tenant fails to give such notice to the Landlord as provided herein, this Lease shall automatically terminate at the end of the First Renewal Term. [ 17 ] On May 7, 2007, Del’s assigned its interest as tenant to the Claimant, with the consent of the Defendant. That agreement was accompanied by a guarantee of the Claimant’s obligations, with the guarantors being the five principal shareholders of the Claimant. In

the assignment agreement, condition 7 read in part as follows: [The Defendant] represents and warrants that [the Defendant] is the fee simple owner of the Premises and that neither [Del’s] nor [the Defendant] has any unsatisfied obligations arising out of or incurred in connection with the leasing of the Premises to [Del’s], and no defense or right of termination, offset, deduction, abatement or counterclaim are known to [the Defendant] to exist with respect to any rents or other sums payable to or to become payable by [Del’s] except as may be set forth in subsection 5(

a) hereof. [The Defendant] further represents and warrants that it has consented to the subleasing of a portion of the Premises to Eagle Machine Inc. and RTR Trailermart Inc. [The Defendant] hereby consents to the assignment of the lease from [Del’s] to [the Claimant] upon the express conditions contained in this Assignment on the express condition that [Del’s] will continue to be responsible under the lease. [ 18 ] Condition 5(

a) of that document was a clause which provided that neither Del’s nor the Defendant had any unsatisfied obligations to one another arising out of the lease except for those expressly listed in that clause. These included a list of repairs set out in

schedule A to the lease, and that

schedule included the following: (

b) The fan at the east end of the building does not work… (

d) The loading dock requires repair… (

k) The air conditioner requires repair. [ 19 ]

Schedule A went on to provide that the Claimant was to arrange for these repairs to be done and submit its invoices for these repairs to the Defendant, who would then pay them from money that it was holding as a security deposit. Kelvin McCulloch is the CEO of the Claimant. He testified that he was not onsite when those repairs were done and cannot say if or when they were done. He recalls that when the Claimant took possession of the premises, there were two dock levellers that were part of the loading dock.

Only one of these levellers worked, and both were in poor condition. [ 20 ] Stewart Kemle, who is the Secretary of the Defendant, as well as a director and shareholder, testified that all of the requirements listed in

schedule A were completed within the first nine months of the Claimant’s occupancy of the premises. [ 21 ] It is not in issue that the option to renew the lease for the Second Renewal Term was exercised by the Claimant. That this renewal term was scheduled to come to an end on August 31, 2015, but that the Claimant remained in possession of the premises for an extra month with the agreement of the Defendant. 2. The Claimant’s Occupancy [ 22 ] Aside from the matters that bring these parties to court, it appears that the Claimant was a good tenant.

There are no complaints made about unpaid rent, and it appears from the evidence that the Claimant was diligent about meeting its obligations to its landlord and responding to most of the Defendant’s requests. One of the problems that led to the disagreement between these parties was caused not by either of these parties, but by a sub-tenant. By 2012, part of the property had been sublet by the Claimant to a company known as Prime Link Logistics. The subleasing had occurred with the Defendant’s knowledge and approval. This sub-tenant failed to pay its rent and as a result, it was denied access to the property.

The sub-tenant went into receivership and bailiffs eventually seized their property. [ 23 ] This sub-tenant left its portion of the property in a mess, leaving oil stains on the floors, on the walls and in the yard. The Claimant hired a power-washing company to clean up the oil staining inside the warehouse. The Defendant was concerned about possible environmental damage caused by oil spilled in the yard. When the Defendant demanded that the Claimant address the problem, the Claimant hired a consultant to address any environmental damage that may have occurred to the premises.

The environmental engineer that the Claimant retained arranged to have the oil-stained soil excavated and removed. According to the evidence of Mr. McCulloch no third party claims or government investigation resulted from this matter. [ 24 ] Mr. Kemle testified that the departure of this sub-tenant created what he described as an environmental issue. He recalls that there was some discussion at the time about the possibility of the Claimant vacating the property if a suitable new tenant could be found. Mr. Kemle testified that he gave notice to the Claimant of the Defendant’s intention to inspect the premises.

He said that on July 25, 2012, he personally inspected the portion of the leased property that had been occupied by the sub-tenant and that he noticed a considerable amount of oil spillage and staining. He observed buckets of dirty oil, used oil filters, and oil spills in the yard. He decided that an environmental expert, AMEC, was required.

In his words, he considered this to be a very serious matter. [ 25 ] On July 27, 2012, the Defendant sent a letter to the Claimant which included the following: During the property inspection on July 25, 2012, we noted many significant oil stains and spills in the gravel area and outside other areas of the property that Buckerfields subleased to Primelink. Many pictures of those areas were taken at that time. As provided within the Primelink Sublease and Buckerfields Headlease, Abbotsford Tractor shall engage AMEC, at Buckerfields expense, to test and remedy those areas of contamination to their satisfaction.

I will be contacting AMEC on Monday morning to arrange for a site evaluation as soon as they are available to do so. In the interim, Abbotsford Tractor must insist that no further alterations occur to the outside area that was subleased to Primelink until those tests and results have been completed. [ 26 ] Mr. Kemle testified that it was Mr. McCulloch who actually retained AMEC, but that this was done at Mr. Kemle’s suggestion. After AMEC had provided their report, Mr. Kemle requested to see a copy of the report, but he said that Mr. McCulloch refused to provide it to him.

Because of this, the Defendant decided to pay AMEC for its own report. [ 27 ] In cross-examination, Mr. Kemle was referred to an email from Mr. McCulloch dated August 2, 2012 at 9:09 a.m., in which

Mr. McCulloch wrote: “AMEC will issue their report next week and we will forward it to Abbotsford Tractor, FYI.” The report from AMEC was dated August 10, 2012, and a letter from the Defendant’s lawyers dated August 31, 2012 suggests that the lawyers had received and reviewed that report. [ 28 ] After this sub-tenant left, another sub-tenant leased a portion of the property. By all accounts this company, Tri-Link Systems Inc., was a good sub-tenant. This company performed a number of improvements to the yard. They put a fresh covering of gravel on the yard and graded and levelled it.

When Tri-Link vacated the premises, their entire damage deposit was returned to them. In the opinion of Mr. McCulloch, when Tri-Link vacated the premises, their portion of the yard was left in very good condition by them. [ 29 ] On July 21, 2015, the Defendant conducted an inspection of the premises. As a result of that investigation, the Defendant sent the Claimant a list of ten items which, in the Defendant’s opinion, required attention. Rather than going over all of these items and discussing how many of them were rectified, the focus will be on the items that are still in dispute.

By the time the Claimant vacated the premises, the Defendant’s complaints were limited to three main items: 1. Yard Clean-up 2. Repairs to the dock levellers 3. Repairs to the heater [ 30 ] The Defendant also alleges that it is entitled to money for legal fees associated with the environmental problem as well as for the time spent by Mr. Kemle arranging for the administration and organization of cleaning up the property after the Claimant vacated it. [ 31 ] The term of the lease came to an end on August 31, 2015, but by the agreement of the parties, the Claimant remained in possession for another month. Mr.

McCulloch testified that he believes that the leased premises were left in better condition that they had been when his company first moved in. Mr. Kemle disagrees. [ 32 ] There were some bad feelings at the end of the lease. Joe Yurick, the Claimant’s local manager, testified that he was upset with Mr. Kemle because Mr. Kemle wasn’t satisfied with the state that the property was left in, while Mr. Yurick believed that the Claimant had gone above and beyond what was required of it in that regard. Mr. Yurick told Mr. Kemle that he was leaving to get a set of keys, but he never returned.

He said that he was upset over how he was being treated by Mr. Kemle and so he left, telling Mr. Kemle that he would be coming back, but never intending to do so. [ 33 ] Mr. McCulloch said that when the lease ended he hadn’t heard anything from the Defendants about the return of his damage deposit. He became concerned that the Defendant did not intend to return the deposit. He was contacted by his sub-tenant, Mr. Sidhu, about his company’s damage deposit, and Mr. McCulloch arranged for this to be paid back to the sub-tenant. After waiting for what Mr.

McCulloch considered to be a reasonable period of time for the return of the damage deposit, he referred the matter to the Claimant’s lawyers. 3. Yard Clean-up [ 34 ] In the first year that the Claimant occupied the premises, it arranged for the fences on the property to be repaired. In a letter from the Claimant to the Defendant’s lawyers dated February 19, 2008, Mr. McCulloch writes as follows: I enclose a final invoice for reimbursement in the amount of $2,593.50. This invoice from Progressive Fence Installations Ltd. reflects the cost of repair work on the fence around the compound.

This invoice has been paid. Please forward a cheque for this amount. In our view there are now no further repairs required in connection with Del’s tenancy at 34633 Vye Road, other than brush clearing around the fence line. We would appreciate if your client would confirm or otherwise advise if any additional repairs are required. With regard to the brush that has overgrown parts of the fence line, we are prepared to clear this away and submit our costs for reimbursement. However, we have noted that the brush on the outside of the line serves as an effective deterrent to thieves coming on our property.

We therefore propose to leave the brush on the outside of the fence during our tenancy on the understanding that we will clear the brush away if our lease is not renewed. [ 35 ] This letter contained an invoice submitted to the Claimant by Progressive Fence Installation Ltd. dated January 10, 2008, for the sum of $2,593.50. It is for the replacement of damaged line posts, the straightening of the fence line, and for the repair of damaged barbed wire and tension wire on the existing perimeter fence line. (The invoice date is listed as 10/01/2008. I infer that this refers to January 10 th because Mr.

McCulloch’s letter was sent in February, and because it has a lower invoice number from one sent in April.) [ 36 ] The Claimant was later invoiced the sum of $8,751.75 from Progressive Fence Installations Ltd. on April 18, 2008. This was for the supply and installation of a fence, removal of the old fence, and repair to the existing line posts and top fence rail.

The Claimant wrote to the Defendant’s lawyers on May 28, 2008 asking for reimbursement of this invoice and the previous one as well as for written confirmation that it had complied with all of the repair and maintenance requirements of the lease assignment agreement. [ 37 ] Joe Yurick was the Claimant’s on-site manager of the premises from September 27, 2010 until the Claimant vacated the premises. He recalls that in 2012, when Prime Link Logistics, the previous sub-tenant, left the premises, they left the yard in terrible condition.

They also left the inside of the portion that they used in a very dirty condition. He recalls personally spending a couple of months of his time on the clean-up. He said that a company came in to check the soil as part of an intense clean-up operation.

He also recalls that some brush was cut down, but that not all of it could be removed because of the presence of a fish habitat nearby, outside of the fence line. [ 38 ] Gary Sidhu, the President of Tri-Link Systems Inc., the Claimant’s final sub-tenant, testified that while his company was on the premises, it was diligent in keeping the yard clean and keeping the parking lot free of potholes. He testified that when his company

moved on site, it provided the Claimant with a damage deposit and that damage deposit was returned in full when it vacated the premises. Mr. Yurick agreed that when Mr. Sidhu’s company left the premises in August of 2015, they left their portion of the yard in very good condition. They graded the yard, cleaned out their portion of the warehouse, [ 39 ] An email was sent by Stewart Kemle on behalf of the Defendant to Kelvin McCulloch on behalf of the Claimant on July 21, 2015, following the Defendant’s inspection of the premises. In the email three of the ten items that Mr. Kemle complains of in the email concern the state of the yard. Specifically, Mr. Kemle’s complaints are as follows:

(6) The fencing along the west side of the property has been damaged and requires repair.

(7) There is considerable vegetation around moat of the perimeter fence that needs to be cut back.

(8) The yard requires a clean-up of general refuse. [ 40 ] The Claimant hired Active Fencing Inc. to remove and repair the fence around the property before it vacated the premises. It paid Active Fencing for three invoices: one for $2,923 plus taxes on August 15, 2015, one for $4,600 plus taxes on October 6, 2015, and one for $2,363 plus taxes on October 29, 2015. The second invoice is for a new fence on Vye Road.

The last invoice from the fencing company describes the work done as being for removal of “the old fence around the old location and repair all the holes and bent posts around the fence line.” [ 41 ] The Claimant also hired a company called First Class Waste Services Inc. to clean up the property.

It paid invoices to First Class, inclusive of taxes, for $540.86 (dated July 26, 2015), $1,449.24 (dated July 31, 2015), $885.74 (dated August 31, 2015) and $1,556.36 (dated September 30, 2015). [ 42 ] When the Claimant vacated the premises, it hired a labourer to clean out its greenhouse, take down the sheds on the property, and remove all of its flower boxes. It provided invoices for this work, showing wages paid to do this work in July, August and September of 2015 for a total of 356.5 hours. [ 43 ] There were piles of topsoil on the premises when the Claimant vacated it. In cross-examination, Mr.

McCulloch testified that he was unaware that the Defendant had any problem with the Claimant’s method of disposal of topsoil that it had on the premises, which was to grade it in with the gravel on the parking lot. [ 44 ] Joe Yurick testified that on the last day that the Claimant was on the premises, he had hired a landscaping company to do some final clean-up work where some blocks had been. The landscaper was delayed and was not able to get there until after the premises had been returned to the Defendant.

The landscaper was told that he was not allowed on the premises by the Defendant to complete this work, according to Mr. Yurick. In cross-examination, Mr, Yurick said that he told Mr. Kemle that he had hired a landscaper to grade the premises, but that Mr. Kemle told the landscaper not to do so. [ 45 ] Mr. Kemle testified that when he examined the yard on October 1, 2015, he had a number of complaints about the state that it had been left in. He was displeased that topsoil had been spread throughout the yard, rather than removed. His concern was that this increases the potential for unsightly weed growth.

He says that this topsoil was not present prior to the Claimant’s occupancy of the premises and therefore it cannot be said to be a problem that can be traced to the pre-existing state of the property at the time the Claimant took possession. He says that this is a problem entirely created by the Claimant. [ 46 ] One of the Defendant’s complaints about the way that the premises were left when the Claimant vacated the property concerns the way that the Claimant’s signage was removed.

The Defendant has produced photographs of the property showing housing for electrical wiring to the Claimant’s signage sticking out of the ground with an exposed wire, as well as housing for power outlets sticking out of the ground.

In this regard, the Defendant relies on Clause 9.2 of the original lease, which reads as follows: At the expiration of the Term, the Tenant shall have the right to remove its signage and trade fixtures from the Leased Premises and shall make good any damage to the Leased Premises resulting from such removal. [ 47 ] The photographs taken of the property also show a number of standing fence posts left inside the fenced property, as well as two dumpsters full of rubbish, a number of mounds of dirt and soil, a number of planter boxes inside the fence line, a concrete planter, as well as a number of stacked wooden pallets. [ 48 ] Mr.

Kemle said that he spent four and a half hours on the property that day. He recalled that Mr. Yurick seemed agitated and that Mr. Yurick had promised to come back to the property that day, but he never did. In total, Mr. Kemle recorded eight hours of his time that he spent on the property dealing with problems which he says are attributable to the Claimant’s failure to comply with the lease by leaving the premises in a proper state. He has submitted an invoice for his time at a rate of $40 per hour. [ 49 ] The Defendant hired PR Construction Limited to clean up the property once it was vacated by the Claimant.

Specifically, this company removed and cleaned up the concrete slabs that were left on the property, back-bladed the gravel to fill in potholes, hauled away the topsoil piles that were left on the property, and removed the pallets and fence posts left by the Claimant.

All of this was done at a cost of $6,169.74 (inclusive of taxes), and the Defendant is seeking to be reimbursed for this amount from the damage deposit it now holds. [ 50 ] Phillip McKenzie is a real estate agent who was hired by the provincial government in connection with a proposed widening of Sumas Way in order to extend the Nexus lane for the Huntingdon Border Crossing.

He testified that an agreement was executed between the Claimant, the Defendant, and the provincial government, pursuant to the Expropriation Act , which required that the fence line on the east side of this property would be required to move as part of an purchase of that portion of the property by the government. The agreement was dated February 26, 2015 and was made an exhibit at this trial.

Essentially, it is the Claimant’s position that it is not honest for the Defendant to claim that it can deduct costs for repairs to the fence line from the damage deposit, when it is also receiving money from the Government for moving the fence line in any event.

4. The Dock Levellers [ 51 ] Jeff Cameron was employed with Del’s Farm Supply in Abbotsford, before taking employment with the Claimant. He recalled that two dock levellers were installed in the back of the warehouse sometime before he began working with Del’s in 2001. He remained at that store until October of 2006 when he moved to Salmon Arm to work for the Claimant.

He testified that the dock levellers were not maintained well by Del’s during the time that he worked on the premises. [ 52 ] Stewart Kemle agrees that the dock levellers were installed during Del’s tenancy, but he estimates that they were installed, in his words, “possibly in 2003.” His brother John Kemle testified that he inspected the premises in April of 2007 as part of the process of an appraisal of the property.

He testified that at that time he manually lifted each of the dock levellers to see if they were working properly, and they were not. [ 53 ] Joe Yurick also recalled that the dock levellers were very old and that they did not work very well during the time that he was the manager of the Claimant’s store on this property. [ 54 ] On February 7, 2008, the Defendant’s lawyers provided the Claimant with a cheque for $6,507.12, reimbursing the Claimant for two invoices it had paid to BC Truck Industries Ltd.

These invoices were submitted by that company on August 21 st and September 30, 2007, for $4047.03 and $2,460.09 respectively. The first is for installation of a 6’ x 6’ dock leveller and the second is for more parts and labour. In a letter from Mr. McCulloch to the Defendant’s lawyers, he notes “the original invoices were paid several months ago. [ 55 ] On two occasions, both in July, the Claimant hired a company to repair the dock-levellers in the loading bay area of the premises.

According to an invoice provided to the Claimant, dated July 16, 2012, the following service was done to the dock levellers: Adjusted main lift springs; adjusted lip control; cleaned out under dock leveller; very rusty hinge and joint locations. Brake box damaged, worn out, sticking. Holding needs to be replaced. Whole needs estimate for repair. [ 56 ] The Claimant also paid two invoices for service calls to two separate dock levellers on October 3, 2012. One of these invoices was for $776.70 (inclusive of taxes) for labour and grease for a service call on that dock leveller.

The invoice suggests that the hinges on that dock leveller were seizing up from lack of use. The hinges and hinge shafts were removed, cleaned, lubricated, and reinstalled. It indicates that the leveller worked adequately after that. The invoice for the other dock leveller was for $391.43 (inclusive of taxes) and was also for labour and grease.

The work is described as checking and repairing the dock leveller by disassembling it, cleaning and repairing it and by making some adjustment. [ 57 ] An invoice dated July 24, 2014 shows that the Claimant paid $1444 (inclusive of taxes) for the following services: Travelled to customer location; inspected for report of dock keeps popping up; found brake box spring broken; ordered and picked up parts; returned to customer site; cleaned up under dock; removed rusted bolts from mount and brake box; removed brake box and installed a new one; installed a new mount pin and bolts; lubricated all hinge and joint location; adjusted main lift springs and lip activation bar; tested dock for proper operation, ok, cleaned up area. [ 58 ] On May 11, 2016, over seven months after the Claimant had vacated the premises, the dock levellers were inspected by Greg Lawrence of BC Truck Lift Industries Ltd.

The invoice for this service call shows that one of the dock levellers was functioning and just needed servicing. Mr. Lawrence repaired this one. He said that he recommended replacement of the other dock leveller. His invoice reads “main springs are stretched. Lip may require repositioning and re-welding. Rear hinge semi seized and would require dock to be removed to repair.” [ 59 ] According to an invoice from Masonlift Ltd. dated July 27, 2016, one mechanical loading dock Pentalift unit was supplied and installed at a cost of $4,457.25. 5.

The Heater [ 60 ] There is some dispute as to whether or not the heater, which forms part of the Defendant’s set off, was ever working during any part of the Claimant’s tenancy. Jeff Cameron testified that when he worked on the premises (from 2001 to 2006), the heater was never used, so he is unable to say if it ever worked. Similarly, Barb Frocklage, who worked for the Claimant at this premises until the fall of 2007, testified that to the best of her recollection, the heater in the warehouse was not working. She is unable to recall if it had been working in 2004.

In cross-examination, she said that this heater never worked. She said that this was a concern for her because she was worried at the time that some of the inventory stored there might freeze. [ 61 ] Joe Yurick also testified that this heater never worked during the time that he worked at the Claimant’s store on this property. [ 62 ] Stewart Kemle was unable to say whether or not this heater was in working order at the time that the Claimant took possession of the premises. He recalled that in 1995 “it worked fine, we tested it” and that in 1998 “I’m pretty sure it worked. I probably did a walk around.

There’s no way to verify that, but no one complained.” He was unable to say if this heater was working in 2005, in 2007 or in 2010. In his words, there were “no complaints”. John Kemle said that when he inspected the property in April of 2007, in his words, “I missed inspecting the heater.” [ 63 ] Tim Jonkman is an electrician who worked on the premises over a span of about fifteen years, both for the Claimant, and previously for Del’s. He testified that he was asked to check out the gas unit heater located at the back of the warehouse on the premises.

He said that on his examination of the heater, it had electrical power going to it. He testified that he could never remember the heater actually discharging heat. [ 64 ] In August of 2014, the Claimant called in a company to look at the air conditioning unit on the property. That company was of the opinion that the unit needed to be replaced. The company was of the opinion that the unit was too old to be repaired. The work performed by that company, Fraser Valley Refrigeration Ltd., is described as follows on their invoice of October 30, 2014 (for work

completed on August 13, 2014): Unit is a split, not working. Turned the thermostat on. Went to roof and found it had an air conditioner split. Lennox condenser had a burnt out motor. Air handler had a refrigerant leak (according to the last contractor). Pan wheels were worn, all components bad. Replacement required. Curb measures 61x37.5. [ 65 ] The Claimant spent $2,368.20 (taxes included) to replace the air conditioner fan motor. [ 66 ] After the Claimant vacated the premises, the Defendant hired K & R Mechanical to inspect the heater which was not working.

Ralph Ohlmann of that company testified that he found that the heater was full of hay and other debris. He believed that this was the reason it was not working. He cleaned out the heater, including the heat exchanger and all of the tubes. He made sure that there was proper ignition and flame. Once the unit was started, it was discovered that it had a crack in the heat exchanger and could not be used. His bill for this inspection was $393.75 (taxes included). Mr. Ohlmann acknowledged in cross-examination that this was an old heater.

K & R Mechanical replaced this unit with a used unit heater at a further cost to the Defendant of $2,551.50. Their invoice is dated December 15, 2015. 6. Legal Fees [ 67 ] Part of the Defendant’s set-off concerns legal fees for the sum of $3,465.00. These are included in two invoices that the Defendant paid to its lawyers at around the time of the environmental issue that occurred in August of 2012. One invoice, dated August 30, 2012 is for discounted legal fees of $4,000.00 (with disbursements and taxes, the bill totals $4,501.81).

The other is for fees of $1,920 (with disbursements and taxes, this bill totals $2,332.03). [ 68 ] The difficulty with this claim is that the description of services for which these fees were provided has been redacted from the copy of the statement of account submitted in evidence. The Defendant does not wish to disclose a copy of the invoices with the services rendered described more fully.

This puts the Claimant, as well as this Court, in a difficult position of not being able to scrutinize these bills and determine whether or not the services for which the Defendant was billed are properly attributable to the Claimant under the lease. The Defendant’s position essentially is one of saying, “I won’t show you what these legal bills are for, but trust me, I’m entitled to set them off.” Analysis [ 69 ] As was stated in the

summary of the law contained earlier in these reasons, in this case it is the Defendant who bears the burden of proof, on a balance of probabilities, to show that it is properly withholding money from the damage deposit that would otherwise be owing to the Claimant.

Both counsel have acknowledged this in their final submissions. [ 70 ] More specifically, the onus is on the landlord (the Defendant in this case) to prove what the condition of the premises were at the beginning of the lease, and also to prove that they were in worse condition when the Claimant vacated the premises, and that the damages claimed were incurred for the purpose of bringing the premises back to their condition at the start of the lease, reasonable wear and tear excepted.

The Claimant has the burden of proof, on a balance of probabilities, of proving that any deterioration in the premises falls within the “reasonable wear and tear” exception. 1. What is the Proper Date for Comparison of the State of the Premises? [ 71 ] The parties disagree of when the “before” date in this analysis is. Counsel for the Claimant relies on the BC Supreme Court decision of Porte Development (Main) Ltd. v. Janus Productions Inc. , 2007 BCSC 670 as authority for the proposition that the operative date is when the renewal period commenced. In this case, that date is September 1, 2010.

Counsel for the Defendant states that the proper date is September 1, 2005, or alternatively May 7, 2007, when the Claimant became the Assignee of the obligations of the previous tenant, Del’s Farm Supply Canada Co. [ 72 ] Certainly on that last mentioned date, the Claimant had what one counsel referred to as a “clean slate”.

Paragraph 7 of the Assignment and Assumption of Lease agreement made on May, 2007, reads as follows: Landlord represents and warrants that Landlord is the fee simple owner of the Premises and that neither Assignor nor Landlord has any unsatisfied obligations arising out of or incurred in connection with the leasing if the Premises to the Assignor, and no defence of right of termination, offset, deduction, abatement, or counterclaim are known to the Landlord to exist with respect to any rents or other sums payable to or to become payable by the landlord except as may be set out in Subsection 5(

a) hereof… [ 73 ] Subsection 5(

a) concerned the settlement of a claim for the loss of a shed and is not relevant to these proceedings. In the agreement of May 7, 2007, the Claimant stepped into the shoes of the previous tenant and started with a clean slate. [ 74 ] Counsel for the Claimant goes further and argues that the comparison date is when the last renewal period began, September 1, 2010. He relies on the law as set out in Porte Development (Main) Ltd. v. Janus Production Inc. , 2007 BCSC 670 .

Counsel for the Defendant says that it should be the date of the original lease because the Second Renewal was really just an extension of the existing lease. [ 75 ] At first glance, the Defendant’s argument has some appeal, but the Claimant’s argument accords with the law on this issue. An extension is defined as being the continuation of the same contract for a specified period.

A renewal on the other hand is “the re-creation of a legal relationship or the replacement of an old contract with a new contract, as opposed to the mere extension of a previous relationship or contract.” Here there are two factors that support this being a renewal, as opposed to an extension. Firstly, it is called a “Renewal” in the contract. The terms “First” and “Second Renewal Option” are used. This suggests that the parties intended this to be a renewal because they called it a renewal. Secondly, this term does more than just extend the time that the Claimant was entitled to be in possession of the property.

It also adjusted the rent and put a mechanism in place in case the parties could not agree on what that rent should be.

[ 76 ] However on an analysis of each of the items of set off, I don’t believe much will really turn of which date is selected on a consideration of each of the five components of the Defendant’s set off. 2. Yard Clean-up Costs: $6,169.74 [ 77 ] The evidence satisfies me that the yard was not left in a satisfactory state at the conclusion of the lease, and the Defendant was entitled to some compensation for having to clean up the yard.

In the lease assumed by the Claimant, it covenanted that it would “peaceably surrender the Leased Premises to the Landlord in substantially the same order and condition as they were required to be kept during the term.” The Claimant was diligent in keeping the yard in good shape, and cannot be faulted for being irresponsible. The evidence is to the contrary, that the Claimant was very diligent about the condition of the yard for the most part. [ 78 ] The problem arises with what is seen in the photographs taken by the Defendant after the Claimant vacated the premises.

Specifically, there are dumpsters full of garbage that were not removed, wooden pallets and fence posts that were not removed, mounds of soil left on the property, topsoil mixed in with the gravel rather than being removed, wooden planters left on the property, and electrical fixtures sticking out of the ground which were not removed.

The Claimant was obliged to clean this up or alternatively to reimburse the Defendant for this clean-up. [ 79 ] The Claimant made arrangements to have some of this cleaned up, but the persons it hired to do so were unable to do so prior to the time that the Claimant was scheduled to vacate the property. While the Claimant should be credited for its efforts in this regard, it is unfortunate that the clean-up was not completed within the scheduled time. The Defendant had already extended the time for vacating the premises. The Defendant could not be expected to extend this indefinitely. Mr.

Yurick testified that he disingenuously told Mr. Kemle that he was coming back, when he had no intention of doing so. Accordingly, the Defendant cannot be faulted for taking these measures itself. [ 80 ] The lease agreement obligated the Claimant to keep the property in “good order” and to surrender the premises not as they found them, or as they were at any particular point in time, but “in substantially the same order and condition as they were required to be kept during” the Claimant’s occupancy.

This was not the condition they were left in. [ 81 ] While the invoice from PR Construction seems high on the face of it, it was not really challenged in the evidence. The invoice includes the removal of posts and posts were in fact left on the property and were required to be removed. The invoice includes the removal of concrete imbeds, and the same comment applies. Piles of topsoil were left on the property and it was reasonable for the Defendant to have these removed. Nothing in the invoice appears out of order or unrelated to what was required to be cleaned up as shown in the photos taken by the Defendant.

Accordingly, the Defendant is entitled to be reimbursed for the bill from PR Construction from the damage deposit it holds. [ 82 ] In my view the existence of the Expropriation Agreement with the provincial government is really a red herring on this issue. While a portion of the property has been expropriated for construction of a lengthening of the Nexus Lane to the Huntingdon Border Crossing, the evidence of Mr. McKenzie is that this project has been put on hold. In the meantime, the Defendant had to make the property ready for a prospective tenant.

It is unclear why the Expropriation Agreement should relieve the Claimant of its obligation under the lease. 3. Replacement of a Dock Leveller: $4,457.25 [ 83 ] The Claimant took possession of premises that had old dock levellers that were not in very good working order. There is some confusion about whether these were installed in 2001 or 2003, but the best evidence on their state comes from the Claimant’s employees, specifically Mr. Cameron, Ms. Frocklage and Mr. Yurick. The Claimant is unable to understand why it should get stuck with the bill for the repaired dock levellers and frankly, so am I.

The lease agreement assumed by the Claimant required the Claimant to keep the premises in good order, “except for reasonable wear and tear”. It did not require the Claimant to leave the premises in a better or improved condition. [ 84 ] The bulk of the evidence supports the position of the Claimant that the Claimant took over premises that had dock levellers that were not in very good working order. The evidence also discloses that the Claimant spent a lot of money to get the dock levellers in a workable state so that it could use them.

While this is commendable, it does not operate to rewrite the lease so as to add this to the Claimant’s obligations on vacating the property. The evidence supports the contention that the dock levellers were between twelve and fourteen years old, that they required a lot of usage, and that they were problematic throughout the tenancy and even going back to the time when the previous tenant occupied the premises.

The repairs that were ultimately done to them occurred over seven months after the Claimant vacated the property and they were replaced over nine months after the Claimant left. [ 85 ] The Defendant has not contradicted the Claimant’s evidence about the poor state of the dock levellers at the commencement of the Claimant’s occupancy or at the relevant date for comparison, or for that matter throughout the Claimant’s occupancy of the premises. What the Defendant is claiming a set off for here is an improvement, not a restoration to the previous state of the property.

The Defendant’s position does not take into account any reasonable wear and tear on the dock levellers after being in use for so long. The Defendant has not met the burden of proving that this is something that the Claimant is responsible for under this lease and accordingly, the Defendant is not entitled to set off its bills for repairing or replacing the dock levellers from the damage deposit it holds. 4. Inspection and testing: $393.75 and Installation of a New Heater: $2,251.50 [ 86 ] The Defendant wishes to set off the cost of inspection and replacement of the heater that was in the warehouse.

The Claimant says that this is unfair because this heater never worked in the first place. The evidence is consistent to the extent that witnesses either have testified that the heater did not work or that they are unsure if it worked or not. [ 87 ] Jeff Cameron testified that when he worked on the premises, the heater was never used, so he is unable to say if it ever worked. Barb Frocklage, who worked for the Claimant at this premises until the fall of 2007, testified that to the best of her recollection, the heater in the warehouse was not working. She is unable to recall if it had been working in 2004.

In cross-examination, she said that this

heater never worked. She said that this was a concern for her because she was worried that some of the inventory stored there might freeze. Joe Yurick also testified that this heater never worked during the time that he worked at the Claimant’s store on this property. Stewart Kemle was unable to say whether or not this heater was in working order at the time that the Claimant took possession of the premises. He could only remember it working in 1995 and said that in 1998 he was “pretty sure it worked.” He was unable to say if this heater was working in 2005, in 2007 or in 2010.

He assumes it was from the fact that there were “no complaints”. John Kemle said that when he inspected the property in April of 2007 he missed inspecting the heater. The electrician Mr. Jonkman could only recollect that there was power going to it, but he could not recall whether or not it ever discharged any heat. [ 88 ] There is not sufficient evidence to show that this heater was ever working during the Claimant’s occupancy and the best evidence comes from the Claimant’s employees who recollect that it never worked.

To make the Claimant pay for the repairs to the heater would be to make it pay for improving the premises, something it is not obliged to do under the terms of its lease. These expenses do not form a proper part of the Defendant’s set off from the money held for the damage deposit. 5. Legal Fees Incurred for an Environmental matter: $3,465.00 [ 89 ] The lease in question allows the Defendant to be reimbursed for some of its solicitor clients costs under certain circumstances, but the Defendant bears the burden of proving that the costs it claims fall within what the Claimant has accepted responsibility for.

For some reason the Defendant has only provided statements of account with the description of services redacted. The Claimant has been denied the opportunity to challenge whether or not it is in fact responsible for the services for which the Defendant has been billed. Have other unrelated services or disbursements been included in the bill? Were the services billed for reasonable or excessive?

The Claimant is being denied the opportunity to question this, and this Court is also prevented from making those same inquiries or from being satisfied that the legal fees claimed fall are something that the Claimant is responsible for under the lease. [ 90 ] It is true that the lease agreement allows the Defendant to recover some of its solicitor-client costs under certain conditions, but denying anyone from examining the legal bills makes it impossible to determine if those conditions exist.

Simply put, the Defendant has not met the burden of proof in this case of proving that these legal fees are the subject of a proper set-off against the damage deposit and it is not entitled to recover this amount from the Claimant or reimburse itself for these fees out of the damage deposit. 6.

The Defendant’s Time for Arranging the Repairs: $336.00 [ 91 ] The lease agreement provided in paragraph 12.3 that in the event that the Defendant brought an action for the recovery of any amount due under the provisions of the Lease, “or because of a breach by act or omission” of a covenant in the lease by the Tenant, the Defendant would be paid for “all expenses incurred therefor”.

Having found that the Claimant was in breach of its covenant regarding the state that the property was surrendered in, is the Defendant entitled to be reimbursed for the time spent by its officer in arranging for the proper clean-up of the property? [ 92 ] Neither the rate charged by Mr. Kemle, nor the amount of time he spent, are unreasonable. The only question is whether the Claimant is legally obligated to pay this bill. In determining whether or not payment of Mr. Kemle for his time is “an expense” incurred by the Defendant, resort must be had to the rules of construction of commercial agreement.

This requires a construction that attempts to ascertain the intention of the parties, as evident from the contract as a whole. Words are normally given their usual meaning unless this appears inconsistent with the overall intent of the agreement. [ 93 ] An expense is typically defined as something expended to secure a benefit or bring about a result. The incurring of an expense implies that something has first been paid out or some liability has been acquired. In this case Mr. Kemle lost his time, spent attending to extra duties as the principal actor for the landlord.

His bill does not involve reimbursement of anything that he is directly out of pocket for. In the past, when Mr. Kemle was required to do some duty under the lease, such as an inspection for example, it was not the past practise for him to send a bill for his time or for the Claimant to pay for that time. It was just something that he was expected to do, without submitting a bill each time he had to talk to the landlord or send a letter. It is unclear how this situation is much different, if at all. Based on the parties past practice, the plain meaning of the word expenses, and principles of

interpretation of lease agreements, I am not satisfied that the term “expenses” in this clause of the lease requires the Claimant to pay for this item. [ 94 ] This is not to suggest that the time spent by Mr. Kemle was not valuable, that it was unreasonable, or that it was not made necessary by the actions of the Claimant. It is a matter of enforcing the contract that the parties made, and under the agreement under consideration, the Claimant did not contract to pay for Mr. Kemle’s time in performing the duties of the landlord, necessary or otherwise.

Often parties in Small Claims proceedings will demand some compensation from an opposing party for their time and inconvenience and this is denied unless there is some contractual or other lawful basis for doing so. In this case I find that the clause in question is not broad enough to allow for reimbursement of this claimed set-off item. Order [ 95 ] The Defendant is holding a damage deposit of $23,540. It has claimed a set-off of $17.373.24, but it is not my understanding that the balance has been repaid to the Claimant.

If I am wrong in this understanding, then the order now being made should be adjusted accordingly. [ 96 ] Of the amount of the set-off claimed by the Defendant, only $6,169.74 of this has been allowed. Accordingly, the Claimant is entitled to judgement for the sum of $17,370.26, along with interest as calculated under the Court Order Interest Act . [ 97 ] The Claimant is also entitled to costs as allowed under

section 19 of the Small Claims Act and Rule 20(2) of the Small Claims Rules , for its filing fees ($163) and its service fees ($80). This case presented a number of triable issues and accordingly it is not an appropriate case for an order under Rule 20(5). Dated at the City of Abbotsford, in the Province of British Columbia, this 22 nd day of June, 2017. _________________________________

The Honourable Judge K. D. Skilnick