Kjargaard Heating & Cooling Ltd. Plaintiff Defendant by Counterclaim - v. -, 2015 SKPC 164

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2015 SKPC 164 Date: November 25, 2015 File: SC#341 of 2014 Location: Saskatoon _____________________________________________________________________________ Between: Kjargaard Heating & Cooling Ltd. Plaintiff Defendant by Counterclaim - and - Sneha Chakraborty Defendant Plaintiff by Counterclaim Brad Kjargaard For the Plaintiff Heather Knogler For the Defendant _____________________________________________________________________________ JUDGMENT V. H. MEEKMA , J _____________________________________________________________________________ I Introduction

[ 1 ] The plaintiff landlord sues for rent for the balance of a lease remaining after the defendant vacated. The defendant counterclaims for damages for breach of quiet enjoyment and constructive eviction, including aggravated and punitive damages. The basis for the counterclaim was the plaintiff’s agent posting a sign reading “For Sale” and “Business Relocating” on the premises shortly after the defendant opened her business, as well as disruption of her business and statements made by the agent to the defendant and her husband.

II Evidence [ 2 ] The parties entered into a lease on December 5, 2013 which stipulated “for a term beginning on February 1, 2014 and ending date not yet specified but for up to one year upon the condition that tenant performs as provided in the lease”. [ 3 ] There was no specific covenant for quiet enjoyment. With respect to signs and termination, the lease provides: 13. SIGNS. Landlord, during the last 90 (ninety) days of this lease, shall have the right to maintain on the premises either or both “For Rent” or “For Sale” sign.

Tenant will permit prospective tenants or buyers to enter and examine the premises. 14. NOTICE OF TERMINATION. Landlord agrees to provide tenant with 90 (ninety) days notice to terminate said lease in the event the landlord decides to proceed with plans to develop the property. [ 4 ] The premises was the main floor of a commercial building located at 312 Avenue B South, in Saskatoon, Saskatchewan.

The defendant was given early possession in order to clean and renovate the premises to be used as a store and dance studio where the defendant could sell specialty import items such as clothing, jewelry and home decor, primarily to the immigrant community and also teach traditional Indian dance. [ 5 ] Working mostly evenings over two months, the defendant and her husband, with the help of friends in the construction trade, removed walls, drywalled, patched, painted, and installed lighting and other fixtures, including a slate display wall and shelving.

Financial outlay for all of the materials plus professional cleaning of the floors totalled $1,594.29. [ 6 ] The defendant and her husband are immigrants themselves. While her husband works as a professional engineer, the defendant decided to start this business catering to the immigrant community. They were concerned about the expense and risk of starting up a new business so the relatively low rent of $750.00 per month for the first six months and $800.00 thereafter was appealing. [ 7 ] The business opened in February, 2015.

In March, 2015, Brad Kjargaard told them that he wished to sell the building and asked if they wanted to purchase it.

The defendant’s husband testified that he tried but was unable to obtain financing. [ 8 ] On April 25, 2014, the plaintiff listed the building for sale and the plaintiff’s real estate agent, Todd Butler, went to the defendant’s store where he spoke to the defendant and her husband and posted a “for sale” sign on the front of the building. [ 9 ] The witnesses gave different versions of what took place at that meeting between Todd Butler and the defendants. [ 10 ] Brad Kjargaard, principal of the plaintiff company, testified that he was not there but had instructed his realtor, Todd Butler,

to discuss the sign with the tenants and “let them have a say”. Because of the wording of paragraph 13 in the lease he said he had asked Butler to get permission from the tenant to put up the sign. He spoke to Butler about the lease and Butler told him “when I do this, I have a lawyer do it”. [ 11 ] With respect to showing the building, Kjargaard stated in his evidence “I have no say over when they are willing to show it.

Between them and him, they had discussed things”. [ 12 ] Contrary to Kjargaard’s evidence, his witness Todd Butler testified that he and Kjargaard went together to discuss the lease and signage on the building with the tenants. He said they all discussed the lease together and that it could only be terminated if the owner was to re-develop the site. Butler stated “on the first meeting when Brad was there we discussed signage”. [ 13 ] Under cross-examination, Butler stated that Brad Kjargaard was at the building, and showed him the building but he could not recall if Brad was present during the conversation.

He also stated that he did not recall the exact words but they had discussed the basic sign and overlay and he gave them examples of overlay. [ 14 ] According to Butler, the “Business Relocating” portion of the sign only benefits the tenant and is used when the tenant is not renewing the lease. He said the signage was installed in accordance with the tenant’s wishes. Butler acknowledged that the rental being charged to the tenant was low. [ 15 ] The defendant, Sneha Chakraborty, testified that they were shocked to learn that the building was for sale shortly after they opened their business.

Todd Butler came to the building by himself to speak to them about the property being listed. He told them that the rent they were paying was low, not good commercial value and their lease was “not strong”. A new owner might ask them to move out the next day, and they would have no option. He told them that the building could just be demolished the next day and they may, or may not, be given compensation. He said “if you are asked to leave you just have to leave”. He told them that the property belonged to Kjargaard and they had no say in the sign. Butler said “we represent Brad and we are going to put the sign”.

It was never mentioned that they had any say about it. There was no discussion about the sign, they were just “informed”. [ 16 ] Butler also informed them that she would have to provide the security code to show the building, and would have to let him in during business hours, that they had to agree to let people in to see the premises as needed.

The defendant said that she and her husband thought may be if they were paying low rent, the plaintiff was losing money. [ 17 ] According to Chakraborty, it was four or five days later that Butler came back and said “for your own good, let me put a ‘Business Relocating’ sign up for you”. She testified “I had no option but to agree. We do not know the rules of this country”. A sticker stating “business relocating” in fluorescent orange was then posted across the top of the “For Sale” sign.

They were never given any option to refuse or disagree, or have any say in the matter. [ 18 ] According to Chakraborty, she and her husband understood that they had to move out. They did not want to be a problem, hoping that if they cooperated they would be given 90 days notice in the event of demolition by the new owner. [ 19 ] The defendant’s husband, Rahul Mukherjee, corroborated the defendant’s version of the meeting with Butler. One afternoon while Mukherjee was at the store, Butler walked in and stated that he was representing Brad Kjargaard and was there to put a sale sign on the building.

Butler said “that’s a normal practice”. They were given no choice about the sign. Butler said “this will be done and that’s it”. Mukherjee added “he didn’t talk to me nice”. [ 20 ] According to Mukherjee, the next day when he and the defendant came to the store a bright yellow sign reading “Business Relocating” was posted on the building. The “For Sale” sign was larger than their business sign. [ 21 ] Butler had told them on the first day that they did not have a proper lease, that they were paying less than a normal rate, and there was no guarantee that the new owner would keep them on as tenants.

They asked what would happen when it sold and Butler said

“the new owners may keep you, they may give you compensation, or they may want to demolish it”. [ 22 ] The tenants felt that they were being asked indirectly to leave. Mukherjee was very concerned about the imported goods that were arriving for their store which required the civic address on the business licence.

He was afraid of the goods being held at the airport and having to pay storage fees. [ 23 ] Jeffrey Fedyk, the defendant’s agent who assisted them in finding a property to move to, testified that when they called him they told him their building was for sale and that they were being evicted. [ 24 ] Although the evidence of the defendant and her husband differed with respect to how many days elapsed before the “Business Relocating” sticker was added to the “For Sale” sign, I accept their evidence as to the conversation and conduct of the agent Butler and I did not believe Butler’s evidence.

Butler did not give any details of the conversation with the defendant and her husband about the sign. At first, he was adamant that Kjargaard was present during that conversation, but in cross-examination said he did not recall if Kjargaard was present or not, and could not recall the exact words spoken.

I also strongly doubt that Kjargaard instructed Butler to respect the defendant’s wishes with respect to the sign. [ 25 ] Although Kjargaard used the upstairs of the rented premises and came and went daily throughout the time the property was listed for sale, he never went to speak to the defendant or her husband. Mukherjee testified that he had tried to call Kjargaard and received a phone call from him one day while he was on a mine site. Kjargaard said that he had heard about their problems.

Mukherjee told Kjargaard that he was out of town and had poor reception so asked him to go and speak to the defendant at the store, but Kjargaard never did. After that, Butler came into the store and told them that he was representing Kjargaard and they had to talk to him.

Mukherjee complained to Butler about the sign and what people were saying to them about it but Butler told them “it’s going to be there”. [ 26 ] Although the plaintiff started this action, suing for the balance of the year’s rent, and alleges that he was not aware the defendant was moving until he received their notice, he was attending the building daily throughout the time that the “Business Relocating” sign in bright orange lettering was posted on his building.

I am satisfied that Kjargaard and Butler had a discussion about the low rent and the wording of the lease (indeed, Kjargaard began his final summation with the opening statement “I gave them below market rate”). It was in his best interest that any prospective buyer not be deterred by a low rental tenancy agreement. I believe that he left it up to Butler to deal with the tenant to ensure a smooth and profitable sale with no interference, including the posting of a sign, and showing the premises, both contrary to the provisions of the lease agreement.

Kjargaard avoided dealing with the tenants himself. [ 27 ] The property was sold by offer dated September 22, 2014 and the title transferred on October 15, 2014. There was no evidence as to what occurred with the building after that. The plaintiff received 30 days notice to vacate from the defendant on May 29, 2014, to be effective June 30, 2014. The plaintiff immediately asserted a claim for rent to the end of the year, obviously not prepared to forego rent until he had sold the building.

Had he not breached the lease himself, he would only have had a valid claim to the date he sold the property, but he threatened to sue, and did sue, for a further seven months’ rent plus interest. The plaintiff also alleges that the defendant did not vacate on June 30, 2014, but there was no evidence to support that.

Kjargaard also acknowledged that he took no steps to mitigate his loss after the defendant vacated. [ 28 ] The defendant counterclaimed for damages based on breach of the implied covenant for quiet enjoyment and constructive eviction. [ 29 ] The signage itself, especially the “Business Relocating” portion caused the defendant a great deal of stress and aggravation. She and her husband described how, as a woman in the Indian immigrant community, there was a great deal of doubt as to her chances of success in starting her own business.

She said that some people in her culture think women can do nothing, and would think they had to close because a woman is running the business. The sign saying that they were relocating suggested that they were not doing well. Her customers, people she spoke to at the Farmer’s Market, even at Temple, asked why they were moving so soon when they had just opened, was the business not doing well, were they not paying the rent? Mukherjee testified that people came and asked if they were having a sale, and asked when will be their last day? He said his wife would get taunts.

Someone suggested that she should take a job at Superstore.

[30] The showings of the premises also disrupted their business. Butler would come in with prospective buyers during businesshours. They would touch the merchandise, walk in on the dance lessons, and talk about demolishing the building in front of customers. [31] The new premises the defendant move into is on 2nd Avenue and although the rent is much higher ($3,000.00/month), it wasready for occupancy and no improvements were necessary. Sales increased in the new location, so there is no evidence of financial lossincurred after they moved.

III Analysis [32] Canadian Law of Landlord and Tenant, Williams and Rhodes, 6th ed., defines and discusses quiet enjoyment with reference tothe common law: 9:1 The covenant for quiet enjoyment is an assurance against the consequences of a defective title including any disturbance foundedthereon, and against any substantial interference, by the covenantor or those claiming under him, with the enjoyment of the premises forall usual purposes. If the covenant is expressed, it displaces any implied covenant. An express covenant may be restricted or absolute.

If there is no express covenant, a restricted covenant for quiet enjoyment will be implied from the mere contract of leasing.

Theprinciple that noone is allowed to derogate from his own grant is applicable to lessors. 9:28.1 The covenant for quiet enjoyment is not broken until something occurs to disrupt the tenant’s enjoyment after the term hascommenced. 9:28.4 The measure of damages is all the loss to which the lessee has been put, naturally arising from the breach: Haack v Martin (SCC), [1927] SCR 413 9:28.5 In Donovon v Lee (1991) 16 RPR (2d) 292 (BCSC), the wrongfully evicted tenant was awarded out-of-pocket expenses whichincluded moving expenses, staff salaries, loss of net earnings and increased rent costs, as well as aggravated damages in the amount of$20,000.00 as compensation for the stress and humiliation and exemplary damages of $5,000.00. 9:28.9 At common law the rent is suspended by a breach of the covenant only if such breach amounts to an eviction in law: Mah Po vMcCarthy (1909) 10 WLR 670, 2 SaskLR 119 (CA). [33] The issue in determining whether the quiet enjoyment covenant is breached is whether the incidents substantially interferewith the tenant’s ordinary and lawful enjoyment of the lease: see 615636 Saskatchewan Ltd v Keith Pierce Insurance Financial Ltd 2001SKQB 510 at para 22. [34] There is an objective element to the test of whether a landlord has breached the covenant i.e. whether a reasonable tenantwould conclude that the activity complained of would significantly interfere with the enjoyment of the lease: 615636 Saskatchewan Ltdv Keith Pierce Insurance, para 25. [35] The general principle is that the lessor is not allowed to derogate from his grant so as to interfere with the lessee’s enjoymentof the premises for all usual purposes: Irvine Recreations Ltd v Gardis, (SKQB), para 14. [36] The placing of the sign, indicating that the defendant was re-locating, as well as the disruptive showing of the premises duringbusiness hours, interfered with the defendant’s enjoyment of her business for the usual purposes.

In my opinion, any reasonable personwould conclude that the actions of the real estate agent would significantly interfere with the defendant’s enjoyment of her lease.

[ 37 ] Not only were the actions of the agent a breach of the implied covenant for quiet enjoyment, they also breached the specific terms of the contract which provided for signage and showing of the premises only during the final three months of the lease.

Clearly, the parties contemplated a one year lease - the landlord is suing for the balance of one year’s rent. [ 38 ] A breach of the covenant of quiet enjoyment constitutes constructive eviction “where the breach is intentional or the probable consequence of intentional conduct, the consequences are foreseeable, the interference has the character of permanence and wrongfulness, and the degree of interference is so substantial or intolerable as to make it reasonable for the tenant to vacate, then the breach will be found to constitute a constructive eviction”: Arangio v Patterson (1993), 38 ACWS (3d)798 (Ont Gen Div) at para 23 . [ 39 ] Where there is a constructive eviction the tenant’s obligation to pay rent is terminated and the tenant is entitled to damages for consequential loss: Arangio, para 24. [ 40 ] In Arangio the Court found the landlord’s actions constituted breach of quiet enjoyment and constructive eviction entitling the defendant to vacate, stop paying rent, and be entitled to consequential and punitive damages (para 26). [ 41 ] I am satisfied that in the case at bar, the actions of the agent Butler constituted constructive eviction.

The posting of the sign together with the disruptive showing of the premises were such a degree of interference that the defendant really had no reasonable choice but to vacate. [ 42 ] Having received very little benefit from the lease considering the interference with her use of the premises and the damage to her goodwill in the community, the defendant is certainly entitled to reimbursement for rental paid from the date the sign was posted until June 30.

Having lost the benefit of the leasehold improvements, she is also entitled to reimbursement for those expenses, which will be limited to the cash outlay as the defendant did not counterclaim for labour. [ 43 ] There remains the issue of exemplary, or punitive, and aggravated damages. [ 44 ] Ten thousand dollars ($10,000.00) in exemplary damages was awarded against the landlord’s agent for unlawful interference with the property rights of the tenant in No 1 Lawn and Garden Care Inc v Weyburn Trailer Court Ltd et al , 2006 SKQB 63 .

In that case, the landlord in a verbal month to month lease gave 18 days’ notice to vacate. The landlord’s agent had attempted to remove the tenant’s equipment from the premises even before the notice was given. The Court found that the tenant was entitled to damages to compensate for losses sustained and “may also be entitled for damages for breach of the implied covenant for quiet possession” (para 9).

The Court awarded damages sustained for business interruption of $5,000.00. [ 45 ] The tenant claimed exemplary damages for the “high-handed, arrogant behaviour of Paul Ehmann” (the agent who had trespassed to move the tenant’s equipment even after warning by police). At para 14, the Court states “exemplary or punitive damages are awarded in situations where the conduct in question offends ordinary standards of morality or decent conduct.

The conduct attracting such awards includes ‘malicious, high-handed, arbitrary, oppressive, deliberate, vicious, brutal, grossly fraudulent, evil, outrageous, callous, disgraceful, wilful, wanton’ (Waddams, The Law of Damages , (3d ed) 491 (To Can Law Book 1996). In his calculation it seems that the value of ordinary standards of morality or decent conduct counted for little.

The purpose of exemplary damages is to add weight to such standards when calculations are made in the future”. [ 46 ] The Court awarded $10,000.00 exemplary damages against the agent for unlawful interference of the property rights of the tenant but did not order such damages against the landlord stating that there was no evidence the principal was instructing the agent’s “relocation” activities. (para 15) [ 47 ] I am satisfied in the case at bar that the plaintiff was complicit in the actions of the agent. He knew that the posting of the “For Sale” sign and the showing was contrary to the lease agreement.

He knew what the sign read. He avoided meeting directly with the defendant and delegated all tasks relating to the sale to his agent. If he did not have knowledge of the exact discussions between them, it was because he did not want to know. He gave full authority to Butler to act on his behalf and he takes the consequences.

[48] Punitive damages are designed to address the purposes of retribution, deterrence and denunciation: Fidler v Sun Life [2006] 2SCR 23, at para 55. Punitive damages are to be resorted to only in exceptional cases and with restraint (para 62). Quoting from Whiten vPilot Insurance 2002 SCC 18 , [2002] 1 SCR 595: Punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment). [49] Butler’s dealings with the defendant were high-handed, arbitrary, oppressive, deliberate and callous, and bordered onfraudulent as cited in the Weyburn Trailer case.

His conduct certainly offends ordinary standards of decent conduct. In my opinion, inthe circumstances of this case, it satisfies the criteria for punitive or exemplary damages. [50] Unlike punitive damages, aggravated damages are purely compensatory in nature.

Aggravated damages focus on the effect ofthe injury on the plaintiff and the cases suggest that for damages to be awarded for mental suffering, it would have been reasonable forthe parties to contemplate such damages at the time of the contract. (See: Fidler v Sun Life, para 55) [51] Both the defendant and her husband testified to the stress and humiliation which the defendant endured as a result of Butler’sactions.

That the posting of such a sign and showing of the premises so early in the lease would have such consequences was within thecontemplation of the parties when the contract was made, hence the provision that a sale sign and showing could only take place duringthe last three months of the lease.

The concern caused by posting a “For Sale” sign on the premises was the very basis on which Butlerjustified adding the words “Business Relocating” to the sign. [52] It was the added sign in fluorescent orange that she was relocating when she had no intention to move which caused thedefendant the most distress, and would be clearly aggravating in the mind of any reasonable person. [53] The defendant has also counterclaimed for unjust enrichment but there is insufficient evidence to support that claim, nor formoving expenses or rent for the new premises.

IV Conclusion [54] The plaintiff’s claim for rent is dismissed. The defendant, plaintiff by counterclaim, will have judgment against the plaintiff,defendant by counterclaim, for the following:

a) reimbursement for rent paid from April 22, 2014 to June 30, 2014 of $1,725.00;

b) expenses for repairs and renovations to the premises of $1,594.29;

c) punitive damages of $1,500.00;

d) aggravated damages of $1,000.00. Total: $5,819.29. Plus interest under The Pre-Judgment Interest Act on $3,319.29 (

a) and b)) from June 30, 2014.

__________________________ V.H. Meekma, J