JJN Discount Appliances Inc. v. Archibald, 2022 NSSM 9

IN THE SMALL CLAIMS COURT Of NOVA SCOTIA Citation: JJN Discount Appliances Inc. v. Archibald , 2022 NSSM 9 Date : 20220127 Claim : No. SCT508635 Registry : Truro Between: JJN Discount Appliances Inc. CLAIMANT and Karen Archibald and 3065455 Nova Scotia Limited DEFENDANTS Adjudicator: Julien S. Matte Heard: January 12-13, 2022 (via teleconference) Appearance: Shane McCracken, Counsel for the Claimant Karen Archibald, self represented, for the Defendants Matte, Adjudicator, [ 1 ] The parties entered into a commercial arrangement with respect to a warehouse property located just outside of Truro.

After a short period into an arrangement that was intended to last three years, the parties found themselves at odds and now ask the Court to sort it out. Facts [ 2 ] The Claimant, JJN Discount Appliances, sells discounted appliances. In and around December 2020, the Claimant was looking for warehouse space to expand its market into the Truro area. Around the same time Karen Archibald as principal of 3065455 Nova Scotia Limited (“Defendant”) advertised the rental of the subject warehouse property (“Property”) on a popular online marketplace.

As a result the parties began communicating through text to arrange a site visit. The full record of the parties’ text communications was provided to the Court by consent. [ 3 ] At the time, the Defendants had entered into a purchase and sale agreement with the then Property owner. The sale eventually closed on May 9, 2021. The initial closing date was the subject of some debate between the parties. In the end, the Court accepts the Defendant’s estimate of the end of last February as the initial closing date.

[ 4 ] On January 10, 2021, the parties and their principals met at the Property along with the Defendant’s daughter and the Property’s then owner. By all accounts the Property owner was introduced to the Claimant’s principals but otherwise did not take

part in the meeting between the parties. The parties’ recollection diverges on whether the Defendant disclosed that she was in the process of purchasing the Property at the initial meeting. [ 5 ] The parties discussed the essential terms of a lease during the meeting and over text. By January 15, 2021, after waiting for a draft lease from the Defendant, the Claimant took the initiative of forwarding a precedent lease found online for consideration by the Defendant.

The Defendant suggested a couple of changes and the parties agreed to the lease including its term found at clause 7: The term of the Lease commences at 12:00 noon on March 1, 2021 and ends at 12:00 noon on February 28, 2024.

The tenant will be provided access to the building so that work can commence February 1, 2021. [ 6 ] A plain reading of this clause in the context of clause 10 titled “Rent”, leads the Court to conclude that the use of the building and associated lease payment was to commence on March 1, 2021 but the Claimant were to be given access to the Property from February 1 to March 1 to set up their business without having to pay rent.

However, clauses 9 and 32 appear to contradict this plain reading. [ 7 ] Clause 9 reads: Notwithstanding that the term of this Lease commences on February 1, 2021, the Tenant is entitled to possession of the Premises at 12:00 noon on February 1, 2021. Clause 32 notes: 45 day fixturing period . [ 8 ] The underlined reference to February 1, 2021 can only be interpreted as a typo in the context of the clause and given the clear words describing the term of the lease noted at clause 7.

Further the “45 day fixturing period” corresponds to the period of February 1 to March 15 and contradicts the express clause setting out the Term of the lease. Given that clause 32, by definition requires the reader to use clause 7 to set out the start point of the fixturing period, the 45 days expressly contradicts the 30 days set out in clause 7. [ 9 ] Given that the term of the lease is an essential element of any lease and was confirmed by the parties at the hearing, the Court finds that the parties intended a 30 day fixturing period as noted in clause 7.

However, because of the events that follow, little turns on the Court’s finding. [ 10 ] As early as January 21, 2021 the Claimant asked the Defendants if they were able to unload some of their inventory in the space. The text thread makes it clear that the Defendant obtained permission from the then owner before agreeing. The Claimant’s principals both confirmed that by this time, they understood that the Defendant did not own the building but was in the process of acquiring it.

Further, the evidence is quite clear that the then owner of the building was aware at all times of the proposed Lease with the Claimant. [ 11 ] On January 27, 2021 the parties signed the Lease and the Claimant moved in a truckload of inventory. While unloading the inventory the Claimant discovered that the floor would have to be lowered and asked the Defendant who replied: "I don't see why not but will have to wait til I own it" To which the Claimant said: "No problem Karen we'll hang tight. Thanks for making the space available on short notice .

" [ 12 ] The status of the Property’s ownership and representation thereof may have been the thread that helped unravel the

parties' arrangement but is not determinative of the issue before the Court. It is clear from the evidence that the Defendant had the authority from the then owner to negotiate a lease with the Claimant with an original anticipated closing date on the sale of the Property in late February 2021.

Had the closing gone as scheduled, the fixturing period on the lease would have expired and the Claimant would have opened their discount appliance store just as the Property transferred to the Defendants. [ 13 ] Instead two events seem to precipitate the confusion that led to this proceeding. [ 14 ] On February 11, 2021 the Claimant asked if they could open their store early. In response, the Defendant texted back that insurance would need to be confirmed before the store could open and the front door installed before customers could come in.

The text also indicates that once the store opened, the Claimant would have to pay lease payments to the then owner. The next day on February 12, the Defendant confirmed that the door would be installed that day but that a wall still had to go up to separate the spaces and noted that “you will probably ready to go once done”. [ 15 ] Around the same time, the Municipality informed the Defendant that there would be delays in the approval of a needed subdivision application due to Covid.

As a result, the closing of the purchase and sale of the Property was delayed, as it turns out until May 9, 2021. [ 16 ] On February 13, 2021, the Claimant opened their store. At the time the separating wall was not up and the owner had not been provided with proof of insurance from the Claimant. Soon after, over a series of texts, the Defendant asked the Claimant to pay rent to the then building owner.

As a result of the interactions, the Defendant asked for a meeting with the Claimant. [ 17 ] On March 1, 2021 the parties met to discuss issues surrounding the early opening, the payment of rent to the then owner and the lease. The Defendant was unhappy about the way the Claimant had opened their store before the construction was finished and proof of insurance had been provided. The Defendant felt that the actions of the Claimant were putting the then owner at risk.

The meeting did not go well. [ 18 ] According to the Claimant, the Defendant told them that they had to leave the space and pay the invoice provided for Feb 13 to March 12 to the then owner.

On the same day, the Defendant contacted its lawyer who sent the Defendant an email indicating that the Claimant considered the lease valid and in force and would provide the rent payment upon receipt of information of her ownership of the Property. [ 19 ] ln response, the Defendant sent the Claimant’s lawyer an email explaining that the Claimant was in breach of a verbal agreement with the then owner because the Claimant had failed to pay the rent and was accordingly asked to leave and then notes: Should rent be paid immediately for the period February 13 - March 12, your client will be given the time to sell and or move inventory to another location.

An additional month to sell or move inventory will be granted if necessary if your client agrees to pay Carson rent for the period March 13 - April 12. and finally: Regarding the tenancy between your client and 3065445 NS Ltd., I will be forwarding this letter and the lease to my lawyer..... [ 20 ] On March 3, 2021, the Defendant sent the Claimant’s lawyer a detailed email setting out the salient facts of the dispute between the parties.

After describing the issue of rent payment, the Defendant suggests the following: I suggest that JJN pay rent of $837.50 plus hst to Carson (to Karen as she paid it) as of March 1 only to settle the matter (this is no admission of a position) on a week to week basis and not waste time and energy on 15 days of rent. The closing date shall happen soon. [ 21 ] The parties agree that moving forward until, as it turned out, May 9, 2021, the Claimant paid the then owner rent at the same rate as the lease rental rate on a week to week basis. [ 22 ] At the end of the March 3 email, the Claimant writes:

"In the meanwhile JJN appliances and 3065445 NS Ltd. can proceed to litigation on whether or not the lease is valid and not involve Carson." [the then owner] [ 23 ] On March 4, 2021 the Defendant texted the Claimant the following with no answer: "Joel as the validity of the lease is in question please DO NOT expend money on leaseholds." [ 24 ] The Claimant were in contact with the then owner to provide rent.

On March 22 the then owner wrote in part: "I hope to have the building sold to Karen by May 1 at which time your rental with me would end." [ 25 ] The Defendant’s primary concerns in early March was ensuring that the then owner was paid for rent and finding out if the lease was valid. However, her position that the Claimant should leave, presumably in the interim, would appear at odds with a position that they might stay if the lease was in fact valid.

Either the parties had an agreement or the Claimant only had permission to be in the building until the sale closed. [ 26 ] Between March 9 and April 22, 2021 there was no communication between the parties until the Defendant advised, “Joel my lawyer says the lease is valid, we are closing may 3”. [ 27 ] To which the Claimant responded: "Ok Karen, do we need to do anything else here or just continue with the rent payments." [ 28 ] The brief exchange forms the totality of the parties’ conversation with respect to the status of the Lease until early May when the Defendant asked the Claimant if they thought the lease was valid.

She received no answer. [ 29 ] On May 10, 2021 the first day after the sale of the Property closed, the Defendant texts indicating that she was now the owner of the building, the Claimant would have to pay rent if they want access and : "Please confirm that you and nick confirm that the lease is valid and enforceable and that it begins on May 10 2021 and that rent is payable every month thereafter on the 10th day of every month" [ 30 ] For the first time since April 22 message of “Ok Karen, do we need to do anything else here or just continue with the rent payments.”, the Claimant answered: "Based on the agreement we had with Carson we were told we had until May 10 to remove our items." [ 31 ] An exchange followed on May 13, 2021 with the Defendant asserting that the lease was valid and the Claimant requesting the chance to remove the inventory that remained. [ 32 ] On May 10, 2021 the Claimant was prevented from retrieving the remaining inventory.

The Defendant admits detaining the inventory and selling four of the items. Analysis [ 33 ] The Claimant took the position that the Defendant had misled it into believing the Defendant was the owner of the Property prior to the Agreement being signed. Based those allegations, the Claimant urged the Court to make negative credibility findings against the Defendant’s principal and ultimately find that Agreement should be rescinded. While it is unclear if the ownership was disclosed at the initial meeting and the parties’ text communication were at times ambiguous, there is no evidence of any deception.

Both of the Claimant’s principals testified that they knew the Defendant was in the process of purchasing the Property prior to signing the Lease. The Court finds no basis to rescind the Lease based on the Defendant’s conduct. Rather, the parties were each focused on

their own ends. [ 34 ] On the one hand the Claimant wanted to rent a warehouse and unload inventory as soon as possible to start selling it off. As a no frills operation, the Claimant only needed minor plumbing to set up a washing station to clean appliances before opening their store and therefore it was not in its interest to delay the opening. On the other hand, the Defendants were focused on preparing the building for the two businesses that would occupy it and ultimately allow the Defendants to be successful landlords.

This required the installation of a dividing wall between the spaces and a new public entrance.

With each focused on completing tasks to ensure their own business success, communication between the parties suffered. [ 35 ] The Claimant takes the further position that the Defendant repudiated the lease when she advised the Claimant at the meeting of March 1 as confirmed by her email to the Claimant’s counsel also of March 1, 2021 that: “Accordingly, your client was asked to vacate the premises immediately or pay rent before the end of the day as invoiced.” The reference to rent was for the interim period before the Property transferred to the Claimant, for rent paid to the then owner. [ 36 ] The Claimant, through counsel advised the Defendant after the March 1 meeting that the Claimant considered the lease to be valid.

As of March 3, the Defendant also indicated to the Claimant that she was taking steps to determine if the lease was valid, a clear indication that the Defendant may in fact agree with the Claimant’s counsel. The Defendant’s position crystallized on April 22 when she confirmed to the Claimant that the lease was valid. [ 37 ] The Court recognizes that the Defendant’s request for the Claimant to leave with the suggestion that the parties “can proceed to litigation on whether or not the lease is valid” was not practical given the reality of moving inventory in and out.

However any perceived ambiguity should have given rise to a need for clarification when the Claimant received the April 22 text, “Joel my lawyer says the lease is valid, we are closing may 3”. [ 38 ] Instead of requesting a meeting, the Claimant answered “Ok Karen, do we need to do anything else here or just continue with rent payments.” When asked, at the hearing, what was meant by the text response, the Claimant’s principal advised that he was just trying keep things smooth and did not want to create conflict. [ 39 ] It appears that the Claimant changed its mind about remaining on the Property at some point after March 1, 2021 but neglected to tell the Defendant to avoid confrontation.

The Claimant now asks the Court to find that the Defendant, by her words and her actions, repudiated the lease. However, from March 3 through to May 10 2021, the Defendant’s position did not change. She was seeking legal advice on the validity of the lease and once obtained communicated her position to the Claimant. While the Defendant’s original position from March l suggesting the Claimant would be given time to sell off inventory as long as they pay rent, has to be interpreted in light of the circumstances, namely the informal interim rental arrangement with the then owner.

The Defendant wanted to ensure he was paid regardless. [ 40 ] There is little evidence of repudiation. In fact by April 22, 2021 both parties had expressed the view that the Lease was valid, the Claimant on March 1, 2021 through counsel and the Defendant on April 22, 2021 after consulting counsel. The parties agreed that the Lease was valid, valid from the standpoint of the Defendant’s ownership at the time it was signed. Despite this apparent agreement, there was no effort to

schedule a meeting and ensure the parties were prepared to move forward. [ 41 ] While the event that changed the start date of the Lease, namely the delayed subdivision approval, does not rise to the level of frustrating the lease as the disruption did not cause permanent injury to the agreement, it did cause confusion which should have been addressed by the parties soon after April 22, 2021. [ 42 ] Instead, both parties proceeded under their own assumptions.

The Claimants appearing to rely on the Defendant’s March l, 2021 email despite their own counsel's opinion that the lease was valid and the March 3, 2021 email indicating the Defendant was seeking a legal opinion. In response to the Defendant’s acceptance that the lease was valid in the April 22, 2021 text, the Claimant’s response of “ do we need to do anything else here or just continue with the rent payments ”, is ambiguous at best and could easily be interpreted as accepting the Lease.

Given that the Claimant testified that they had been busy moving their inventory out since March 2021 it appears that the response was intentionally ambiguous as the Claimant had already decided they would not be staying after the Property changed ownership. [ 43 ] On the other hand, the Defendant took until April 22, 2021 just one week before the initial sale closing date to

confirm her intentions with the Claimant all the while ignoring evidence that the Claimants were moving their inventory out of the Property. Given so much at stake, the lack of follow through with a phone call or the demand for an immediate meeting seemed imprudent. Findings [ 44 ] The Court finds that the parties and the then owner of the Property were all aware of the ownership status when the Lease was signed on January 27, 2021. The Defendant had the authority to enter into the Lease with a lease term that was intended to start when the sale of the property was anticipated to close on or before March 1, 2021.

By mid January the Claimant had already moved their inventory prior to signing the Lease and by February 11, 2021 sought permission to open their store earlier than the March 1, 2021 Lease start. [ 45 ] At this time, since the Defendant did not own the Property, she arranged to have the then owner paid with one month's rent to account for the pre closing tenant occupation of the Property. Due to a delay from the Municipality, the closing was put off to an unknown future date.

As a result the Claimant entered into a week to week arrangement directly with the then owner. [ 46 ] By March 1, 2021 the parties met to address a number of issues including that the fact that the Claimant had not paid the then owner for the previous two weeks rent. On that basis, the Defendant declared that the Claimant had to leave. However, by day's end, emails with the Claimant’s counsel were exchanged and taken in context with a March 3, 2021 email made the parties' positions clear.

The Claimant was of the view that the lease was valid while the Defendant wanted to consult with counsel before confirming. [ 47 ] Therefore as of March 1, 2021 the Claimant’s position was that it would continue to rent the Property on a week by week basis from the then owner until the sale of the Property closed at which time the Lease would take effect. This position was taken after the initial meeting but before the March l email from the Defendant in response to the Claimant’s counsel.

No further response was provided despite the Defendant’s March 1, 2021 email. [ 48 ] The Defendant’s position on March 3, 2021 was that she did not know if the lease was valid and wanted to find out. As of April 22, 2021 the Defendant communicated that she had been advised by her counsel that the Lease was valid. At this point, the Defendant’s position aligned with the Claimant’s position of March 1, 2021 and the parties should have been able to move forward.

In fact the Claimant’s response seems to confirm this: "Ok Karen, do we need to do anything else here or just continue with the rent payments" [ 49 ] However, the Claimant’s principals testified that after March 1, 2021 they were under the impression that the Defendant was requiring them to leave and therefore not willing to proceed with the Lease.

Further, that the above statement was not an endorsement of continuing with the Lease but rather an attempt at minimizing conflict as the date of their departure neared. [ 50 ] The Court does not find the Claimant’s explanation credible given its own counsel's position that the Lease was valid and that the Claimant wished to move forward. At no time after March 3, 2021 did the Defendant express an intention to repudiate the lease. The initial requests asking for the Claimants to leave were made on the basis that the Claimants had failed to pay the then owner for rent from mid February to March 1 2021.

Once clarified, the only issue remaining between the parties was whether the Lease was valid having regards to the Defendant’s future rather than present ownership. [ 51 ] The Court finds that it was not until May 10 and May 13, 2021 that it became clear that the Claimant had no intention of remaining in the Property for the Lease term ending in February 2024. While the Lease could have been amended to reflect the new start date or a new term entirely, the lease could continue without it.

The late start date due to the delayed property closing as a result of the Municipality does not rise to the level of frustration of the contract. [ 52 ] The Court finds that the Claimant repudiated the lease when it failed to pay the stipulated rent on or about May 10, 2021 and is liable for damages. [ 53 ] The Defendant testified that she prevented the Claimant from removing the rest of its inventory in distress for rent and eventually sold four of the appliances. A list of all inventory detained is attached as

Schedule A.

[ 54 ] The common law as codified under the Tenancies and Distress for Rent Act gives the right to distrain for rent to a landlord when rent is in arrears. On May 10, 2021, rent became due for the month of May 2021. The Court finds that rent was not in arrears at the time that the Defendant refused to allow the Claimant to retrieve their inventory nor was evidence tendered to show that the provisions of the Act were followed when the Claimant’s appliances were sold. [ 55 ] The Court finds that the Defendant is liable for damages in detinue and conversion.

Damages [ 56 ] The Claimant provided very little evidence on the value the inventory pointing to a document which listed the items at retail prices. The Defendant tendered an exhibit showing that examples of those prices are prices charged by major retailers not by discount stores. The Defendant explained the difference between retail and discount stores. Despite Counsel's objection, the Court accepts that the Defendant could generally testify as to the difference between discount and retail.

The Defendant suggested that the true value to the seller of a discount store is 25% of retail based on a 50% value minus the retailer’s costs. [ 57 ] A document presented showed the items on the Claimant’s website listed at retail prices crossed out with figures at half the price. Counsel suggested that these could be sale prices but no evidence was provided by the Claimant. The small appliance prices seem to match the retail amounts. [ 58 ] The Court accepts that retail pricing is not appropriate to value the inventory of a discount appliance store.

The Court also finds that valuing the inventory's value at 25% of the retail due to retailer’s overhead is not appropriate for the purpose of assessing damages. Absent any additional evidence, the Court values the items at 75% of retail to reflect the nature of Claimant’s business as a discount appliance store and the evidence presented. The retail value of the items was accepted by the parties to be $31,404.66. Applying the rate of 75% to the retail value of the inventory, the Court finds that the damages for the Defendant’s wrongful detention and conversion of the Claimant’s inventory is $23,553.50.

This is roughly the same amount as the prices taken from screenshots of the Claimant’s website. Counterclaim [ 59 ] As noted above, the Court finds that the Claimant was in breach of the Lease when it failed to pay the rent due. The Defendant testified that she had contacted a number of agencies to list the Property for rent but could not secure a new tenant until now. The Defendant was optimistic that she would have a tenant by the end of January 2022.

The Defendant claims the maximum under the Court’s jurisdiction of $25,000.00 for rent not paid from May 2021 to the date of the hearing, a figure that nears $30,000.00. [ 60 ] The Claimant argued that if damages were awarded to the Defendant, she had not provided any documents to prove her efforts at mitigation of her damages and damages should be denied or reduced. However, where a lease is repudiated by a tenant, the landlord has no duty to mitigate. If the landlord does mitigate or the tenant sublets the space, those efforts will be accounted for in calculating any loss. (See AFG Glass Centre v.

Roofing Connection, 2010 NSSC 108 at paras. 29-32 ). If the Defendant had a duty to mitigate, the Court finds that it has met it here. [ 61 ] The Court finds that the Defendant is entitled to $25,000.00 in damages for unpaid rent under the Lease.

Summary [ 62 ] The Claimant has requested that damages be awarded in lieu of the return of the inventory and therefore given the findings above, the Court orders the Claimant to pay the Defendant the sum of $1,446.50, being the difference between damages awarded to each party with title for the inventory listed at

Schedule A transferred to the Defendant. [ 63 ] As success was divided, the parties shall bear their own costs and no pre-judgment interest is awarded.

Julien S. Matte, Adjudicator

Schedule “A” Product RF28R7201SR/ AA RF23R6201SR/ AA RF27T5202SR/AA RF27T5201SR/ AA RF23R6201SG/ AA RF18HFENDBSRIAA RF22M9581SG/AA NQ70M7770DG FFTR1821TS Whirlpool 30" black fridge Westinghouse 30' fridge Coffee maker Black & Decker

(88) Toaster oven Black & Decker

(11) Pressure Cooker Black & Decker

(7) Kettle Black & Decker

(12) Skillet Black & Decker

(11) Panini Grill

(5) Whisk Black & Decker

(10) Blender Black & Decker (9) *numbers in brackets is quantity of product. **Highlighted items have already been sold