101163380 Saskatchewan Ltd. - v. -, 2012 SKPC 85

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2012 SKPC 085 Date: May 28, 2012 File: 12/11 Location: Wynyard _____________________________________________________________________________ Between: 101163380 Saskatchewan Ltd. - and - Patricia Melsted-Chabot Naveed Anwar For the Plaintiff Patricia Melsted-Chabot For the Defendant _____________________________________________________________________________ JUDGMENT J.A.

PLEMEL , J _____________________________________________________________________________ INTRODUCTION [ 1 ] In August 2010, Mustafa Guner entered into a verbal agreement to rent commercial space in Wynyard, Saskatchewan from the defendant with the intention of opening a restaurant. Mr. Guner is the plaintiff company’s sole director. Over the next three months, while the premises were being renovated, the relationship between Mr. Guner and Ms. Melsted-Chabot became strained. The restaurant was opened for only a matter of days before it was closed due to irreconcilable differences.

The Statement of Claim states “the plaintiff demands for the leased premises or to be paid for his expenditures of renovating the leased premises”. The defendant, however, states

that it was Mr. Guner who terminated their agreement through his actions and that she owes the plaintiff nothing. THE EVIDENCE [ 2 ] The plaintiff is a company incorporated in Saskatchewan with a registered office in Wynyard, Saskatchewan. According to the Corporate Registry Profile Report the company was incorporated in April 2010. Mustafa Guner and Riza Erylcu became directors of the company on September 1, 2010. Riza Erylcu ceased to be a director on November 16, 2010.

When this action was commenced on June 24, 2011, according to the corporate records, Mustafa Guner was the company’s sole director and held the position of president. He was the only witness for the plaintiff. [ 3 ] The defendant was the only defence witness. She resides in Wynyard and owns the business premises in question. It is part of a building which is divided in two by a firewall. At all material times the defendant operated a laundromat in the larger side of the building. In 2010 she sought to rent out the smaller side, which previously had been a restaurant but which was currently vacant.

She advertised this space for rent. [ 4 ] Mustafa Guner saw the advertisement and came to Wynyard in the first week of August 2010, to look at the property. He met with the defendant and after he looked at the property she gave him the key to it that day. Several days later Riza Erylcu also looked at the property. On or about August 8, 2010, they took possession of the restaurant side with the intention of doing renovations and re- opening it as a restaurant to be operated under the name Mediterranean Kebob House. There was a verbal agreement between Mr.

Guner and the defendant that she would not charge them any rent while they renovated the property for a period of about three months. Unfortunately, there was no agreement in writing at this time. At trial the parties testified as to what each thought they were agreeing to. Their testimony differs greatly. Adding to the problem is that it appears they did not address their minds to issues which they should have and which they now ask the Court to deal with. [ 5 ] The defendant testified that she would not enter into a contractual agreement with a numbered company and that she made this clear from the outset.

However, this action was brought by the plaintiff numbered company and not by Mr. Guner. [ 6 ] The defendant testified that the amount of rent to be paid by the renter which she verbally agreed to was $2,000.00 per month. She had never been charged for utilities on this property but testified that she made it clear that if she was ever billed for them in the future, the party renting the restaurant would have to pay their share of the utilities. Mr. Guner testified that the oral agreement was to pay $2,000.00 per month and this included utilities.

The plaintiff has not satisfied me that the rent of $2,000.00 included utilities. [ 7 ] Mr. Guner, Mr. Erylcu and Ms. Melsted-Chabot met together in a lawyer’s office with the intention of having a formal lease prepared. It is unclear how soon they did this after the proposed renters took possession of the property. Mr. Guner and Mr. Erylcu signed the lease on October 29, 2010. This was almost three months after the first meeting with the defendant and just days before the opening of the restaurant.

They signed both on their own behalf naming them both as tenants and also on the company’s behalf naming it as a tenant. The defendant attended the lawyer’s office after that to sign but, on reading the written terms, declined to do so. She had two main concerns. The primary concern was that clause 6(

d) stated she was responsible for payment of all utilities. She testified that she had not agreed to that and nor would she ever. Another concern was that the plaintiff numbered company was listed as one of the tenants and she did not want to lease to a numbered company. The draft lease has been filed as an exhibit. Clause 7(

d) states that in the event the plaintiff does not pay rent or other liabilities, Mr. Guner and Mr. Erylcu personally “shall jointly and severally be responsible and liable for the same”. [ 8 ] After she first met Mr. Guner but before the restaurant opened for business and well before attending the lawyer’s office on or about October 29, the defendant received a bill for utilities. Around the end of September or the beginning of October, she contacted Mr. Guner by phone to tell him of this and to let him know he would have to begin paying his share.

She testified that he screamed at her and told her he would sue her for half a million dollars as they were in the middle of painting the restaurant. He hung up on her. I accept that this conversation took place. She testified that “things went down hill quickly from there”. I will refer to this phone call as “the phone call about utilities”. The parties would have been well advised to stop everything at this point and clarify what the terms of the lease were. Instead they ignored the fact that there was a fundamental disagreement. Mr. Guner continued on with renovations and preparations to open for business.

It is difficult to determine exactly how much work was done and how much expense was incurred before the phone call about utilities and how much took place after.

[ 9 ] The defendant testified that she was away from Wynyard for several weeks after that phone call and when she returned she discovered that they had built a small porch on the front of the building which one would enter before going into the restaurant. She testified, and I accept that this caused her concern. The boiler room containing equipment necessary for the hot water supply to the laundromat and restaurant were in the back of the restaurant and could only be accessed through the restaurant. Though she had a key to the restaurant, she did not have keys to the porch. She discussed this with Mr.

Guner who, she testified, refused to give her a key. I accept her evidence on these points. [ 10 ] The restaurant opened at the end of October or the beginning of November. The defendant was at the opening. Nothing was said about the porch. Around November 6 to November 9, Mr. Guner discovered that there was no hot water to the restaurant so he called the defendant and reported this. She contacted a plumber who attended the next day to fix the problem. Mr. Guner testified that the plumber only made repairs to the defendant’s side of the building but not to his side.

He may have believed that, but that was not the case. The plumber needed access to the boiler room to sort out the problem. The defendant testified that the plumber came to her and advised her that Mr. Guner was not allowing him into the restaurant. She then went over to the business with the plumber and Mr. Guner refused them both access telling her, through the door, that she needed to give him 24 hours notice before she was allowed to enter. She testified that he gave her “the finger”.

I am satisfied that this occurred on or about November 9. [ 11 ] Finding herself unable to operate the laundromat without hot water, the defendant contacted a lawyer who prepared an eviction notice on November 9. She gave this to Mr. Guner the same day. She testified that from November 9 to November 16 she did not open the laundromat for business as she had no hot water. On the night of November 15 or the early morning hours of November 16, the defendant and her husband entered the restaurant by forcing the lock on the porch. They changed the lock to give them access but making it impossible for Mr.

Guner to enter the restaurant. He never again opened the restaurant for business but was given a date on which to remove his property. He testified that when he tried to gain entry on the morning of November 16 either the defendant or her husband gave him “the finger”. [ 12 ] The Statement of Claim states in part: On October 29, 2010, the defendant and plaintiff entered into an agreement of lease and the plaintiff started renovating the leased premises to run his business. The plaintiff spent $55,000.00 to renovate the leased premises.

After completing the renovation and before the plaintiff move ( sic ) in to the leased premises, the defendant broke the lock and entered in the leased premises. The plaintiff demands for the leased premises or to be paid for his expenditures of renovating the leased premises. [ 13 ] At trial the plaintiff filed documents showing the following expenses: Furniture and fixture: $ 8,620.56 Equipment: $ 9,566.44 Repair and Maintenance: $ 5,751.34 Office Expenses: $ 1,526.49 Supplies: $ 1,648.33 Total: $27,113.16 [ 14 ] Documents filed do not include an amount for Mr.

Guner’s own labour although he testified that he personally worked renovating the restaurant. To bring the claim within this Court’s jurisdiction the plaintiff limits its claim to $20,000.00 plus interest and costs of issuance of the claim. [ 15 ] In her Statement of Defence, the defendant outlines her disagreement with the claim. She elaborates on this in her evidence.

I would summarize her defence position as follows: the plaintiff has no claim because she specifically stated she would not do business with a numbered company; the verbal agreement was for $2,000.00 rent a month plus the utility costs incurred in operating the restaurant and Mr. Guner refused to pay her that amount; Mr. Guner prevented her from entering the boiler room, making it impossible

for either of them to operate their businesses. She asks that the plaintiff’s claim therefore be dismissed in its entirety as it was Mr. Guner and not she, who caused their agreement to come to an end. ISSUES [ 16 ] The issues are as follows: 1. Does the plaintiff company, rather than Mr. Guner, have standing to bring this action? 2. If it does, then was there a binding contract between the parties? 3. If there was not a contract, then was there an agreement between them on which the plaintiff may otherwise recover? 4. If the plaintiff is entitled to reimbursement what is the amount? ANALYSIS [ 17 ] Since Mr.

Guner was one of the two directors of the plaintiff company at all material times, and since he was the only director at the time this action was commenced, I see no prejudice to the defendant in having this action commenced by the plaintiff numbered company rather than by Mr. Guner.

As already noted, he and Riza Erylcu signed the draft lease on their own behalf as tenants and on behalf of the plaintiff company as tenant, showing their intent to assume personal responsibility for payment of rent or other liabilities in the event that the plaintiff numbered company did not pay. [ 18 ] The problem is that there never was a signed lease and the agreement between the parties was general in nature. The plaintiff is incorrect when it states in the Statement of Claim that the parties entered into an agreement on October 29, 2010.

The defendant refused to sign that lease and there was no agreement that day. Their agreement took place when they first met in August. It was not reduced to writing at any point. [ 19 ] Dickson J. stated in Soleil Hotel & Suites Ltd. v. Soleil Management Inc., 2009 BCSC 1303 ,

(2009) B.C.J.

No. 1900 (B.C.S.C.) at paragraph 328 : ...If the alleged agreement has not been reduced to writing, the Court must consider what the parties said and did and assess objectively whether, in context, their words and actions establish an intention to be bound... [ 20 ] She stated further at para. 334: In order to determine whether a binding contract was created the Court may consider both the parties’ conduct leading up to and following conclusion of the alleged agreement... [ 21 ] This passage was cited with approval by Acton J. in Bayda v. 626910 Saskatchewan Ltd. , 2011 CarswellSask 127, 2011 SKQB 36 . [ 22 ] The burden is on the plaintiff to prove its case on a balance of probabilities. [ 23 ] The oral agreement Mr.

Guner and the defendant entered into in August was not sufficiently certain in its essential terms to be a binding and enforceable contractual lease. There was no meeting of the minds on essential terms such as whether or not the monthly rent included utilities, whether the tenant would be a numbered company or the terms of access the defendant would have to the restaurant and especially to the boiler room.

[ 24 ] Though there was no enforceable contract the plaintiff is entitled to some restitution for goods and services provided by Mr. Guner. “Where no contract exists between the parties...the courts have allowed a deserving party to recover something on a quantum meruit basis, which is not the same as what might have been recovered if there had been a valid, enforceable contract upon which the successful party could have sued.” ( The Law of Contract , Fridman, 4 th edition, page 12.) [ 25 ] I am satisfied that in August there was an oral agreement that Mr.

Guner or his company would lease the property for an undetermined period of time and that he would be given three months to renovate it. Implied in this agreement is that he would incur reasonable expenses for inside renovations of the space to be taken up by the restaurant itself. The agreement was conditional on what each thought the rent was to be.

After the date of the phone call about utilities at the end of September or beginning of October, I am not satisfied there was any agreement whatsoever. [ 26 ] As I indicated earlier, I am not satisfied that the monthly payment of $2,000.00 was ever intended to cover utilities. If that was not apparent to Mr. Guner before, then it certainly should have been after the phone call about utilities, that there was no meeting of the minds about the utilities. Certainly after that date Mr. Guner knew there was a dispute about the utilities but continued his renovations and incurred expenses in any event.

He should not have. [ 27 ] I will deal first of all with expenses which the plaintiff may have incurred but which I find were never agreed to by the defendant either expressly or by implication. [ 28 ] Mr. Guner made some significant alterations to the premises. I have heard evidence or viewed exhibits indicating that expenses for such alterations were incurred by the plaintiff. These include shingles, exterior painting of the whole building, the building of a small porch leading into the restaurant and the installation of a shower at the back of the restaurant.

Besides there being no express or implied agreement between the parties that the plaintiff could undertake these changes to the premises there are other problems. It is not clear to me that exterior painting and shingling was required. Regarding the shower, Mr. Guner testified that he had the defendant’s permission to install it; the defendant denies this. I am not satisfied that he had her permission to install it. Furthermore, it is not clear to me that the shower, which was not installed by a professional plumber, was installed according to existing health and building codes.

Similarly, it is not clear to me that the porch was built according to building codes or that it meets normal standards such as being wheelchair accessible. The defendant testified that the shower and the porch were not installed according to code. I am not satisfied that the shingles, exterior paint, shower, or porch added value to the property. [ 29 ] The plaintiff led evidence of economic loss suffered as a result of purchasing such things as restaurant food, furniture, equipment and office supplies. After the locks were changed by the defendant she gave Mr.

Guner or his representative access to the restaurant to remove the plaintiff’s belongings. Mr. Guner left the sale and disposal of these items in the hands of a third party who sold them at prices which were substantially lower than the plaintiff’s purchase cost. Some of these items were purchased before the phone call about utilities; some were purchased after. I am not awarding damages for any of these losses. In those cases where the purchases were made after the phone call about utilities, the plaintiff should not have proceeded to make these purchases without the utilities disagreement being settled.

Where the purchases were made before the phone call about utilities, the plaintiff may have been able to reduce its losses substantially by returning items or cancelling agreements to purchase. No evidence was presented by the plaintiff about these possibilities and it is not clear that Mr. Guner canvassed this with his suppliers. [ 30 ] The plaintiff led evidence of economic loss suffered as a result of wages which had to be paid to restaurant staff.

Again, the plaintiff should not have completed his staff hiring commitments unless or until he resolved the disagreement about the payment of utilities. [ 31 ] There is an invoice from Gene’s Electric dated November 12, 2010 for $2,707.00. I am not awarding the plaintiff anything for these expenses for two reasons. First of all, the invoice is dated November 12, 2010 and I have not heard any testimony stating that the work was done prior to the phone call about utilities. The plaintiff should not have undertaken renovations after that date.

Secondly, I have insufficient evidence to establish that this invoice was paid by the plaintiff. Unlike many other invoices on file, this one is not stamped “paid”. [ 32 ] I will now deal with matters for which I find the plaintiff is entitled to recovery.

[ 33 ] The plaintiff is entitled to payment of an invoice dated August 26, showing payment made to Gene’s Electric in the amount of $980.00. It appears to me that this was for the installation of electrical outlets along the firewall which separated the laundromat from the restaurant. The outlets were for drink coolers depicted in some of the photographs. The defendant testified that there should have been no electrical installations along that wall as such installations interfere with the integrity of the firewall itself.

She testified that she believes the installation of electrical outlets on this wall are contrary to fire regulations. Mr. Guner testified that the defendant gave him permission to install these outlets. The defendant denies this. Even if he did not have her express permission I find that these were routine renovations which were impliedly permitted by the verbal agreement between the defendant and Mr. Guner in August. Furthermore, the outlets were installed by a professional electrician who is required to comply with building codes.

This electrical work was conducted before the phone call about the utilities while the general agreement between the parties was still in place. [ 34 ] In examining invoices and considering the testimony I have heard, I am satisfied that the following invoices, found in Exhibit P-2, Tab E, labelled “furniture & fixture (Renovation)” were for renovations to the restaurant space which were impliedly agreed to when the plaintiff was given access to the restaurant space for the purpose of doing renovations.

Although the defendant might not see these renovations as being beneficial to her, the plaintiff did them with her implied consent and incurred expenses in doing so. I find the plaintiff is entitled to reimbursement for them on a quantum meruit basis.

August 31 - Roger Parks (hauling to dump, etc.) $ 100.00 September 7 - Home Hardware (interior paint and miscellaneous) $ 156.67 September 16 - Home Hardware (interior construction material) $ 206.04 August 26 - Home Hardware (interior paint and miscellaneous) $ 265.61 August 19 - Home Hardware (interior construction material) $ 252.37 August 28 - Home Hardware (interior construction material) $ 428.96 August 26 - Gene’s Electric (labour and materials) $ 980.00 September 30 - Home Hardware (bulbs, kitchen faucet, miscellaneous) $ 96.99 September 13 - (8 hours cleaning, dumping junk) $ 160.00 TOTAL: $2,646.64 [ 35 ] Mr.

Guner spent his own time renovating the restaurant doing such things as painting and building shelves. I am satisfied from all the evidence, especially the photographs, that he spent at least 30 hours on these two jobs prior to the phone call about utilities. In the circumstances of this case, given the nature and extent of the work involved, I find $15.00 to be a reasonable hourly rate at which to reimburse him for this. I am therefore crediting the plaintiff with Mr. Guner’s labour for 30 hours at $15.00 per hour for $450.00.

I find the defendant liable for $2,646.64 as shown in the invoices referred to plus $450.00 for Mr. Guner’s labour for a total of $3,096.64. [ 36 ] The plaintiff affixed a sign on the outside of the restaurant with the words “Meditteranean Kebob House”. It also constructed the porch which I have already referred to. Though these additions may add no real value to the defendant’s building, they were paid for by the plaintiff. The plaintiff therefore may choose to remove them and has 60 days from the date of this judgment to do so at its own expense.

If the plaintiff or someone on its behalf does not remove them within this time, they shall become the property of the defendant. If the plaintiff removes either or both of them, it shall restore the areas where they are attached to the premises to the condition they were in prior to their installation. [ 37 ] Invoices for other construction material have been filed. I am not satisfied on a balance of probabilities that invoices other than those listed in paragraph 34 were for goods or services which were covered by the implied terms of the agreement the parties entered into in August.

CONCLUSION [ 38 ] For the reasons stated, the plaintiff will have judgment against the defendant in the amount of $3,096.64, along with pre- judgment interest from the date this claim was commenced, being June 24, 2011.

[ 39 ] The parties will assume their own costs. _______________________________ J.A. Plemel, J