2011 QCCQ 4472, 2011 QCCQ 4472

Grinch Realties Inc. c. Lingerie Josephine inc. 2011 QCCQ 4472 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-22-157787-097 DATE: May 3, 2011 ______________________________________________________________________ BY THE HONOURABLE ELIANA MARENGO, J.C.Q. ______________________________________________________________________ GRINCH REALTIES INC. Plaintiff/Cross-Defendant v.

LINGERIE JOSEPHINE INC. and DEBBIE HUQ and PIERRE LAURIN Defendants/Cross-Plaintiffs ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] On July 12, 2005, a commercial lease intervened between plaintiff landlord ("the Landlord") and defendant tenant Lingerie Josephine Inc. ("the Tenant"). [ 2 ] Landlord is suing Tenant, Tenant's guarantor Pierre Laurin and Tenant's director Debbie Huq, solidarily, for arrears in rent and damages.

THE FACTS [ 3 ] The term of the lease was August 1, 2005 to December 31, 2008. [ 4 ] The premises, located at 1448 Sherbrooke Street West, in Montreal, in a row of nineteenth century heritage buildings, were to be used to operate a shop for the sale of "very very high end" loungewear and lingerie from Europe. [ 5 ] The monthly rent was fixed at $4,000.00 to $4,306.00, plus the applicable taxes. [ 6 ] Tenant took possession of the premises in July, 2005, and proceeded to invest some $75,000.00 worth of leasehold improvements therein.

Inter alia , the vestibule floor tiles were replaced; 2 faux walls were created; beautiful fixtures and new track lighting were installed to replace the old and outdated ones; 2 black panels were installed to create a changing area; 4 pieces of antique furniture were brought in; the floor was painted; electrical wiring for sound and alarm systems was added; shelves were installed; some carpeting was installed. [ 7 ] As can be seen from the numerous "before and after" pictures filed into the Court record (exhibits P-5, P-9, D-3 and D-4), these improvements resulted in the creation of a stunning and elegant boutique, for which Tenant received many compliments and accolades, not only from neighbouring merchants, but also from the City of Montreal.

In fact, the City bestowed "le Grand Prix du Concours Créativité Montréal 2006, catégorie Commerce-Boutique" upon Tenant. Landlord was also "very very happy" with the results. [ 8 ] Tenant had received written authorization to replace the tiles in the vestibule. [ 9 ] The other improvements and installations were not authorized in writing; however, Landlord's principals G. Hirsh and Robert Landau were fully cognizant thereof, as they, but in particular Hirsh, were present throughout the improvement work, and never objected thereto.

[ 10 ] At a very high personal cost to Huq and Laurin, who were obliged to inject some $400,000.00 of their own money to keep the business afloat, Tenant managed to respect the terms of the lease agreement to the very end. [ 11 ] Although Tenant was at times late in paying its rent, pay it did, save and except for the last 2 months.

Tenant asked Landlord to offset these 2 months rent with the $10,000.00 security deposit paid at the beginning of the lease. [ 12 ] At the end of the term, the lease was not renewed, and Landlord was advised accordingly (exhibit D-1). [ 13 ] Although the relationship between the parties was very good during the term of the lease, things took a turn for the worst, when Tenant moved out. [ 14 ] On December 31, 2008, Laurin cleaned the premises, and carefully removed whatever he could therefrom.

Pictures P-9, P- 10 and D-4 are worth a thousand words, and show that the premises were left in very good condition. [ 15 ] Garbage was neatly packed in 2 large bags, along with hangers, which were left for disposal. [ 16 ] Laurin filled a truck with the majority of the contents of the boutique; however, the faux wall panelling and the 4 black panels were left behind.

Arrangements were made by Tenant for one of its clients ("Manon") to come and carefully remove and take away these items the next day. [ 17 ] Before leaving, Laurin met with janitor Felix to return the keys, and advise him of said arrangements, that to which Felix agreed. [ 18 ] Unfortunately, when Manon arrived the next day, with a truck and 3 people to remove said items, Felix refused to let them in. Manon advised Laurin, who in turn called Felix, only to be told that he had received strict instructions from Landau not to let anyone in.

This was very distressing to Huq and Laurin, as they had paid $20,000.00 for these items, and had been offered $4,000.00, by Manon, to buy them. [ 19 ] Neither Huq nor Laurin, who were dealing with a personal crisis of their own at the time (their young son had just been hospitalized for a heart condition), could understand what was happening, as they had always acted in good faith.

Other than the fuchsia washroom, which perhaps needed to be repainted grey, and the exterior awning, which needed to be replaced, the premises had been left in very good condition. [ 20 ] Landlord had written to Tenant, on December 19, 2008, alleging default under the terms of the lease, in the amount of $9,720.80. Landlord had also asked that Tenant "leave the premises in exactly the same state as when (it) took possession at the commencement of the lease, fair wear and tear accepted.

This will include replacement of the exterior awning to the same plain green colour that Bellon Industries have previously supplied." (exhibit P-2).

Landlord concluded as follows: "Any failure on your part to leave the premises in good order as referred to in the preceding sentence, will entitle Grinch Realties to use any portion of your security deposit to complete any necessary work on your behalf." [ 21 ] Given the good condition of the premises and the $10,000.00 security deposit, which it had paid, Tenant did not believe anything serious was amiss. [ 22 ] On February 18, 2009, Landlord sent the following letter to Laurin: "Pierre Laurin […] Montreal Qc […] WITHOUT PREJUDICE Dear Mr.

Laurin, We would refer to a letter written to Debbie Huq and Lingerie Josephine Inc. dated December 19 th , 2009 copy of which is enclosed herewith. We wish to alert you to the fact that Lingerie Josephine Inc. is in default under the terms of the lease entered into between themselves and Grinch Realties dated July 12 th , 2005 for premises at 1448 Sherbrooke Street West.

Since Debbie Huq – Lingerie Josephine Inc. have not corrected the default in question and have abandoned the premises without leaving them in the condition in which they were delivered, we are putting you on notice herewith that we will hold you entirely responsible for costs incurred in correcting this default and any obligations under the term of the lease.

May we suggest that you contact the undersigned as quickly as possible to try and resolve this matter in an amicable manner failing which we will have no alternative but to instruct our attorneys to take proceedings immediately against Lingerie Josephine Inc. and

yourself personally without further notice." (exhibit P-2) [ 23 ] Although Laurin remembers having seen this letter at some point, he does not remember having received it at the time.

In fact, the address mentioned therein is incorrect. [ 24 ] Be that as it may, Tenant eventually met with Landlord to examine the premises. [ 25 ] At trial, Laurin declared: "À l'été, je me suis aperçu que… les panneaux… avaient été arrachés… les panneaux noirs détruits." [ 26 ] According to Tenant, the remaining items, which should have been removed with care, were not. [ 27 ] Had Landlord let Tenant's people finish emptying the premises, on January 1, 2009, they would have done so carefully, thus minimizing the impact. [ 28 ] Tenant nonetheless offered to carry out certain repairs; but, Landlord insisted upon doing the work itself, and sending the bill to Tenant. [ 29 ] Huq and Laurin were flabbergasted when they subsequently received Landlord's claim for $38,000.00. [ 30 ] As Laurin stated, "La marge entre la demande et ce que l'on avait constaté était irréconciliable." [ 31 ] Huq was further "appalled", when she was accused of having wilfully caused damages to the premises, when all throughout her occupation, she did her utmost to pay the rent and to bring the lease to term; and she had no issues with Landlord.

The Landau family even shopped in her boutique. [ 32 ] Laurin also found it "bizarre" that he and Huq were being accused of fraud, since they had always acted in good faith and their relationship with Landlord, as above stated, had always been healthy. [ 33 ] How could this be happening?

After all, Tenant had truly embellished the premises, and Huq had done everything she could to respect the terms of the lease, pay the rent and keep the business going to the very end. [ 34 ] Laurin decried the fact that they were now being sued for an exorbitant amount; that Landlord would not allow Tenant to carry out the repairs; that Manon was denied access to the premises, on January 1 st , 2009; that Tenant's property had been disposed of; and that Laurin and Huq were being accused of fraud. ANALYSIS [ 35 ] The relevant terms and conditions of the lease read as follows: "7.(

c) The Lessee shall not make any alterations or repairs to the Premises or any other part of the Building nor install any fixed, or additional fixtures or service, electrical installations and fixtures immoveable partitions, doors, fixed counters, air conditioning ducts, plumbing facilities or piping, for water or steam, nor make any connection thereto nor cause any wires, pipes or other services to be run into the Building without first obtaining the consent in writing of the Lessor." "7.(

e) Any alterations or repairs to the Premises and any of the installations above described and so made by or for the Lessee under the foregoing

Article 7 (

c) shall, upon their completion, become a part of the Premises and the property of the Lessor and shall, at the option of the Lessor, either be surrendered with the Premises upon termination of this Lease without any compensation being due therefore by the Lessor, or, shall be removed at the expense of the Lessee." "7.(

f) Notwithstanding the foregoing provisions of this

Article any moveable partitions, or counters may be installed and removed at the option and discretion of the Lessee during the term of this Lease and shall at all times remain the property of the Lessee, subject to the restoration of the Premises to their original state." " Special Covenants […] 14) The Lessee agrees to accept delivery of the Premises in their present condition and that any modifications that might subsequently be made to the Premises will be at the entire cost of the Lessee and will not be undertaken until a modification plan is submitted and approved in writing by the Lessor beforehand. […] 18) The Lessee shall have the right to have its business name added to the awning at the exterior entrance to the Premises, in white letters, and in the style of the existing awning.

The Lessee will be responsible to pay the full cost of this alteration (using Bellon & Cie or some other similar company approved by the Lessor) as well as being responsible to pay the full cost of restoring the awning to its original condition with a plain fringe at the termination of the Lease or any extension thereof."

[ 36 ] Landlord is claiming, inter alia , $38,444.85, for damages to the premises. [ 37 ] Although Tenant did not obtain official written consent to make all of its leasehold improvements, the evidence clearly shows that Landlord was aware of same, from the outset and as they were being carried out, and tacitly approved them. Tenant did not, therefore, contravene par. 7(

c) of the lease or par. 14 of the Special Covenants. [ 38 ] With its letter dated December 19, 2008 (exhibit P-2), Landlord exercised the second option contained in par. 7(

e) of the lease, namely removal at the expense of Tenant. [ 39 ] Furthermore, under par. 7(

f) of the lease, Tenant had the right to install and remove moveable partitions, which remained its property at all times. [ 40 ] Tenant made concrete arrangements to have the moveable partitions and the faux wall panels carefully removed. However, Tenant was denied access to the premises by Landlord.

It cannot therefore be held liable for any breach in this regard; and, if damage was caused to the premises during the removal thereof, blame lies not with Tenant, but with those who performed the work for Landlord. [ 41 ] It appears from the numerous pictures filed into the Court record, that Tenant left the premises in very good condition, and that, in fact, Landlord was able to lease the premises, with Tenant's leasehold improvements, for a higher rent (exhibits D-6 and D-7). [ 42 ] Holes made in the floor and walls with a view to install and affix shelving, lighting, an area rug and mounts, with "nails, bolts, screws and adhesive material", were necessary to operate the business, and do not constitute "damage" to the premises. [ 43 ] Furthermore, when Tenant offered to have the holes patched and the walls painted by its own contractor, Landlord refused. [ 44 ] With regards to the limited discoloration of a relatively small area of the floor, this clearly constitutes normal wear and tear. [ 45 ] With regards to the old missing mirror and light fixtures, Tenant stated that they disappeared during the renovations. [ 46 ] Landlord wants $850.00 for the mirror and almost $10,000.00 to replace outdated lighting equipment, such as light bulbs and track components (exhibit P-4)! [ 47 ] Although Landlord did not present any expert proof regarding the depreciated value of same, it is obvious that this portion of the claim is exaggerated and unrealistic. [ 48 ] The same can be said of Landlord's estimate for painting and sanding and varnishing the floor. [ 49 ] First of all, the floor was neither sanded nor varnished, and the estimate for painting was also grossly exaggerated, as can be seen from the Rona invoices filed as exhibit P-4-A. [ 50 ] Tenant estimated the cost of plastering and painting at about $2,000.00. [ 51 ] Based on the foregoing and, in its discretion, the Court can only approximate the cost thereof (including the depreciated value of lighting components) at $4,000.00. [ 52 ] Tenant is also responsible for the cost of replacing the awning, in the amount of $1,354.50 (exhibit P-4-B and par. 18 of the Special Convenants). [ 53 ] Of course, Tenant is also liable for two months rent (November and December, 2008), in the amount of $9,720.80 (exhibit P- 3), plus the NSF charges in the amount of $56.44. [ 54 ] From the total amount of $15,131.74, one must deduct the security deposit of $10,000.00, which leaves a balance owing of $5,131.74 $ by both Tenant and guarantor Laurin. [ 55 ] Huq is not liable towards Landlord. [ 56 ] There is no lien de droit between the two, either contractually or extra-contractually, Huq having acted in good faith at all times (arts. 2803, 2804 and 2805 of Civil Code of Quebec ). [ 57 ] Landlord's allegation of Huq's wilful intent to cause damage, is, simply stated, complete and utter nonsense, and totally unsubstantiated by the evidence. [ 58 ] The same holds true for Landlord's allegations of fraud on defendants' part. [ 59 ] Via their cross-demand, defendants are claiming damages in the amount of "20 000 $ à parfaire " for their extra-judicial costs and $15,000.00 "à

titre de troubles et inconvénients, considérant notamment les atteintes à leur réputation causées par les allégations de fraude, le stress d'être attaqué en justice sans raison … " (par. 100 of the amended plea and cross-demand). [ 60 ] The Court finds that there was indeed procedural impropriety on Landlord's part. [ 61 ] Its claim against Huq was clearly unfounded and frivolous.

It also consists in a use of procedure that is excessive and unreasonable, thereby causing prejudice to Huq, in that it caused her personal stress, much trouble and inconvenience, not to mention financial hardship. [ 62 ] There was not an iota of evidence in support of Landlord's allegations against Huq, and Landlord did not show that its action was not excessive or unreasonable and was justified in law.

[ 63 ] In virtue of art. 54.4 of the Code of Civil Procedure , the Court finds Landlord liable towards Huq in this regard, and must pay her damages in the amount of $5,000.00. [ 64 ] This compensation is for damages which she suffered as a direct result of Landlord's improper use of procedure. This is not for damage to her reputation, as there was no proof of same, but for the trouble, stress and inconvenience which she suffered, as well as for a portion of her extrajudicial costs and for punitive damages.

Let it be known that Landlord was put on notice, in this regard, by defendant, before plea, but nevertheless persisted in its personal claim against Huq. [ 65 ] With regards to Laurin, given the contractual nature of the lien between the parties and given the absence of proof with regards to his allegations of slander, the Court shall not grant him or Tenant damages for extrajudicial costs [1] or for "troubles et inconvénients". [ 66 ] Finally, Landlord's claim for extrajudicial fees is denied, as defendants' pleadings are not improper. [ 67 ] In closing and as a reminder to Landlord, the Court wishes to cite the following passage taken from an

article entitled "Les baux commerciaux, Les contrats d'adhésion et L'obligation de bonne foi", where the author writes: " 3.4 L'abus de droit La notion de bonne foi interdit également à quiconque de se servir de ses droits d'une manière abusive. L'absence de bonne foi peut être invoquée lorsque l'on exerce ses droits d'une manière malveillante, trompeuse, abusive ou déraisonnable. Cette notion exige aussi que les personnes agissent raisonnablement, avec de bonnes intentions, nonobstant les conditions du contrat. Nous devons constater qu'il n'est pas suffisant de suivre la loi ou la lettre du contrat. En outre, une

partie ne peut invoquer le non-respect des obligations du bail par son cocontractant afin de refuser d'honorer les siennes.

Agissant de cette façon, ce cocontractant, même s'il prétend avoir suivi la lettre du contrat, n'en respecte toutefois pas l'esprit." [2] WHEREFORE THE COURT HEREBY: DISMISSES plaintiff's action against Debbie Huq, with costs; GRANTS Debbie Huqs' cross-demand, in part; CONDEMNS plaintiff to pay to Debbie Huq the sum of $5,000.00, plus legal interest and the additional indemnity provided for in art. 1619 of Civil Code of Quebec , from November 30, 2009, plus costs; GRANTS plaintiff's action, in part, against Lingerie Josephine Inc. and Pierre Laurin; CONDEMNS Lingerie Josephine Inc. and Pierre Laurin, solidarily, to pay plaintiff the sum of $5,131.74, with legal interest and the additional indemnity provided for in art. 1619 C.C.Q., from January 11, 2011, with costs. __________________________________ ELIANA MARENGO, J.C.Q.

Me Philip Aspler Aspler & Associates Attorneys for plaintiff Me Julien Archambault and Me Hubert Sibre Davis, s.e.n.c.r.l. Attorneys for defendants Dates of hearing: February 9 and 10, 2011