) Appearances: ) STORAGEVAULT CANADA INC. ) ) Catherine Howden & Kara Moore plaintiff, ) for the Plaintiff - v. -, 2022 MBKB 206

Date: 20221028 Docket: CI 19-01-24389 (Winnipeg Centre) Indexed as: StorageVault Canada Inc. v. Keystone Western Inc. Cited as: 2022 MBKB 206 COURT OF KING'S BENCH OF MANITOBA BETWEEN: ) Appearances: ) STORAGEVAULT CANADA INC. ) ) Catherine Howden & Kara Moore plaintiff, ) for the Plaintiff - and - ) ) KEYSTONE WESTERN INC., defendant. ) ) ) ) ) ) ) Amanda Verhaeghe for the Defendant Judgment Delivered: October 28, 2022 MARTIN, J. INTRODUCTION [ 1 ] Keystone Western Inc. (Keystone) was a subtenant occupying a portion of warehouse space in a multi-tenant commercial property in Winnipeg.

StorageVault Canada Inc. (StorageVault) acquired the corporation that owned the property. Keystone then entered into a new Lease with StorageVault for a term of three years and one month. Keystone vacated the premises before the Lease expired. [ 2 ] StorageVault claims for the unpaid rent for the remainder of the Lease, approximately $350,000, plus interest and taxes. Keystone says it was entitled to terminate the Lease without further obligations because its occupation was “illegal” in that the property did not comply with City of Winnipeg (the City) by-laws.

They filed a counterclaim for past rent paid and other expenses on several bases that the Lease was never truly in effect. At trial they abandoned the counterclaim. ISSUES [ 3 ] Aside from any fact findings, the heart of this dispute is whether Keystone was entitled to terminate the Lease because of noncompliance with the City’s by-laws. FACTS [ 4 ] A brief

summary of the facts will suffice. [ 5 ] Keystone was a subtenant of a multi-tenant commercial property, at 750 Marion Street in Winnipeg, for approximately two years before StorageVault purchased the shares of the corporation that owned the property and became the landlord. [ 6 ] On August 29, 2017, Keystone and StorageVault entered into a new Lease, commencing September 1, 2017, for approximately 36,000 square feet of warehouse space for a specified Initial Term of three years and one month. The rent provision itemized rent to

October 31, 2020. I find this was an error in that the Initial Term, as specified, would end September 30, 2020. This is the date that I find the Lease was due to expire. [ 7 ] StorageVault, for unknown reasons, was unaware that Keystone had not acquired an occupancy permit from the City either as a subtenant, or more importantly, as a tenant after September 1, 2017. [ 8 ] Around July 12, 2018, Keystone requested an amendment to the Lease to utilize a portion of the premises as a retail showroom to sell Argo ATVs. StorageVault was unaware Keystone’s major shareholder and principal, Mr.

Curtis, had acquired the Manitoba Argo business. Regardless, StorageVault quickly agreed to the proposal, provided Keystone would be responsible to obtain all required approvals from the City, including building and occupancy permits and bear the associated costs. StorageVault provided a Lease Modification Agreement to Keystone, which Keystone never executed. Nonetheless, the parties moved forward with the plan. [ 9 ] In September 2018, Keystone told StorageVault they started the process with the City and were informed they did not have an occupancy permit, which they then applied for.

It was at that time they discovered the 750 Marion Street property was not designated by the City as a multi-tenant property, which needed to happen before the occupancy permit would be issued. It is unclear how StorageVault was unaware of the zoning designation, but regardless of this fact, both Keystone and StorageVault had specific legal responsibilities and site issues to remedy to become compliant with the City requirements and by-laws. [ 10 ] Much of the trial was devoted to communications and details surrounding these matters, which I need not detail as they are not material to the critical issue.

Suffice it to say, there is no doubt Keystone became frustrated by the delays in the following months. They wanted to quickly rectify the situation to avoid any disruption creating their Argo retail space. At one point, they even withheld rent for a month as a display of frustration. However, I find StorageVault acted reasonably throughout in attempting to obtain the multi-tenant designation and assisting Keystone with its plans; StorageVault removed other tenants and incurred considerable expense to obtain the multi-tenant designation.

To be clear, much of this would have been necessary regardless of Keystone’s retail plans, as StoreageVault had to bring the property into zoning compliance. [ 11 ] The City never took any enforcement, or other action, against either Keystone or StorageVault, over the lack of an occupancy permit or other by-law deficiencies. Throughout the entire Lease, until they vacated on August 28, 2019, Keystone was able to conduct its business from the premises as it had always done, even as a subtenant much earlier.

For all intents and purposes, as long as Keystone and StorageVault were moving ahead toward compliance, there was never any tangible concern from the City about the noncompliance. [ 12 ] In June 2019, StorageVault became aware that Keystone was actively, and publically, offering up to 30,000 square feet of its warehouse space. Keystone did not inform StorageVault of this beforehand.

When StorageVault questioned Keystone, they explained that they were looking for warehousing clients, not subletting. [ 13 ] Within a few months, around the weekend of August 26, 2019, Keystone removed all of its warehoused goods and other business materials from the leased space. They vacated the premises in its entirety. They did not forewarn StorageVault .

On August 28, 2019, StorageVault received a letter from Keystone’s lawyer explaining: … We are advised that after entering into the Lease Agreement our client became aware that the Landlord is not in possession of the appropriate Occupancy Permit for the building in which the Premises is situated. The Landlord’s Occupancy Permit is, in our view, a necessary and fundamental precondition to the operation of the Lease Agreement. Without it, our client’s ability to occupy the premises pursuant to the terms of the Lease Agreement, and the law generally, is frustrated.

As such, our client has vacated the Premises and considers the Lease Agreement to now be at an end. [sic] Days later, the September rent check was declined by the bank for “non sufficient funds”. No further rent payments were made by Keystone. [ 14 ] In his testimony, Keystone’s principal, Mr. Curtis, testified that it vacated for two reasons. First, his biggest concern was that Keystone’s occupancy was unlawful and as such, he was not sure if insurance would cover the inventory of stored goods Keystone kept in the warehouse space.

Second, Keystone was frustrated with StorageVault over the whole process dealing with the City. [ 15 ] I reject Mr. Curtis’s testimony for the following reasons: i. he conceded he made no inquiries about whether his insurance concern was valid or correct, and never mentioned his concern to StorageVault .

It is inconceivable that if he had a legitimate concern about insurance coverage for millions of dollars of inventory, he would not have addressed this with his insurance broker or StorageVault; ii. he claimed he was unaware of an April 29, 2019 e-mail from the City to Keystone months earlier, which stated in part “[t]he landlord permit issued April 17. … Now the tenant space you’re occupying is defined and legal. …”. The e-mail was not an exhibit in the trial. Keystone’s counsel asserts the e-mail is inadmissible hearsay. In other words, this representation from the City cannot be relied on as a

true and accurate statement of fact. While Mr. Curtis claimed ignorance of the email, clearly Keystone received it and its keymanagement employees were fully aware of the City’s position. They understood it meant StorageVault had secured the multi-tenancydesignation required to be compliant with the City by-laws. Keystone did nothing to scrutinize this determination by the City.

In effect, they accepted what the City represented; iii. the situation with the City was moving forward, it was not stalled; iv. in May 2019, Keystone was offering up to 30,000 of its 36,000 square feet of space, creating an inference that they nolonger had use for the majority of the rented space in a way consistent with its past use; and v.

Keystone had other company space readily available to it, which it subsequently moved into by August 28, 2019. [16] All in, Keystone did not have any discussions with StorageVault about any concerns they had about their occupancy permit, orthe multi-tenant designation, per se. They did not give any hint or advance notice they thought the Lease was invalid, or that their occupancy wasunlawful, nor did they voice any concerns about their insurance, nor that they would terminate the Lease and vacate the premises.

Throughout, Keystone’s concerns revolved around using some space for Argo retail, which StorageVault was under no obligation tofacilitate but agreed to nonetheless. Keystone did not act forthrightly and transparently when they vacated. [17] I find that Keystone vacated the premises and considered the Lease at an end as of August 28, 2019 because they no longerneeded the warehouse space. The reasons offered by Mr. Curtis in his testimony, and in a letter from Keystone’s lawyer, were no more than a thinly veiled pretext.

Having said that, I acknowledge that StorageVault did not in fact formally obtain the required multi-tenant designation from the Cityuntil sometime after. [18] The question remains, leaving Mr. Curtis’s questionable business ethics aside: was Keystone legally entitled to walk away fromthe Lease in August 2019, before its expiry, because of the zoning issues? ANALYSIS [19] Perhaps remarkably, after what I am assured by counsel was a thorough and exhaustive examination of case precedents, noprecedent directly on point was found.

Thus, the analysis and answer to the issue turns on various commercial leasing and contractualprinciples. Was the Lease Illegal? [20] A central submission by Keystone is that the Lease was void, and therefore unenforceable, because it was an illegal contract,according to the City building by-laws, in that an owner cannot permit occupancy of a building without first obtaining the requiredbuilding occupancy permit (Winnipeg Building By-law, No. 4555/87, s. 15.1.1), in this case, the multi-tenant zoning designation.

Keystone says, as a matter of public policy, they cannot be required to continue with, or be liable for, an illegal contract. I disagree; theanalysis is more nuanced. [21] I agree as a general proposition that contracts or leases made for an immoral or illegal purpose, or which contravene public policyof the day or statutory provisions, may be void or unenforceable. As this case deals with statutory illegality, I will restrict my commentsaccordingly.

In determining whether a particular contract, or lease, will be void or unenforceable, case specific facts, and the purpose of the impugned statute, are critical factors for analysis. [22] For example, in Reliable Life Insurance Company v. M.H. Ingle & Associates Insurance Brokers Limited, (ONCA), the Ontario Court of Appeal, at paras. 42 – 48, explained various aspects of the modern view of the doctrine of illegality. Thefacts are not critical, but the Court’s comments are.

Notably: [42] It would be wrong to say that the law respecting the enforceability of contracts that contravene a statute is clear and that thedecisions in the cases are all consistent. Much turns on the particular terms on the statute, its underlying policy, and the facts of the caseat hand. … [46] In Royal Bank of Canada v. Grobman (1977), (ON SC), 18 O.R. (2d) 636, 83 D.L.R. (3d) 415 (H.C.J.) Krever J.relied upon both the reasons of Kelly J.A. and Laskin J.A. in Sidmay in holding that a mortgage securing a bank loan that exceeded theloan to value ratio provided for in the Bank Act was enforceable.

He said at pp. 651-52 O.R.: As I understand the evolution of the current law of contract, modern judicial thinking has developed in a way that has considerablyrefined the knee-jerk reflexive reaction to a plea of illegality. [47] At pp. 652-53 O.R.

Krever J. referred to what he considered to be "the modern judicial view of illegality in the contracts field andthe consequences the Courts are prepared to visit upon a contract entered into in contravention of a statute." He said: The serious consequences of invalidating the contract, the social utility of those consequences and a determination of the class of personsfor whom the prohibition was enacted, are all factors which the Court will weigh.

Waddams, The Law of Contracts, 4th ed. (Toronto: Canada Law Book, 1999) at p. 416 approves of the "modern judicial view" reflected in Krever J.'s judgment. ( underlining added for emphasis ) [ 23 ] Further, as noted by Angela Swan, Jakub Adamski & Annie Y. Ne, in Canadian Contract Law , 4th ed. (Toronto: LexisNexis Canada Inc., 2018): 10.103 What is clear from the recent cases considered above is the extent to which the courts have moved from what Krever J. referred to as the “knee-jerk” response to a plea of illegality.

This attitude is in marked contrast to that displayed some 100 years earlier and, indeed, well into the latter part of last century. The result is the development of a much more satisfactory approach to the problems when a contract comes close to or just over the line separating legal from illegal actions. The question of enforcement can be addressed head-on and the relevant questions like the purpose of the legislation and the class of people to be protected by the legislation can be identified and considered.

Earlier, under the heading The “Purpose” Test, the authors stated: 10.93 The most radical and significant change in the traditional approach to illegal contracts is the recognition by the Courts that it is important to consider the purpose of any legislation that makes the making or performance of a contract illegal or potentially illegal. [ 24 ] More recently, in Wang v.

Jiang , 2021 BCCA 132 , under the heading The Modern Approach to Illegality, the Court stated: [50] This brings us full circle to the more general issue of the approach to be taken to contracts that may be illegal at common law or by virtue of a statutory prohibition. … The law has now clearly rejected the strict approach taken (with exceptions) by courts to illegal contracts in the past, in favour of a more "flexible" approach that focuses not on public policy (including the enforcement of governmental duties and taxes) but on factors relevant to the "integrity of the judicial process".

These factors include the objectives of the prohibition that was breached, whether the misconduct was serious in intent and result, the relative "fault" of the parties, the likely consequences of declaring the contract invalid, the possible unjust enrichment of one party as a result of the non-enforcement, and the potential that letting the estate 'lie where it falls' may bring about an unfair or disproportionate result: see generally S.M. Waddams, The Law of Contracts (6th ed., 2010) at 573-580. The Court followed this

summary statement, with an extensive examination of the development of the law. [ 25 ] Thus, a case specific examination and weighing of a host of factors is necessary in order to determine whether this contract, this commercial lease, is unenforceable because of statutory illegality in that an occupancy permit could not be readily obtained.

These factors may include, among others: • whether the contract was entered into for an illegal purpose; • the nature and purpose of the contract; • the relative bargaining positions of the parties entering the contract; • the nature and purpose of the statute in question; • the nature of the illegality created by the statute; • the affect of the illegality on the parties to fulfill their contractual intentions; • the conduct, or fault, of the parties before and after entering the contract; • whether one party would receive a windfall or unjust enrichment, or alternately loss or damage, from voiding or not enforcing the contract; and • generally the consequences of voiding the contract, including the social utility of doing so, or whether it would be contrary to public policy to grant the relief claimed.

In large measure, these factors consider the nature of the transaction, the statute, the relative equities between the parties, the remedies sought, including the proportionality of the outcome, and whether the integrity of the judicial process may be undermined. [ 26 ] Succinctly, in these circumstances, the contract at issue is a commercial Lease that was entered into by experienced, knowledgeable business entities with equal bargaining positions at arms length. There was, and is, no illegal intent or purpose.

Both parties, for their own and mutual interests, determined it beneficial to enter into the Lease - - in other words, the Lease facilitated each party advancing its legitimate business interests. Each party took on obligations and responsibilities, primarily the landlord providing quiet enjoyment of its warehouse space and the tenant paying rent in exchange. In entering the Lease, neither party gained an unfair advantage over the other, nor conducted themselves in an underhanded or disreputable way. [ 27 ] The Lease itself is not controversial. It is a relatively short, simple and straightforward agreement.

At paragraph 14, the parties agreed that “[t]he Tenant acknowledges that there are no representations, conditions or warranties, or collateral agreements made by or on behalf of the Landlord or its agent other than are expressed herein.” The Lease is silent as to any obligations respecting occupancy permits, zoning, or any other provisions that may be interpreted or implied as a condition precedent to the Lease. There are no terms that direct a particular consequence or result if the Lease contravened a statute.

[ 28 ] The City building by-laws, specifically s. 15.1.1, prohibit an owner from permitting occupancy, or use of a building, without first obtaining a building occupancy permit for the appropriate “occupancy group”, such as multi-tenant versus single tenant occupancy.

Section 2.3 of the by-law stipulates that it “establishes administrative requirements and procedures for the enforcement” of the applicable building code. Various enforcement powers are provided for, including cease and desist orders or possible payment of an “administrative penalty” (s. 25.2) for any contravention of the by-law. In lieu of a penalty, a compliance agreement may be arranged. Any unpaid penalty may become a court judgment. Clearly, the administrative penalty scheme is different from a prosecution offence of a quasi-criminal nature, including possible conviction and fine. I should add, that even if enforcement was subject to a

summary conviction, it would not change the result of my overall analysis. [ 29 ] The National Building Code of Canada , 2010, (NBC) has been adopted as the building code in Manitoba, while the Manitoba Building, Fire and Plumbing Codes were repealed.

A review of the NBC demonstrates that its objectives are to limit the probability that a person may be exposed to unsafe or unhealthy situations, in part by promoting fire and structural protection, and accessibility for persons with disabilities. [ 30 ] Neither Keystone nor StorageVault were aware that either, or both, were not in compliance with the by-law until about 15 months after the Lease had been entered and in operation, let alone the additional time Keystone had been a subtenant. Throughout, until Keystone left at the end of August 2019, each conducted their business fully and without hindrance.

Each cooperated to bring about compliance, and to facilitate space for Keystone’s retail plans. Regardless of the nature of noncompliance, or illegality, with the by- laws, it was within a tolerable range of noncompliance for the City, as evidenced by it not taking, or even threatening to take, any enforcement proceedings whatsoever. Further, subsequent to the City email in May 2019, Keystone understood their occupancy was “legal”.

Regardless of the exact evidentiary value of the City’s email, there is also no question that the City did not view these circumstances as a serious by-law contravention. [ 31 ] All in, I find that not enforcing the terms of this Lease between these business entities would be inconsistent with the intentions and obligations of the parties, as demonstrated by their actions throughout, and would work as an injustice to StorageVault. The nature of the illegality was not such that an otherwise valid commercial lease, which was serving its purpose, should be declared void or unenforceable.

I have found that vacating the premises on the basis explained by Mr. Curtis in court, or by Keystone’s lawyers to StorageVault, was a mere pretext to the real reason they left - - that their business had changed, such that they did not want the leased space any longer. Foisting the financial consequence of that to the landlord caused damage to it through loss of rent; a loss they have shown they could not mitigate, except negligibly. [ 32 ] I do not find the Lease void or unenforceable based on principles of illegality. Enforcing the Lease would not undermine the judicial process.

To the contrary, voiding it would unjustly give Keystone a significant benefit, at StorageVault’s expense. [ 33 ] Before moving on to the next issue I will address jurisprudence relied on by Keystone, all of which is distinguishable, and make some additional comments and findings: • In Kootney Veneers Ltd. v. Enviro-Smart Systems Ltd. , 2005 BCSC 4 , a commercial lease was not found to be illegal by statute or common law despite the fact that the tenant could not legally occupy the premises according to city by-laws (para. 16 – 17). Notionally, this supports StorageVault’s position.

However, the court found that the landlord was in breach of an implied condition precedent to obtain a permanent occupancy permit after a certain date, which it did not do, and “[t]hus the parties’ obligations under the lease never came into effect” (para. 21). The court left it to the parties to make further submissions as to the effect of this judicial determination on the landlord’s remedies. Here, as noted earlier, the Lease specifically provides there are no conditions to the Lease other than those specified.

I do not find there were any conditions precedent, implied or otherwise, respecting an occupancy permit. Moreover, Keystone was a subtenant for some time prior to StorageVault becoming the landlord, and its tenancy continued under the new Lease before and after discovery of the zoning issue. If there had been an implied condition precedent that zoning by-laws be complied with, which I do not find, I would find the condition was waived by Keystone, and StorageVault, as evidenced by Keystone’s continual occupation of the premises and the operation of the Lease before August 2019. • In Lantz v.

Hansen , [1987] N.S.J. No. 76, 1987 CarswellNS 201 , the court found that a residential tenancy lease was illegal and void where the tenant objected to taking possession in the absence of the landlord having secured an occupancy permit. The Court noted not only the by-law, or ordinance, requirement for a permit, but also that the potential existed for a “quasi-criminal prosecution under the Ordinance” (para. 7).

Further and alternately, the court held that a statutory condition mandated under the applicable Residential Tenancies Act was implied into the lease and would be breached by enforcing the lease or providing damages in lieu. Critically, different from here, is the nature of the lease (residential, not commercial); the tenant objected before he took possession; the ordinance had a quasi-criminal offence mechanism not an administrative penalty scheme; and, there was a statutory condition implied into the lease. • Grace v. Leverman , 2013 NSSM 14 , was another residential tenancy dispute.

The small claims adjudicator determined the lease was void, illegal, where the landlord did not have the proper permit for occupancy. Without any meaningful analysis of the principles of the contractual legality, the adjudicator concluded “… courts do not typically enforce illegal contracts, as a matter of public policy” (para. 18). Having found this, he also concluded it might have been be different if “… the Tenant had known of the situation and knowingly participated” (para. 25). Importantly, that the lease was residential featured prominently.

The adjudicator also recognized context may inform the result but he did not consider the modern view of the doctrine of illegality. These issues negate its precedential value to this situation. • in Pensionfund Realty Ltd. v. MacCoshams Storage & Distribution Centres (Winnipeg) Ltd. et al., (MBQB)(Pensionfund), the Court determined, at para. 14, that no implied condition was to be imputed in a lease of land or unfurnished buildingbut rather, a party, tenant, must rely on the terms set out.

However, the plaintiff landlord had expressly agreed to ensure that the building met localbuilding and fire codes so that “representation was a warranty and formed part of the contract between the parties” which the landlordbreached (para. 17). Moreover, given the nature of the hazardous goods the tenant was storing, the city: (

i) refused to issue a necessaryoccupancy permit without major renovations, which the landlord was unwilling to undertake; and critically, (ii) ordered that the tenant remove the goods it was warehousing. Under all of these circumstances, the landlord was unsuccessful in itsclaim for future rent, while the tenant was unsuccessful in its claim for contribution to its moving costs. Clearly, Pensionfund is entirely distinguishable on its facts from this situation, and in any event, the statement respecting impliedconditions supports StoreageVault’s legal position. • In Abraham v.

Coblenz Holdings Ltd., 2013 BCCA 512, the court upheld the trial judge’s finding that the landlord committed afundamental breach of the lease and that “the tenants were entitled to accept it and bring the lease to an end” (para. 19).

Further at para.28, the court stated “an innocent party is not required to communicate its acceptance of the repudiation immediately”, but rather musthave a reasonable opportunity to assess the circumstances, assess options and explore resolution. “What matters is whether, in all thecircumstances, the tenants acted reasonably in communicating their course of action so as not to prejudice the other party by inducing itto act as if the repudiation of the agreement had not been accepted”. I take no issue with these statements of principle.

However, they do not apply to these facts. [34] I do not find these cases support Keystone on the facts I have found. If anything, they assist StorageVault. Leaving aside theillegality analysis, I find there was no express or implied condition, nor representation or warranty, that the Lease was premised upon thelandlord obtaining proper zoning authorization before occupation. The lack of zoning authorization was an innocent oversight which,once known, StorageVault attempted to remedy. Critically throughout Keystone maintained the ability to continue its businessuninterrupted, just as intended by the Lease.

To the extent that the Agro retail space was delayed, that did not amount to a breach of the Lease. StorageVault was not required by the Lease to agree to any retail use and Agro was a side-business that did not materiallyimpact the 36,000 square feet Keystone leased. None of StorageVault’s actions or difficulties in obtaining the zoning amounted to afundamental breach or repudiation of the Lease. I do not find a fundamental breach in these circumstances particularly as both partieswere able to operate throughout, as intended by the Lease, without any interference by the City.

There is no evidence to demonstrate thatKeystone could not have continued to receive the benefits of the Lease - use of the warehouse space for the intended purpose - until theterm expired on September 30, 2020. [35] I do not accept that StorageVault’s actions, in attempting to meet the City’s requirements for zoning, were unreasonable, nor wasKeystone entitled to consider the Lease repudiated by the Landlord’s action or inaction. Nor do I find that Keystone’s conduct, inultimately vacating the premises almost a year after finding out about the zoning issues, was reasonable.

Rather it was premeditated, inthe-dark-of-the-night, so to speak, to prejudice any ability StorageVault may have had for legal, or other recourse, before Keystone fled. Moreover, I have found Keystone’s after-the-fact excuse the next day was a pretext for their real motivation. [36] In the end result, the Lease is not void ab initio. Further, I do not find it unenforceable. I find Keystone had no right in law torepudiate it. Keystone is bound to the Lease it entered. By not paying rent from September 1, 2019, Keystone is in default of the Lease. [37] Given these findings, the next issue is damages.

Is StorageVault Entitled to Rent for the Balance of the Term? [38] A seminal case respecting repudiation and termination of commercial leases is Highway Properties Ltd. v. Kelly, Douglas andCo. Ltd., (SCC), [1971] SCR 562 (Highway Properties). The Supreme Court of Canada considered what remedieswere available to a landlord for a tenant in default on a lease.

At page 570, the Court explained three recognized mutually exclusivecourses of action a landlord could take and then set out a proposed fourth alternative, “namely that the landlord may elect to terminatethe lease but with notice to the defaulting tenant that damages will be claimed on the footing of present recovery of damages for losingthe benefit of the lease over its unexpired term”. The court went on to adopt this alternative as a viable and pragmatic procedure againsta defaulting tenant. [39] In Corydon Village Mall Ltd. v.

TEL Management Inc. et al., 2015 MBQB 67, (Corydon Village Mall), Pfuetzner J., as she then was, summarized the fourth alternative at para. 82 as: [82] … that decision stands for the principle that a commercial lease should be treated as a contract and not simply as a conveyance,allowing a fuller range of remedies to be available in cases of default. Accordingly, Laskin J. held that where a tenant abandons thepremises and refuses to pay rent, the landlord, in accordance with the doctrine of anticipatory breach, could sue for complete damageswithout waiting for the expiration of the entire term of the lease.

This is consistent with what the landlord did in the case at bar. It issueda statement of claim to enforce its right to receive payments of rent under the lease. [40] On my findings, there is no real dispute that the fourth remedy, established in Highway Properties, applies here. StorageVault isentitled to damages for unpaid rent from September 1, 2019 to September 30, 2020, in the amount of $325,000. [41] Finally there is the issue of mitigation. In Corydon Village Mall, relevant mitigation principles in such a situation were set out atparas. 83 - 84:

[83] The defendants also argued that the landlord’s damages should be limited because it failed to take reasonable steps to mitigate its losses. One of the cases cited by the defendants, Pensionfund Realty Ltd. et al. v. Keg Restaurants of Manitoba Ltd. et al. , 2004 MBQB 206 , 189 Man.R. (2d) 28 , states the following principle respecting the landlord’s duty to mitigate.

McCawley J. states (at para. 44): Highway Properties and other authorities cited by counsel also state that in a commercial context where the tenant has defaulted and the landlord proceeds on the premise that the lease remains in force, that there is no duty on the landlord to mitigate its loss. ... [84] Based on this authority, I find that the landlord had no obligation to mitigate because it never terminated the lease in accordance with the terms of the lease.

However, in the event that I am incorrect and the lease was effectively terminated by the landlord when it issued the statement of claim, I will deal with the issue raised by the defendants of whether the landlord took sufficient steps to mitigate its loss. The onus to prove failure by the landlord to take reasonable steps to mitigate is on the tenant . [ 42 ] Here, despite no legal requirement to do so, the landlord attempted to mitigate but was successful only in a very limited way. As such, the amount of monies, actual mitigation, need be deducted from the judgment.

Alternately, if there had been a duty to mitigate, I would have found StorageVault acted reasonably in so doing; there is no evidence to the contrary. C ONCLUSION [ 43 ] StorageVault is entitled to damages for unpaid rent from September 1, 2019 to September 30, 2020 in the amount of $325,000. To this sum, federal and provincial sales tax must be added, as well as pre-judgment interest at the Court rate. The total at the end of May, 2020 is approximately $368,600. Additional prejudgment interest should be added to the date of this decision, and post judgment interest thereafter, all at the Court rate.

Any funds received in mitigation are to be deducted. I leave it to counsel to complete the final precise calculation of the judgment. [ 44 ] StorageVault is entitled to costs, which may be spoken to if not agreed. [ 45 ] Counsel should finalize and provide a form of judgment, or seek an appointment before me to do so, within the next 30 days. ________________________ J.