StorageVault Canada Inc v Keystone Western Inc, 2023 MBCA 93

Citation: StorageVault Canada Inc v Keystone Western Inc, 2023 MBCA 93 Date: 20231031 Docket: AI23-30-09876 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Jennifer A. Pfuetzner Madam Justice Lori T. Spivak Mr. Justice James G. Edmond BETWEEN : ) R. M. Beamish and storagevault canada inc. ) A. E. Verhaeghe ) for the Appellant (Plaintiff) Respondent ) ) C. E. Howden and - and - ) N. D. M.

Hamilton ) for the Respondent Keystone western Inc. ) ) Appeal heard and (Defendant) Appellant ) Decision pronounced: ) October 31, 2023 On appeal from 2022 MBKB 206 pfuetzner JA (for the Court) : [ 1 ] The defendant appealed a judgment, granted after a trial, ordering it to pay the plaintiff, its former landlord, just over $344,000 in respect of unpaid rent, GST and interest (less a mitigation credit). The defendant raised several arguments in support of its appeal. [ 2 ] At the hearing of the appeal, we dismissed the appeal with brief reasons to follow.

These are those reasons. [ 3 ] The defendant entered into a commercial lease (the lease) with the plaintiff in August 2017 after having occupied the leased premises as a subtenant for some time. Unbeknownst to either party, the building was not designated by the City of Winnipeg as a multi-tenant property as is required under City of Winnipeg, by-law No 4555/87, The Winnipeg Building By-law (15 December 2022) [the by-law]. [ 4 ] When this became known in or about September 2018, the plaintiff took steps to rectify the issue.

The defendant continued to make all payments in accordance with the lease until it vacated the premises in late August 2019, and then failed to pay rent for the remainder of the term of the lease—being until September 30, 2020.

At the time that the defendant moved out, it took the position that compliance with the by-law was “a necessary and fundamental precondition to the operation of the Lease” and considered the lease to be at an end. [ 5 ] The plaintiff unsuccessfully sought a new tenant and ultimately converted the space to its own use from which it earned a modest amount of income during the final month or two of the lease.

The plaintiff filed its statement of claim on November 7, 2019 seeking unpaid rent for the entire term of the lease. [ 6 ] Turning to the defendant’s grounds of appeal, the defendant’s first submission is that, during the course of the trial, the trial judge exhibited a reasonable apprehension of bias against it and appeared to have prejudged the case by unduly interfering in and challenging the defendant’s evidence and intended arguments. [ 7 ] The legal test for reasonable apprehension of bias is well-known: “ [W]hat would an informed person, viewing the

matter realistically and practically — and having thought the matter through — conclude. Would he think that it is more likely than not that (the decision-maker), whether consciously or unconsciously, would not decide fairly ” ( Yukon Francophone School Board, Education Area #23 v Yukon (Attorney General) , 2015 SCC 25 at para 20 ). [ 8 ] Having carefully considered the impugned comments of the trial judge in the context of the entire record, we are not persuaded that he demonstrated a reasonable apprehension of bias or prejudgment of the matter.

The trial judge was entitled to flag issues of concern to counsel so that they could be addressed during the course of the trial. Throughout, he indicated that he had not prejudged or made a determination of the case. [ 9 ] Second, the defendant asserts that the trial judge made several errors in his assessment of the evidence. We are not convinced that the trial judge made any palpable and overriding errors in his factual findings or in the inferences he drew.

Moreover, even if the defendant has identified errors in how the various permits and designations were referred to in both the evidence and in the reasons, any such errors are not material to the outcome. [ 10 ] Third, we are not persuaded by the defendant’s submissions that the trial judge erred in failing to find that compliance with the by-law was a condition precedent to the lease or that he erred in his alternative finding that the defendant had waived any such condition.

As previously indicated, neither party was aware of the non-compliance at the time the lease was entered into; the defendant was already in occupation of the premises at that time and it remained there after the non-compliance was discovered. [ 11 ] Next, the defendant objects to the manner in which the trial judge dealt with its argument that the lease should be declared void ab initio pursuant to the doctrine of illegality of contracts. Notably, it does not take issue with the trial judge’s statement on the modern approach to the doctrine of illegality, which favours a flexible weighing of factors.

As stated in Wang v Jiang , 2021 BCCA 132 at para 50 , those factors include: . . . . . . [T]he 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 [SM Waddams, The Law of Contracts , 6th ed (Toronto: Canada Law Book, 2010) at paras 573-80]. . . . See also Transport North American Express Inc v New Solutions Financial Corp , 2004 SCC 7 at paras 22-24 .

Rather, the defendant maintains that the trial judge failed to consider an important factor in his analysis—namely, the objects and purposes of the by-law, which are to ensure the safety of the occupants of the building. [ 12 ] In our view, the trial judge made no palpable and overriding errors in his consideration of the relevant factors and he was entitled to decline to “find the Lease void or unenforceable based on principles of illegality” (at para 32).

Indeed, the trial judge specifically identified and referred to the objectives of the by-law in his reasons (see para 29). [ 13 ] Finally, we are not convinced by the defendant’s argument that the trial judge erred in finding that the plaintiff had taken reasonable steps to mitigate once it became aware that the defendant had vacated the premises and ceased the payment of rent. In our view, his finding is reasonably supported by the record. [ 14 ] In

summary, we were not persuaded that the trial judge exhibited a reasonable apprehension of bias, erred in law or made any errors of fact or of mixed fact and law that would invite appellate intervention. The appeal was therefore dismissed with costs. JA JA JA