Canada: Injunctions To Restrain Breach Of Contract - Stipulated Remedy Clauses - Old Habits Die Hard

INTRODUCTION

The issues that were before the court in 1465152 Ontario Limited v Amexon Development Inc.¹ are substantial and far-reaching, particularly for the commercial real estate leasing industry. The decision is an excellent vehicle for the discussion of important issues relating to injunctions in the context of contractual property rights, equitable extortionate conduct, abuse of process, permissible breaches of contract on the basis of economic efficiency, and the interpretation and enforceability of contractual limitation of remedies clauses, particularly in the context of a claim that can be made under a concurrent tort.

OVERVIEW

The Landlord in Amexon wished to demolish a large commercial building in which the Tenant occupied leased premises, and redevelop the property. The premises constituted approximately 3% of the rentable area of the building. All of the other tenants had left as a result of agreements made with the Landlord, which offered to relocate the Tenant into similar (and better) premises in an adjoining building owned by the Landlord, and to pay compensation. After some bargaining, the Tenant refused to move.

It was the Landlord's position that the only reason for the Tenant's refusal to relocate was its desire to extract as much money from the Landlord as possible. There was nothing unique or special about the leased premises, nor any other reason why the Tenant had any need or compelling interest to remain there. The Landlord argued that damages were an adequate and suitable remedy for the Tenant in the circumstances of the case, that an injunction was an unreasonable and grossly disproportionate remedy, and that in any event the lease contained a stipulated remedy clause that plainly limited the remedies available to the Tenant for breach by the Landlord of any of its obligations under the lease to a claim for damages.

It is the author's view that the decisions made by the application judge and the CA in Amexon conflict with decisions of the Supreme Court of Canada,² the House of Lords,³ the High Court of Australia,⁴ the British Columbia Court of Appeal,⁵ the Alberta Court of Appeal,⁶ and even sister panels of the Ontario Court of Appeal.⁷

FACTUAL BACKGROUND

The leased premises comprised approximately 3750 square feet of space in a Class B 5- storey-plus-basement office building originally constructed circa 1973 with a total rental area of 132,775 square feet. The nominal tenant was the management company for a law firm which included four lawyers and approximately 25 legal assistants and law clerks. The Landlord wished to redevelop the property and was able to negotiate agreements to vacate with all of the other tenants in the building. The Tenant was willing to relocate, so long as it received what it considered adequate compensation.

There were 35 suitable substitute office buildings, with a total of 74 postings for rentable space. The closest buildings were located at the abutting property and were owned by a sister company of the Landlord. Those buildings were of similar design and construction and provided a higher level of amenities. The Landlord ultimately made a proposal that the Tenant relocate to premises in the next-door building, with one year's free rent and other inducements or, if the Tenant were to choose to relocate to premises owned by a third party, the Landlord would provide compensation in the sum of $100,000 to the Tenant. The proposal was not accepted. The Landlord then gave notice to vacate to the Tenant.

Section 13.07 of the lease provided (in relevant part):

Upon application, the Tenant was granted a declaration that the notice to vacate was void and of no force and effect and, to implement that declaration, a permanent injunction to prevent the Landlord from reentering the leased premises and otherwise failing to fulfil its obligations to supply the leased premises with services and utilities and all other goods and services required by the lease.

Download - Injunctions To Restrain Breach Of Contract - Stipulated Remedy Clauses - Old Habits Die Hard

Footnotes

1 2015 ONCA 86, affirming an unreported decision delivered by handwritten endorsement. A separate costs endorsement is reported at 2014 ONSC 4384. An application for leave to appeal to the SCC was dismissed (2015 CanLII 38341, 2015 CarswellOnt 10072), although a settlement had been made between the parties shortly prior to the release of that dismissal. The author was counsel for the Landlord at the Court of Appeal and has a partisan view of the decisions made both there and in the court below.

2 Semelhago v Paramadevan [1996] 2 S.C.R. 415; Highway Properties Limited v Kelly, Douglas and Company Limited [1971] S.C.R. 562; J.G. Collins Insurance Agencies Ltd. v Elsley [1978] 2 S.C.R. 916.

3 Co-operative Insurance Society v Argyll Stores [1998] A.C. 1.

4 Progressive Mailing House Pty. Ltd. v Tabali Pty. Ltd. (1985) 157 CLR 17.

5 Denovan v Lee (1989) 65 D.L.R. (4th) 103; Evergreen Building Ltd. v IBI Leaseholds Ltd. (2005) 262

D.L.R. (4th) 169.

6 Allard v Shaw Communications Inc. 2010 ABCA 316.

7 Rahawanji v Gwendolyn Shop (1973) Ltd. 2011 ONCA 771; Pointe East Windsor Limited v Windsor (City) 2014 ONCA 467.

First published in the Advocates' Quarterly volume 45, Number 4, July 2016. Reproduced by permission of Thomson Reuters Canada Limited.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.