Décision

Vakis c. Java U Group Inc.				2013 QCCS 5759
JF 0697    SUPERIOR COURT
CANADA
PROVINCE OF QUEBEC
DISTRICT OF			MONTREAL
No:		500-17-044958-083
DATE:	November 19, 2013
______________________________________________________________________
IN THE PRESENCE OF THE HONOURABLE WILLIAM FRAIBERG, J.S.C.
______________________________________________________________________
CHRISTIAN VAKIS
Plaintiff/Cross-Defendant
v.
JAVA U GROUP INC.
Defendant/Cross-Plaintiff
______________________________________________________________________
JUDGMENT
______________________________________________________________________

FACTS

[1]   The Plaintiff Christian Vadis, a retired pharmacist who owns a building (the “building”) located at 5001 Park Avenue in the Montreal borough of Plateau Mont-Royal, presents a claim for lost rent and other damages in the aggregate amount of $109,802.50 against the defendant company Java U Group Inc. (“Java U”), the owner of a chain of coffee bar restaurants, on the ground of the latter’s unilateral cancellation of an offer to lease premises in the building dated June 1, 2006 (the “Offer”). 

 

 

[2]         The premises consisted of 1,800 square feet on the ground floor of the building, a basement and a V-shaped 10-feet wide band (the “terrace”) paved with brick coloured pavés unis (manufactured interlocking stones) located between the inner edge of the public sidewalk and the west and south walls of the building that face Park Avenue and St. Joseph Boulevard respectively.[1]

[3]         Java U claims that Mr. Vakis could not satisfy his obligation to provide enjoyment of the premises for their intended purpose[2] since the borough authorities would not issue it a permit to use the terrace as a café-terrasse, an essential condition of the offer.

[4]         It cross-demands for the return of a $5,000 deposit and for damages in the amount of $28,404.09, comprising the cost of demolishing the premises in the amount of $18,404.09 and trouble and inconvenience in the amount of $10,000.

[5]         Mr. Vakis contends that use of the terrace was not fundamental to the prospective lease; only the area inside the building as a restaurant was.  The clause allowing the use of the terrace was merely supplementary and permissive, permitting it only if the municipal authorities approved, but with no guarantee that they would. 

[6]         There are therefore two essential questions in this case - whether Mr. Vakis guaranteed that the terrace could be used as part of the restaurant operations, and if Java U’s cancellation of the offer was unfounded because he did not, whether he sufficiently mitigated the resulting damages, given his claim for 19 months of lost rent.   

FACTS

[7]         The premises were occupied as a pharmacy since the early 1930’s. 

[8]         Mr. Vadis took them over from the previous pharmacist in 1972 and bought the building in 1975.

[9]         In 1998, he leased the premises to Apotékon Inc., a company owned by Mr. Philippe Lemieux, pharmacist, who continued to operate a pharmacy there under the Uniprix banner, while Mr. Vakis moved his stock to another pharmacy that he owned on Jean Talon Street.

[10]        In April 2006, Apotékon purchased its own building across the street on Park Avenue with the intention of moving its pharmacy there and tried to sublet the premises, placing an À Louer sign in the window for that purpose.  

[11]        Jeffrey Itzcovitch, then the president of Java U, noticed the sign while driving by on Park Avenue.   

[12]        When he still saw it a week later, he decided to enquire within.

[13]        He was interested in the premises as a potential Java U café location because the building was on a corner and the sidewalks were very wide on both sides.   

[14]        He met Mr. Lemieux, who told him the borough sector where the building was located was zoned for all types of retail operations and he invited him to submit an offer of sublease.

[15]        Mr. Itzcovitch had his office prepare one dated April 25, 2006 (P-5) and he emailed it to Mr. Lemieux, who forwarded it to his lawyer, Me. François Marchand, who on May 2 2006 faxed it to Mr. Vakis’s lawyer, Me. Armando Fargnoli.

[16]        Me. Fargnoli then invited Mr. Itzcovitch to meet at his office on May 9, 2006.

[17]        There, Mr. Itzcovitch informed Me. Fargnoli that the location was attractive because of its potential for a corner terrace café.

[18]        According to Mr. Itzcovitch, Me. Fargnoli told him the terrace was available for lease on both sides and that if Java U wanted it, it would have to apply for a municipal permit.

[19]        On May 18, 2006, Messrs. Itzcovitch and Fargnoli met at the premises, the former accompanied by Pascale Vaillancourt, an interior designer who had designed many Java U locations.  

[20]        Ms. Vaillancourt testified that she measured the available linear feet for counters and that Me. Fargnoli showed her the terrace area.

[21]        She recalls asking Me. Fargnoli if Mr. Vakis would allow Java U to make a door in the wall facing Park Avenue in order to allow direct access to the terrace on that side and that Me. Fargnoli replied affirmatively.

[22]        For his part, Me. Fargnoli recalls that he informed Java U’s representatives that they would first have to check with the municipal authorities.  He himself did not know what the zoning was since he had not checked.

[23]        Ms. Vaillancourt did not affirm that Me. Fargnoli made any representation concerning the zoning.  

[24]        Meanwhile, Apotékon had moved out on or about May 12, 2006, having paid the rent for that month. 

[25]        On that date, one of its attorneys sent a fax message to Me. Fargnoli informing him that the key to the premises was available for Mr. Vakis to pick up at Mr. Lemieux‘s new pharmacy across the street (P-4).

[26]        Since another chain, Multi-Restaurants Inc. (“Multi”) was also interested in the premises, Me. Fargnoli asked Mr. Itzcovitch to send him a cheque for $5,000 in trust so that he would suspend negotiations with Multi while Java U checked with the municipal authorities to see if the intended use was permitted under the zoning by-law. 

[27]        Me. Fargnoli received the cheque by messenger the next day, May 19, 2006. 

[28]        Five days later, Mr. Itzcovitch phoned Me. Fargnoli and according to the latter, informed him that he had sent someone to the borough office to verify the permitted use and that he wanted to receive an offer to lease as soon as possible, since he was about to leave on vacation and wanted to have occupancy of the premises on June 1, 2006.  The parties would sign a formal lease later. 

[29]        To save time, and because he knew its terms were acceptable to Java U, Me. Fargnoli used the latter’s sublease offer to Apotékon dated April 25, 2006 (P-5) that Me. Marchand had sent him on May 2 as a model, modifying it to increase the rent and more pertinently for this case, by deleting the last two sentences of the first paragraph of section 5, the complete text of which read as follows:     

5. The premises shall be used solely for the operation of a java u café (sic).  A sine qua non condition of this offer is that the Tenant’s use is permitted under governing municipal by-laws or legislation.  Should the Tenant’s use not be permitted, this offer to lease and any subsequent lease shall be null and void without penalty. 

[30]        Section 5, renumbered as section 7, as contained in the offer (P-2) now read as follows:

7. Use of premises

A)  The premises shall be used solely for the operation of a java u café (sic). If landlord (sic) insurance should increase because of this, tenant will pay the increase;

B) The tenant shall have the right to use the property seven days a week, twenty-four hours a day.  

[31]        The premises are described in section 1 of both the offer and the sublease offer (P-5) thus:

1.    Location of property

A local (sic) having a square footage of approximately 1800 square feet with a terrace (& basement)[3] located at 5001 Park Avenue.

[32]        Section 11 of the offer was identical to section 9 of the offer of sublease, reading as follows:

Subject only to municipal approbation, the tenant may, at its expense, install a terrace exclusive to its own use without incremental base rent or additional rent;  

[33]        By the time Me. Fargnoli had prepared the offer, Mr. Itzcovitch had left for Las Vegas so Me. Fargnoli emailed it to him.

[34]        Mr. Itzcovitch phoned Me. Fargnoli to request only one change - that the delay to cure tenant’s defaults in section 13 be increased to 30 days from 15 days, a change that Me. Fargnoli readily accepted.

[35]        He emailed the offer with this revision to Mr. Itzcovitch, who signed it and faxed it back, whereupon he had Mr. Vakis come to his office to sign it on June 1, 2006. 

[36]        Java U’s representative then picked up the key to the premises.

[37]        Shortly thereafter, Mr. Vakis called Me. Fargnoli to complain that Java U’s contractor had begun to demolish the interior of the premises.  

[38]        Later, Me. Fargnoli received a telephone call from Mr. Itzcovitch, who complained about a leak into the premises from the apartment above and that some of the wires exposed by the demolition were not according to code and that he did not want Java U to have to replace them.

[39]        Me. Fargnoli then convened a meeting at the premises on July 5, 2006, which he attended with Mr. Vakis, Mr. Itzcovitch, one of the latter’s associates and a representative of Java U’s contractor.    

[40]        Me. Fargnoli observed that the premises had been gutted. 

[41]        At the meeting, Mr. Vakis agreed to pay Java U for having its contractor repair the leak and install electric cable that conformed to code.

[42]        Meanwhile, even though Java U had turned the premises into an empty shell, devoid of walls, ceiling and floor, as well as heating and air conditioning systems, it had still not received confirmation from the borough authorities that its intended use would be in conformity with the zoning by-law.  

[43]        After the on-site meeting of May 19, 2006, 11 days before the offer was signed, Pascale Vaillancourt had her firm prepare an extensive construction plan for the interior, which also showed tables and chairs in the terrace area outside.  The plan was accompanied with a display board of colours and materials.

[44]        She transmitted the plan to Java U’s architect so that he could verify its conformity to the building code and the borough zoning by-law 01-277.

[45]        A few weeks later, the architect phoned her to announce that the zoning by-law did not permit the operation of a terrace café.

[46]        She immediately called Mr. Itzcovitch with the bad news, and he told her to stop all work on the project as a result.

[47]        After the site meeting of July 5, 2006, Me. Fargnoli had no communication with Mr. Itzcovitch until around August 16, 2006, just after his return from vacation.  He returned the latter’s call made in his absence.

[48]        Mr. Itzcovitch told him that there was a problem with the borough authorities, who would not allow the operation of a terrace café at the premises.

[49]        Me. Fargnoli testified that he expressed surprise, reminding Mr. Itzcovitch that the latter had informed him shortly before he prepared the offer that he had checked with the city and verified the permitted use.

[50]        According to Me. Fargnoli, Mr. Itzcovitch told him that he had only checked about the use of the interior of the premises as a restaurant, but that he had forgotten to ask about the use of the terrace.  

[51]        As a result, he was in trouble with his partners.  He told Me. Fargnoli he therefore wanted to cancel the offer and that Java U would pay Mr. Vakis a few thousand dollars to replace the gyproc for the walls and ceiling.

[52]        Me. Fargnoli refused to yield, insisting that Java U was bound by the offer and was responsible if it had signed it without first thoroughly verifying the permitted use under the zoning by-law.

[53]        On August 22, 2006 Java U’s attorney, Me. Laurent Debrun, sent Mr. Vakis a notice of default (D-1) advising him that it considered the offer null and void ‘’due to the complete frustration of its core consideration’’ and calling upon him to return the $5,000 deposit in order to avoid being sued for ‘’the unnecessary expenses incurred in relation to this failed business venture’’.    

[54]        The essence of the complaint, subsequently reiterated throughout these proceedings, was expressed on page 1:

Before preparing this Offer, our client made it very clear to you that the availability of the terrace as part of the commercial operation of the Java U Restaurant-Café-Bar was a condition sine qua non to this Offer.  Without a terrace, the location was and is of no interest to our client.  

You represented to our client that our client could operate the terrace subject only to the approbation of its design and layout by the City. This is confirmed in the description of the leased premises in the offer to Lease.

Our client was just informed that the City of Montreal, Borough of Plateau Mont-Royal has a by-law which prohibits any commercial use of a terrace in your building (Regulation 01-277).

Because of the classification of this building, this terrace cannot be operated and the building is of no interest or value to our client.

Had it not been for this misleading statement made to our client it would never have made to you this offer to Lease.

[55]        Java U’s attorney wrote follow-up letters on September 1 and September 8, 2006 reiterating its demand.

[56]        The letter of the 8^th replied to Me. Fargnoli’s letter of September 5, 2006 (D-5), which stated:

It is my client’s position that yours failed to carry out the proper due diligence and as such, is solely responsible for his (sic) own damages as well as those of my client.

I also do not understand why your client thought it wise to gut the place prior to obtaining confirmation that the city permitted the terrace since it is stipulated in paragraph 11 of the offer.

[57]        Me. Debrun retorted:

Before our client thought it wise to ‘’gut the place’’ prior to obtaining confirmation that the City permitted the terrace, it is solely on the strength of your clear representation to the effect that you had knowledge of the fact that the City allowed the use of the terrace (which is why the terrace was made part of the leased premises in the offer to lease).   

[58]        He added,

As you can see, there are serious contradictions between the parties’ respective recollection of the relevant events.

[59]        He concluded:

We reiterate for the very last time that our client demands the return of the $5,000 deposit made and that, should this sum be credited to our client forthwith, he (sic) will grant your client a release from any claims with respect to wasted expenditures.     

[60]        Me. Fargnoli’s reply of September 12, 2006 was brief.  He stated he would reply to Me. Debrun’s letter of September 5 (he meant September 8) ‘’at another time’’, and that Mr. Itzcovitch should return the key to the premises to him as soon as possible so that they could be shown to a potential tenant.

[61]        The key was promptly returned.

[62]        Realizing that Java U was never coming back, Mr. Vakis placed an À Louer sign in the window of the premises, referring all inquiries to Me. Fargnoli.  The latter testified that he received a few inquires by telephone as a result, without being specific.

[63]        He also received a written overture from Multi, the operator of the ‘’Pik-Nik’’ chain of restaurants, on September 15, 2006 (P-11) and one from an agent, Richard Gareau, on behalf of another restaurant chain, Café Suprême, on October 17, 2006 (P-10).  

[64]        Multi attached a draft offer (the ‘’Multi offer’’).

[65]        It provided for a 10-year term, monthly rent of $4,000, increasing to $4,100 from May to September if a terrace café could be operated, and a five-year option to renew at a market rent to be negotiated in good faith.

[66]        For Café Suprême, Mr. Gareau proposed a term of 10 years at a monthly rent of $4,250 for the first five years and of $4,958 for the second five years, with two five-year options to renew at a market rent.

[67]        Mr. Vakis did not take up either proposal.

[68]        Prior to the offer, Mr. Vakis had received an undated draft offer from a numbered company to lease the premises as a restaurant bar under the name ‘’Masai’’, likewise for ten years, with two five year renewal options, at a monthly rent of $4,800 the first year, increasing by $200 each subsequent year of the original term, and to be negotiated for the renewal terms.

[69]        He was not interested.

[70]        After the approach on behalf of Café Suprême, the next overture came eight months later, from the Second Cup chain on June 21, 2007 (P-9).

[71]        It proposed a 10-year term at a monthly rental of $4,650 for the first five years and $5,100 for the second five years and two five year renewal options at a rent to be negotiated, or decided by arbitration failing agreement.

[72]         However, Mr. Vakis turned down this offer too.  He was not interested in potential aggregate terms of 20 years.  Moreover, Second Cup required him to make expensive improvements but still wanted a 90-day rent-free fixturing period and two months additional free rent.

[73]        Finally, on September 14, 2007 Mr. Vakis signed a lease with 9186-3951 Quebec Inc. (P-8) to use the premises as a clothing and accessories boutique for a term of five years at a monthly rent of $4,200 increasing by the Consumer Price Index (‘’CPI’’) each year, with an option to renew for three years at a rent increased by the CPI plus one percent.

[74]         The lease also provided for every second month of the first year to be rent-free in consideration of the tenant making around $80,000 of renovations, although the lease did not provide for any accounting of the cost of the improvements.

[75]        Mr. Vakis waited another eight months, until May 21, 2008, before he had Me. Fargnoli write to Java U to hold the latter responsible for his loss.  He claimed 21 months of arrears of rent at the lower rate that Apotékon had paid rather than as stipulated in the offer, plus the six months of free rent he had agreed to allow 9186-3591 Quebec Inc., likewise at the rate Apotékon would have paid during the same period.

[76]        On August 28, 2007, Mr. Vakis sued Java U for 13 months of arrears and six months of free rent, this time calculated at the $4,600 monthly rate that Java U would have had to pay pursuant to the offer.  He also claimed the electricity costs and non-residential taxes that Java U would have had to pay in those periods.

[77]        During the trial, the Court wondered aloud why neither party had actually researched the zoning by-law 01-277 of the Plateau Mont-Royal borough to ascertain whether the premises could be operated as a restaurant to begin with, since if not, the offer would be void as against directive public order, regardless of any contemplated use of the terrace area.

[78]        This prompted Java U’s attorney to request a suspension of the trial so that a licensed land surveyor could be engaged to measure the distance between the premises and the closest restaurant, since he had ascertained that in June 2006 the zoning by-law did not allow restaurants to be located within 25 meters of each other and he believed that a restaurant directly across Park Avenue was less than that distance from the premises.

[79]        The Court rejected this proposal, considering that the action was pending for more than five years without such a claim ever being made, and because the trial was almost over, the extra time and cost entailed would not respect the principle of proportionality.

[80]        The Court did, however, agree to delay taking the case under advisement for a month so as to permit Java U to find and file documentary proof in the form of an occupancy permit showing that any other premises in the building were occupied as a restaurant in June 2006, since Java U’s attorney contended that there was a sushi restaurant next door.

[81]        In the event that such proof was produced by October 28, 2013, the Court agreed to re-open the hearing, figuring that this was a simple and inexpensive way to avoid an injustice if the premises could never have been a restaurant to start with.

[82]         Even in that eventuality, the Court warned that there would be some sanction in the form of extra-judicial costs being awarded to Mr. Vakis because of the last-minute introduction of the proof and five years of wasted litigation in the result.

[83]        Ten days before the deadline, Java U’s attorney introduced a motion to amend its Re-amended Plea and Cross-Demand in which it alleged that the permitted use of the next-door premises located at 5011A Park Avenue in 2006 was that of Épicerie, commerce produits alimentaires sushi pour emporter - but not a restaurant.  

[84]        On the other hand, Java U alleged that premises across the street located at 5008 Park Avenue, located less than 25 meters from the building (at 5001) held a Certificat d’occupation dated January 20, 2006 indicating Restaurant and Café-terrasse as the authorized uses.

[85]        To back up its contention that the premises were less than 25 meters from an existing restaurant, Java U also filed a report dated October 4, 2013 from Jean-Louis Chénard, land surveyor, in which he certified that the width of Park Avenue, designated as lot 2 135 854, Quebec cadastre, is 24.38 meters, running between lot 1 868 134, Quebec cadastre, replacing lot 12-2-58, cadastre of the Village of Côte-Saint-Louis, on which civic number 5008 is located, and lot 1 868 153, Quebec cadastre, replacing lot 12-4-1, cadastre of the Village of Côte-Saint-Louis, on which the building is located.

[86]        Java U would therefore have the Court conclude, if the amendment were authorized, that the premises were less than 25 meters from another restaurant in June 2006 and therefore could not be used for that purpose, thereby rendering the offer void.            

CLAIMS OF THE PARTIES

Mr. Vakis

[87]        The offer is the equivalent of a lease.

[88]        The offer warns Java U that the use of the terrace as part of its proposed restaurant is subject to the approval of the municipal authorities and the provision of the interior space alone satisfies Mr. Vakis’s warranty that the premises can be used for their intended purpose.

[89]        Me. Fargnoli never represented on his behalf that the terrace could be used for any commercial purpose, in contradiction of the offer.

[90]        He made a reasonable effort to re-lease the premises by putting a sign in the window, thereby satisfying his obligation to mitigate his damages pursuant to art. 1479 C.C.Q.

Java U

[91]        Mr. Vakis should have sued Apotékon for loss of rent because the latter abandoned the premises in May 2006 while litigation was already pending between it and him.

[92]        Me. Fargnoli assured its representatives verbally that the terrace could be used as part of a restaurant café.

[93]        Since such use was an essential condition of the proposed lease, Me. Fargnoli as an attorney had a duty to inform Java U that he did not know whether the use would be permitted by the municipal authorities and that it was therefore incumbent on Java U to check.  

[94]        Mr. Itzcovitch could reasonably believe that the installation of a terrace without incremental rent, ‘’subject only to municipal approbation’’, meant that such approval was limited to the design and layout of the terrace, i.e. how it could be used for that purpose, not whether it could be used for that purpose.

[95]        The clause was at the least ambiguous and Me. Fargnoli therefore had a duty to give Java U a specific warning.

[96]         Mr. Itzcovitch could reasonably believe that the approval of the municipal authorities in section 11 of the offer referred to design and layout only since section 5 of its earlier sublease offer, wherein section 9 was identical to section 11, had provided that if the tenant’s use of the premises, including the terrace, was not permitted municipally, the offer and any subsequent lease would be null and void.  

[97]        Java U is entitled to return of the $5,000 deposit and damages in the amount of $28,404.09, comprising the cost of demolishing the premises in the amount of $18,404.09 and trouble and inconvenience in the amount of $10,000 because of Me. Fargnoli’s negative misrepresentation that use of the terrace as an outdoor café would be permitted by the municipal authorities.

[98]        Java U is entitled to at least the annulment of the offer and the restitution of the deposit, if not damages, because Mr. Itzcovitch’s belief that the terrace would be permitted by the municipal authorities was an excusable error as to an element of the contract that was essential in determining his consent by virtue of art. 1400 C.C.Q.

[99]        Mr. Vakis’s silence between Me. Fargnoli’s letter of September 12, 2006 and his notice of default of May 21, 2008, - including the failure to respond to Me. Debrun’s email of November 6, 2006, once more asking for the return of the deposit and proposing another possible restaurant tenant known to Java U who would be content with the interior alone for less rent - deprived Java U of a chance to mitigate the damages and was tacit acceptance by Mr. Vakis of a ‘’walk-away deal’’, whereby he kept the deposit and could re-let the premises but would not claim damages.     

[100]     In all events, considering the commercial attractiveness of the premises and the channels of publicity available, Mr. Vakis failed to mitigate his damages as he could have.

ISSUES

[101]     The Court must decide the questions set out below.

[102]     A preliminary question: should the Court entertain Java U’s 11^th hour motion to amend its Re-amended Plea and Cross-Demand so as to permit reopening the hearing in order to try its allegation that the premises were less than 25 meters from a restaurant in June 2006 and therefore could not also be used for that purpose, rendering the offer void?

[103]     Was the offer the equivalent of a lease?

[104]     Should Mr. Vakis have sued Apotékon instead of Java U for his loss?

[105]     Did Me. Fargnoli negligently represent to any representative of Java U that the zoning by-law permitted the operation of a terrace café at the premises, thereby entitling Java U to annulment of the offer, return of the deposit and damages?

[106]     Does section 11 of the offer confine municipal approval of a terrace café to its design and layout rather than whether it can be operated at all?

[107]     Did Mr. Itzcovitch’s professed belief that the operation of a terrace café was permitted by the zoning by-law constitute an excusable error as to an essential element of the contract entitling Java U to demand its resolution and the return of the deposit? 

[108]     Did Mr. Vakis tacitly limit his recourse to the retention of the deposit by not stating his position until May 21, 2008, 21 months after Java U notified him that it considered the offer void?  

[109]     Did Mr. Vakis take reasonable measures to mitigate his damages?

[110]     What are Mr. Vakis’s recoverable damages?

 

 

DISCUSSION

Should the hearing be reopened to determine whether the offer was void because the premises were less than 25 meters from an existing restaurant in June 2006?

[111]     The Court believes it would be unfair and a waste of resources to reopen the hearing to consider an allegation that could have been made years before and which the Court believes is unfounded anyway, since the 25-meter limit of the zoning by-law is not between the boundary lines of the properties on which restaurants may be located but between the restaurant operations themselves.

[112]     In the present case, the 24.38 meter width of the public way ended at the western edge of the terrace of the building facing Park Avenue.

[113]     There could be no restaurant operation in the terrace area, but it would be confined to the building, an additional 10 feet from the public way. 

[114]     A restaurant in the building would therefore not have contravened section 240 of the zoning by-law by being located within 25 meters of an existing restaurant.

[115]     For these reasons, the Court will not hear Java U’s motion to amend.

Was the offer the equivalent of a lease?

[116]     The offer had the essential elements of an enforceable lease - a lessor, a lessee, premises and their intended use, a rent and a term - even if the parties agreed to enter into a formal lease later.

[117]     Added to this was the delivery and occupancy of the premises. 

[118]     Just as art. 1710 C.C.Q. makes a promise of sale with delivery and possession equivalent to a sale, so too is a promise of lease, likewise accompanied, equivalent to a lease.   

[119]     Our courts have gone even further, dispensing with the requirements of delivery and possession to assimilate a promise of lease to a lease if the essential terms of the latter are present.[4]

Should Mr. Vakis have sued Apotékon instead of Java U?

[120]     The long-standing litigation with Apotékon was essentially a claim by the latter for damages arising from a flooding in the building.

 

[121]     The litigation was settled in June 2007, with mutual releases by the parties.   

[122]     Apotékon’s abandonment of the premises in May 2006 meant that Mr. Vakis was free to re-lease them to third parties and since he accepted the offer from Java U on June 1, 2006 and the latter took immediate occupancy, he could have no claim for lost rental against Apotékon after that date as a new lease was in place.

[123]     He could only claim arrears prior to June 1 and any difference in rent after that date for the balance of the term, neither of which had anything to do with Java U.

Did Me. Fargnoli negligently represent to any representative of Java U that the zoning by-law permitted the operation of a café terrace?

[124]     Since Mr. Vakis did not object to testimony contradicting or varying section 11 of the offer, the Court must assess the probative value of the testimony it heard from the three individuals who dealt with each other prior to its signature.

[125]     The testimony of the designer, Ms. Vaillancourt, is entirely neutral on the question.  She did not affirm that she heard Me. Fargnoli make any such representation at the on-site meeting of May 18, 2006, only that he indicated the location of the terrace.

[126]     So the question comes down to the whether the Court should believe Mr. Itzcovitch or Me. Fargnoli.

[127]     The Court believes Me. Fargnoli for a variety of reasons, none of which is conclusive but which are persuasive in the aggregate. 

[128]     Me. Fargnoli did not check the zoning but understood that Java U would do so in the 12 days before signing the offer, the purpose of the $5,000 deposit being to give it the time to do so.

[129]     In its Plea, Java U alleged that Me. Fargnoli made the representation to no fewer than four individuals, not counting Mr. Itzcovitch.

[130]     The Court draws a negative inference from the fact that none of these individuals except Ms. Vaillancourt testified and she failed to corroborate the allegation.

[131]     As for Mr. Itzcovitch, his testimony is inconsistent with the surrounding factual circumstances.

[132]     On the one hand, his office prepared an offer of sublease for submission to Mr. Lemieux of Apotékon after the latter met him on the premises and informed him that the premises were located in a sector that allowed their retail use; but it is apparent that he had no assurances at that time that the terrace could be used as an outdoor extension of a restaurant.

[133]     This would explain why section 9 of the offer of sublease (P-5) made the installation of a terrace ‘’subject only to municipal approbations (sic)’’.  Such language would convey that getting the approval was not assured.

[134]     On the other hand, if the use of the terrace was so crucial and Me. Fargnoli had assured him in their telephone conversation of May 9, 2006, their meeting of May 10, 2006, their meeting of May 18, 2006 or their telephone conversation of May 24, 2006 that the municipal authorities would allow the use of the terrace for restaurant purposes, why would he, an experienced businessman claiming to have built 30 Java U locations, have signed an offer that clearly allowed for the possibility that they would not?

[135]     Indeed, the Court carefully reviewed its notes of Mr. Itzcovitch’s testimony and the most that can be ascertained is that he affirmed that Me. Fargnoli told him that the terrace was available on both sides of the building but that Java U would have to apply for and pay for ‘’the permit’’.

[136]     It does not see in such a representation anything contradicting the terms of the offer signed 23 days later at Mr. Itzcovitch’s insistence.  Yes, the terrace was available but whether it could be used would depend on municipal permission.                 

Does section 11 of the offer confine municipal approval of a terrace café to its design and layout rather than to whether it could be used commercially at all?

[137]     Considering the offer as a whole with a view to reading its provisions in relation to each other and so that they have some effect, the Court believes that making the terrace part of the premises without incremental rent would depend on whether the municipal authorities permitted its use.

[138]     In that case only, the lessor would likewise allow such use by Java U but there was manifestly no guarantee that the borough would issue an occupancy permit to allow it. 

[139]     On the other hand, there was no qualification at all as to the use of the interior premises.

[140]     Seen in that context, the reference to municipal approbation had to mean something more than just design and layout.  If it meant only that, the qualification would have had to extend to the premises in their entirety and would have been redundant.

[141]     That is because any occupation has to conform to municipal by-laws governing the mode of occupation as opposed to the kind of occupation.

[142]     It would not therefore have been necessary to single out the terrace versus the rest of the premises as requiring municipal approbation unless something more than modalities of occupation was intended.

[143]     Hence, it is the ‘’installation’’ of the terrace, i.e. its entirety as an operation that the borough must permit.  Otherwise, section 11 would have no purpose since the lessor’s warranty of permitted use under art 1854 C.C.Q. would apply to it as it does to the rest of the premises without that provision.      

Did Mr. Itzcovitch’s professed belief that the operation of a terrace café was permitted by the zoning by-law constitute an excusable error as to an essential element of the contract entitling Java U to demand its resolution and the return of the deposit? 

[144]     It should be noted to begin with that Mr. Itzcovitch never testified as to any particular understanding of section 11 that he held.  For example, the notion that he would have understood it to mean that municipal approval of the design and layout of the terrace was required and nothing more did not emanate from him but from Java U’s attorney.  It is a hypothesis having no foundation either in his testimony or in the text.  

[145]     In other words, Mr. Itzcovitch never claimed he was in error as to what the text meant.  His testimony was rather that section 11 was overridden by Me. Fargnoli’s express verbal assurance that municipal approval of the terrace would be obtained.  

[146]     As noted, Me. Fargnoli gave no such assurance in the estimation of the Court.

[147]     Assuming, however, that Mr. Itzcovitch mistakenly understood section 11 in the way Java U’s attorney suggests, was the error excusable?

[148]     In the view of the Court, it was not.  Mr. Itzcovitch was a businessman with deep experience in the building and operation of café restaurants in Montreal.  He would have known that terrace cafés were not permitted in certain sectors, and acting prudently, he would not have signed the offer, much less demolished the interior of the premises, until he had verified with the borough that the intended use would be permitted.   

[149]     Given the text of section 11 - drafted by his office - and his own knowledge of the domain, Mr. Itzcovitch’s error, if there was one, was inexcusable.  He was the victim of his own lack of circumspection.   

Did Mr. Vakis tacitly limit his recourse to the retention of the deposit by not stating his position until May 21, 2008, 21 months after Java U notified him that it considered the offer void?  

[150]     Mr. Vakis’s delay to claim damages until May 21, 2008 is not fatal to his claim.

[151]     Firstly, even though Me. Fargnoli wrote to Me. Debrun on September 12, 2006 in reply to his letter of September 8, 2006 that he would make Mr. Vakis’s position known later, nothing in the earlier letter indicated that failing to respond to it by any particular date would mean that Mr. Vakis accepted that his recourse would be limited to retention of the deposit.

[152]     Me. Debrun could not unilaterally impose such a result and the law does not do so either.

[153]     In fact, the letter says the opposite: namely that the return of the deposit ‘’forthwith’’ would result in Java U’s granting a release to Mr. Vakis from its own claim in damages.

[154]     The only effect that the delay to send a notice of default has is to retard Java U’s obligation to pay damages, inclusive of interest and the additional indemnity.

[155]     Because Me. Fargnoli changed the calculation of Mr. Vakis’s claim between May 21, 2008 and August 28, 2008, when the proceedings commenced, the Court will consider the later date as the one on which Java U was put in default.[5]    

Did Mr. Vakis take reasonable measures to mitigate his damages?

[156]     This is a question that an abundant jurisprudence dealing with landlord’s claims for damages shows is highly contextual, every case turning on its own facts.

[157]     In general, it may be stated that landlords and tenants obliged to re-let or to re-locate by reason of the other party’s default will be permitted to take the time and use the means of prospection that are appropriate to the nature of the premises and the size of the market involved.   

[158]     The courts will be more indulgent when the proof shows that the use, situation or configuration of the premises is of interest to a limited clientele or that they are located in a small population centre.

[159]     In a smaller centre with limited media outlets, posting a sign on the premises has been held to be a reasonable effort at mitigation, the courts accepting that publishing newspaper ads or engaging a broker would not likely have resulted in re-letting the premises sooner.

[160]     If the premises are difficult to rent by reason of their nature or the state of the market, once appropriate means of publicity have been employed, the courts will be prepared to accept longer delays.

[161]     It is not taking a long time to re-let or to re-locate per se that suggests a failure to mitigate, but taking a long time to employ the reasonable means of prospection that are available.

 

[162]     Thus in Locations Le Carrefour Laval inc. c. Europe Cosmétiques inc.,[6]  for example, Emery J. was guided by proof of the inherent difficulty of leasing unusual premises in awarding 13 months of lost rent to the plaintiff shopping centre because the defendant tenant failed to honour an offer to lease space on two floors for use as a day spa:

91. Quant à cette obligation de mitiger ces dommages et de faire tous les efforts raisonnables pour tenter de relouer l'espace commercial laissé vacant par la défenderesse, la demanderesse a fait entendre Richard Gareau. Il est courtier immobilier depuis 20 ans. À l'automne 2009, il mentionne que la demanderesse lui a donné le mandat de trouver un locataire pour relouer cet espace commercial. Il a mentionné d'emblée au procès qu'il est très difficile de louer un deuxième étage dans un centre commercial destiné à la vente au détail. Il a approché environ 25 de ses clients réguliers. Il a aussi procédé à de nombreuses autres démarches pendant environ neuf mois. Il souligne que le Carrefour Laval confie rarement ce genre de mandat puisque ce centre commercial est occupé à 100 % à longueur d'année.

92. En fait, Sylvie Plourde a mentionné que le Carrefour Laval n'avait pas cherché de locataire depuis une quinzaine d'années. Elle a elle-même fait de nombreuses démarches en contactant notamment plusieurs autres spas et centres de beauté. Ce n'est que le 6 juillet 2010 que Carrefour Laval a signé un bail avec Industria Spa. Ce bail est entré en vigueur le 1^er janvier 2011. Industria Spa a loué le rez-de-chaussée d'une superficie de 1 400 pieds carrés et seulement 1 600 pieds carrés au deuxième étage. À la date du procès, Carrefour Laval n'avait toujours pas loué l'autre partie du deuxième étage qui compte environ 6 000 pieds carrés. …

[163]     In the present case, Mr. Vakis did not face similar challenges.

[164]     The premises are located at a busy intersection in a trendy part of the city with no impediments to access or particular zoning barriers other than the proscription of terrace cafés.

[165]     Given the overtures made simply as a result of a sign in the window, the Court believes that had he placed ads in the major dailies and listed the premises with a broker, Mr. Vakis would have succeeded in renting the premises much sooner after Java U abandoned them.    

[166]     An À Louer sign for rent sign alone may suffice in a small town,[7] but not in the second largest city in the country.

 

[167]     Nothing was heard from Mr. Vakis or Me. Fargnoli between September 12, 2006 and September 14, 2007 when the premises were re-leased, and there was no proof of any expression of interest from a potential tenant between October 17, 2006 and June 21, 2007.

[168]     Surely Mr. Vakis could have done more and earlier.

[169]     His excuse that he did not want to lease the premises for up to 20 years because he was afraid he would die before the end of the term is unpersuasive.

[170]     A practical landlord would be pleased to assure an income stream for his old age and for his heirs.

[171]     The Court believes that Mr. Vakis could have accepted the offer from Multi broached in September 2006, and even though the annual rent in the draft submitted was $7,200 less than that payable by Java U under the offer, he would have been able to sue the latter for the difference until May 31, 2011, when its lease expired.   

[172]     Even if he had not accepted Multi’s offer, the existence of two other possible offers in early autumn 2006 (from Café Supreme and Masai) lead the Court to conclude that damages of six months lost rental are reasonable in the circumstances.

[173]     It figures that an offer could have been signed by November 1, 2006, followed by a three-month fixturing period[8] ending January 31, 2007. 

 

 

 

 

 

 

 

 

 

 

 

What are Mr. Vakis’s recoverable damages?

[174]     In the result, the Court calculates Mr. Vakis’s damages as follows:

Lost rent Aug. 1, 2006 to Jan. 31, 2007			6 X $4,600		$27,600.00
GST/QST					3,850.20
				Total	31,450.20
Re-connection of heating and ventilation system					427.31
Jan. 11, 2007 (P-13)
Heating  for period ended Jan. 14, 2007 (P-15)					542.56
Heating for period ended Jan. 31, 2007					176.61
(1/4 X 706.42 for period ended March 14, 2007)
				Total	719.17
Non-residence tax for 5 months (Aug. to Dec.)					1,500.22
in 2006 (P-15 in fine)
Non-residence tax for Jan. 2007
(P-15 in fine)					428.85
				Total	1,929.07
			Grand Total		$34,525.75

WHEREFORE FOR ALL THE FOREGOING REASONS THE COURT:

[175]     MAINTAINS Plaintiff/Cross-Defendant’s Motion to Institute Proceedings in part;

[176]      MAINTAINS Plaintiff/Cross-Defendant’s Defence to Cross-Demand;

[177]     DISMISSES Defendant/Cross-Plaintiff’s Re-amended Plea and Cross-Demand;

[178]     CONDEMNS Defendant/Cross-Plaintiff to pay Plaintiff/Cross-Defendant the sum of $34,525.75, plus interest and the additional indemnity under art. 1619 C.C.Q. calculated from August 28, 2008, the date of service of the Motion to Institute Proceedings;

 

 

[179]     THE WHOLE with costs.

 

 

	__________________________________ WILLIAM FRAIBERG, J.S.C.
Me Jean El Masri Attorney for Plaintiff/Cross-Defendant
Me Raffaele Mastromonaco Attorney for Defendant/Cross-Plaintiff
Dates of hearing:  September 23, 24, 25 and 26, 2013