Tuesday, November 19, 2013

Damages due a tenant for a wrongfully terminated lease

Dasham Carriers Inc. v. Gerlach, 2013 ONCA 707:

[17]   When a party sustains a loss by reason of a breach of contract, damages are to be awarded in an amount that will place him in the same position as if the contract had been performed.  This method of calculating damages, commonly referred to as "expectation damages," is the standard common law rule.

[18]   There is no special approach to the calculation of damages recoverable by a wrongly evicted tenant.  The calculation is governed by the rule applicable to all breaches of contract: the tenant is entitled to be placed in the same position as if the lease agreement had been performed.  This proposition was recognized in Haack v. Martin, [1927] S.C.R. 413, a case in which the Supreme Court wrestled with the calculation of a farmer's loss of profit as a result of his being evicted from land he had leased for the purpose of operating a farm. AlthoughHaack is a dated case, its discussion of damages for wrongful eviction remains good law today and continues to be cited in Ontario: see e.g. Burns v. Sohi, 2012 ONSC 2414, 21 R.P.R. (5th) 205, at para. 300; and Upper Room Alliance Group Ltd. v. John Volken Foundation (2008), 54 B.L.R. (4th) 97 (Ont. S.C.), at paras. 139-40, supplementary reasons at [2008] O.J. No. 4899.

[19]   This approach to the calculation of expectation damages in wrongful eviction cases, namely, the benefit the tenant expected to receive to the end of the lease term less the rent the tenant would have had to pay the landlord, was approved by this court in Procopio v. D'Abbondanza (1975), 8 O.R. (2d) 496 (C.A.), at p. 498. In Procopio, the tenant entered into a lease under which she was paying below-market rent. The landlord subsequently locked her out of the rental unit. The court held that the tenant was entitled to damages equivalent to the difference between the current market value of the rental premises and the amount she was paying under the favourable terms of the lease.

[20]   Accordingly, to calculate the amount required to restore the respondent to the position it would have been in if the contract had been performed, the respondent is entitled to the benefit it would have received over the course of the twelve months left to run under the lease – that is, the amount of rent it would have received from its two subtenants – less the amount of rent it would have owed the appellant for the use of the leased premises during that period. 

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