One of the longest standing principles at law is that if there
is a breach of contract a party can sue for damages such that they
should be placed in the same position as if the contract had been
Lease agreements commonly include termination clauses where upon
default by the lessee all remaining payments automatically become
due, discounted to take into account the time value of money.
Properly drafted acceleration clauses can be considered a genuine
pre-estimate of damages as the lessor is in the same position they
would have been in had the contract been completed. If the lessor
were to collect full payments (i.e., not discounted) the lessor
would be in a better position than he or she would have been had
the default not occurred. A recent Ontario Court of Appeal case
takes this principle one step further. In Hav-A-Kar Leasing
Ltd. v. Vekselshtein 2012 ONCA 826
("Hav-A-Kar"), the Court awarded the lessor all
remaining lease payments in full without discounting. What is
interesting is that the Court relied on Keneric Tractor Sales
Ltd. v. Langille,  2 S.C.R. 440, as precedent for the
enforcement of payment acceleration clauses, however this case
acknowledges the need to discount future payments to properly
reflect the time value of money. This was not discussed or followed
by the Court.
In Hav-A-Kar, the lease agreement was for a motor
vehicle and provided for payment of all amounts unpaid upon default
by the lessee. The lessee defaulted and the lessor sued for
damages, including enforcement of the accelerated payment clause.
The trial judge rejected the lessee's argument that the payment
clause was a penalty, as opposed to a liquidated damages clause.
The lessee appealed the decision on the basis that the trial judge
erred in enforcing the accelerated payment clause. The appeal was
dismissed. The Court of Appeal, in making its determination, relied
on the well established principle that damages for breach of
contract should put the plaintiff in the same position as if the
contract had been performed. It was found that the accelerated
payment clause was not excessive, it simply put the lessor in the
position it would have been if the lessee performed its obligations
under the lease agreement. The Court decision was focused on
whether acceleration was an appropriate remedy and to a much lesser
extent (or not at all) on how this acceleration should have been
As noted above, the problem with the Court of Appeal decision is
that it ignores the benefit to the lessor of receiving future lease
payments today. The math was simply wrong. While not stated, the
Court may have taken into account that the full value of the
remaining payments and the discounted value of those payments,
given that it is a small ticket lease in a low interest rate
environment, may be quite small. If this were the case it would be
helpful if the Court indicated as such. What is concerning is that
this case may be relied upon in a different fact situation where
the differential between the two amounts are large which is why we
bring this decision to your attention.
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.
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Under the Income Tax Act, the Employment Insurance Act, and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions or GST.
Under the Income Tax Act, the Employment Insurance Act, the Canada Pension Plan Act and the Excise Tax Act, a director of a corporation is jointly and severally liable for a corporation's failure to deduct and remit source deductions.
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