The Quebec Court of Appeal in Meyerco Enterpresis Ltd.
v. Kinmont Canada Inc. (2016 QCCA 89) has recently
partially overturned a lower court ruling that awarded damages for
a false estoppel signed by a tenant based on application of a cap
rate paid by the buyer and addressee of the estoppel instead
applying general principals of damages including mitigation.
Notwithstanding statements in the tenant estoppel that confirmed
payment of rent without offset or compensation, the tenant was in
fact paying its rent by offsetting services provided to a landlord
affiliate. The tenant defaulted almost immediately after the
The buyer sought redress by way of a reduction of purchase price
(as opposed to cancellation of the transaction).
While there was no discussion on the scope of the
representations provided, there was a finding of misrepresentation
and fraud on the part of the vendor and its sole director, officer
The Court noted that the buyer did not include in its pleadings
the termination of the lease in question, the amounts recovered by
the buyer from the tenant as damages in the termination, nor the
amounts payable under the lease with the replacement tenant.
While a court may in certain circumstances have discretion in
awarding damages, this discretion would not be justified where
proof of damages is relatively easy to make as was the case before
The Court notes that article 1407 of the Civil Code of Quebec
allows for a reduction of price equivalent to the damages a buyer
would be justified in claiming.
Where a buyer chooses to seek a reduction in price as opposed to
an annulment of the contract, the buyer must prove their damages
being the reduced value of the property acquired and accessory
damages as opposed to the price the buyer would have paid absent
fraud (which can in certain circumstances be equivalent to the
resulting loss of value).
The Court found residual value in vacant space in that it has
re-leasing potential and hence some economic value. A simple cap
rate formula while indicative of value is part of a more complex
valuation and properly weighted.
Applying the principles to the case before it, the Court found
that the buyer did not offer or attempt to offer any satisfactory
objective persuasive evidence of its actual or real damages as to
the diminished value of the property.
Given the lack of proof of damages, the Court did not substitute
or award an alternative calculation and dismissed the suit,
resulting in no recovery for the plaintiff (the lower court
mentioned the lack of solvency of the seller hence the importance
of a finding against the sole shareholder).
In a similar recent decision of the Superior Court of Quebec
(Gestion Elm Bishop Inc. v. Milsa Farias and Samir
Tadros – rendered July 3, 2015), the Court awarded
damages against the shareholders of a corporation in favour of the
purchaser of a building for a false 8 month discrepancy on the
termination date of a lease provided in an estoppel to buyer's
lender. The Court awarded the full 8 months as damages but noted
buyer's reasonable mitigation efforts.
These decisions highlight the importance of financial due
diligence against tenants as well as the establishment of
mitigation efforts in proving damages in the event of a false
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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