2008 BCCA 35 A.L. Sott Financial (FIR) Inc. v. PDF Training Inc.

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:	*A.L. Sott Financial (FIR) Inc. v. PDF Training Inc.,*
	2008 BCCA 35

Date: 20080124

Docket: CA032562

Between:

A.L. Sott Financial (FIR) Inc.

Appellant/Respondent by Cross Appeal

(Plaintiff)

And

PDF Training Inc., Edward J. Cooke and Maureen Palfreyman-Cooke also known as Maureen Mabel Palfreyman, Dubrulle French Culinary School Ltd., Dubrulle French Culinary School Ltd. doing business as Dubrulle International Culinary & Hotel Institute of Canada, the said Dubrulle International Culinary & Hotel Institute of Canada

Respondents/Appellants by Cross Appeal

(Defendants)

And

John Paul Johnson

Defendant

Before:	The Honourable Madam Justice Rowles
	The Honourable Mr. Justice Smith
	The Honourable Mr. Justice Chiasson

H. Silber	Counsel for the Appellant
N. Kambas	Counsel for the Respondents
Place and Date of Hearing:	Vancouver, British Columbia
11 & 12 October 2007
Place and Date of Judgment:	Vancouver, British Columbia
24 January 2008
Written Reasons by:
The Honourable Mr. Justice Chiasson
Concurred in by:
The Honourable Madam Justice Rowles The Honourable Mr. Justice Smith

Reasons for Judgment of the Honourable Mr. Justice Chiasson:

Background

[1] A.L Sott Financial (FIR) Inc., a company controlled by Mr. Arnold Silber, owns a building in Vancouver on West 2nd Avenue. PDF Training Inc. is a company controlled by Mr. Cooke and Ms. Palfreyman. It is not a company of substance. Mr. Cooke and Ms. Palfreyman also control Dubrulle International Culinary & Hotel Institute of Canada, which operates a culinary school. Dubrulle’s lease of premises in which it operated the school was due to expire on September 30, 2000.

[2] In January 2000, negotiations concerning renting the West 2nd building began between Mr. Silber and Mr. Cooke and Ms. Palfreyman. PDF was to be the tenant and Dubrulle a sub-tenant. In early March 2000, an offer to lease was executed. Mr. Cooke and Ms. Palfreyman were to provide personal guarantees of $250,000. Amendments to the agreement were proposed by PDF, to which Mr. Silber agreed, but since the amendments would delay the lease, Mr. Silber stipulated that the amendments were conditional on PDF paying a non-refundable $36,667 to A.L. Sott to compensate for lost rent.

[3] On July 10, 2000, a second offer to lease was executed (the “Offer to Lease”). It is the document at issue between the parties in this litigation.

[4] PDF was to receive possession on the earlier of: the day a building permit was issued for tenant improvements or October 1, 2000, provided it had executed the landlord’s form of lease. A building permit was not issued by October 1, 2000.

[5] In late August or early September 2000, Mr. Cooke obtained a key to the premises and during September 2000 physical work was undertaken in the building on behalf of PDF. It resulted in a claim by A.L. Sott of damages for trespass.

[6] Paragraph 9 of the Offer to Lease stated PDF would “pay to the Landlord a management fee of __% of the Basic Rent”. A draft landlord’s form of lease was delivered to PDF on October 2, 2000. The number “5” was inserted in the blank. PDF refused to accept the insertion and took the position there was no agreement to pay a management fee.

[7] During the next two months the parties discussed a number of issues related to the lease, including their disagreement concerning the management fee. A.L. Sott remained adamant that a management fee was required. No lease was offered to PDF that did not contain a requirement to pay a management fee.

[8] In early December, Mr. Cooke decided that PDF would not lease the premises. A.L. Sott took the position that PDF was a tenant and sent notices of rent and taxes due.

[9] On December 11, 2000, A.L. Sott filed a petition against PDF, Mr. Cooke and Ms. Palfreyman seeking a declaration the Offer to Lease constituted an enforceable contract and judgment for amounts owing under it. That proceeding was converted to this action on January 11, 2001. On February 5, 2001, A.L. Sott gave notice it intended to re-enter the building and to re-let it as agent for PDF without terminating the lease. The building was leased to West Marine Canada Corp. on February 7, 2001. On March 26, 2002, A.L. Sott gave notice it was terminating the lease due to the non-payment of rent and other charges and advised it would seek damages incurred by PDF’s wrongful repudiation of the lease agreement.

[10] In paras. 2 and 3 of her reasons for judgment, which are found at 2004 BCSC 1646, 1 B.L.R. (4th) 53, 25 R.P.R. (4th) 94, Madam Justice Neilson stated the positions of the parties at trial:

The plaintiff claims damages for breach of contract against PDF, and against Mr. Cooke and Ms. Palfreyman pursuant to their guarantees. It also seeks damages for trespass against all defendants, on the basis that they had no authority to enter the building and begin demolition.

The defendants say that there was no enforceable agreement between the parties. Alternatively, the plaintiff fundamentally breached the agreement by failing to deliver a final lease in accordance with the terms of the offer to lease. They deny that they entered the building without authority. PDF counterclaims to recover the costs it incurred in the transaction.

[11] The defendant John Paul Johnson was described in the pleadings as a demolition contractor retained by the other defendants. Mr. Johnson did not enter an appearance and default judgment was taken against him, with damages to be assessed (para. 9).

[12] In the result, Neilson J. held PDF, Mr. Cooke and Ms. Palfreyman liable for trespass and awarded A.L. Sott $274,446 in damages. She concluded A.L. Sott fundamentally breached the Offer to Lease by failing to deliver a lease that did not require a management fee and awarded PDF $112,227.68 damages. The claims against Dubrulle were dismissed. A separate order was made concerning costs.

[13] A.L. Sott appealed seeking judgment against PDF for unpaid rent, $250,000 against Mr. Cooke and Ms. Palfreyman, increased damages for trespass, judgment against Dubrulle, punitive damages, dismissal of the counterclaim of PDF and special costs in favour of A.L. Sott. Mr. Cooke, Ms. Palfreyman and PDF cross-appealed seeking dismissal of the trespass claim, setting aside the trespass damages and an increase in the damages for breach of contract.

[14] For the reasons that follow I would dismiss the appeal and cross-appeal.

The trial judgment

[15] After setting out the background of the parties and their negotiations in paras. 1 – 33, the trial judge discussed the facts related to A.L. Sott’s allegation of trespass in paras. 34 – 66. She noted that witnesses for A.L. Sott testified that Mr. Cooke was given access to the building for the limited purpose of determining what work was required to reconfigure the premises to be suitable for a cooking school. Mr. Cooke agreed he did not have a development permit, but gave a number of reasons for undertaking demolition work in the building. In para. 63, the judge observed:

[….] the building was essentially taken back to the studs. The wiring and mechanical systems were removed. Only one light was left. The plumbing was dismantled. An upstairs window was broken and used as a chute to throw out debris. The evidence varied as to whether load-bearing walls were removed. [….]

[16] After reviewing the law applicable to trespass, the judge addressed the liability of the respondents:

[181] It is true that the plaintiff gave PDF a key to the building. Mr. Cooke conceded, however, that this was provided for a limited purpose. The demolition clearly went far beyond that. Authority to enter a building for a particular purpose does not provide a defence to trespass if the building is entered and used for another purpose: Gross v. Wright, [1923] 1 W.W.R. 882 (S.C.C.) at 891.

[182] Mr. Cooke said that his dealings with Mr. Nicholsfigueiredo, Ms. Bumen, Mr. Michaels, and his structural engineer, left him with the “impression” or “understanding” that the work was justified. I found Mr. Cooke’s evidence on these matters vague and unsatisfactory. It was often internally inconsistent. It was also inconsistent with the evidence of Mr. Nicholsfigueiredo, Ms. Bumen and Mr. Michaels. Where their evidence conflicted with Mr. Cooke’s, I prefer their versions of the events and conversations.

[….]

[187] I conclude that the defendants have offered no justification for entering the building and performing the demolition. Those actions were an unauthorized intrusion on the plaintiff’s property, and constitute trespass.

[188] I have used the plural “defendants” advisedly to this point. It is now necessary to examine the role of each in ascertaining whether all are liable in trespass, as the plaintiff contends.

[189] I have no difficulty in finding that PDF committed trespass. It was a party to the Offer to Lease, and the tenant under the proposed final lease. The work was done at its direction and for its benefit.

[….]

[195] Ms. Palfreyman did not testify. As a party to this action, she is a central participant, and it was clearly within her power to give evidence. No explanation was offered for her failure to do so. In these circumstances, I find I may draw an inference that her evidence would have been unfavourable to her position, or at the least would not have supported it: R. v. Jolivet, [2000] 1 S.C.R. 751 at paras. 22-27; Murray v. Saskatoon, [1952] 2 D.L.R. 499 at 506-7.

[196] On all of the evidence, I conclude that Ms. Palfreyman knew that the demolition was being carried out without authority, that she condoned it, and, at the very least, that she assisted with the financial arrangements for it.

[197] I agree with the plaintiff that Mr. Cooke and Ms. Palfreyman were involved with PDF in a concerted action for a common purpose in carrying out the demolition, to pave the way for tenant improvements under the lease. Each of them “aided, counselled, directed or joined” the trespass and all three are accordingly jointly liable in trespass: Horseshoe Bay Retirement Society et al v. S.I.F. Development Corp et al (1990), 3 C.C.L.T. (2d) 75 (B.C.S.C.) at 78-9.

[198] As well, I find Mr. Cooke and Ms. Palfreyman are personally liable for trespass on the principles set out in Craig v. North Shore Heli Logging Ltd. (1997), 34 B.C.L.R. (3d) 330 (S.C.) at 340-342. There, the plaintiff sued a corporation and its sole director for trespass arising from logging timber on the plaintiff’s property. Smith J. found both the company and the director were joint tortfeasors, stating:

The corporate defendant Heli Logging is an empty shell devoid of assets and operation. It has conducted no business since 1989. Mr. Zilahi has always been the alter ego of Heli Logging. It was his deliberate actions that caused the damages experienced by the plaintiffs. It would be hollow compensation indeed, if the plaintiffs' award for damages was not enforceable against the person whose conduct is the subject matter of this action.

[199] I conclude that the situation here is similar. PDF is a company without substance. Mr. Cooke and Ms. Palfreyman are its only directors and officers. Their deliberate actions led to the trespass.

[200] With respect to Dubrulle, the plaintiff argues that it should be liable in trespass because the demolition was done for its benefit. I disagree. Dubrulle was simply one of several sub-tenants that were to occupy the building. It was not otherwise involved. I find that insufficient to attract liability.

[17] Turning to damages for trespass the judge stated:

[204] An award of damages for trespass should restore the plaintiff as nearly as possible to the same position it would have been in had the trespass not occurred.

[205] Typically, damages are measured either by the diminution in value of the land, or by the cost of restoration to its original condition. In some situations, consequential losses have also been awarded: Maeckelburg v. Radium Waterworks District (1982), 24 L.C.R. 286 (B.C.S.C.), aff’d (1983), 53 B.C.L.R. 90 (C.A.); McLachlan v. CIBC et al (1987), 13 B.C.L.R. (2d) 300 (S.C.), aff’d (1989), 35 B.C.L.R. (2d) 100 (C.A.) [McLachlan].

[206] Damages are generally measured as at the date of the breach of duty. However, fairness may require that the date of assessment be later to ensure that the plaintiff is properly compensated: Begusic et al v. Clark, Wilson & Co. et al (1991), 57 B.C.L.R. (2d) 273 (C.A.) at para. 65.

[207] An award of damages is an assessment, based on the evidence available. It is not a precise mathematical calculation: McLachlan (B.C.S.C.) at 197-198, and (B.C.C.A.) at 695. The overriding requirement is that it be reasonable, practical, and fair to all parties: Kates v. Hall (1991), 53 B.C.L.R. (2d) 322 (C.A.) at 330-331.

[208] I have concluded that the plaintiff’s damages should be measured by the cost of restoring the building to a leaseable condition in early 2001, and related consequential losses. The plaintiff’s intention was to lease, rather than sell, the building. When the parties’ obligations under the Offer to Lease ceased in early December, it was left with a building that was more difficult to lease because of the demolition. [….]

[18] The judge stated in para. 220, “restoration of the building to its precise original state is not a reasonable measure of damages” and held in para. 223, “a reasonable award is the cost of restoring the building to a condition that permitted [A.L. Sott] to rent it for the same amount as prior to the demolition”. She found A.L. Sott was “entitled to recover reasonable costs of […] upgrades” because the trespass removed the opportunity of the building being used “without conforming to City requirements” (para. 234). The judge concluded the reconstruction would take four to eight weeks and allowed consequential damages – lost rent, insurance, taxes and utilities – for the period January 1 – February 28, 2001 and in the result awarded damages of $274,466 for trespass. She refused to award punitive damages.

[19] Concerning the breach of contract claim, the judge reviewed the law concerning the interpretation of contracts and the provisions of the Offer to Lease. She then considered what terms were essential to a binding agreement and had this to say:

[115] I have concluded that the introductory words of the Offer to Lease, and section 16, established that the parties intended to agree. It remains to consider whether the Offer to Lease contained agreement on the essential terms: identity of the parties, a description of the premises, the commencement date and the duration of the term, and the rent.

[116] It is clear that the parties reached agreement on the first three of these. Their dispute centres on whether they agreed to the rent. Two questions arise. Is the management fee in section 9 properly construed as part of the rent? If so, did the parties agree on a management fee?

[20] In para. 122 the judge concluded, “any management fee payable […] is properly construed as a part of rent” and stated in para. 146, “I find that the Offer to Lease was an enforceable agreement, which, properly construed, did not require PDF to pay a management fee”.

[21] Concerning the position of A.L. Sott the judge stated:

[154] The plaintiff was intransigent on this issue. Each draft of the final lease required payment of a 5% management fee. The only concession it made was an offer to reduce it to 4%. The day before the term was to commence, the rent demanded by the plaintiff under the Offer to Lease included a 4% management fee.

[155] I have earlier found that on a proper construction of the Offer to Lease, no management fee was payable. I have also found that if the parties could not agree to an additional term in the final lease, section 16 required that the final lease incorporate the terms and conditions of the Offer to Lease. It also required that the final lease be provided within a reasonable period.

[156] I find that the plaintiff breached its obligations under sections 9 and 16 of the Offer to Lease by failing to deliver a final lease, within a reasonable period, that did not require payment of a management fee.

[22] In answer to A.L. Sott’s position that the breach was not fundamental, the judge had this to say:

[159] In short, I find that the plaintiff’s breach produced serious and material consequences for PDF. The commercial setting and benefits contemplated by the parties under the Offer to Lease became unworkable. PDF was unable to access or take possession of the building. It was thus deprived of the substantial benefit of the agreement. I find that the plaintiff fundamentally breached the Offer to Lease.

[23] In para. 165, the judge concluded PDF, Mr. Cooke and Ms. Palfreyman were entitled to treat A.L. Sott’s fundamental breach as a repudiation of the Offer to Lease. The judge then discussed whether PDF affirmed the contract or accepted the repudiation and found:

[171] […] I find that PDF’s failure to pay rent or take possession of the premises on December 1, 2000 were clearly acts inconsistent with the continuation of the Offer to Lease. I conclude that these adequately communicated acceptance of repudiation to the plaintiff. The obligations of the parties under the Offer to Lease therefore came to an end in early December, 2000.

[172] PDF thus had no obligation to pay rent. The plaintiff’s claim for breach of contract against PDF is accordingly dismissed, as is its claim against Mr. Cooke and Ms. Palfreyman pursuant to their guarantees.

[24] On its counterclaim, PDF was awarded $112,277.68: the return of deposits of $5,000 and $67,121.43, plus $40,156.25 for the cost of work to ready the premises for occupancy.

[25] In separate oral reasons [A.L. Sott Financial v. PDF Training Inc. et al (18 March 2005), Vancouver S006569 (B.C.S.C.)], Neilson J. dealt with costs. She concluded the trespass and contract claims were discrete and awarded the appellant 50% of its costs of the main action and the respondents 50% of their costs of the main action. PDF was given 100% of its costs of the counterclaim. The appellant was awarded special costs related to certain discovery of documents issues and the respondents were not to recover their costs of giving discovery on those issues. Costs payable to Dubrulle were to be paid by PDF, Mr. Cooke and Ms. Palfreyman. Costs were to be at Scale 3.

Positions of the parties

[26] In its factum, the appellant identifies the alleged errors of the judge as follows:

· construing the Offer to Lease as not providing for the payment of a management fee;

· concluding that the conduct of the appellant amounted to a fundamental breach of the Offer to Lease;

· concluding that if there had been a fundamental breach of the Offer to Lease, PDF had communicated its acceptance of the appellant’s repudiation of the Offer to Lease;

· concluding that Dubrulle was not jointly and severally liable for the trespass committed against the appellant;

· erring in the test she applied in the assessment of damages for wilful trespass and further erring in the measure of damages she found on the test she did employ;

· concluding that punitive damages should not be awarded to the appellant;

· granting judgment to PDF on its counterclaim;

· concluding that special costs of the trial should not be awarded against the respondents.

[27] The respondents state the issues on appeal are whether the judge erred in fact or in law:

· finding that the appellant fundamentally breached the July 10, 2000 Offer to Lease by failing to provide a final lease within the time and with the terms and conditions set forth in the July 10, 2000 Offer to Lease;

· finding that Dubrulle French Culinary School Ltd. was not jointly and severally liable for trespass;

· applying the test she applied in the assessment of damages;

· holding that punitive damages should not be awarded to the appellant;

· granting judgment to PDF on its counterclaim.

[28] The respondents’ cross-appeal seeks to overturn the judge’s finding of trespass. The appellant contends the cross-appeal should be dismissed.

Discussion

[29] At the hearing of the appeal, the appellant stated there are two principal issues: whether PDF breached the Offer to Lease by failing to pay rent and abandoning the premises – the claim against Mr. Cooke and Ms. Palfreyman on their $250,000 guarantee flows out of this; and the assessment of damages for trespass, which was not based on diminution in value. The appellant presented an outline of the damages it seeks totalling $567,102.82.

[30] The appellant says other errors concerning damages for trespass were taking into account factors that should not have been included and failing to base consequential damages on the time it took to rent the premises as opposed to the time it would take to restore the building.

[31] The appellant also asserts Dubrulle should have been held liable for trespass.

[32] On appeal, the appellant seeks $100,000 in punitive damages against the respondents and asserts if punitive damages are awarded, it should be entitled to special costs. It did not pursue special costs as a stand-alone claim and says if no punitive damages are awarded, there should be no special costs.

[33] I shall address the issue of punitive damages later in these reasons, but conceptually the appellant is in error linking punitive damages to special costs. Damages is a remedy connected to a substantive wrong. Special costs flow out of the conduct of litigation.

[34] An examination of the alleged errors of the trial judge shows that many are based on her findings of fact. Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 provides guidance for this Court’s review:

21 [….] the standard of review is not to verify that the inference can be reasonably supported by the findings of fact of the trial judge, but whether the trial judge made a palpable and overriding error in coming to a factual conclusion based on accepted facts, which implies a stricter standard.

22 [….] Although we agree that it is open to an appellate court to find that an inference of fact made by the trial judge is clearly wrong, we would add the caution that where evidence exists to support this inference, an appellate court will be hard pressed to find a palpable and overriding error. As stated above, trial courts are in an advantageous position when it comes to assessing and weighing vast quantities of evidence. In making a factual inference, the trial judge must sift through the relevant facts, decide on their weight, and draw a factual conclusion. Thus, where evidence exists which supports this conclusion, interference with this conclusion entails interference with the weight assigned by the trial judge to the pieces of evidence.

23 We reiterate that it is not the role of appellate courts to second-guess the weight to be assigned to the various items of evidence. If there is no palpable and overriding error with respect to the underlying facts that the trial judge relies on to draw the inference, then it is only where the inference-drawing process itself is palpably in error that an appellate court can interfere with the factual conclusion. The appellate court is not free to interfere with a factual conclusion that it disagrees with where such disagreement stems from a difference of opinion over the weight to be assigned to the underlying facts. [….]

[….]

25 Although the trial judge will always be in a distinctly privileged position when it comes to assessing the credibility of witnesses, this is not the only area where the trial judge has an advantage over appellate judges. Advantages enjoyed by the trial judge with respect to the drawing of factual inferences include the trial judge's relative expertise with respect to the weighing and assessing of evidence, and the trial judge's inimitable familiarity with the often vast quantities of evidence. This extensive exposure to the entire factual nexus of a case will be of invaluable assistance when it comes to drawing factual conclusions. In addition, concerns with respect to cost, number and length of appeals apply equally to inferences of fact and findings of fact, and support a deferential approach towards both. [….] It is our view that the trial judge enjoys numerous advantages over appellate judges which bear on all conclusions of fact, and, even in the absence of these advantages, there are other compelling policy reasons supporting a deferential approach to inferences of fact. We conclude, therefore, by emphasizing that there is one, and only one, standard of review applicable to all factual conclusions made by the trial judge -- that of palpable and overriding error.

[Emphasis in original.]

[35] In H.L. v. Canada (Attorney General), 2005 SCC 25, [2005] 1 S.C.R. 501 Fish J. emphasized that “the majority reasons in Housen should not be taken to have decided that inferences of fact drawn by a trial judge are impervious to review though unsupported by the evidence” (para. 73). He said (at para. 74):

I would explain the matter this way. Not infrequently, different inferences may reasonably be drawn from facts found by the trial judge to have been directly proven. Appellate scrutiny determines whether inferences drawn by the judge are “reasonably supported by the evidence”. If they are, the reviewing court cannot reweigh the evidence by substituting, for the reasonable inference preferred by the trial judge, an equally – or even more – persuasive inference of its own. This fundamental rule is, once again, entirely consistent with both the majority and the minority reasons in Housen.

[Emphasis in original.]

[36] A core issue is whether the Offer to Lease required a management fee. The appellant asserts that because there was a provision in the Offer to Lease dealing with a management fee, but with the quantum or percentage left blank, the trial judge should have implied agreement by the parties to a reasonable fee and established it. The appellant agrees with the judge’s statement of the law in para. 133:

The principles governing implication of contractual terms were usefully summarized by Kirkpatrick J. in [Sacks v. Canada Mortgage & Housing Corp. (2001), 42 R.P.R. (3d) 240 (B.C.S.C.)] at paras. 135-36. These indicate that a term will be implied only where it is necessary to give business efficacy to the contract. It must be so obvious that it “goes without saying.” It may not contradict an express term of the contract. No term should be implied if the contract is effective without it. Judges are warned not to make contracts for the parties.

[37] The judge continued:

[134] I find that those principles have no application here, on a proper construction of section 9. Section 9 states that PDF will be directly responsible for “the repair, replacement, maintenance and operation of the premises”, and for paying the operating costs associated with those activities. PDF is to pay the plaintiff’s costs and expenses in conducting periodic inspections of the premises, “… and shall pay … a management fee of ___% …” If PDF is not properly performing its maintenance obligations, the plaintiff is entitled to take them over at PDF’s expense. Specifically, the plaintiff may take over the “property management of the Premises”.

[135] In my view, on a plain and literal interpretation of section 9, PDF is to perform the tasks related to management of the building, unless and until a periodic inspection by the plaintiff reveals it is not doing so properly. PDF will pay the costs of those inspections. The provision for a management fee, however, is blank because it is PDF who is responsible for the management. PDF will only become liable to pay the plaintiff’s property management costs if the plaintiff finds it necessary to take over the management duties.

[136] The plaintiff argues that it would nevertheless incur its own internal management expenses. Since this is a triple net lease, it says it is a necessary inference that those expenses will be charged back to PDF in a reasonable amount. I disagree. [….]

She concluded in para. 137, “implication of a reasonable management fee is not obvious, nor necessary to give effect to the parties’ intentions […]”.

[38] Construction of the provisions of a contract generally is a question of mixed fact and law (Hayes v. Weyerhaeuser, 2008 BCCA 31; Petty v. Telus Corp., 2002 BCCA 135, 164 B.C.A.C. 152). In this case, the trial judge looked at the surrounding circumstances of the Offer to Lease, noting there had been no discussion of a management fee, reviewed the language of the Offer to Lease and considered the need to imply a reasonable fee in order to give business efficacy to the parties’ bargain. I see no reviewable error which would allow this Court to interfere with her finding that the parties did not agree to a management fee.

[39] The judge held the appellant breached the Offer to Lease by failing to deliver a draft lease that did not require a management fee. The appellant contends this breach was not fundamental and asserts the appellant could have signed the lease under protest pursuant to s-s. 62(2)(d) of the Law and Equity Act, R.S.B.C. 1996, c. 253.

[40] Subsection 62(2) is permissive. It states a party “may elect to perform the contract in accordance with the requirements of the other party”; and s-s. 62(7) says “[n]othing in this section limits the right of a party to recover compensation on any other basis”. In my view, PDF was not obliged to proceed under protest.

[41] In para. 159 the judge stated her reasons for concluding the appellant’s breach was fundamental and constituted repudiation. They were factual and based on evidence available to the judge. I see no basis on which this Court properly could interfere.

[42] The appellant contends the respondents did not communicate acceptance of the appellant’s repudiation. The judge correctly noted there is no requirement for a particular mode of such communication. She reviewed the conduct of the parties, including a letter from the respondents’ lawyer stating the respondents would not sign a lease requiring a management fee and took into account no rent was paid and no effort was made by PDF to take possession. In para. 171, the judge concluded the respondents had communicated acceptance of the appellant’s repudiation. That was a finding of fact and there was evidence available to the judge to support it. I see no basis on which this Court properly could interfere.

[43] The appellant asserts the judge erred awarding to PDF the deposits and costs of refurbishing because the money actually was paid by Mr. Cooke and Ms. Palfreyman. The judge dealt with this contention in para. 254 stating:

It is true that the funds did not come directly from PDF. I find, however, that the only reasonable interpretation is that the funds were paid by the other defendants as agents of PDF, to discharge its obligations as tenant under the Offer to Lease and Addendum.

[44] It is clear the payments were an obligation of PDF and the judge found they were made on behalf of PDF.

[45] There is ample evidence to support this finding of fact by the judge. I see no basis for this Court to interfere with it.

[46] The appellant’s contention the judge erred in declining to find Dubrulle liable fails for the same reason. She looked carefully at the role played by Dubrulle and concluded in para. 200, as a fact, Dubrulle was not involved in the trespass.

[47] It is convenient now to address the counterclaim.

[48] The respondents assert the judge erred in finding they committed trespass based on the course of dealings between the parties. Their submissions on the point were advanced to the trial judge. She canvassed the course of dealings of the parties at length. She also considered the relationship between Mr. Cooke, Ms. Palfreyman and PDF and stated in para. 187:

I conclude that the defendants have offered no justification for entering the building and performing the demolition. Those actions were an unauthorized intrusion on the plaintiff’s property, and constitute trespass.

[49] The respondents candidly agreed they are asking this Court to find the judge should not have rejected their assertion that they thought they were entitled to do what they did. In para. 182, the judge specifically rejected Mr. Cooke’s evidence and stated her preference for the evidence of others. The respondents have advanced no basis on which this Court properly could interfere with the judge’s findings of fact and her determination that the respondents’ actions constitute trespass.

[50] The parties also differ concerning the judge’s assessment of damages for trespass. The appellant contends it was too low; the respondents state it was too high.

[51] Part of the appellant’s contention concerning the damages for trespass is the assertion the judge erred by limiting the period of consequential damages to the time required to reconstruct the building, eight weeks, as opposed to the longer period it took to rent the premises. In my view, the appellant’s position is flawed because it overlooks causation.

[52] The respondents’ trespass required rebuilding which resulted in lost revenue until the premises were useable. The need to find a new tenant and the time it took to do so, flowed from the appellant’s repudiation of the Offer to Lease. It was not linked causally to the trespass.

[53] The appellant asserts the judge erred by failing to assess damages based on a diminution of value as opposed to the cost to reconstruct. It is clear the judge was well aware of these different approaches to damages. She stated in para. 205, “[t]ypically, damages are measured either by the diminution in value of the land, or by the cost of restoration to its original condition”.

[54] The appellant asserts it bought the property to rent, not to sell it. The judge agreed with this contention. Evidence was led to suggest the rental value was diminished by reason of the trespass. Evidence also was led dealing with the cost of rebuilding. The building’s income producing potential should be unaffected if the building were restored to its previous rentable condition. I do not think the judge erred in her approach to assessing damages for trespass.

[55] The parties raise a number of issues concerning the judge’s appreciation of the evidence related to the cost of rebuilding. The respondents say no consideration should have been given to installing a second story in the premises because West Marine did not want a second story. The appellant asserts the judge looked at reconstructing the base building and it had two floors. The significance of the second floor issue arises out of the report of Mr. Chercover, an expert called by the appellant. He estimated costs of construction between $145,000 - $200,000, which included seismic upgrading and two floors.

[56] Assessing damages based on projected costs of rebuilding is unlikely to be capable of scientific precision and a court is not required to proceed on that basis. The judge correctly stated the law in para. 207:

An award of damages is an assessment, based on the evidence available. It is not a precise mathematical calculation: McLachlan (B.C.S.C.) at 197-198, and (B.C.C.A.) at 695. The overriding requirement is that it be reasonable, practical, and fair to all parties: Kates v. Hall (1991), 53 B.C.L.R. (2d) 322 (C.A.) at 330-331.

[57] It is apparent in this case the trial judge struggled with the evidence she was given. She rejected merely following the costs incurred by West Marine (para. 212). In para. 214, she stated she approached with caution the estimates of the parties’ experts. She concluded it was not reasonable to assess damages based on restoring the building “to its precise original state” (para. 220). After considering evidence that the City would require certain upgrades, the judge concluded in para. 234, “[…] the plaintiff is entitled to recover reasonable costs of the upgrades. The trespass by the defendants removed any opportunity that the plaintiff, or anyone else, had of using the building without conforming to City requirements”.

[58] Turning to the evidence, the judge stated in para. 235 she considered Mr. Chercover’s estimates to be “too generous” and she discounted them. The judge noted she was forced to provide an arbitrary estimate of the costs of upgrades, due to the competing evidence of the experts (paras. 227, 235).

[59] I see no error in principle by the judge. She correctly stated the law and reviewed at length the evidence that was available to her. I would not disturb her finding of the quantum of damages for trespass.

[60] I turn to punitive damages, an award of which is discretionary. The trial judge had this to say in para. 249:

I am unable to find support for the plaintiff’s contention that the defendants used the demolition as leverage in the negotiations over the final lease. There was no power imbalance between the parties. Nor did the trespass violate a deeply personal interest of the plaintiff.

The appellant has identified no error in law that would allow this Court to interfere with the trial judge’s finding of fact and exercise of discretion refusing an award of punitive damages.

[61] I would dismiss this appeal and cross-appeal.

“The Honourable Mr. Justice Chiasson”

I agree:

“The Honourable Madam Justice Rowles”

I agree:

“The Honourable Mr. Justice Smith”