Legal Blog

Lease Damages – Foreseeability

Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited 2018 Ont CA

Tenant repudiated lease and landlord subsequently sold the property because it could not afford the maintenance and mortgage expenses without tenant’s rental income. Only damages were in issue. The trial judge awarded damages not only for lost rental profits, but for the capital appreciation that landlord would have enjoyed had it not been forced to sell the property. The court considered Hadley v. Baxendale, noting that damages could be recovered, if, in the usual course of things, the damages fairly, reasonably, and naturally resulted from the breach of contract or if they were reasonably contemplated by the parties at the time of the contract. The test under the first branch of remoteness is objective. The court held that the inherent bargain in a commercial lease does not include the opportunity to profit from speculative capital appreciation and damages for lost capital appreciation do not fairly and reasonably arise for breach of a commercial lease. Under the 2^nd test, there was no evidence that, at the time of the lease, the parties contemplated capital appreciation would be something for which the tenant would be liable if the lease were breached.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.