July 31st, 2018
On July 26, 2018, the Court of Appeal affirmed a judgment enforcing a commercial lease indemnity entered into by Parc Downsview Park Inc. and Penguin Properties Inc., a real estate development firm. The appellant, Penguin, sought to avoid enforcement of the indemnity, alleging that it had been procured through oral misrepresentations. Jonathan Lisus and Zain Naqi represented the successful landlord, Parc Downsview, arguing that Penguin was a sophisticated party, and that no oral representations were made or relied upon. Parc Downsview was also successful in its cross-appeal on the quantum of damages. It argued that the landlord had no duty to mitigate its damages and was entitled to rental payments up to the end of the lease term, expiring in 2020. Writing for the majority of the Court of Appeal, Justice Brown accepted this argument, citing the “onerous language of the indemnity” including Penguin’s “absolute and unconditional” covenant to pay rent. He found that implying a duty to mitigate “could result in a situation where [Parc Downsview] is left holding the bag – a result contrary … to the plain language of the indemnity.”
The Court’s decision affirms the importance of respecting the plain language of agreements concluded by sophisticated commercial parties.The decision is available here: https://www.canlii.org/en/on/onca/doc/2018/2018onca666/2018onca666.html?resultIndex=1.