Executive Summary: Key Legal and Evidentiary Issues

• Landlord was entitled to claim full rent after tenant's repudiation since it affirmed the lease rather than terminating it.

• Subletting refusals did not constitute repudiation because the tenant never formally treated them as such.

• Personal covenantors remained liable, and indirect contributions did not reduce personal liability.

• Remediation costs were awarded due to the sub-tenant leaving the premises in poor condition.

• Summary trial was appropriate as all material facts were undisputed and determinable on the record.

• Landlord awarded solicitor-client costs and pre-judgment interest under the lease and applicable law.

Facts and outcome of the case

This case involved a commercial lease dispute between the landlord, Emerald Isle Hotels Inc., and its tenant, Mother Nature’s Market & Deli Ltd., for a retail premises in Sidney, British Columbia. The lease, signed in 2016, had a ten-year term expiring in 2027. The permitted use of the premises was for operating a retail food market and deli. The lease obligations were personally guaranteed by three individuals, including Klaus Allerdissen, the sole director of the tenant company.

The tenant ceased store operations in 2018 but continued paying rent for some time. In 2020, it attempted to sublet the premises, but Emerald Isle rejected initial sub-tenants before accepting one in 2022. That sub-tenant operated for a few months before abandoning the premises in disrepair. In early 2023, Mother Nature’s counsel informed Emerald Isle that it would stop paying rent due to financial hardship. Emerald Isle responded by expressly rejecting the repudiation, asserting that it would hold the tenant to its ongoing obligations under the lease.

The landlord re-entered the premises, conducted extensive cleaning and repairs, and eventually sued for unpaid rent and remediation costs. Mr. Allerdissen argued that he had met his personal covenant obligations through indirect financial support, but the court found those funds were provided to the company, not directly to the landlord, and thus did not offset his liability.

The British Columbia Supreme Court ruled in favor of Emerald Isle. It found that the landlord properly affirmed the lease in response to the tenant’s repudiation and therefore had no duty to mitigate damages. As the repudiation was not accepted, the lease remained in effect, and the tenant was liable for all rent due. The court also concluded that the landlord’s refusal to approve subletting did not amount to a repudiation because the tenant never formally treated it as such.

The court awarded the plaintiff $219,948.75 in unpaid rent from March 2023 to October 2024, $18,426.75 in remediation costs, pre-judgment interest under the Court Order Interest Act, and solicitor-client costs pursuant to the lease. Emerald Isle was also granted the right to apply for additional unpaid rent as it accrued.