Executive Summary: Key Legal and Evidentiary Issues

• Validity and enforceability of the lease agreement and subsequent amendments between the landlord and tenant.

• Determination of the tenant’s liability for unpaid rent, additional rent, and damages following lease termination.

• Assessment of the landlord’s duty to mitigate losses and calculation of rent received or assumed from reletting the premises.

• Evaluation of the reasonableness and proof of mitigation costs, including construction and realtor commissions.

• Application of contractual interest and legal costs provisions as stipulated in the lease.

• Effect of the respondents’ non-participation in the proceedings on the outcome and calculation of damages.

Facts of the case

The applicant, 2470324 Ontario Inc., was the landlord of commercial premises located at 530 Yonge Street, Toronto, leased to the respondent, E-Blue Gaming Inc., for a ten-year term beginning 1 June 2018 and ending 31 May 2028. The lease was amended prior to commencement, and the individual respondents indemnified the landlord against any damages resulting from the tenant’s default. The tenant first defaulted on rent payments in February 2020, leading to a rent reduction agreement in July 2020 and a rent deferral agreement in December 2021, which acknowledged arrears of $206,585.06 at that time. The tenant again failed to pay rent from April 2023, including both basic and additional rent, prompting the landlord to terminate the lease in September 2023.

Procedural history and reference

On 11 April 2025, Justice Sanderson declared the respondents jointly and severally liable for damages for breach of the lease, directing that the quantum of damages and costs be determined by way of reference. The respondents did not participate in either the application hearing or the reference proceedings, despite being served with all relevant materials and hearing details.

Calculation of damages and mitigation

The landlord claimed damages for rental arrears up to the date of breach, as well as future rent due to the end of the lease term, subject to its duty to mitigate. Evidence was provided showing rental damages to the date of termination were $262,510.42, with additional unpaid basic and additional rent calculated through to the end of the lease, totaling $2,440,639.09. The landlord also demonstrated efforts to mitigate losses by reletting the basement and part of the main floor, resulting in actual and assumed rent receipts totaling $800,444.67, which were credited against the total rent owing. The landlord further claimed costs incurred in preparing the premises for reletting and realtor commissions, amounting to $205,808.29 (including HST).

Discussion of policy terms and clauses at issue

Key lease provisions considered included Section 9.03, which stipulated interest on overdue amounts at prime plus 5% (12.20% per annum), and Section 9.07, which entitled the landlord to full legal fees in the event of tenant default. The landlord, however, sought only partial indemnity costs, which the court found reasonable and less than what the lease entitled.

Ruling and outcome

Associate Justice Jolley found the landlord’s total damages claim of $2,097,249.16 (including HST) to be supported by the evidence and reasonable, and awarded this amount. The landlord was also awarded partial indemnity legal costs of $24,921.86. Interest was ordered at the contractual rate specified in the lease. The respondents were given fifteen days from service of the reasons and report to oppose confirmation, failing which the report would be confirmed. The successful party is the applicant landlord, 2470324 Ontario Inc., with a total award of $2,097,249.16 in damages plus $24,921.86 in costs.