Executive Summary: Key Legal and Evidentiary Issues

• Scope of the tenant’s contractual obligation under clause 26 to return the commercial premises “in the same state” at lease end, including responsibility for more than ordinary wear and tear.
• Factual assessment of the condition of the leased garage premises at expiry, based on photographs and evidence of oil, holes in walls, disrepair and lack of cleanliness, versus what would qualify as normal wear and tear for an auto repair business.
• Reasonableness and quantum of restoration costs, including reliance on three comparable estimates and the landlord’s actual expenditure of $70,338.30, less a $10,000 amount paid at lease signing.
• Extent of solidary (joint and several) liability of the tenant company and the individual and corporate guarantors for lease obligations and resulting damages.
• Interpretation of clause 20(d) of the commercial lease and whether its wording is sufficiently clear and precise to allow recovery of extrajudicial legal fees as contractual damages.
• Application of Quebec civil law principles on contractual clauses for legal fees, including requirements under articles 1373, 1374 and 1617 C.C.Q. and case law such as Groupe Van Houtte and Laferrière to deny recovery of the plaintiff’s claimed extrajudicial fees.

Factual background

The dispute arises from a commercial lease between 8566941 Canada Inc. (the landlord) and Service Magique Auto Inc. (“Magique Auto”) for premises located at 465 Alexandre-Taché Boulevard in Gatineau, intended for the operation of an automotive repair garage. The lease was entered into on December 1, 2017, for a fixed five-year term expiring on October 31, 2022. Magique Auto occupied the premises as a garage during the lease and vacated a few months after the term ended. In addition to the corporate tenant, several parties agreed to guarantee Magique Auto’s obligations. The defendants Abdelkader Dimia, 9340-7070 Québec Inc. and Mohamed Dimia each executed guarantees making them solidarily liable with Magique Auto for all lease obligations. At trial, Magique Auto and 9340-7070 Québec Inc. were unrepresented after their counsel withdrew. Mohamed Dimia was absent, having filed a consumer proposal under the Bankruptcy and Insolvency Act, which triggered a stay of proceedings in his regard. Only Abdelkader Dimia appeared, self-represented, to contest the landlord’s claim.

Lease obligations at the end of the term

A central issue concerned the tenant’s obligation to restore the premises at the expiry of the lease. Clause 26 of the lease, drafted in French, required the tenant at the end of the term to leave the premises in the same condition as when possession was taken and, in particular, to close the holes in the walls. The clause also contemplated that the landlord would conduct a visit of the premises. This contractual wording framed the Court’s analysis of whether Magique Auto and its guarantors had fulfilled their obligations upon returning the premises. The landlord alleged that, when Magique Auto left, the premises were in a deplorable state and far from the condition they were in at the start of the lease, thereby breaching clause 26 and the tenant’s general duty to act prudently and diligently under the lease.

Condition of the premises and evidentiary findings

The Court carefully examined the evidentiary record, particularly photographic evidence filed by the landlord. These photographs showed that the premises were left in poor condition: oil was present on the floor and along the base of the walls, there were visible holes in the walls, and there was a general state of disrepair and lack of cleanliness. The judge concluded that the damages to the premises clearly exceeded normal wear and tear. The defendants produced no persuasive evidence to contradict this visual proof or to show that the condition reflected only inevitable deterioration from the operation of a garage. The Court also took into account a letter the landlord had sent to the defendants in June 2022, shortly before the lease expired. In that letter, the landlord reiterated the obligation to restore the premises and listed a series of sixteen specific items of work that had to be done, including significant repair and restoration tasks. There was no evidence that the defendants, at that time, denied either the existence or the scope of those obligations, which supported the conclusion that the tenant had accepted the restoration duties and then failed to perform them.

Defence arguments on use of premises and scope of restoration

Abdelkader Dimia advanced two main lines of defence. First, he argued that the landlord could legitimately claim only the costs associated with rebuilding an office within the premises, and not the full restoration amounts claimed. In his view, the landlord’s claim for over $70,000 in restoration expenses was excessive in light of the lease and the nature of the use. Second, he contended that, given that the premises were expressly leased for use as an automotive repair garage, the landlord should reasonably expect that the premises would be returned in the kind of condition typically associated with such operations—namely, with oil stains and a higher level of wear. The Court rejected both arguments. On the contractual point, the judge held that the lease did not limit the restoration obligation to the reconstruction of an office; clause 26 required the tenant to leave the premises in the same state as at the beginning of the lease, subject only to normal wear and tear. As for the nature of the business, the Court concluded that the express obligation to restore the premises to their original condition prevailed. The fact that the use was a garage did not relieve the tenant of the contractual responsibility to clean, repair, and restore beyond normal wear.

Assessment of restoration costs and reasonableness of damages

The landlord sought $70,338.30 as the cost of restoring the premises, plus $15,000 in extrajudicial legal fees. Before undertaking the work, the landlord had obtained three independent estimates, ranging between $68,888 and $72,525, which corroborated the scale and cost of the necessary repairs. The landlord then carried out the work and incurred actual costs in the amount of $70,338.30. The Court found this figure reasonable, given the scope of the work required to return the premises to their original state. Importantly, the judge noted that Abdelkader Dimia had introduced no concrete evidence to show that the amounts were excessive or that the restoration could have been done for less. The Court therefore accepted the landlord’s reconstruction costs as proven. However, because the landlord acknowledged receiving $10,000 at lease signing—a sum that had to be applied in reduction of its claim—the compensable restoration amount was reduced accordingly. The Court fixed the net damages for restoration at $60,338.30. It also held that Magique Auto and the guarantors (other than the stayed party) were solidarily liable for these damages, meaning each could be pursued for the whole amount.

Claim for extrajudicial legal fees and interpretation of clause 20(d)

Beyond restoration costs, the landlord sought $15,000 in extrajudicial legal fees, invoking clause 20(d) of the lease. That provision granted the landlord the right, in case of tenant default, to recover all damages suffered and all expenses incurred as a consequence of the default, including, in the event of termination, the difference between what the tenant would have paid and the net amounts actually received for the premises for the remainder of the term. The Court examined whether this clause met the requirements under Quebec civil law for shifting extrajudicial legal fees to the tenant as contractual damages. Referring in particular to the Court of Appeal’s decision in Groupe Van Houtte inc. (A.L. Van Houtte ltée) v. Développements industriels et commerciaux de Montréal inc., and to Laferrière and other authorities, the judge recalled that clauses providing for payment of extrajudicial fees are, in principle, valid in commercial contracts, but they must be drafted clearly and precisely. Under articles 1373 and 1374 C.C.Q., the object of the obligation must be determinate or at least determinable, and the clause must unambiguously stipulate that the debtor assumes the creditor’s extrajudicial costs. The Court found that clause 20(d), as written, did not expressly mention legal fees and was not sufficiently clear or precise to be interpreted as covering the landlord’s lawyers’ fees. While it allowed the landlord to recover “all damages” and “all expenses,” the wording did not meet the standard articulated by the Court of Appeal for allocating extrajudicial fees. Nor did it set out any determinable method for calculating those fees. Consequently, the judge ruled that the landlord had not discharged its burden of proving, on a balance of probabilities, a contractual right to recover its extrajudicial legal fees. The claim for $15,000 in such fees was therefore dismissed.

Ruling and overall outcome

In the result, the Superior Court granted the landlord’s modified originating application in part. It held that Magique Auto had failed to honour its obligation under clause 26 to return the premises in their original condition, and that the extensive oil contamination, damage to walls and overall disrepair went beyond normal wear and tear for a garage operation. The Court ordered Service Magique Auto Inc., Abdelkader Dimia and 9340-7070 Québec Inc. to pay, in solidum, $60,338.30 to 8566941 Canada Inc., together with interest at the legal rate and the additional indemnity from July 19, 2023, the date of the invoice for the restoration work. The Court also awarded the landlord its legal costs, although the exact monetary value of those costs and of the accruing interest and indemnity is not specified in the judgment and therefore cannot be precisely determined from the text alone. The successful party in the litigation is 8566941 Canada Inc., which obtained a principal monetary award of $60,338.30 in damages, plus interest, additional indemnity from July 19, 2023, and legal costs, while its separate claim for $15,000 in extrajudicial legal fees was denied.