Executive Summary: Key Legal and Evidentiary Issues

• A daycare operator sued its former landlord and its principals for failing to disclose the sale of the leased premises.
   
• Quebec's Small Claims Division examined whether a lease clause requiring advance notice of a sale had been breached.
   
• Evidence showed the plaintiffs had validly exercised a lease renewal option before the building was sold.
   
• Causation became central once the court found a third-party purchaser's own decision to terminate the lease broke the chain of liability.
   
• Undisclosed evidence, including a $150,000 settlement with the new owner and a three-month rent abatement, undermined the damages claim.
   
• Personal liability against the corporate principals failed for lack of any evidence piercing the corporate veil.
   

Facts of the case

9413-4764 Québec inc. operated a daycare in Montreal under a commercial lease with Bates Holdings inc., running from February 2020 with an option to renew for a further five years. In March 2024, well within the notice period, the daycare exercised that renewal option by registered mail. Months later, without being told a sale was underway, the daycare's representatives learned — when a stranger rather than an expected insurance agent showed up to a scheduled visit — that the building had been sold to Jardins Bates inc. ["Jardins Bates" is the name used in the judgment's French narrative; the English settlement agreement excerpted in the same judgment refers to this entity as "Bates Gardens."] The new owner subsequently sent the daycare a notice dated August 8, 2024, terminating the lease at the end of its current term. The daycare requested compensation, and the parties ultimately settled for $150,000 under a Lease Termination and Settlement Agreement that included a broad release of claims against third parties. The daycare, having failed to secure alternative premises, wound down operations and had its provincial operating permit revoked. It then sued Bates Holdings and its two principals, Robert and Raphael Bixenspanner, in Small Claims Court for $15,000, alleging that the failure to disclose the pending sale caused it to incur wasted expenses and ultimately lose its business.

Policy and legislative provisions at issue

The lease's renewal clause allowed the tenant sole discretion to extend the term for five years, provided written notice was sent at least six months before expiry — a requirement the daycare met. A separate clause, 2.05, obligated the landlord to immediately advise the tenant upon receiving or accepting a purchase offer for the building, while preserving the tenant's other legal remedies for damages if the lease was terminated for reasons other than eviction or tenant default. The same clause also set out a schedule of liquidated compensation, starting at $75,000 and decreasing over the renewal period, payable if the tenant were evicted for reasons other than its own default. The settlement agreement between the daycare and the new owner contained a release provision under which the daycare renounced any right of action against that owner or any third party connected to the lease or its termination.

Reasoning and analysis

The court found that Bates Holdings and its principals had indeed breached the notice obligation in clause 2.05, offering no explanation for failing to inform the daycare of the sale or the pending purchase offer. However, breach alone was not enough to succeed: the plaintiffs still had to prove that this failure caused their claimed damages. On that point, the evidence did not hold up. The court noted that the new owner had committed to honouring existing leases and was therefore bound by the daycare's validly exercised renewal — yet it was that owner's independent decision to terminate the lease, not the original sale itself, that caused the disruption to the daycare's operations. [The judgment contains conflicting statements as to which supporting documents the plaintiffs put into evidence: one paragraph states that four specific documents, including the termination notice and the settlement agreement, were not introduced, while the next paragraph states the plaintiffs brought all of these documents except the termination notice.] The plaintiffs also had not disclosed that they received a three-month rent-free period before vacating, or that their $150,000 settlement was double the base liquidated damages figure specified in clause 2.05 of the lease. The court further found no evidence that the daycare made reasonable efforts to mitigate its losses. As for the personal defendants, the court held that the lease bound only the corporate entities, and the plaintiffs had neither alleged nor proven any basis for disregarding the separate legal personality of Bates Holdings to reach its principals individually.

Ruling and overall outcome

The Tribunal dismissed the daycare's claim in its entirety, concluding that although the defendants breached their notice obligation under the lease, this breach was not shown to be the cause of the damages alleged — that causal role belonged instead to the new owner's independent decision to terminate the lease, a decision the daycare had already accepted in exchange for a $150,000 settlement. The defendants, as the successful party, were awarded legal costs of $374, though the judgment's own reasoning identifies the underlying filing fee as $347, a discrepancy the source does not otherwise explain.