Landlord has no obligation to mitigate loss for unpaid rent: BC Court of Appeal

A judge made a legal error by concluding that the tenant’s assertions could raise a defence to the landlord’s claim for unpaid rent, the British Columbia Court of Appeal has ruled.

The case of Anthem Crestpoint Tillicum Holdings Ltd. v. Hudson’s Bay Company ULC Compagnie de la Baie D’Hudson SRI, 2022 BCCA 166 involved a lease in a shopping mall in Victoria, BC, which was set to expire in 2024. The tenant closed its store in the mall in June 2019 and stopped paying rent in April 2020.

In July 2020, the landlord brought a civil claim for unpaid rent. In October, the landlord applied for summary judgment or, alternatively, for judgment by summary trial. The tenant claimed that there were two genuine issues that potentially offered a defence and needed further discovery before trial.

First, the tenant argued that the landlord’s refusal to consent to an assignment of the lease in December 2019 breached the lease agreement and its duty of good faith contractual performance. Second, the tenant contended that the landlord’s failure to pursue opportunities to re-let the premises violated its duty of good faith contractual performance and its duty to mitigate avoidable loss.

The chambers judge determined that the tenant succeeded in raising genuine issues for trial and dismissed the application. She found that the tenant was entitled to explore these potential defences at discovery. The judge ordered the landlord to answer questions to which it had objected on the basis of relevance.

The landlord successfully appealed, as the BC Court of Appeal set aside the judgment and ruled in the landlord’s favour in the amount of unpaid rent until the date of the appellate court’s judgment, with the trial court determining the amount of rent owing to date, if disputed. The appellate court permitted the landlord to bring further proceedings from time to time to claim rent due and owing under the lease, if such proceedings were necessary.

According to the appellate court, the failure to pay rent was a repudiation of the lease, which the landlord refused to accept. Thus, the lease and the tenant’s obligations to pay rent remained in effect, the court found. Moreover, neither of the tenant’s allegations could constitute a viable defence to a liquidated claim for unpaid rent, even if proven true, the court said.

First, it was too late to take the refusal to consent to an assignment of the lease as a repudiation of the lease agreement, given that the tenant affirmed the agreement after finding out that the landlord did not consent to the assignment, the appellate court ruled.

The appellate court noted that, if the refusal to approve the assignment was unreasonable, it could have been taken as a repudiation of the lease. However, the tenant took no steps to accept such repudiation. Therefore, the lease subsisted.

Second, the appellate court rejected the argument that the landlord had a duty to the tenant to explore opportunities for re-letting the premises as legally unsound, whether framed as a damages claim or as a defence to the unpaid rent claim.

The landlord had no obligation to mitigate its loss caused by the tenant’s non-payment of rent, the appellate court held. There was no loss to mitigate as long as the lease continued and the claim was for debt, not for damages, said the court.

The case was proper for summary disposition since there was no contest to the essential facts supporting the claim and no factual issues to be weighed or assessed, the appellate court concluded.