M.D. ACTON QUEEN’S BENCH FOR SASKATCHEWAN Citation: 2013 SKQB 407 Date: 2013 11 18 Docket: Q.B. 100/2011 Judicial Centre: Moose Jaw BETWEEN: GOLDENCHILD HOLDINGS LTD. and 101122980 SASKATCHEWAN LTD. Counsel: Robert C. Fielding for the plaintiff Gail D. Wartman for the defendant JUDGMENT KRAUS J. November 18, 2013 [1] The plaintiff, the landlord, claims damages against its tenant, the defendant, asserting negligence by failing to clean, wax and polish the vinyl tile floor in the building, thereby permitting moisture to penetrate between and underneath the tiles resulting in lifting and cracking. The tenant denies responsibility, contending the cause is normal wear and tear or high humidity arising from water entering the building due to inherent structural defects for which the landlord is responsible. The tenant asserts that the landlord breached the lease by failing to repair the roof and by failing to take other remedial measures to prevent water from infiltrating the building, resulting in losses to the tenant’s restaurant operating in the building. The tenant also claims damages for economic interference, alleging the landlord interfered with the sale of its restaurant. [2] Six witnesses testified for the landlord which owns and leases the building to the tenant. The landlord sold the restaurant to the tenant at the time of the lease, retaining the exclusive use of portion of the basement under the lease. [Exhibit PD1, Tab 1, lease between the parties made July 11, 2008] [3] The landlord operated restaurant business within the premises from 2001 until 2008, having converted the premises from its previous use as grocery store; new vinyl tile floor was installed over plywood subfloor in 2001. Mr. Phan, one of the principals of the plaintiff corporation, testified the floor was always clean and described daily floor maintenance of sweeping and mopping, and annual stripping, waxing and polishing. Prior to turning over possession of the restaurant to the tenant on August 1, 2008, the landlord painted the exterior and polished and waxed the floor. Mr. Phan spoke to one or more of the three principals of the defendant corporation, inviting them to observe the stripping, waxing and polishing of the floor but, instead, the tenant expressed its intention to hire floor cleaner to do such work. [4] Water leaked into the building from the roof, damaging ceiling tiles and dripping onto the floor. The tenant placed containers to catch the water coming from the ceiling, closed the restaurant for several days and notified the landlord about the problem. Mr. Phan went to the restaurant in February, 2011, observing water stained ceiling tiles, sagging ceiling tiles (which had not been sagging in 2008) and deterioration of the vinyl floor tiles. He asked the tenant to fix the floor tiles but was told that the problem was caused by movement of the building and by normal wear and tear. During the seven years the landlord operated the restaurant, Mr. Phan described water leakage into the restaurant from the roof and moisture in the basement in the spring although repairs to the roof had been done and the basement was equipped with sump pump. [5] The installer of the original vinyl tile floor was called as witness for the landlord, having been hired by the contractor who had installed the plywood subfloor. Although the installer assumes that the subfloor had been properly installed by the contractor (by affixing plywood with construction adhesive on top of gypcrete), he does not know whether it was so installed. The installer was qualified, by consent, as an expert with respect to the nature of vinyl tile floor coverings with particular reference to the condition and reasons of the floor covering installed on the main floor of the building and the cost of repair. The installer made report on August 12, 2013. [Tabs 12 and 13, PD1] In his opinion, the life expectancy of the vinyl tile floor is 20 years if regularly maintained by polishing and waxing to prevent moisture penetrating between the seams of the tiles which could thereupon swell the plywood subfloor and lift the tiles. The installer added that the floor must be swept regularly to remove dust and debris in order to prevent denigration of the polish. The installer looked at the floor in July 2013, comparing its condition to the photographs taken in 2008. [Tabs 18 and 19, PD1] In his opinion, moisture entered the floor because of insufficient floor polish, causing heaving, separation, chipping and scratching of tiles. In his further opinion, humidity from basement moisture could cause the problem but, if so, it would show up at the edges of the floor, near the walls, and he did not see any such indication. He is of the view that water will run off if the floor is polished. The installer also observed water damage to ceiling tiles in part of the restaurant. [6] Another witness for the landlord has been in the flooring industry for more than 30 years. Although not an expert, he looked at the floor in February, 2013 and concluded that the lifting of the tiles was due to water caused by lack of polish. He estimated the cost to repair the flooring, having been asked by both parties to do so: two areas of the restaurant floor showed reasonable wear and tear but the other two areas were “bad”, his cost estimate to repair the bad areas being $22,281. [7] The property manager of the landlord was retained in April 2011. He received calls from the tenant about water leakage, attended the restaurant and, on several occasions, observed continuous drips of water from the ceiling, being caught in pots and pans. He phoned roofer who solved the problem, after the snow went off the roof. The property manager does not recall the dates. [8] Jing Doh Ling, one of four witnesses who testified for the tenant, is the managing director of the defendant corporation. Persistent water issues in the building came to head in February 2011 when water leakage from the roof through the ceiling onto the floor required their restaurant to be shut down on several occasions; some customers were lost to their business and overhead costs of $1,600 daily continued. The basement floor had lot of water, damaging some of the tenant’s record boxes as well as some wood near the stairs. Mr. Ling admits stripping, waxing and polishing the vinyl floor on only one occasion, in October 2011, within the last five years. He denies receiving any instruction about maintenance of the floor but he admits that he does not know what may have been said to the other two directors. Mr. Ling also admits cleaning the floor in response to the landlord’s notice of March 11, 2011, [At Tab 5, PD1] and acknowledges some of the vinyl floor tiles had lifted. However, he testified that, in the problem areas, lifting was caused by instability of the subfloor due to water and, in other areas, was simply due to normal wear and tear. Mr. Lin also described ceiling tiles along the north wall bunching up at the edge closest to the wall which itself is 3" off plumb. These observations by the tenant are confirmed in the report of the landlord’s consulting engineer dated October 24, 2011 recommending remedial action. [Tab 11, PD1] The tenant had complained about water issues in the past and in 2009, in response, the landlord arranged roof repairs, resolving the tenant’s complaint for awhile, although another roof repair was required in subsequent year. The tenant replaced some floor tiles which present lighter in colour than the older tiles in the photographs. [9] The tenant wishes to sell the restaurant business but must renew the lease to do so. The tenant has given Notice of Intention to Renew the Lease to the landlord. [part of Tab 1, PD1] [10] Mei Lin, another director of the tenant, testified through an interpreter. She had taken off time from her job in Toronto to look at the restaurant, arriving in Moose Jaw on May 8, 2008 and staying for about four days. They purchased the restaurant, effective August 2008, for $168,000 with deposit of $70,000, Ms. Lin, dishwasher, contributing $40,000. She was adamant that she did not receive any instruction from the landlord about waxing and polishing the floors. In the spring following purchase of the restaurant, Ms. Lin saw water coming into the restaurant from the ceiling and water running into the basement. The kitchen was flooded and the restaurant had to close. Now, she wants to sell the restaurant but the circumstances with the landlord have created “bad reputation” for sale. [11] certified property inspector testified for the tenant. He was qualified, by consent, as an expert with regard to the structural soundness of the subject building, and made his inspection report on June 13, 2013 [Tabs 16 and 17, PD1]: the main floor of the restaurant showed signs of penetration by water from the roof; the basement received grade water run off (which should be directed into the street); and, cracks should be sealed to keep water out of the building and resist the freeze/thaw cycle of our climate. He observed wood decay in the basement, denigration of the integrity of concrete blocks and water penetration throughout all three exterior walls. The building has excessive moisture: material samples taken on June 13, 2013, and now, show moisture readings of 66%-99%, compared with standard readings in building material of 17%-19%. The building inspector recommended consultation with flooring contractor for an opinion. [Section 8, Interior, Tab 17, PD1] [12] The final witness for the tenant was qualified, by consent, as an expert in the field of installation and physical properties of floor coverings. [Tab 15, PD1] He inspected the building on two occasions. In his opinion, the subfloor is unstable, causing cracking and gaping of floor tiles. The major cause of the instability is moisture in the basement: he observed standing water in the basement, alkaline and effervescence on the concrete, and dampness under the floor tiles on the main floor above the basement arising from moisture in the basement evaporating to the main floor above. The moisture issue must be resolved before any repair or replacement can be undertaken to the main floor of the restaurant otherwise, it is waste of money. The subfloor has lot of noticeable movement, sponginess being evident when weight is applied. It is unstable and must be rebuilt. He gave an example of vinyl tile floors in schools where, if sealed properly at the outset to prevent invasion of water, floors are cleaned few times each year by flooding. In his experience, vinyl tile floors will last years and years; problems caused by water infiltration are cumulative over time and may take long time to show up. Pooling water in the centre of the basement floor will cause problems evident in areas other than along the walls. While it is not correct that lack of maintenance was the sole cause of the problems with the flooring, he would attribute 25% of the damage to maintenance issues. All structural issues must be rectified before any flooring work can be done. The high humidity in the basement also creates health hazard, black mold being present in the ceiling. PERTINENT PROVISIONS OF THE LEASE 2. a) iv. Repairs and Maintenance That the Lessee, at its sole cost and expense, shall maintain and keep the demised premises in good repair excepting reasonable wear and tear and damage by fire, lightning, tempest, impact of aircraft, acts of God or the Queen’s enemies, riots, insurrections, civil commotions, structural defects or weaknesses and explosion. Subject as aforesaid and without limiting the generality of the foregoing, the Lessee shall keep the demised premises in clean and tidy condition. The obligation to repair as aforesaid shall not extend to or include repairs to the subfloor, roof or outside walls, (except plate glass in outside walls) of the building containing the demised premises or to any wiring installed by the Lessor in or about the said building unless the need for repair is caused by negligence or improper use or lack of proper maintenance on the part of the Lessee or its agents or employees. 2. a) xiv. Use The Lessee will keep the demised premises and every part thereof in clean and tidy condition and will not permit waste paper, garbage, ashes or waste or other objectionable material to accumulated (sic) thereon. The Lessor may draw to the attention of the Lessee breaches of this covenant, and instruct the said Lessee to rectify such breaches forthwith upon notice. 4. a) iii. Lessor’s Repairs: The Lessor covenants and agrees with the Lessee that the Lessor will from time to time cause to be made all necessary repairs and replacements to the demised premises which are not required to be made by the Lessee under any of the Lessee’s covenants hereunder, including repairs and replacements which are reasonably necessary as result of ordinary wear and tear and structural repairs and any repairs to the sub-floor, roof or outside walls (except plate glass in outside walls) and any repairs to the wiring installed by the Lessor, provided that the foregoing covenant by the Lessor shall not extend to any repairs which shall become necessary as result of any act or omission (including improper use or lack of property maintenance but excluding ordinary wear and tear) on the part of the Lessee, the Lessee’s agents or employees. The Lessor shall also maintain and ensure the reasonable operation of the heating and cooling system (including air conditioning) at the Lessor’s sole expense. 8. The Lessee shall have the right to lease the lands and premises in Schedule “A” hereto for further years on the same terms as indicated herein except for the following changes: a) The new term of the Lease shall be from August 1st, 2013 to July 31st, 2018; b) The basic rent shall be $7,700 per month (plus applicable federal and provincial taxes as indicated above); and c) There shall not be any additional option to renew the lease; and provided as follows: that the rent is not in arrears and; that the Lessee shall have provided to the Lessor written Notice of its Intention to Renew this lease for further year term on or before January 1st, 2013; then on the delivery of the said Written Notice of Intention to Renew to the Lessor, the term of the lease shall thereby be renewed as amended. CASE AUTHORITIES [13] Neither party cited or relied upon any case authority. POSITION OF THE LANDLORD [14] The landlord submits that the tenant is responsible for the lifting and cracking of the vinyl floor tiles by failing to maintain the floors with regular cleaning, waxing and polishing. The landlord claims damages in the amount of $22,533 to repair the two bad areas of the restaurant floor. The tenant rented the older building on an “as is” basis and, while some issues did arise, they were addressed and remedied on an ad hoc basis. The tenant had the opportunity to inspect the premises before closing the transaction but did not do so. Although the premises were looked at, the tenant did not retain building inspector at the time of purchase of the restaurant and lease of the building. There is no evidence of tortious interference by the landlord in preventing the sale by the tenant of its restaurant business. POSITION OF THE TENANT [15] The tenant submits the moisture in the building causes high humidity resulting in the problems with the subfloor and the vinyl tile. The tenant points to the questionable timing of the landlord’s notice dated March 11, 2011, shortly after the tenant complained about the roof leaking. The tenant submits that damage to the floor has not been shown to be the result of its negligence but is caused by structural defects in the building for which the landlord is responsible. [16] There is no issue that at the time the tenant took possession, the vinyl tile floor was waxed, polished, shiny and clean, without any chipped, lifting or loose tiles. Nor had the tenant expressed any concern about the floor tiles at that time. There is no issue, as well, that the tenant waxed and polished the floor on one occasion only, in October of 2011. [Invoice for $2,530 from Moose Jaw cleaning service dated October 19, 2011, Tab 3, PD1] The evidence does not show that the water leakage into the building was explained to the tenant prior to purchase of the restaurant and lease of the building. [17] In my view of all of the evidence excessive moisture and high humidity within the building undermined the subfloor, causing instability and resulting in lifting and cracking of the vinyl floor tiles. Moisture in the building material samples recently tested by the certified building inspector are five times in excess of standard reading for normal building samples, and accept his observations as to structural defects of the building giving rise to water infiltration into the building through the roof, ceiling, exterior walls and into the basement. also accept the opinion of the tenant’s expert in the field of installation and physical properties of floor coverings: after examining the building on two separate occasions and observing the cumulate effects of water infiltration into the building over time, particularly the standing water in the basement, (which must be resolved before any remedial work is undertaken) the witness was unequivocal that the movement and instability of the subfloor is primarily the result of moisture arising from structural defects in the building, and that only small percentage, perhaps 25%, of the cause of the lifting and cracking of the floor tiles could be attributed to poor maintenance lack of sufficient polish and waxing. The installer of the floor in 2001 was also of the view that water in the basement could cause the problem with the tiles but did not do so here since there was no evident water damage near the walls. However, when he looked at the floor last July, the installer did not test for moisture or humidity levels in the building material, nor did he test the subfloor. [18] The evidence does show that a part, but only a part, of the moisture entering into the subfloor was due to the negligence of the tenant in failing to properly maintain the floor. I accept that the damage to the floor is $22,281, and I find that the tenant is contributorily negligent to the extent of 25% of the damage. Leaking of water through the ceiling onto the floor did necessitate closure of the restaurant, causing reduction of business from customers who could reasonably be expected to be put off by the unsightly ceiling and floor tiles, and the catchment of the dripping water. Although the evidence shows that the restaurant was closed for several days even though daily overhead costs of $1,600 continued, no evidence was offered as to loss of profit or any other business losses. Nor has the tenant proved tortious inference by the landlord with potential sale of the restaurant. [19] The lease is in good standing. Both parties have substantially complied with their obligations under the lease which has now been renewed for five more years pursuant to clause (8) of the lease and reasonably assume the renewed lease will expire on July 31, 2018. By that time, when the premises are returned to the landlord, the floor will be 17 years old, having lasted 17/20 of its 20 year expectancy. The tenant’s liability is therefore ameliorated by the remaining life of the floor (three years) at the end of the renewed lease. The loss suffered by the landlord is, therefore $836. [25% of 3/20 of $22,281]. I find the only business loss proven by the tenant for which the landlord is responsible to be $4,800. [3 days closed at $1,600 per day in lost overhead costs] Thus, the net set off owing by the landlord to the tenant is $3,964. [$4,800 set off by $836] [20] The tenant shall have costs for this three day trial of $2,500 inclusive of disbursements, in lieu of taxable costs. [21] In the result, the tenant is awarded judgment against the landlord in the amount of $6,464 [$3,964 plus $2,500]. The tenant may set off this judgment against the base monthly rent of $7,700 as specified in clause 8(b) of the lease.
HELD: The Court held that the cause of the damage was high humidity in the building caused by water leaking into it from the roof. The failure of the tenant to maintain the floor caused approximately 25 percent of the damage to the floor. The estimated span for the flooring was 20 years. As the lease was in good standing at present and would expire in 2018, the age of the floor at that time would be 17 years. The Court awarded to the landlord the amount of $836, which was 25 percent of 3/20 of the damages claimed. The business loss claimed by the tenant was $4,800. Thus the net setoff owing by the landlord to the tenant was $4,800 less $836. The defendant tenant was awarded costs of the three-day trial of $2,500.