D.L.G. & Associates Ltd. v. Minto Properties Inc., 2014 ONSC 7287
Decision Date: December 16, 2015
http://canlii.ca/t/gfnxq
In February 2011 DLG, which operated a franchised restaurant, signed a ten-year lease in a mixed commercial and residential property owned and operated by Minto. The lease included a provision that DLG maintain insurance coverage against “all risks.” The restaurant opened in July 2011. In early October the sewer backed up and flooded the restaurant. The resulting damage, clean-up, and reconstruction meant that the restaurant was closed until early December 2011. Minto covered the costs but declined to follow plumbers’ recommendation to install a backflow preventer. DLG’s insurer revoked coverage for flood and sewer back-up; Minto acknowledged the cancellation and accepted continuation of the lease. In September 2012 there was a second sewer back-up and the restaurant was again closed. DLG advised Minto that it was in danger of losing its franchise and that the franchisor had demanded payments over $36,000. Minto denied liability and insisted that DLG continue to perform obligations under the lease agreement. In November the franchisor terminated the franchise; DLG informed Minto that it had elected to treat the lease as terminated.
DLG alleges that it was induced to enter into the lease, that Minto lied regarding previous problems with the plumbing, and that Minto breached its obligation to correct known plumbing problems. They claim against Minto for breach of contract, negligence, negligent misrepresentation, and fraudulent misrepresentation. Minto moved the to have claim dismissed, arguing that DLG’s claims are precluded by the Covenant to Insure in the lease. Judge Perell found in favour of Minto that the Covenant to Insure prevents DLG’s claims for breach of contract, negligence, and negligent misrepresentation; however the claim for fraudulent misrepresentation can stand.
Comment: I will keep readers up-dated if DLG and Minto continue to pursue this through the courts.