OH lease Rules that prescribe future rules arguably unenforceable

RECENTLY, questions have arisen whether Westsea can make rules regarding the parking of uninsured vehicles in lessee's parking stalls. Such rules are not included in the lease or in the Rules themselves. However, Westsea presumably would rely on two references, Article 4.11 and Rule 35, in the lease that might give them the authority to make new rules that are not otherwise in the lease or the Rules.

In my opinion, for reasons discussed, there is a very strong argument that these provisions are void for uncertainty and unenforceable. 

...

Article 4.11 

To observe and perform the rules and regulations forming Schedule "B" hereto and such further reasonable rules and regulations as the Lessor may from time to time adopt and of which written notice shall have been given to the Lessee.

Rule #35

Parking of vehicle of Lessees only shall be permitted and in such location and on such terms as the Lessor from time to time may prescribe.

...

One of the basic principles of contracts is certainty, and these kinds of clauses have been held unenforceable. An excellent recent case on this from the BC Court of Appeal is 585582 BC Ltd v. Anderson 2015 BCCA 261.

The court referred to another case that closely parallels Westsea's rule to "prescribe rules"...

[24]        Another instructive case is Sekretov and City of Toronto (Re), 1973 CanLII 712 (ON CA), [1973] 2 O.R. 161, 33 D.L.R. (3d) 257 (C.A.).  The restrictive covenant in that case provided that the owner of the land burdened by the covenant “shall not use the lands herein for any other purpose than that provided by resolution of [the Municipal] Council”.  The Ontario Court of Appeal upheld the ruling of the trial judge that the restrictive covenant was invalid on the ground the covenant did not specify the land intended to be benefitted by it.

[25]        In addition, the Court held that the covenant lacked certainty.  The reasoning of Mr. Justice Schroeder on behalf of the Court was as follows at 168:

… The covenant as expressed in the transfer is thus susceptible of the interpretation that the use to which the land may or may not be put must depend upon the whim of Council to be expressed in a resolution or resolutions to be passed at some future time or times as occasion may require.  I cannot think of anything more uncertain and more indefinite than such a provision…  Where such vagueness and uncertainty exists in a restrictive covenant imposed on a servient tenement the covenant cannot be enforced.  I cannot avoid coming to the conclusion that the covenant sought to be imposed in this form is altogether too vague and indefinite to be enforceable against a successor in title to the purchaser of the lands in question.

[26]        In the present case, the covenant prohibits the rental of a unit to the public unless it is done in accordance with the “Rental Pool Management Agreement”, defined as an agreement between the owner of the unit and the rental manager setting out the terms by which the rental manager will manage the unit and make it available for rental use.  The form of the agreement is not attached to the covenant, nor is it incorporated by reference into the covenant.  Indeed, the agreement did not even exist at the time of the creation of the covenant.  Rather, it is an agreement that must be negotiated between each owner of a strata lot and the rental manager.

[27]        There is no certainty with respect to the terms of the Rental Pool Management Agreement and, as a result, there is a lack of certainty in the covenant itself.  By looking at the covenant registered against a unit, a successor in title to the unit cannot determine the terms by which the unit may be rented to the public....This is similar to Sekretov in the sense that the use of an owner’s unit can be affected by the whim of the rental manager expressed at some future time. 

[emphasis mine]

It is apparent to me that Article 4.11 and Rule 35 contain just this kind of arbitrary rule-making authority at Westsea's whim expressed at some future time, and in my view these provisions would likely be held unenforceable by a court. 

I should note that this may not apply for those who have recently purchased suites and who have been given notice of the new rule, if the new purchaser has agreed to it, in which case a collateral contract is formed.  

[Nothing in here should be construed as legal advice, and the opinion expressed here is my own].

Response to Westsea's Application for Leave to Cross-Appeal, and my "long-paper"

This is a short update:

I've filed a Response to Westsea's Application for Leave to Cross-Appeal.

Basically, I wanted to focus the court's attention on the test for prudent and reasonable discretion under the lease.  It is both parties' aim (Westsea's and mine) for the court to reconsider whether litigation costs are payable by the leaseholders as an operating expense under the lease. This by itself is not likely to be an issue the court would find to be of public and national importance, but it's possible that a number of other issues are. Regardless, the parties respective applications for leave to appeal to the Supreme Court of Canada are long-shots.

I have also prepared what I call my "long paper on private 99-year leases".  Basically the idea is to lay the groundwork for why new legislation regulating these 99-year leases is necessary in BC. I've sent this to the BC Law Institute https://www.bcli.org/ and have received a positive response.  They have indicated they will table the matter at an upcoming meeting to discuss whether the issues warrant a report by the BCLI.  I feel cautiously optimistic my paper makes a sufficient case for a further review by the BCLI, but we won't know for a while.  If the BCLI decides to report on the issues, it would go a long way to persuading our legislators that some kind of legislation is needed.

I have also sent the paper to Jacquie Dawes, Deputy Minister of Municipal Affairs and Housing. It is my understanding that staff have been assigned to review these 99-year leases, which I expect is largely a response to the numerous emails and correspondences from leaseholders who have raised concerns about these leases, both at Orchard House and other 99-leaseholds in BC. However, this paper should assist policy staff to understand the problems with these leases and where there is a legislative gap.

Note I may make ongoing updates to the long-paper.

Westsea's Application to the SCC to Cross-Appeal

Background
This is an update on the status of my Supreme Court of Canada (SCC) Application for Leave to Appeal the decision of the Court of Appeal in October 2017. Recall that the Court of Appeal (CA) concluded that Mr. Justice MacKenzie's decision that Westsea could not recover its litigation costs as an operating expense under the lease, was premature and that Westsea, in effect, had to go back and charge leaseholders its litigation costs, and then to sue those who refused to pay.

For many reasons, as I have set out in my Application for Leave, I felt this decision was unjust, and so I applied for leave to appeal.  Statistically there is a 10-15% chance that leave will be granted, so leaseholders must recognize this reality and accept that the chances of actually obtaining leave to appeal are quite small.

SCC opens file
The SCC registry finally opened its file on February 8, 2018, almost three months after the registry received my material in mid-November.  This sort of delay, though at the high end, is still within the range of normal, I understand.

From February 8, Westsea had 30 days from then to file a Response and/or to file an Application for Leave to Cross Appeal.  Yesterday Westsea served me with its Application for Leave to Cross-Appeal. and I have learned that Westsea has also mailed copies to other leaseholders.

This is to address some questions that I have received.

Some commonality of issues raised
First, leaseholders have known from correspondence from Westsea's lawyers, that Westsea has planned to cross-appeal. This means that Westsea also believes that the Court of Appeal erred.  Our respective reasons as to why the Court of Appeal was wrong are not all the same, but they are partially the same (see Issue 1, page 10, of my Application for Leave to Appeal, and Issue 1 of Westsea's Application for Leave to Cross-Appeal). It's somewhat technical, so I won't delve into the details of the commonality between our respective applications, but anyone interested can review these links.

From my perspective, even if the SCC were to grant leave strictly on the basis of Westsea's cross-appeal leave application, and not on my initial leave application, this would be fine since the cross-appeal application covers one of the main issues I was raising, and then raises a second issue that I primarily agree with. In either case, if leave is granted, it's likely the SCC would review the actual decision of Mr. Justice MacKenzie, but it would do so in the context of other issues of public/national importance. Both parties want this.

What this means, I believe, is that there is now an increased chance that the SCC will grant leave. It is not at all guaranteed, however, but if both parties agree the CA was wrong, the SCC will surely scrutinize the issues very closely before deciding whether to grant or dismiss our applications.

A brief response
I do plan to submit a short Response (as I am entitled now to do), primarily in respect of the issues related to prudent and reasonable discretion (see Issue 7 of my Application for Leave to Appeal) which Westsea appears to recognize as an issue related to the ones they have raised, albeit very obliquely. I also plan to provide a short Response to Westsea's position on costs.  I will update leaseholders when that is done.

A unique collaboration?
I draw attention to Westsea's paragraph 9 (p. 21) of its Application for Leave to Cross-Appeal:

"Instead, the practical consequences of the Appeal Decision are to require new litigation and force Orchard House leaseholders and Westsea to risk breaching their contractual obligations, either by refusing to pay the legal costs demanded or by demanding legal costs that are not recoverable under the Lease. The Appeal Decision imposes this requirement, oddly, in an attempt to protect the interests of interested parties who declined to participate in the Petition, being the other leaseholders at Orchard House who were served with the Petition.  It is unsurprising then that both Westsea and Mr. Trenchard seek leave of this Honourable Court to appeal the Appeal Decision."

This paragraph summarizes very nicely the reasons why both parties feel that the CA was wrong. There is certainly a sense of a unique circumstance here in which the CA has caused both parties to in effect, join forces, to seek a resolution to these issues. It may very well be that the Court of Appeal quite intentionally set matters up this way.  Of course we will never really know and, even if it did, we will not know for some time whether this makes the Court of Appeal brilliant in its foresight, or on the contrary, highly absent in foresight, or something inbetween.

Nonetheless, the circumstances are interesting, and if indeed this goes to the SCC, there may be cause for legal practitioners to study what the heck happened in this case. Of course this doesn't help the leaseholders or, for that matter, Westsea, in any practical way at present.

Other questions that have arisen:

SCC agents
On the cover is the name of an agent (lawyer) Marie-France Major.  That person is simply an agent for Westsea in Ottawa.  Parties are allowed to use SCC agents (who are lawyers) to assist them with procedural and other issues before the SCC. They are expensive though, which is why I have not hired one.  If we are fortunate enough to be granted leave to appeal, I will in fact be obligated to retain an agent in Ottawa to assist with procedural issues.

Service
Leaseholders appear to be receiving a copy of Westsea's cover letter to me that refers to "service on you" -- this is simply Westsea's service of its material on me, with a copy to leaseholders. This does not mean leaseholders are somehow being made parties to these matters. They are simply being provided copies of the material.

However, it is a significant issue as to whether or not parties should have been given notice of Westsea's original appeal, and how one party may effectively represent a large number of others -- that is a big issue here.

Case Planning Conference - 16-3355 - April 12 2018

Now that the trial to determine who is responsible to pay for the windows/doors project is going ahead in June 2019, there are a number of steps along the way that need to happen, mostly in relation to the exchange of evidence for the trial. Often the parties cannot agree to how and when these steps should occur, so they need to apply to the court to guide them. 

In our case, there are many things the parties disagree about, and so I've filed a Notice of Case Planning Conference, set for April 12, 2018, so I can ask a Master or a Judge to make orders to guide the litigation process.  

This is actually the second Case Planning Conference, but the first was prior to Westsea's application to strike my Notice of Civil Claim (which they subsequently lost), and at the time of the first Case Planning Conference, we agreed to put certain matters on hold pending the outcome of Westsea's application.

So for this second Case Planning Conference, in addition to asking for orders about the exchange of documents and examinations-for-discovery of certain key witnesses from Westsea, I also want to ask the justice to order that Westsea cannot charge its own litigation costs to leaseholders prior to the trial (see link above, item #5).  Of course, the issue of whether they can charge those costs at all under the lease needs to be re-litigated, further to the Court of Appeal decision, but my argument here that Westsea cannot "pre-charge" its litigation costs derives from the BC Supreme Court Civil Rules.

First, under Rule 5-3(1)(v), a judge or master at a case planning conference can make:

Rule 5-3 — Case Planning Conference - Orders

(1)(v) any orders the judge or master considers will further the object of these Supreme Court Civil Rules.

From there, the authority to limit Westsea's apparent attempt to charge litigation costs prior to the trial falls under Rule 14-1.

Rule 14-1 Costs

Costs to follow the event

(9)Subject to subrule (12), costs of a proceeding must be awarded to the successful party unless the court otherwise orders. [my emphasis]

When costs payable

(13)If an entitlement to costs arises during a proceeding, whether as a result of an order or otherwise, those costs are payable on the conclusion of the proceeding unless the court otherwise orders. [my emphasis]

In our case, first we do not yet know who will be the successful party or if there will be divided success.  Secondly, the Rules are clear that unless the court orders otherwise, the parties must wait until the conclusion of the trial before seeking their costs. So, my argument is that it is plain and obvious that Westsea cannot seek to charge its litigation costs in relation to action 16-3355 before the trial, if in fact they are doing this - which seems to be the case, although at this time we do not actually know because they will not provide a breakdown of their "legal costs". 

To support my application, I will likely prepare an affidavit that includes some of the recent correspondence from Westsea and their counsel regarding their demand for litigation costs to the leaseholders as operating expenses, in addition to some of my own correspondence to Westsea and its counsel on the issue.

Link to Further Amended Notice of Civil Claim

Further Amended Notice of Civil Claim_link

The Sisyphean Journey...Application for Leave to the SCC

Following on my last post entitled the Sisyphean Journey, I'm going to stay with that theme for now. Anyone wishing to see more about why I refer to the current state of my litigation with Westsea Construction as such a journey, may like to check my last post on the subject.

Admittedly there is a certain futility and even delusional optimism associated with applying for leave to appeal to the Supreme Court of Canada (SCC) in relation to the Court of Appeal decision (for more discussion, again see last post).  The SCC receives something in the order of 500 applications for leave a year, and grants leave in about 50 or 60 such cases. So, the sheer probability of my application being granted leave is small. 

However, there are some reasons to think this may meet the SCC tests of national and public importance in granting leave. I won't delve into detail here, but Memorandum of Argument on my application for leave spells it all out. My materials arrived at the SCC registry on Thursday.  As I understand it, time begins to run for other deadlines once the other side is served with the materials, which I did the week before.  The Registry still needs to assign a file number to it and send confirmation the file is open, but I have learned materials have been received and entered into their system. There is at least one part of the application that is incomplete (waiting for a document), and there may be other things that I will need to correct.

For now, I can await receipt of Westsea's reply material. I do have some idea of how they intend to respond, but I won't comment further at this time.

In the end, I am certainly prepared to see leave not granted, but will hold some guarded and cautious optimism. We will likely know within 3 to 4 months. Of course, even if leave is granted, there is no guarantee the SCC would see things favorably in my direction.

There is also Westsea Court of Appeal matter #2 upcoming soon as well.  More on that front later.

The Sisyphean journey: Trenchard v. Westsea Construction Ltd. CA44007 judgment released

On October 6, 2017, the Court of Appeal made an oral judgment in this dispute, released in written form today .

Summary of decision

The court allowed Westsea's appeal in part, but on grounds raised by neither of the parties. The court said that the decision by the lower court was premature, and that Judge MacKenzie should, in essence, have sent Westsea away to make its demand for payment from the leaseholders, and that Westsea should subsequently have litigated if and when leaseholders refused to pay.  Instead, Judge MacKenzie went on to interpret the Orchard House lease and found that the lease was properly interpreted to mean that Westsea could not recover its litigation costs from the leaseholders. However, the Court of Appeal said that Westsea had inappropriately made its election to seek its litigation costs from all the leaseholders in the context of litigation between only myself and Westsea, and so Judge MacKenzie ought not to have interpreted the lease, leading to Westsea's appeal.


Court's decision contains some elements of fairness

While I can see some elements of fairness in the Court of Appeal's decision, overall I can only describe the decision as bizarre.  In terms of its fairness, the decision forces Westsea to account individually to each leaseholder for their specified apportioned cost, and then to take action against those who refuse to pay. In this way, the Court of Appeal does seem to recognize the transparency issue that I raised in my original petition. Additionally, given Judge MacKenzie's decision in which he found Westsea could not charge its litigation costs back to leaseholders, and that the Court of Appeal expressly neither impugned nor supported that part of his decision, there is some risk to Westsea should it decide to re-litigate. Also, there is a sense of neutrality to the decision, and this is reflected in its decision not to award costs to either party.

Sisyphus re-visited

However, the likelihood that Westsea will want to re-litigate the issue is very high, in my view, because of other litigation on the go, and the potential for future litigation involving Westsea and other leaseholders, whether they are from Orchard House or other buildings. So, in my view, the court's decision pushes the re-set button on an issue that it really ought to have decided.  In the end, the court's decision serves to increase the prejudice to the leaseholders, rather than to mitigate the potential injustice related to any failure by Westsea to notify leaseholders of its demand for payment of its litigation costs associated with my petition.

In practical reality, as I pointed out to the court, some leaseholders will simply pay on demand because they are intimidated by the demand and will not be aware they can still dispute the issue.  Others, like myself, who dispute the matter, will have to roll the painful Sisyphean litigation rock uphill all over again, all the way up to the Court of Appeal again for a definitive answer.  In my view, this is not a just result.

A rare instance in which I agreed with counsel for Westsea

Indeed, even counsel for Westsea argued that Judge MacKenzie properly had jurisdiction to make his decision. Westsea of course disagreed with Judge Mackenzie's interpretation of the lease, and this was the basis for their appeal, but they did not dispute that he had jurisdiction to make the finding. Counsel for Westsea pointed out that I had obtained an order for substituted service and served all of the other leaseholders with notice of my amended petition. This meant the leaseholders had been notified of my application to the court for an interpretation of the lease.

Disagreeing with this view, however, the Court of Appeal said:

"It was wrong for Westsea to have urged the court to decide an issue prematurely, resulting in it incurring additional legal expenses here and in the court below".

However, in fact Westsea was not the party to apply originally for the interpretation as made by Judge MacKenzie. It was I who originally sought his declaratory judgment.  On this basis, Westsea made it's election at the petition hearing that it would pursue costs under the lease, which thus created "a real issue" that was squarely within the judge's jurisdiction to decide.

While obviously Westsea's counsel and I have disagreed on many things, I agree whole-heartedly with him that Judge MacKenzie had jurisdiction to consider the issue and to make a declaratory finding. In fact in R. v. Solosky, 1980 1 SCR 821, the Supreme Court of Canada stated:

"Declaratory relief is a remedy neither constrained by form nor bounded by substantive content, which avails persons sharing a legal relationship, in respect of which a 'real issue' concerning the relative interests of each has been raised and falls to be determined". (p. 830)

Indeed, I commenced my litigation under a petition and not a Notice of Civil Claim for the very reason that the issues I was raising involved declarations, and I carefully followed the Rules of Court on this point.


Insufficient opportunity to prepare submissions on a point not raised by either party

In our case, the problems, as I see them, with the Court of Appeal's decision, are compounded by its failure to provide a reasonable opportunity to allow both parties more time to generate submissions on an issue that was not raised by either parties. The Court of Appeal was frank about relying on a distinct issue not raised by either party, saying (para 12), "As the appeal is allowed but not for the reasons argued before us, I would not make any award as to costs."

While it's great there were no costs awarded, the failure of the court to allow time for the parties to make adequate submissions on this point is really a huge error, in my view.

The Supreme Court of Canada, in R. v. Mian, 2014 2 SCR 689, stated, at para 30

"An issue is new when it raises a new basis for potentially finding error in the decision under appeal beyond the grounds of appeal as framed by the parties. Genuinely new issues are legally and factually distinct from the grounds of appeal raised by the parties (see Quan v. Cusson, 2009 SCC 62, [2009] 3 S.C.R. 712, at para. 39) and cannot reasonably be said to stem from the issues as framed by the parties. It follows from this definition that a new issue will require notifying the parties in advance so that they are able to address it adequately." [my emphasis]

That the Court of Appeal sought submissions from me summarily without time to research the new issue, is even more egregious, I argue, given that I am a self-represented litigant.

My failure to cross-appeal

While there are other technical errors which I won't get into at the moment, I want to comment on the the court's statement at paragraph 6:

"I say the "primary" issue because Mr. Trenchard in his factum seeks various other remedies in the absence of any appeal by him.  Clearly he is not entitled to the relief he seeks as he did not cross-appeal."

Now, admittedly, in my factum I applied for a "declaration" for a finding that Westsea had breached its duty of honest performance. This was, I suggest, a matter addressed implicitly by Judge Mackenzie's decision, and was raised in issue by Westsea. Now, I accept that I ought not to have sought a declaration on this particular point in the absence of a cross-appeal, but the court seems to have lumped together a bunch of my arguments in response to issues fairly raised by Westsea and by the nature and character of Judge MacKenzie's decision. (See here for Westsea's factum).  This sort of generalized impugning of my arguments is, I would argue, really just bad decision making.

My application for fresh evidence

Also, one of the "remedies" I had sought was in relation to an application I made for fresh evidence. Now, right away some may think, "oh god, what's Trenchard up to trying to bring in fresh evidence". But the evidence I sought for admission was a whole bunch of other identical leases from other buildings in BC. With these I wanted to show that the Orchard House lease is a standard form lease. This is important in light of a recent decision by the Supreme Court of Canada in Ledcor Construction v. Northbridge Indemnity Insurance Co, 2016 SCC 37, which, on my argument, effectively instructs appellate courts to consider, in the determination of the appropriate standard of review, whether a contract is standard form or not.

Coupled with this, I argued that the Orchard House standard form lease in question is residential and not commercial, which distinguishes it from a line of authority that has been mounting in BC that applies commercial lease precedents to 99-year residential leases like ours, which is really comparing apples to oranges.  The key difference is that for commercial leases, parties have greater equality of bargaining power and enter leases at arms-length, and often under the oversight of lawyers.  This is not the case for standard form residential leases, which are essentially "take-it-or-leave-it" contracts drafted by the lessor and which lessees have had no hand in negotiating.

There are other technical errors which, in my view, the court made. I won't get into these here, but the court of appeal actually stated during submissions that it had considered my motion for fresh evidence in along with its deliberations, but in the end it did not say how.  This, in my view, is another procedural error.

Application for leave to appeal to the Supreme Court of Canada (SCC)

The Orchard House 99-year residential lease, and many others just like it in BC are, in my view,  standard form residential leases, affecting upwards of 3000 individual leasehold units. This makes interpretation issues under these leases to be fundamentally issues of substantial public importance. I understand that the mandate of the SCC is to consider cases of public importance, and it is not primarily concerned with appeal court errors. Of course, it seems to me, an appeal court must err in some way for a further appeal to become attractive to the parties.

In the end, what I take from the Court of Appeal decision is an opening to seek leave to appeal to the Supreme Court of Canada. Now statistically about 10-15% of leave applications are granted, so the odds of getting leave are small.  However, because of the public importance aspect of these issues, such an appeal seems well worth a try.

At this stage of the game it's just another hill on the Sisyphean journey.  On the way, I am prepared to see the ball roll in either direction. If it rolls back over me, it may scuff me up, but it's not big enough to break me.