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