Disputing WS’s litigation costs

Updated 7 July 2021

Contributions to the legal expenses of the lessees sued by Westsea in this matter can be made at the GoFundMe page (opens new browser tab):  https://www.gofundme.com/f/efknd-no-we-don039t-pay-westsea039s-legals?utm_source=internal&utm_medium=email&utm_content=campaign_link_t&utm_campaign=welcome

In mid-2021 a long legal process is still unfolding for a dozen Orchard House suite lessees/tenants who refused to pay part or all of Westsea Construction’s $1,665,250 in billings so far for its litigation and legal expenses for 2017, ’18 and ’19 (although incurred as far back as 2014). The company sued us for alleged default of the lease, meaning it is asking the court to make us pay its billed litigation expenses plus interest and, if we will not or can not, to foreclose on our homes; in other words, eviction.

This situation stems from earlier litigation regarding whether the landlord could bill a lessee (really a pre-paid rent tenant) for the cost to replace all of the Orchard House tower’s original windows. In a front-page story on 7 June 2020 the Times-Colonist reported on the B.C. Court of Appeal upholding a lower-court ruling that the lease does allow Westsea to bill replacement of its building’s windows to the lessee tenants. The story then turns to the company’s litigation expenses in that matter also being billed to the lessees. The story has a few errors, such as use of the word “condo” and the misunderstanding that we own our suites; the news report can be read here (opens a new browser tab): T-C reports BCCA decision  .

It was in January of 2018 that the company warned all Orchard House lessees that we would be required to pay the firm’s litigation costs to oppose lessee Hugh Trenchard’s suit challenging the company’s right to bill him for new and upgraded windows. That letter can be read here (opens new tab): Pay or we sue . Note that the letter also said that litigation expenses would be separated from legal costs directly connected to the remediation work and “ongoing leaseholder and/or tenant issues”. But no separated information was ever provided, so lessees would not have the option to decline to pay only the landlord’s litigation expenses, which we feel tenants should not have to pay.

The civil trial regarding the windows expense took place in June, 2019; Madam Justice Karen Douglas ruled for Westsea, which decision was upheld in May 2020 by the B.C. Court of Appeal. Read about that on this site under the headline “Appeals court rules for Westsea”.

Some of us lessees had agreed with Mr. Trenchard that we are tenants who should not be paying for replacement windows that improve the landlord’s building, on which point we feel that the lease is ambiguous, as it speaks to tenants paying for “window washing”, but is silent on window replacement. Other lessees believed that because all tenants will have use of new windows for the next 30 years, it’s reasonable that we pay for them. These opinions are beside the point regarding us being required to pay our landlord’s litigation expenses.

If the company billing its tenants its litigation expenses sounds inappropriate, it had been found to be so by B.C. Supreme Court Judge Brian MacKenzie, who ruled in 2016 that Westsea could not bill lessees its litigation expenses for having opposed Mr. Trenchard’s first suit, which had sought disclosure about the then-pending windows-replacement project. Westsea’s lawyer–perhaps fearing an adverse ruling–agreed at the courthouse that Westsea would send the windows engineering report to all lessees, in return for which Trenchard withdrew his claim.

In fact, Justice MacKenzie ruled that even if he thought that the Orchard House lease allowed Westsea to require reimbursement of those litigation expenses by its long-term tenants, he would not have permitted the charge because the company could have avoided litigation entirely by providing Mr. Trenchard with the reasonable disclosure for which he had asked.

The company assigned its Vancouver team of lawyers to bring that ruling to the B.C. Court of Appeal. Three judges there noted that Westsea wanted to bill all lessees, but that only Mr. Trenchard was party to the original request for disclosure that Westsea opposed, and to the subsequent question of whether the company could bill all lessees its expenses in that matter. The Court of Appeal concluded that Westsea “was wrong” to have asked the judge to decide whether it could bill all lessees, and that Justice MacKenzie’s decision was premature, set it aside without supporting it or questioning it, and suggested that Westsea might choose not to bill all lessees. ‘Sounded like guidance to me.

When Westsea’s lawyer told the justices it was “inevitable” that the company would proceed to bill all lessees its litigation expenses for the windows case, the lead justice replied that lessees might then be well advised to hire a lawyer. It’s reassuring to read the Court of Appeal judgement, so I’ve scanned a copy that has some underlining by me. You might skip the quoted precedents, which are beyond us non-lawyers. ‘Opens a new tab: Appeal Court re WS legal billing .  Note that at para 12 the appeal judgement says that if Westsea chooses to raise the issue again it should identify the specific litigation costs it claims the lease allows it to bill to lessees; “It is only by proceeding in the manner described (providing a statement of the legal fees and expenses to the leaseholders setting out its claim under the clause) that the issue would properly be raised before all of the interested parties: all of Orchard House’s 210 leaseholders.”

Early in 2018, then, came the first Orchard House past-year operating year (2017) “shortfall” bill for $551,954, of which $426,337 was Westsea’s legal and litigation expenses attributed to 2017, although apparently partially incurred as early as 2014. In May of 2019 we were billed a second past-year (2018) “shortfall”, this time of $495,690, of which $453,771 was the company’s legal and litigation expenses. To that point the litigation billings totaled $880,108. As well, suite fees increased 38% for 2018 and about 25% more for 2019, some portion of which was to cover the landlord’s litigation expenses. My letter in June of 2019  asking for more disclosure about 2018 and the 2019 expenses was sternly dismissed by Westsea’s lawyer as “inappropriate”. Oh, pardon me.

In a letter dated 19 October 2020 we finally received the company’s statement of Orchard House operations for the previous year, 2019, and were told to pay a “deficit” of $209,402. The one-page spending sheet shows that the company spent fully $659,525 on “legal” that year. The legal billings for 2017, ’18 and ’19 total an astounding $1,665,250. What portion of these “legal” expenses were reasonable expenses for the operation of the building we cannot know, as the promised separation of these expenses has not been provided for any year. The implication here is that Westsea made it impossible for lessees to decline to pay litigation expenses specifically, regardless of the B.C. Court of Appeal ruling noted above.

Some of us lessees had to decide in 2018 whether to pay the first of these bills and then sue Westsea for recovery, or refuse to pay and let Westsea sue us; we chose the latter. Here is my letter to Westsea of 14 July 2018 (opens a new tab): Ltr to WS re not paying legal costs .

Of course, among others, Mr. Trenchard refused to pay, and wrote the company a very clear letter that you can read here (‘opens new tab): July 16 2018 letter to WS re refusal to pay litigation costs . He also applied to the courts for an injunction, as these crushing costs were forcing some lessees out of their modest apartment homes. In support of that application numerous Orchard House lessees provided affidavits documenting the financial and emotional impacts of Westsea’s litigation-expenses billings. But facing court delays that would likely make an injunction too late to matter, Trenchard stopped that effort. Although never presented in court, the injunction application addresses these issues, so it’s available here (‘opens a new tab): June 29 2018 Application for injunction .

In October of 2018 Westsea’s “petition action” lawsuit for us not having paid its litigation expenses was served on 22 suite lessees. The company amended the Petition in January of 2021, which version can be read here (opens a new tab): Amended Petition to the Court filed Jan 13 2021 .  The failure by some lessees to pay was inadvertent while a few others naturally feared losing their suite, so some of the 22 were excused from the lawsuit in exchange for a demanded fee of $2,000 each to the company for its costs to pursue them plus the missed “deficit” payments. Brave lessees of 13 suites each put up cash to jointly hire a lawyer, while Mr. Trenchard is self-represented. Our lawyer-prepared submission of “Response” to Westsea’s legal action can be read here (opens new tab): Response to Petition . This Response will be updated to address new arguments made in the company’s amended Petition.  Mr. Trenchard’s arguments go beyond what our lawyer put forward, so his Response as amended and filed in March, 2021 is here (opens a new tab): Amended Response to Petition Filed March 3 2021  .

Two of our group have died since this started in 2018, while two other lessees faced unbearable financial pressure, so have bought their way out, although likely at a cost far higher than $2,000, which price they are not permitted to disclose. The 10 suite lessees who remain are committed to the legal process to have this question finally decided.

Orchard House lessees who are not involved in this action—and lessees in other leasehold buildings in Victoria and the Lower Mainland—likely understand that the pending interpretation by the court of the lease on this is also vital for them; we hope and expect to set a legal precedent that will effectively prohibit all leasehold landlords in B.C. from billing lessees the landlord’s litigation expenses in the future. You may want to help us with our legal costs via our GoFundMe page (opens new tab): GoFundMe to raise funds to oppose Westsea.  .

Madam Justice J. Power has been assigned to manage our case planning and to be the trial judge (the correct term for a Petition suit is “hearing”, as opposed to “trial”, as it involves no witnesses or cross examination). This justice is familiar with residential leaseholds in part because in August of 2017 she refused Westsea’s application to dismiss Hugh Trenchard’s suit disputing Westsea’s right to charge him a portion of $5.6 million for new Orchard House windows. Justice Power awarded costs to Mr. Trenchard against Westsea in that matter, and we have to suspect that this expense for Westsea was then billed back to him among all lessees; this is legal?

At a case-planning conference 23 September 2019 at the Victoria courthouse Justice Power had decided that to avoid overlapping issues our case should only proceed after the Court of Appeal ruling on Mr. Trenchard’s suit regarding the windows expense. With that case settled our case can proceed.

In a second case-planning conference held by telephone on April 16, 2021 Justice Power expressed concern for the stress and costs imposed on the sued lessees by this drawn-out process. She ordered Westsea and its lawyers to disclose to lessees information about its billings, ordered that Westsea make an offer to settle to all lessee respondents to the suit, and that the parties offer dates to deal with the issues.

Westsea claimed that solicitor-client privilege protects it from having to disclose to lessees or to the court more than bare-bones information about its billings to litigate the windows-cost issue and similar costs related to an earlier action seeking disclosure that Trenchard had commenced. Westsea is asking for a two-day hearing to argue its position on this. We respondents naturally want to know why we were billed hundreds of thousand dollars of other “legal” expenses over those years, whether they were for litigation other than the windows-cost issue or the earlier litigation–there was none that we know of–or what other legal expenses could stem from a simple leasehold/rental building.

Suit respondent Hugh Trenchard argues that Westsea should disclose details of its legal costs billed to lessees for 2014, ’15 and ’16 when he had sought disclosure about the then-pending windows project, which information Westsea eventually agreed to provide. Trenchard points out that Westsea was ordered to pay costs to him in one application, which expense the company may have billed back to him and other lessees, so the details of billings for hearings within the various cases from 2014 on should be before the court.

A third case-planning session took place on 28 June 2021, at which Justice Power ordered Westsea’s lawyers to provide further disclosure to lessee respondents by the fall, at which time yet another conference will be held. The hearing itself will likely take place late in 2022. A court slot can be hard to find, as the company’s lawyers want 15 days of court time, although respondents believe that five or seven days would suffice. It appears that time and its cost are no object when a company can recover the expense from its tenants; you can see why we are asking the courts to rule that the Orchard House lease does not, in fact, permit this.

A side note: Among all other Orchard House lessees not sued by Westsea on this issue, one took another route. Our neighbour lessee Kathleen Walker paid Westsea’s litigation-expenses billings and then filed a claim with the Civil Resolution Tribunal in June of 2020, which can be read here (opens a new browser tab): Kay’s CRT filing .  It’s a place-holder claim that may well be settled on the same basis as the eventual ruling by Justice Power at the superior-court level. Although Westsea’s lawyer argued that the CRT has no jurisdiction and that her claim should be rejected, the CRT has decided it will hold her claim in abeyance until higher courts rule.