Disputing WS’s legal costs

Updated 15 October 2021

Note one: 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

Note two: This lawsuit is important to lessees in at least nine other Lower Mainland leasehold buildings governed by the exact same lease as Orchard House. The B.C. Court of Appeal said, “It is reasonable in these circumstances to characterize this Lease as a standard form agreement. The interpretation of the Lease will have precedential value for the holders of substantially identical leases.”

Whatever prohibition or limitation on Westsea’s legal billings we accomplish in this suit should apply equally to lessees in the following buildings in Vancouver and Richmond: Westsea Towers, The Chelsea, The Heritage, The Horizon, The Martinique, The St. Pierre, The Surfcrest, The Royal (now called Crestwind) and The Imperial (now called Blue Haven). Numerous other leasehold developments have virtually the same lease, so lessees there, such as at Sun Creek Estates, may obtain similar “precedential value” from our fight.

Lessees of 11 Orchard House suites continue to face landlord Westsea Construction’s lawsuit because we do not believe–among other concerns–that the lease allows the company to bill all lessees (tenants) its unlimited legal expenses, including those to oppose litigation initiated by any lessee. That’s right, the landlord believes that if you as a lessee sue it—no matter how legitimate an issue you may raise—you and your neighbours must pay its expenses to oppose you.

The company further asserts that no lessee has the right to challenge the scale of its legal billings, nor to disclosure about the details of what they were for, although in this proceeding a judge has ordered Westsea to do so (there have been three case-planning conferences). The company claims that it exercises the lease-required “prudent and reasonable discretion” incurring such expenses, but without providing lessees with any information so we may know that our money is being spent prudently on things that are reasonable because they benefit us in some way.

Beyond legal expenses, Westsea refuses to answer even the most basic questions about dramatically increased costs incurred to run a simple long-term lease rental building. Read about the company’s refusal to disclose despite very specific questions on this website’s page titled (opens new browser tab) “$ disclosure refused by Westsea”:  https://orchardhouseleaseholder.ca/disclosure-refused-by-westsea/  .

The Petition lawsuit filed against us in October of 2018, however, is only about expenses the company identifies as “legal”, which line item appeared for the first time on the annual one-page spending report for 2016, and which we first refused to pay in mid-2018.

Although the lease mentions legal costs as a possible operating expense, it also says that each year’s budget will be “…based on prior years experience…”, which should protect lessees from dramatically higher or new spending. After 42 years with no “legal” expense at all, lessees were required to pay $6,980 for 2016, jumping to $426,337 for 2017, $453,771 for 2018, $659,525 for 2019, and $341,244 for 2020 = $1,887,857.

These billings to lessees include the company’s extravagant expenses to defend against lessee Hugh Trenchard’s suit that challenged the company billing him (a tenant, remember) for replacement windows, but other legal expenses in each of these four years’ billings were well over $100,000. Somehow Orchard House functioned for 42 years with no such expense, so what changed, and will the court allow that new annual billing to lessees?

Note that the company’s costs in this suit against us for refusing to pay its legal expenses are not being billed to other Orchard House lessees. This is because Westsea alleges that we are in default of the lease for not paying our share of expenses, which is specifically addressed in the lease. The company’s lawyer wrote all lessees October 2, 2018 saying, “To be clear, legal expenses incurred by Westsea in relation to this Petition will be sought from defaulting leaseholders, not from any Orchard House leaseholder who does not participate in this Petition”. That letter can be read here:

Returning to the issue of “legal” cost billings to lessees, we respondents to Westsea’s suit have learned through court-ordered disclosures that the company even billed its tenants the cost of a court application against Mr. Trenchard that the court denied, and for which the company was ordered to pay $2,800 to him. Westsea then appealed that ruling but later abandoned the effort, yet billed Orchard House tenants its expenses. Mr. Trenchard, being a lessee, was obviously expected to pay his suit’s share of the company’s legal expenses in a proceeding he had won! Disclosures still do not reveal whether Westsea’s ordered payment to him was also billed for recovery from him among all other lessees.

This situation raises questions of fairness, access to justice and the total power imbalance between the lessor and lessees that we ask the court to adjudicate in the suit against us. For example:

*Are the landlord’s litigation expenses an “operating expense” for the building? Would it not be unconscionable to interpret the lease as allowing the landlord to bill lessees its expenses to oppose them? Are such landlord’s expenses billed to lessees prudently and reasonably incurred? If allowed, are such expenses not subject to review by the Court Registrar?

*Who would challenge their landlord on even the most legitimate issue if they must share the cost of their landlord’s expenses to oppose him or her… and face the opposition of their neighbours for the costs potentially imposed on them? Lawyers call this a “chilling effect” that may deny access to justice.

*Are legal expenses apart from litigation necessary to operate the leasehold building, or are they the cost of administrative functions formerly and properly performed at reasonable cost by Westsea staff that in 2016 were first referred to a high-priced Vancouver legal team? (Other Westsea-owned leasehold buildings have seen similar new expenses.)

*Are large expenses that did not exist for 42 years allowed to suddenly appear when annual budgets are to be based on past-years’ experience?

*Is comprehensive disclosure about spending not required so that lessees can know that “prudent and reasonable discretion” was exercised by the landlord in spending their money?

*The B.C. Court of Appeal made a finding of fact that the Orchard House lease is a “standard-form agreement”, meaning it recognizes that lessees neither drafted nor negotiated it. If the lease is unclear on any of the points above, should it not be interpreted in favour of those who are not responsible for that lack of clarity, and should not suffer due to it?

*Has Westsea not in various ways breached duties of transparency, honest conduct and good faith in contractual performance?

With this summary we can turn to the history behind our group’s refusal to pay Westsea’s legal billings, which story begins in 2014. That was the year that lessee Hugh Trenchard stopped begging the company for disclosure about the then-planned major project to replace all of the Orchard House tower windows at lessee/tenant expense. He sued, the company’s lawyer agreed to disclosure after four days in court before Supreme Court Justice Brian MacKenzie, settling that issue, but the company then asked the judge to rule that the lease allowed it to bill its expenses in the matter to all lessees.

Some months later, in 2016, Justice MacKenzie ruled that Westsea’s expenses to litigate the request for disclosure were not a building operating cost, so the company could not bill those costs to its lessees. Justice MacKenzie further 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 the cost of litigation 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 subsidiary 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 therefor 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 lessees its litigation expenses, 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 said 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.”

During this period Westsea proceeded to contract for replacement of all Orchard House windows and to bill its lessees about $6 million. Lessee Trenchard felt that he’d pre-paid his rent and that as a long-term tenant he should not be billed for new windows for a suite he did not own, so in 2016 he sued anew, this time to recover about $35,000 he has paid for the new windows, balcony slider doors and upgraded bathroom ventilation. (We’ll nickname all of this “windows”.)

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.

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 specifically the landlord’s litigation expenses if we thought that other legal billings were reasonable.

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” via this link (opens a new browser tab): https://orchardhouseleaseholder.ca/windows-decision-appeal/

In a front-page story on 7 June 2020 the Times-Colonist reported on the B.C. Court of Appeal upholding the 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  .

While the new windows-cost question was in the courts, it was early in 2018 that all lessees received the first very substantial 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. There was no disclosure so that we or Mr. Trenchard could tell whether some of these costs were from 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. 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.

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 of lessees’ money on “legal” costs that year. In 2021 were learned that 2020 legal spending was $341,244. The legal billings for 2017 through 2020 total an astounding $1.9 million. By blending all “legal” costs under that heading Westsea made it impossible for lessees to decline to pay any specific expense, such as for litigation with a lessee, regardless of the B.C. Court of Appeal guidance 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 on top of the windows-replacement charges 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 making 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 initial 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, one has gone to nursing care, and 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 few 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 you. If the courts rule entirely or largely in our favour, then Westsea and even other leasehold landlords may be prohibited from billing lessees expenses to oppose them in litigation. Or legal expenses may be ruled to be an entirely new cost as of 2016 against which lessees are protected. 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 Hearing judge (a Petition suit has a “hearing”, as opposed to a “trial”, as it involves affidavits but no witnesses or cross examination). This justice is familiar with residential leaseholds in part because in August of 2017 she heard Westsea’s application to dismiss Hugh Trenchard’s suit disputing Westsea’s right to charge him a portion of what became $6 million for new Orchard House windows. Justice Power did not allow the application and ordered costs to Mr. Trenchard from Westsea in that matter. Court-ordered disclosures since then have yet not yet revealed whether this award was billed back to him among all other lessees.

At the initial case-planning conference in September of 2019 at the Victoria courthouse Justice Power decided that to avoid overlapping issues our matter should only proceed after the Court of Appeal ruling on Mr. Trenchard’s suit regarding the windows expense. With that case settled in 2020 our case could proceed.

In a second case-planning conference held by telephone in April of 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 and ordered that Westsea make an offer to settle to all lessee respondents to the suit.

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. Westsea asked for a two-day hearing to argue its position on this, but no such hearing has been ordered. We respondents naturally want to know why we were billed hundreds of thousand dollars of other “legal” expenses over those years, stemming from a simple leasehold/rental building that for decades had no such expenses.

A third case-planning session took place in June of 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 ( ! ). At this glacial pace we can only hope that the Hearing will take place during 2022. A court slot can be hard to find, as the company’s lawyers want 15 days of court time, although respondent lessees believe that five or seven days would suffice.  Note again that Westsea’s costs in this Petition action against us ARE NOT BEING BILLED to other lessees. The company claims that the lease allows it to recover these expenses from those it sued. If it wins.

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 in June of 2020 for recovery of a debt via the Civil Resolution Tribunal, 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.