Yoho Investments Ltd. v. Glacier Park Lodge Ltd.

2013 BCSC 839 Yoho Investments Ltd. v. Glacier Park Lodge Ltd.

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Yoho Investments Ltd. v. Glacier Park Lodge Ltd., 2013 BCSC 839 Date: 20130514 Docket: 4291 Registry: Golden Between: Yoho Investments Ltd., Inc. No. BC0523318, Abbot Ridge Investments Ltd., Inc. No. BC0705941, and 460057 B.C. Ltd., BC0460057 Petitioners And Glacier Park Lodge Ltd., Inc. No. BC054872, Moberly Holdings Ltd., Inc. No. BC0071124, Glacier Park Holdings Ltd., Inc. No. BC0705941, Malcolm Campbell and Linda Campbell, Her Majesty the Queen in Right of Canada, Revelstoke Credit Union, Tekamar Mortgage Fund Ltd., Inc. No. 557325, The Crown in Right of British Columbia, The Crown in Right of Canada, Thorncliffe Properties Inc., Inc. No. BC0400655 Respondents Before: The Honourable Mr. Justice Melnick Reasons for Judgment Counsel for the Petitioners: B. Fairley Counsel for Her Majesty the Queen as represented by Parks Canada Agency: K. Choy and V. Hola Place and Date of Hearing: Golden, B.C. and Cranbrook, B.C. March 18 & 19, 2013 in Golden March 27, 2013 in Cranbrook Place and Date of Judgment: Golden, B.C. May 14, 2013 [1] There are two applications before me. The proceedings concern a hotel and associated properties on Parks Canada land in Rogers Pass near Revelstoke, British Columbia which were leased and operated by Glacier Park Lodge Ltd. and Glacier Holdings Ltd. (collectively or individually referred to as "Glacier

Park Lodge"). The petitioners seek an order setting the matter, or alternatively various issues within the matter, down for trial. The respondents seek an order dismissing the receiver of the lodge and settling its expenses. It also seeks a declaration that various charges registered against the property including the lease itself be removed from title. For the following reasons, I order that the entire matter be set down for trial. I. Background Facts [2] On June 2, 2011, the respondent, Parks Canada, commenced foreclosure proceedings against some of the petitioners, Glacier Park Lodge and Malcolm and Linda Campbell (the "Campbells") as covenantors. The respondent now seeks to clear the lease and associated registrations from title to the Parks Canada land. However, the background of these proceedings starts much earlier than 2011. [3] On February 18, 1970, Her Majesty the Queen in Right of Canada granted a lease over the land at issue in these proceedings to Northlander Motor Lodges Ltd. (now Glacier Park Lodge Ltd.). During that lease, Glacier Park Lodge constructed a 50-room hotel on the property. The construction included a dining room, a four-pump gas station and a convenience store. [4] The lease governing the property included a renewal provision at para. 26 which reads: If, at the end of the term of this lease, the Lessee has paid all rents due under this lease, has

performed, observed and kept the covenants and agreements herein contained in a manner satisfactory to the Minister, and has, at least six months before the end of the term of this lease, applied to the Minister for a renewal lease, Her Majesty will grant a renewal lease on the lands and premises to the Lessee for a further term of twenty-one years at a rent to be determined by the Minister and containing substantially the same covenants and agreements as are herein contained except the covenant for renewal. [5] Those operators, now petitioners, attempted on two occasions during their tenancy to renew the lease, but they say they were rebuffed by the respondent on the basis that it was too early to negotiate a renewal. There is no time frame specified in the lease in which renewal may be affected. [6] In 2008, the former operators of Glacier Park Lodge, now petitioners, were no longer interested in operating the hotel. They sought to sell their shares in Glacier Park Lodge. The Campbells were interested in purchasing those shares, but apparently could not purchase them outright. As a result, on August 19, 2008, in exchange for the shares, the petitioners registered various securities, including a mortgage on Glacier Park Lodge's leasehold interest and a General Security Agreement over other assets in the lodge. The Campbells are now in default of those obligations and owe

approximately $2,500,000 to the petitioners. [7] Paragraph 17(1) of the initial Lease stated that the lessee will not inter alia alienate, assign, mortgage, sell or transfer the possession or share the possession of the land and premises except with the consent in writing of the Minister (of Environment). No such consent was granted for the registration of the mortgage. However, Mr. Aaron Fu attested that Parks Canada knew about the mortgage. The petitioners argue that strict compliance with this provision of the lease was waived. [8] The written lease document stipulated that the term of the lease ended on December 31, 2009. However, tenancy did not end at that date, nor did Parks Canada take any action to end the tenancy at that time. [9] Rather, in a series of letters, Parks Canada informed the Campbells of its position that the Campbells were overholding the property under the same terms as the written lease provided, except the provisions on rent, term and lease renewal. These letters confirmed the Campbells' tenancy until they, on behalf of Glacier Park Lodge in a September 13, 2012 email, advised Parks Canada that the hotel would close on September 30, 2012. The closure may have been brought about because of the Campbells' inability to secure long-term financing without a long-term lease from Parks Canada. [10] It appears, though it is not clear, that negotiations to

extend the lease or create a new lease may have been ongoing throughout the period between December 31, 2009 and at least September 30, 2012 between Parks Canada and the Campbells. On September 18, 2012, Parks Canada sent a letter stating that Glacier Park Lodge's tenancy would expire on September 30, 2012. This coincided with the Campbells' decision to close the lodge on the same day. [11] On October 10, 2012, the petitioners applied to appoint a receiver due, at least in part, to an urgent need to winterize the buildings in order to avoid damage. That application was granted on October 15. It appointed 460057 B.C. Ltd. as receiver in a limited capacity. It defined the term assets to consist of the "hotel, and non-operating gas bar and convenience store, with appurtenant furnishings, equipment, tools, [and] fixtures". The receiver's powers are as follows: 2. The Receiver shall have authority to secure and safeguard the Assets, to winterize the assets, to change locks on any buildings, and to maintain the Assets, but the Receiver is under no obligation to incur any extraordinary expense to improve or maintain the Assets.

3. Pending any further court order, other than the powers set out in paragraph two above, 460057 B.C. Ltd. shall exercise its receivership only in accordance with the consent of the Superintendent of Parks Canada and her authorized representatives. [12] The order also gave any of the respondents the power to apply to vary or set aside the order on 48 hours notice. That provision is the basis of Parks Canada's application to remove 460057 B.C. Ltd., a company for which Mr. Fu is the principal, as receiver in these proceedings. [13] Mr. Fu also stated that he met with the financial administrator for Glacier National Park, Michael Liggins, at some time after he became receiver for Glacier Park Lodge on October 15, 2012. At that meeting, Mr. Fu allegedly told Mr. Liggins that the petitioners were willing to take over the lodge and run it for "up to five years or even longer". To do so, he indicated that a leasing agreement would need to be in place. It is again unclear whether these statements were given in the context of a negotiation to extend the lease. II. Issues [14] The petitioners ask the Court to set various issues down for trial. In particular, they argue that a trial is necessary to determine if the lease, which by its written terms expired in December 2009 but appears to have maintained some force in governing the relationship between the parties until at least September

2012, should have been renewed for a term of 21 years pursuant to para. 26 of the lease document. If a realistic possibility of renewing the lease remains, or if it was or should have been renewed upon an earlier request, then there remains a need for the receiver, and the charges registered against the property remain in place. They also argue that various equitable claims require a trial. [15] The respondent, Parks Canada, seeks a declaration that the lease registered against Glacier Park Lodge is unenforceable. Parks Canada also seeks an order setting aside the October 15, 2012 order appointing 460057 B.C. Ltd. as receiver for Glacier Parks Lodge and seeks to settle the receiver's expenses. The grant of these orders would mean that parties to the receivership would have the securities held against the lease no longer in effect with the erasure of the lease itself. [16] If an issue is not set down for trial, I have no doubt that the respondent will have its application granted. Thus, the sole issue is whether there is a bona fide issue which should be set down for trial. III. Should the matter be set down for trial? [17] As mentioned, the petitioners seek this Court to set various matters down for trial. To do so would require me to at least stay the respondent's application to dismiss the receiver and to declare that the lease is no longer in effect. [18] The Court's power

to set a matter down for trial in chambers is contained in R. 22-1(7)(d) of the Supreme Court Civil Rules. That rule states: (7) Without limiting subrule (4), on the hearing of a chambers proceeding, the court may [...] (d) order a trial of the chambers proceeding, either generally or on an issue, and order pleadings to be filed and, in that event, give directions for the conduct of the trial and of pre-trial proceedings and for the disposition of the chambers proceeding. [19] The law in this area is aptly summarized by Madam Justice Fitzpatrick in Griffin v. 0904713 B.C. Ltd., 2013 BCSC 273 at paras. 30-35: ...The test for conversion of a petition proceeding to an action is whether there is a bona fide triable issue that cannot be determined by reference to the documents and which would affect the outcome of the proceeding: Boffo Developments (Jewel 2) Ltd. v. Pinnacle International (Wilson) Plaza Inc., 2009 BCSC 1701. [31] In Boffo Developments, Madam Justice Ballance stated: [48] The dominant principle is that the Court should exercise its discretion under the rule to convert a petition into trial where there is a bona fide triable issue that cannot be determined by reference to the documents, and would affect the outcome of the proceeding. A bona fide triable issue arises where on the evidence before the Court there is a dispute as to facts or law which raises a reasonable

doubt or suggests there is a defence that deserves to be tried: Douglas Lake Cattle Co. v. Smith, [1991] B.C.J. No. 484 (C.A.). The threshold is, appropriately, a relatively low one. [49] The authorities indicate a tendency of the Court to convert a summary process to a full trial where serious and disputed questions of fact or law are raised. ... [32] The low threshold on an application for conversion to an action was discussed by Mr. Justice Barrow in Canadian Western Bank v. 0777419 B.C. Ltd., 2009 BCSC 683: [30] ...The evidentiary threshold on an application of this nature is very low. I must be satisfied beyond a reasonable doubt, or to a degree of certainty that approaches that standard, that the contention [of the Respondent] cannot be proven on a balance of probabilities. ... [33] This test has been described in slightly different terms in the context of foreclosure proceedings, by stating that an order nisi will not be granted in summary chambers proceedings unless it is "manifestly clear" that there is no bona fide triable issue as to the entitlement to the remedy the petitioner seeks:HGE Administrative Services Ltd. v. Perrick, 2011 BCCA 308 at paras. 17-18; Firstar Investment v. Ridgewood Development, 2003 BCCA 660 at para. 2. [34] The onus of demonstrating the absence of a bona fide triable issue falls upon the petitioners: McCordic v. Hidden Rock Drilling Ltd. and 409060 BC Ltd., 2006 BCSC 1428 at paras. 22-23, citing Firstar Investment at para.

3. See also HGE Administrative Services at paras. 23-24. [35] In attempting to decide whether to remit a matter for trial, the court is not permitted to weigh the evidence or undertake a detailed consideration of the merits: McCordic at paras. 19-21; HGE Administrative Services at paras. 19-20. [20] In this case, the onus of demonstrating the absence of a bona fide triable issue is on Parks Canada. They have not met that onus. [21] I am troubled by the issue of whether the lease was or should have been renewed. I do not interpret the clause in para. 26 requiring preconditions such as payment of rent and keeping "covenants and agreements herein contained in a manner satisfactory to the Minister" to grant unfettered discretion to the Minister to reject a renewal request for any reason s/he so chooses. [22] So long as a petitioner, whether the original operators or the Campbells, sought renewal of the lease at least six months before December 31, 2009 after paying all rents due and keeping all covenants and agreements, para. 26 of the written lease agreement would "automatically" renew the lease for 21 years. [23] The petitioners submitted that the original operators sought renewal of the lease. These requests were undoubtedly made by the petitioners well before six months before December 31, 2009. If all rents were paid and all covenants and agreements were kept, then the lease

should have "automatically" been renewed. [24] The petitioners also submitted a sworn affidavit from Mr. Fu stating that the Campbells requested renewal of the lease pursuant to para. 26 of the lease. Assuming that is correct and the Campbells did so at least six months before December 31, 2009 after meeting the aforementioned conditions, their request should have resulted in an "automatic" renewal. [25] Parks Canada has simply not provided sufficient evidence about the alleged renewal of the lease, attempts to renew it, or fulfillment of the preconditions to the renewal provision by Glacier Park Lodge for me to dismiss the issue on the evidence before me. [26] Parks Canada submits that the petitioners have acknowledged that Glacier Park Lodge failed to meet the preconditions to renewal by virtue of information in an October 10, 2012 affidavit from Mr. Fu in which he swears that the lodge was in a state of disrepair. I find this is not evidence that the lodge was always in a state of disrepair, but rather speaks to the state of affairs after the Campbells had determined to close the lodge. It says nothing about the lodge at the time of the Campbells' request to renew the lease, if such a request was made nor does it speak to the condition of the lodge when the petitioners sought to renew it. [27] Parks Canada also alleges that Glacier Park Lodge had a "history of

non-compliance" with the preconditions and covenants under the lease, citing a variety of alleged breaches including failure to pay rent, perform various covenants, maintain insurance or leave the land in a suitable condition. The only evidence submitted which substantially supports these claims is a paragraph in the affidavit from Mr. Liggins indicating that to his knowledge, the Minister of the Environment did not give written consent to allow the mortgage to be registered against Parks Canada land. As noted, it is a contested fact whether the Minister waived this term of the lease and allowed this mortgage. [28] Parks Canada also raised the issue of maintaining insurance required by the lease. A letter dated August 10, 2012 notes that liability insurance on the property may have been expired after June 6, 2012. This may also have occurred well after a request for renewal was made when preconditions were satisfied. Again, there is simply no evidence one way or another showing insurance was not purchased during much of the timeframe when a renewal request may have been made. There is no other evidence before this Court to suggest there was a failure to meet one of the preconditions to renewal. [29] Parks Canada went to lengths to address 460057 B.C. Ltd.'s capacity to negotiate the renewal of the lease. Regardless of whether or not such submissions have merit, they are

subsidiary to the initial issue of whether the original operators/petitioners or the Campbells reasonably exercised their right to renew subject to fulfilling the preconditions listed under para. 26 of the lease. [30] Much was also made of the receiver's limited capacity to act pursuant to the October 15 order in these proceedings. I note that the power to set a matter down for trial is the Court's to exercise, and the power does not derive from an application from a party. Thus, the allegedly limited nature of the receiver's powers does not have a bearing on my conclusion. [31] In sum, I am satisfied that the factual issue of whether renewal of the lease pursuant to para. 26 should have occurred or was improperly denied is a bona fide triable issue that cannot be determined by reference to the documents before me. Clearly, if the lease was renewed or should have been renewed, the outcome of these proceedings would be affected. At risk of stating the obvious, Parks Canada would not be entitled to a declaration that the lease and various securities attached to it are unenforceable if in fact the lease had been renewed or if renewal had been improperly denied. [32] In my opinion, all of the issues concerning the receiver's capacity to negotiate lease renewal and equitable claims such as unjust enrichment, proprietary estoppel and relief from forfeiture are subsidiary to the first

issue of whether the lease was or should have been renewed. Based on that reasoning, I choose to exercise my power to set the entire matter down for trial pursuant to R. 22-1(7)(d). All of these issues can only be determined on the basis of a fuller understanding of the facts than was presented in these proceedings. [33] The petitioners' application is granted. The respondents' application is stayed. The matter is hereby set down for trial. [34] The petitioners are entitled to their costs of the applications on Scale B in the cause. "Melnick J."