It is very rare – and hence worthy of note – for a residential tenancy matter to wind its way to a court of appeal. On January 13, 2014 the British Columbia Court of Appeal released its decision in Metro Housing Corp v Ganitano (2014 BCCA 10), after hearing arguments the Attorney General of British Columbia, the Rental Owners and Managers Society of British Columbia, and the Tenant Resource and Advisory Centre Society. This case raised an important issue with a constitutional element on the nature of the rights contained in the British Columbia Residential Tenancies Act, the adjudication of which has legal implications here in Alberta as well.
The factual background is lengthy and convoluted, so it has been simplified for present purposes. The respondent, Ms. Ganitano, who had been the tenant of the appellant for over 28 years at the time this matter was heard, had a history of late payment of rent. Her landlord issued a ten-day notice to end the tenancy for unpaid rent pursuant to the requirements of the British Columbia Residential Tenancies Act after she failed to pay her rent on time, apparently because of the late arrival of a government cheque. Under the Act, the tenant has a set period of time to either pay or dispute the notice, failing which the tenant is conclusively presumed to have accepted that the tenancy will end on the date stated in the notice. Ms. Ganitano paid the entire balance, but two days after the deadline imposed by the B.C. RTA. The landlord elected to treat the tenancy as forfeited and accepted the payment only for use and occupation of the premises, and not as payment of rent under the lease. Her application was dismissed by a dispute resolution officer because she failed to apply before the deadline imposed by the B.C. RTA.
The appellant applied for judicial review. She requested that the court grant relief from forfeiture under s. 24 of the Law and Equity Act, which reads:
“The court may relieve against all penalties and forfeitures, and in granting the relief may impose any terms as to costs, expenses, damages, compensations and all other matters that the court thinks fit.”
The chambers judge granted the relief sought and re-instated the tenancy. The landlord appealed.
The sole issue before the British Columbia Court of Appeal was whether s. 24 of the Law and Equity Act empowers a court to grant equitable relief against forfeiture of a residential tenancy. The position of the applicant landlord and the Attorney General was that equity cannot protect against forfeiture of a residential tenancy because the forfeiture is statutory in nature. They argued that the rights of landlords and tenants relating to the non-payment and late payment of rent are covered by the RTA, which precludes recourse to the equitable jurisdiction of the superior courts. With the assistance of the Tenant Resource and Advisory Centre Society, Ms. Ganitano argued that the relevant provisions of the RTA do not oust the equitable jurisdiction of the superior courts because forfeiture in the context of a residential tenancy is based in contract.
To be clear, ‘forfeiture’ means losing possession of something as a penalty for an illegal act or breach. In the context of a residential tenancy, it means the tenant loses all interests in the rented premises and the landlord has a right to re-enter and claim possession of the property. The determinative issue in this case was whether the forfeiture arose from contract or statute.
The significance of the distinction is that the courts cannot intervene to protect against a statutory forfeiture – a point on which the parties agreed. This legal principle is rooted in the constitutional division of powers between the judicial and legislative branches of government. As long ago as 1923, the Pricy Council explained in The King v Northern Canadian Railway Company that allowing a court to use its equitable jurisdiction to grant relief against a statutory forfeiture would be tantamount to granting it the discretion to repeal legislation. This would clearly be an illegitimate exercise of judicial authority.
Faced with this commanding precedent, Ms. Ganitano sought to distinguish between forfeitures imposed by statute and forfeitures arising from contract, but which are authorized or available under a statute. She pointed out that there was no contract between the parties in The King v Northern Canadian Railway Company, so the forfeiture was truly statutory in origin. According to Ms. Ganitano’s characterization of the issue, the rights of landlords and tenants arise from the contract between them. Since the obligation to pay rent is contractual, the penalty for failing to do so – forfeiture of the lease – is contractual as well. It was not disputed that s. 24 of the Law and Equity Act gives the courts the discretion to provide relief against contractual penalties and forfeitures, so the chambers judge did not err in reinstating the tenancy. In support of this contention, she argued that absent clear and express language in the B.C. RTA one should not assume that the legislature intended to extinguish the rights of residential tenants to seek equitable relief from forfeiture.
The Court of Appeal rejected these submissions and granted the appeal, unanimously holding that s. 24 of the Law and Equity Act could not grant equitable relief from forfeiture of a residential tenancy. This is because termination of a tenancy under the B.C. RTA for late or non-payment of rent is properly characterized as a forfeiture imposed by statute, not contract.
In reaching this conclusion, the justices characterized the B.C. RTA as providing a comprehensive scheme relating to the late or non-payment of rent in residential tenancies. They observed that the B.C. RTA abolished the common-law right of a landlord to treat a tenancy as forfeited when a tenant fails to pay rent, instead requiring the landlord to follow the procedures set out in the Act. Furthermore, the B.C. RTA expressly precludes a landlord from resorting to the common-law remedy of distress to assist in obtaining arrears of rent. Of particular relevance was that when a landlord serves notice for non-payment of rent, the B.C. RTA provides five days to either pay or dispute, failing which he or she is “conclusively presumed to have accepted that the tenancy ends” – this is a clear statement from the legislature that a tenancy is deemed terminated by operation of law – not by contract – when the tenant fails to respond within the statutory deadline.
The cumulative effect of these considerations is the Court of Appeal’s finding that the legislature had ousted the equitable jurisdiction of the superior courts by comprehensively delineating the rights of landlords and tenants with respect to the payment of rent in residential tenancies and providing exclusive procedural mechanisms for the enforcement of those rights. Allowing an equitable intervention in this context via s. 24 of the Law and Equity Act would, according to the reasoning in The King v Northern Canadian Railway Company, effectively allow superior courts to repeal legislation on a case-by-case basis and thereby encroach on the legislative sphere. To the justices of the Court of Appeal, such a result would be unacceptable.