Aird v. Country Park Village Properties (Mainland) Ltd.

Aird v. Country Park Village Properties (Mainland) Ltd.
Court (s) Database
Federal Court Decisions
Date
2004-04-13
Neutral citation
2004 FC 551
File numbers
T-1849-01
Decision Content
Date: 20040413
Docket: T-1849-01
Citation: 2004 FC 551
BETWEEN:
TED AIRD, VIVIEN AIRD, GLENN ALSIP, SHIRLEY ALSIP, SHIRLEY BEATTIE, AL BOSSERT, ROGER BOYCE, PAT BOYCE, JIM COLLINS, OLIVE COLLINS, REG COOPER, PAT COOPER, BILL DAVIES, JESSIE DAVIES, ED DAVIES, ELANIE DAVIES, TONY DAVIS, JACKIE DAVIS, WILLARD EDWARDS, ETHNA EDWARDS, PATRICIA ELLIOT, ARCHIBALD ELLIS, KURT FENGLER, ANNA FENGLER, LARRY FENGLER, RENATE FENGLER, TOM GLANCY, SHIRLEY GLANCY, JOE GRZYB, DORLES GRYZB, JOHN GUILIANA, BRITT GUILIANA, ED HOLMES, ETHEL HOLMES, HELEN HOLZWORTH, HERB HOLZWORTH, KATHY HRISHUK, MIKE HRISHUK, PETER JOHNER, HELEN JOHNER, ERNIE KAHLER, HILDA KAHLER, RON BACON, Executor of the Estate of JOSEPH KOVACS, GERRY McCARTHY, MARILYN McCARTHY, RON McCOMB, ROSE McCOMB, PETR MEISTER, INGRID MEISTER, WAYNE MITCHEL, TRUDIE MITCHEL, DIANE MOORE, JOHN MOORE, JOHN MORSE, CATHERINE MORSE, ROY NEFF, DAISY NEFF, JOAN OLLIFFE, JOHN OSTENDORF, NELLIE OSTENDORF, NORMAN PARKER, ROXIE PARKER, KEN PATTERSON, JEFFREY PUNSHON, DOREEN PUNSHON, ELAINE EBY, DOROTHY REID, ED ROGOZINSKY, DELORES ROGOZINSKY, DEREK ROLPH, BETTE ROLPH, DAVID SCHELLENBERG, JOHN SNYDERS, JANNIE SNYDERS, RUDY SNYDERS, JOHN SONNEVELDT, WILLIE SONNEVELDT, TOM SPANN, IRMA SPANN, HARLYN SPROULE, FAYE SPROULE, HENRY STRYD, ADRIANA STRYD, STAN TURNER, HAL WESTON, DOLORES WESTON, DON WHITTAKER, MARYANN WHITTAKER, CATHERINE KNUDSEN, HOWARD KNUDSEN, MARGARET MAKI, LEO MAKI, LORENZ LOHNINGER, HANNELORE LOHNINGER, MARGARET TIBBEN, RALPH CHURCHILL, SANDRA CHURCHILL, JANET REED, CHRIS SEABROOK, MARGARET SEABROOK, FRED HOWSE, PHYLLIS HOWSE, MACE HARRISON, IRENE HARRISON, BUD THOMPSON, MARJORIE THOMPSON, JOHANNA AUBERTIN, GORDON SIDDONS, ROSEMARY SIDDONS, RUSS GRILLS, DIANE GRILLS, BILL MILLER, GERRY MILLER, DEBORAH INNES, ARLESS MISFELDT, JANET MISFELDT, STANLEY BAXTER and GRACE BALES,
Plaintiffs,
- and -
COUNTRY PARTY VILLAGE PROPERTY (MAINLAND) LTD.,
Defendant.
REASONS FOR JUDGMENT
LAYDEN-STEVENSON J.
[1] More than half of the residents in Country Park Village are disgruntled. They are the plaintiffs and, on various dates between 1994 and 2000, they entered into either subleases or assignments of subleases with the defendant, Country Park Village Properties (Mainland) Ltd. (CPV). Throughout this action, CPV is represented by its officer and director, Mr. Norman William Eden. The dispute arose when Mr. Eden notified the subtenants of a rental increase effective March 1, 2000. The ensuing controversy precipitated examinations, investigations, actions, reactions and accusations that culminated in a situation where the parties regarded each other with mutual distrust and disdain. And so it was at the time of trial. The only things that the parties were agreed upon were the issues between them.
BACKGROUND
[2] Country Park Village (Country Park) is a residential park consisting of modular, manufactured or stick built (built on site) homes located at 45918 Knight Road, south of the Trans Canada Highway and east of Vedder Road in the Sardis area of Chilliwack, British Columbia, in what is known as the Fraser Valley. It is situated on lands that are part of Skowkale Indian Reserve in the lawful possession (under a certificate of possession pursuant to section 20 of the Indian Act, R.S.C. 1985, c. I-5) of Robert Sepass, a member of the Skowkale Band. Mr. Sepass applied to the Minister of Indian Affairs and Northern Development (the Minister) for the lands to be leased. The Minister consented and, pursuant to subsection 58(3) of the Indian Act, a commercial lease between Her Majesty the Queen in Right of Canada, as represented by the Minister of Indian Affairs and Northern Development, and Knight Road Developments was executed on February 5, 1992, and registered in the Indian Lands Register on February 12, 1992, as Number 137805. The lease is for a period of 44 years and is some 55 pages long. Paragraph 13.1 defines the use of the lands and provides as follows:
The Lessee will not use the Premises or permit or suffer them to be used for any purpose other than for the construction, operation, and maintenance of a residential development consisting entirely of single family manufactured homes and for ancillary purposes ordinarily associated with such a development. All improvements necessarily required for the aforesaid uses are herein referred to as "Permitted Improvements". No more than 96 manufactured homes may be placed on the lands.
[3] A Modification Agreement dated October 15, 1992, provided for, among other things, an expansion of the use to provide for the addition of a recreation centre and a recreational vehicle storage area. The lease was assigned by Knight Road Estates Ltd. to CPV on October 29, 1992, and registered in the Indian Lands Register on March 5, 1993, as Number 211988. Between April, 1993, and May, 2001, further modifications provided for, among other things, an increase in the number of permitted home units, an extension of the term of the lease (from expiration on February 29, 2036, to expiration on February 28, 2041) and the addition of duplex home units. All modifications were registered in the Indian Lands Register.
[4] CPV, a company incorporated under the laws of British Columbia in 1992, has its head office therein at Victoria. It operated a number of "Country Park" modular home parks on Vancouver Island and was looking to expand. The assignment of the above-noted lease constitutes the result (or one of the results) of its expansion efforts. At the time of its acquisition of the lease, the lands consisted of open field. There was no infrastructure. CPV was both developer and builder with respect to the Chilliwack Country Park. When the park was completed, it consisted of 120 units (some of which were duplexes), a recreation centre and a recreational vehicle storage area.
[5] The head lease set the annual rent payable by CPV at $19,200 for the first year (March 1, 1992, to February 28, 1993), $37,920 for the second year and $66,000 for the third and fourth years. Thereafter, it provided for rent review every four years with the review date being March 1st. There is an alternative provision for payment of 25% of gross rental income. In 1996, CPV paid $66,000; in 1997, it paid $69,000; in 1998 and 1999, it paid $84,500. With respect to the four year period commencing on March 1, 2000, the Minister determined (after a Public Works Canada appraisal) that the annual head lease rent would be set at $102,000. CPV took exception to the proposed rent and settled on (having obtained the consent of Mr. Sepass, the locatee) annual rent in the amount of $84,500 for the years 2000 and 2001 and $97,241 for the years 2002 and 2003.
[6] The development was completed in phases. Because Country Park was on reserve land, CPV executed a Development Servicing Agreement with the District of Chilliwack for the provision of water and sewage services on August 24, 1993. The first homes were ready for occupancy by early 1994. Purchasers entered into a contract of purchase, sale and lease and then a sublease with CPV. CPV used the same sublease throughout (changes were minor and inconsequential), therefore all plaintiffs have the "same" sublease. At first, CPV used a standard purchase sale and lease agreement. When realtors became involved in the sale of the homes, at least four different forms of purchase and sale agreements were used, depending on the particular realtor.
[7] The sublease between CPV and the residents of Country Park , specifically article 2, provides for rent to be paid by the subtenants. Article 2 will be examined in further detail later in these reasons. For now, suffice it to say that the fair market rent (payable by the subtenants to CPV) is also reviewed every four years commencing March 1, 1996.
[8] The plaintiffs entered into their subleases with CPV at various times between April 30, 1994, and October 1, 1999. Some of them acquired their interest directly from CPV, while others acquired their interest by way of assignment from others with CPV's consent. Until 1997, subtenants paid CPV a fixed amount of basic rent plus additional rent. The latter constituted the subtenant's share of actual costs, including a 20% management fee to CPV. After 1997, CPV charged an all inclusive amount for rent, referred to as "gross rent". Those plaintiffs who acquired their interests directly from CPV after March, 1997, have never paid rent that distinguishes between basic and additional rent.
[9] Until March 1, 2000, CPV charged monthly rent as follows:
1994-1995 $185.00 basic rent + $78.00 additional rent
1995-1996 $187.96 basic rent + $78.00 additional rent
1996-1997 $206.76 basic rent + $78.00 additional rent
1997-1998 $287.61 gross rent
1998-1999 $287.61 gross rent for full-size units $150.00 gross rent for duplex units
1999-2000 $287.61 gross rent for full-size units $150.00 gross rent for duplex units
By correspondence dated February 1, 2000, CPV advised its subtenants that the new rent for the four year period beginning March 1, 2000, would be $400.00 per month for full-size units and $300.00 per month for duplex units. As of that review date, there were 41 years remaining on the lease. The plaintiffs took exception to the quantum.
[10] Following the March 1st increase, the plaintiffs attempted to resolve the dispute through mediation, the Residential Tenancy Office, arbitration and in the Supreme Court of British Columbia. All were without jurisdiction. The action in this court was commenced on October 16, 2001, pursuant to subsection 17(3) of the Federal Courts Act, R.S.C. 1985, c. F-7, as amended. Interlocutory relief was obtained on December 4, 2001 (varied in part by Order dated June 13, 2002) permitting the plaintiffs to pay the rent that they were paying prior to March 1, 2000, pending the hearing of this matter.
[11] Country Park's recreational vehicle storage area covers an area equivalent to four full-size units. From the outset, CPV provided the subtenants with free RV storage for their recreational vehicles, subject to availability. Availability does not appear to have been a problem at any time. However, following the above-noted order of December 4, 2001, the subtenants who are plaintiffs in this action were notified that they would henceforth be charged $450 per year for RV storage because they were "not paying Fair Market Rent as set March 1, 2000...".
ISSUES
[12] The issues for determination are as follows:
(a) What is the appropriate Fair Market Rent for the four year period commencing March 1, 2000;
(b) Is CPV required to account for additional rent overcharge;
(c) Is CPV required to provide RV storage free of charge and, if so, to whom.
PRELIMINARY MATTERS
[13] At the outset of the trial, counsel advised that plaintiffs Nell Doornbosch, Bernie Morris, Pat Radbourne, Lynne Reynan and Alan McLean were not proceeding with their actions. The plaintiff, Sophie Honch, had previously discontinued. Accordingly, with the consent of the defendant, the names of those plaintiffs who had discontinued their actions were ordered removed from the style of cause.
EVIDENCE
[14] I do not propose to review all of the evidence. The plaintiffs called thirty-four witnesses. Of those, twenty-seven were plaintiffs, one was a plaintiff's spouse, two were officers from the Department of Indian and Northern Affairs, two were real estate agents and one, Mr. Danny Ronald Grant, provided expert opinion evidence with respect to the issue of fair market rent. Additionally, six plaintiffs, unable to attend due to medical infirmity, with the consent of the defendant, provided evidence by way of affidavit. The defendant called four witnesses: Mr. Eden; Avis Houlden, a real estate agent; Mr. Howard Kevin Mark Langdon, C.A., the accountant for CPV; and Mr. Brian Edward McConnell, an expert witness in relation to the issue of fair market rent. I will refer to the relevant evidence of the various witnesses when analyzing each of the issues.
[15] Overall, the documentary evidence was in a sorry state. The head lease as well as 1994, 1997 and 1998 subleases, representative of those executed by the various plaintiffs, were provided. No sublease was entered with respect to a duplex unit. Other documents were either incomplete or evidently not available. Some plaintiffs had their contracts of purchase, sale and lease while others did not. Most were eventually able to provide copies of their statements of adjustments. In one instance, there were discrepancies between the vendor's and the purchaser's statements of adjustments. The defendant relied heavily on a Second Amended Disclosure Statement dated October 11, 1995, but did not provide the previous statements. Exhibit 5 to the tendered document provided the budget estimate for 1993-1994 rather than one for 1995-1996. Exhibit J-2 contained 130 documents in three volumes, but in no particular order. Attachments and enclosures that accompanied particular documents were located in different volumes for no apparent reason. Little guidance was provided regarding the extent to which the parties relied on the various documents. Exhibits in J-2 contained material not specifically referred to at any time during the testimony.
[16] I will comment, at this point, on portions of the evidence of several plaintiffs to the effect that they did not review the provisions of the sublease and did not see the head lease. To the extent that this evidence conflicts with the specific provisions of the sublease signed by the various plaintiffs, I have accorded no weight to the evidence. In this respect I refer particularly to Articles 15.09, 15.010, 15.011 and 16.01, which provide as follows:
15.09 The Subtenant acknowledges having read and understood a copy of the Head Lease.
15.010 Notwithstanding anything herein contained, this Sublease shall be expressly subject and subordinate to the Head Lease and to the right of Her Majesty thereunder and shall terminate upon termination of the Head Lease.
15.011 The Subtenant agrees to comply with and be bound by all the applicable terms, covenants, conditions, provisos and agreements of the Head Lease. In the event of conflict between the provisions of the Head Lease and this Sublease, the provisions of the Head Lease shall govern.
16.01 In accordance with the provisions of Article 8.01(f) of the Head Lease, this Sublease must be registered in the Indian Lands Registry upon the following conditions: ...
[17] Similarly, I have given no weight to the evidence implying that those plaintiffs who attended the law firm recommended by the defendant received poor legal advice. I accept the evidence of Mr. Eden that he inquired of local real estate agents regarding the identity of lawyers who were familiar with head leases and subleases in relation to First Nations lands. I also accept his evidence that although he recommended that the plaintiffs retain the services of a particular law firm, they were under no obligation to follow the recommendation. Indeed, there were plaintiffs who took their business elsewhere. CPV had its own counsel separate and apart from that of the various plaintiffs. I assume, for purposes of this proceeding, that each of the plaintiffs received independent legal advice. If they did not, this is not the proper forum for adjudication of that issue.
THE SUBLEASE
[18] As noted previously, all subtenants signed the same sublease. I have chosen to rely on the 1998 sublease in evidence. Nothing turns on the choice of this particular document other than the fact that its execution was nearer the March 1, 2000 review date than the 1994 and 1997 documents. A discussion of the issues, of necessity, requires examination of the pertinent provisions of the sublease. Articles 2 and 3 are of particular significance and are therefore reproduced in their entirety:
ARTICLE 2. RENTAL
2.01 The Subtenant shall pay to the Sublandlord during the Term in lawful money of Canada, without any setoff, compensation or deductions whatsoever, Basic Rent as follows:
(a) For the period commencing on the Commencement Date and ending on the 29th day of February, 1996 (the "First Lease Period") Basic Rent shall be the aggregate of the amounts determined in accordance with sub-paragraphs (i) and (ii) below:
i. Rent of $2,220.00 payable in equal monthly instalments of $185.00 payable in advance on the first day of each month commencing on the 1st day of August, 1994 up to and including the 1st day of February, 1996; and
ii. The product of the annual rent set for the immediately preceding Lease Year multiplied by the annual average percentage increase, if any, in the Consumer Price Index which shall have occurred during the immediately preceding calendar year calculated in the manner set out in sub-paragraph 2.1(d) (the "Annual Cola Increase"). The Annual Cola Increase shall commence with the payment due the 1st day of March, 1995.
(b) For the period commencing the 1st day of March, 1996 and ending the 27th day of February, 2041, Rent shall be payable in advance on the first day of each month, and for each Lease Year commencing the 1st day of March, 1996 to the 27th day of February, 2041, shall be the aggregate of amounts determined in accordance with sub-paragraphs (i) and (ii) below:
i. The Fair Market Rent determined by the Sublandlord for each of the eleven (11) four (4) year Lease periods commencing on the 1st day of March, 1996 and ending on the 27th day of February, 2041 (the "Four Year Periods"); and
ii. The Annual Cola Increase.
(c) "Fair Market Rent" means, for any particular Four Year Period the amount of annual Rent for which a willing and knowledgable (sic) lessor would rent the Leased Premises in the free and open commercial market to a willing and knowledgable (sic) lessee without restriction to comparison with other Reserve lands available for leasing at the commencement of each Four Year Period assuming that at such time:
i. The Leased Premises are owned by a lessor in fee simple and have no charges or encumbrances existing against title;
ii. The Leased Premises include the improvements available to the Leased Premises existing as of the commencement of the term of this Sublease but do not include improvements which are subsequently made to the Leased Premises;
iii. The Leased Premises are leased for the uses permitted in this Sublease; and
iv. Such lessor and such lessee are acting at arms length.
(d) The annual average percentage change in the Consumer Price Index for the preceding calendar year shall be calculated using the Annual Average Consumer Price Index as follows:
(Current Period Index - Previous Period Index) (Previous Period Index) x 100
Example:
For the Lease Year commencing October 1, 1994, the percentage increase, if any, in the Consumer Price Index for the immediately preceding calendar year will be calculated as:
(Annual Average ) (Annual Average ) (Consumer Price Index Number) (Consumer Price Index Number ) (for the calendar year ending ) (for the calendar year ending ) (December 31, 1993 ) (December 31, 1992 ) x 100 ( Annual Average Consumer Price ) ( Index for calendar year ending December 31, 1992 )
(e) The "Annual Average Consumer Price Index" means the Housing Component of the Annual Average Consumer Price Index for Victoria, British Columbia, which is published for each year in the December publication of Statistics Canada Catalogue 62-001. If Statistics Canada changes the base year (now December 1984 = 100) of the Consumer Price Index during the Term of this Sublease, ten subsequent calculations made pursuant to Article 2.01 of this Sublease will be computed using the Annual Average Consumer Price Index which is based upon the new base year. PROVIDED, in the event Statistics Canada cease publication of such index for Victoria, the comparable index for Vancouver shall be substituted therefore.
(f) The Sublandlord shall endeavour to determine and notify the Subtenant of the Fair Market Rent at least 60 days before the respective Lease Year commences, but may make such determination and notify the Subtenant at any time within 60 days after the respective Lease Year commences; PROVIDED HOWEVER that in the absence of or pending such determination and notice, the Subtenant shall continue to pay annual Rent in the same amount and in the same manner as in the last Lease Year of the Term.
(g) If notice of the Fair Market Rent is given after the respective Lease Year commences, and the Fair Market Rent is greater than the annual Rent for the last Lease Year of the Term, then the Subtenant will pay the deficiency in annual Rent for the respective Lease Year within 30 days after such notice is given.
(h) "Rent" means the Basic Rent and the Additional Rent payable hereunder;
(i) "Lease Year" means each successive twelve month period during the Term commencing on the 1st day of March.
2.02 Place of Payment - Rent will be paid to the Sublandlord at 3471 Short Street, Victoria, British Columbia, V8X 2V6, or at any other place the Sublandlord may designate in writing.
2.03 Subtenant May Contest Tax Assessment - The Subtenant may contest by appropriate legal proceedings the amount and validity of any taxes or other assessments levied or imposed by any competent authority, any part of which is directly or indirectly payable by the Subtenant under this Sublease, including taxes payable in respect of the Leased Premises, on providing to the Sublandlord security satisfactory to the Sublandlord for that portion of those taxes directly or indirectly payable by the Subtenant. On the Subtenant's request the Sublandlord will join in and support any such proceedings if necessary, but the Sublandlord will not pay any expense nor be subject to any liability in connection with those proceedings, and the Subtenant will indemnify and save harmless the Sublandlord from and against any such liability and expenses; provided the Sublandlord will not be obligated to join in any such proceedings until the Subtenant has provided security satisfactory to the Sublandlord for the Sublandlord's anticipated liability and expenses.
2.04 Net sublease - The Subtenant acknowledges and agrees that it is intended that this Sublease shall be a completely carefree net sublease for the Sublandlord, as applicable to the Leased Premises, and that the Sublandlord shall not be responsible during the term of the Sublease for any costs, charges, expenses and outlays of any nature whatsoever, in respect of the Leased Premises, save and except obligations of the Sublandlord set forth in Article 9 of this Agreement.
ARTICLE 3. UTILITIES AND OTHER CHARGES
3.01 Subtenant Pays Utilities - The Subtenant will pay for its fuel, electricity, telephone and all taxes, licenses, rates and other charges levied or assessed in relation to the Leased Premises, or in respect of any fixtures, machinery, equipment or apparatus installed in the Leased Premises by the Subtenant, charged to the Sublandlord or the Subtenant.
3.02 Property Taxes and Other Charges - The Subtenant will pay when due and notified by the Sublandlord as Additional Rent,
i. If the Leased Premises are assessed separately for property tax or other assessments, rate or other charges, such taxes, other assessments, rates of other charges relating to or unpaid in respect of the Leased Premises and its proportionate share of all taxes, including all charges for local improvements, water and sewer, assessments and other charges, rates, fire protection charges, duties, licence fees or levies of any kind or nature whatsoever which may be made, levied or imposed on the Lands, other than the Leased Premises and any part leased to any other subtenant, or upon the buildings, improvements, structures, fixtures, machinery and equipment ("Landlord's Improvements") from time to time situate in or on the Lands, or upon the Sublandlord or the Subtenant on account thereof during the Term. If the Leased Premises are not separately assessed for property tax, or other assessments, rates or other charges, the Subtenant shall pay when due as Additional Rent its proportionate share of all taxes, including all charges for local improvements, water and sewer, assessments and other charges, rates, fire protection charges, duties, licence fees or levies of any kind or nature whatsoever which may be made, levied or imposed on the Lands or upon the buildings, improvements, structures, fixtures, machinery and equipment from time to time situate in or on the Lands, or upon the Sublandlord or the Subtenant on account thereof during the Term (herein called the "property assessments"). The subtenant shall also pay when due as Additional Rent its proportionate share of all operating costs incurred by the Sublandlord with respect to the Lands and Landlord's Improvements and Leased Premises, and without limiting the generality of the foregoing, these shall include insurance, management fees, general maintenance and repair, garbage disposal, snow removal, electricity, water and sewer. The subtenant shall also pay, when due, its proportionate share of the cost of maintaining and repairing and insuring and operating the Recreation Centre situate on the Lands (herein called the "Recreation Centre"). Without limiting the generality of the foregoing, on the 1st day of January during the Term the Subtenant shall pay to the Sublandlord the Subtenant's proportionate share of the annual assessments for sewer and water required to be made by the Sublandlord to the District of Chilliwack pursuant to the terms of a Development Servicing Agreement made the 24th day of August, 1993;
ii. The Sublandlord will estimate the Subtenant's proportionate share of such amount prior to the commencement of the Term for the period from the Commencement Date to the 31st day of December immediately following the Commencement Date and thereafter for every calendar year thereafter during the Term prior to November 30th in each year of the Term and the Subtenant will pay to the Sublandlord the subtenant's proportionate share of the amount so estimated in equal monthly instalments in advance on the 1st day of each month during each Lease Year of the Term. Within 60 days after the 1st day of January the Sublandlord will make a final determination of the Subtenant's proportionate share of the amount due for the preceding calendar year, or portion of the calendar year as the case may be, and will furnish to the Subtenant in writing a statement of such amount. If the Subtenant's proportionate share of the amount exceeds the aggregate of the instalments paid by the Subtenant during the preceding calendar year or portion thereof, as the case may be, then the Subtenant will pay to the Sublandlord within thirty (30) days after the date of delivery of the statement, the excess. If the sum of the monthly instalments paid by the Subtenant during the preceding calendar year or portion thereof, as the case may be, exceeds the Subtenant's proportionate share of the amount the Sublandlord will return to the Subtenant within thirty (30) days after the date of the delivery of the Statement, such excess. The "Subtenant's proportionate share" means a fraction the numerator being 1 and the denominator being the number of Lots into which the Lands are divided for sublease by the Sublandlord;
iii. The Sublandlord may upon written notice delivered to the Subtenant allocate the Additional Rent between operating costs and other assessments and may direct the Subtenant to pay all or any part of the Additional Rent to a management company to be retained by the Sublandlord; and
iv. In addition to the foregoing, the Subtenant shall pay to the Sublandlord when notified by the Sublandlord an administration and accounting fee equal to twenty (20%) per cent of the amounts due pursuant to the provisions of paragraph 3.1(i) and (ii).
THE DETERMINATION OF FAIR MARKET RENT
[19] The determination of the appropriate fair market rent for the four year period commencing March 1, 2000, involves subsidiary issues. The first question is whether the term "fair market rent" refers to "basic" rent or "gross" rent.
Basic Rent or Gross Rent
[20] When the first plaintiffs occupied the lots at Country Park, they were charged basic rent and additional rent. The latter constituted, in simplistic terms, the subtenant's share of common area and maintenance costs and a management fee. Property taxes on the leased lot were paid independently and individual water and sewage charges were paid to the District of Chilliwack through CPV.
[21] Mr. Eden described the basic and additional rent combined as a "gross" rent. He testified that in 1997 the CPV directors decided that the rent would no longer be broken down into components. Rather, CPV would charge a gross monthly rent. The rationale behind the decision was threefold: basic rent and additional rent added together are a gross rent; the competitors in the Victoria and Vancouver markets charged rents for mobile and modular home parks on a gross basis; and "rent" in the sublease was defined as the basic rent and the additional rent payable. Mr. Eden described it thus: "Effective 1997 ... we took it upon ourselves to read and define the sublease and the head lease as a gross lease, and that's the way we treated it".
[22] CPV maintains that discrepancies existing in the documentation (post 1996 subleases describe a monthly rent of $187.60 when duplex lot leases were $150 gross and full-size lot leases were higher than $187.60) illustrate that no one insisted on strict compliance with the sublease terms. It also maintains that the assessment of rent on a gross basis (post 1997) was based on industry practice, on CPV's interpretation of the sublease and is not contrary to the terms of the sublease. The defendant points to the fact that the majority of the plaintiffs purchased houses at Country Park after CPV adopted the gross rent model. It is said that this raises an inference that, at that time, the setting out of gross rents was acceptable to those plaintiffs. I note that beyond this general, non-specific statement neither evidence, nor argument, was advanced with respect to notions of acquiescence, waiver or estoppel.
[23] CPV provides a list of twenty-three plaintiffs and contends that the statements of adjustments for those plaintiffs reveal that rent is described as gross rent. I do not find the defendant's list helpful. Nine of the transactions relate to duplex lots and for those the rent in the contracts of purchase, sale and lease (when it appears) and in the statements of adjustments is a gross amount. There is no suggestion that the subleases contain similar references and I cannot make that determination because no subleases regarding the duplex lots were tendered as evidence. Of the remaining fourteen transactions, only three of the statements provide for a gross amount (Bales, Boyd, Churchill). In the case of Bossert, the rent in the purchaser's statement of adjustments is broken down into components while the vendor's statement provides for a gross amount. The statements of adjustments for the remainder of the transactions on the defendant's list do not reference a gross rent. Moreover, there are an additional twenty-nine statements of adjustments (P-20) where the rent is broken down and of those, seventeen post-date March, 1997. CPV also relies heavily on the definition provided in article 2.02(h):
"Rent" means the Basic Rent and the Additional Rent payable hereunder.
[24] I do not subscribe to the position taken by CPV. While it may be industry practice to charge gross rents in modular home parks, the relationship between these parties is governed by the provisions of the sublease, to the extent that those provisions are not inconsistent with the head lease. The Supreme Court of Canada has repeatedly instructed that matters of interpretation are to be approached in a contextual manner. Thus, in construing article 2(h) and the term "fair market rent", regard must be had to the entire sublease, particularly articles 2 and 3 reproduced earlier.
[25] In my view, the word "rent" as it is used in article 2.01(a) and (b) and the term "fair market rent" as it is used in article 2.01(b) refer to the calculation of basic rent. The introductory clause of article 2.01 sets out the parameters for paragraphs (a) and (b) and provides for the payment, by the subtenant, of "Basic Rent as follows ..." Paragraph 2.01(a) details the payments to and including February 29, 1996, and provides for an annual Cola increase. The term "Basic Rent" and "Rent" are used interchangeably in paragraph (a). Paragraph 2.01(b) details the "Rent" payable for each of the four-year lease periods and provides for an annual Cola increase. In (b), the words "Rent" and "Fair Market Rent" are used interchangeably. Both (a) and (b), however, fall under the introductory phrase that specifies "Basic Rent as follows...".
[26] Article 3.02 delineates the charges payable by the subtenant as "Additional Rent". Paragraph 3.02(i) reinforces and clarifies Article 2.04 regarding a "Net Sublease". If the CPV interpretation were adopted, paragraph 3.02(i) would serve no useful purpose. Paragraphs 3.02(ii), (iii) and (iv) further strengthen this position. While it is correct that CPV can itemize its actual costs at the end of each year, if the lot rent is gross, the subtenants are left not knowing what additional rent they paid and article 3.02(ii) would be meaningless.
[27] There are further difficulties arising out of the defendant's interpretation. First, I see no justification for applying the Cola increase to actual costs when regard is had to the definition in paragraph 2.02(e) that refers only to the housing component of the annual average Consumer Price Index. Second, the subtenant is obligated under paragraph 3.02(iv) to pay a 20% administration and accounting fee. The fee is calculated as 20% of the amounts set out in 3.02(i) and (ii), i.e., the additional expenses. Third, article 12.01 envisions that overholding subtenants, upon expiration of the sublease, will be required to pay monthly rent equal to 120% of the monthly basic rent. Fourth, CPV, from the opening of Country Park in 1994 through to March, 1997, charged basic rent and additional rent, not a gross rent. It appears anomalous to have two distinctly different approaches arising from the same document.
[28] Viewed contextually, the only reasonable interpretation of the definition of "rent" in paragraph 2.02(h) is that the word can refer to either basic rent or additional rent. In short, "rent" can be, and is, used interchangeably with both "basic" rent and "additional" rent within the sublease. A conjunctive interpretation whereby "rent" must include "basic" rent plus "additional" rent (when regard is had to the surrounding provisions) results in an absurdity. There is no dispute that the word "rent" and the term "fair market rent" are used interchangeably. Thus, when setting "fair market rent", CPV is setting or determining the "basic" rent. This is not inconsistent with the provisions of the headlease. While this result may not reflect industry practice, or be convenient, the sublease and the provisions contained therein dictate the relations between these parties.
[29] The second question that arises is whether the rent established by CPV in 1996 was a fair market rent. Determination of this issue will impact on the appraisal evidence. However, for purposes of clarity and cohesiveness, I believe it is best dealt with at this juncture.
Was the 1996 Rent Fair Market Rent?
[30] Mr. Eden testified that in 1995 or 1996, he contacted Burgess, Austin and Associates and requested a survey of modular home pad rentals in suburban parks. He received a fax transmission (Exhibit P-7, also found at J-2 Tab 124) that provided the information set out below. A handwritten notation "As of February, 1995" appears next to the title "Current Monthly Pad Rents".
Survey of Modular Home Pad Rentals in Suburban Parks
Park Current Monthly Pad Rents Common Amenities
SUBJECT Laity Street/Lougheed Hwy $255 to $270 No facilities Maple Ridge
Garibaldi Mobile Home Par(sic) $305 Minimal facilities 12892 232nd Avenue Maple Ridge
9132 120th Street $305 No facilities Surrey
Plaza Mobile Home Park $320 No facilities 8266 King George Hwy Surrey
Crestway Bay $488 to $510 Rec complex w/sauna, swirl Surrey clubhouse
Crispen Bays $350 to $498 Outdoor pool 7790 King George Highway Surrey
Westvilla Estates $385 to $491 Sauna, clubhouse, rec room 8560-156th Street Surrey
[31] After reviewing the information and noting that the closer one gets to Vancouver the higher the rents, Mr. Eden met with the other members of the CPV board of directors. Mr. Eden described the result of the meeting as follows:
We thought about at one time setting the rents at the higher level of 370 to 380 in the park for 1996 but we decided as a marketing business decision was to leave the rents as they were and put a modest 10 percent increase on them. As we have done in our other parks give a lower, undermarket value for pad rents ... for that particular period. Because we know we can raise the rents every four years under the head lease. So we, as a business decision, decided that even though we realized that rents were undermarket, it was a benefit to us to market the park at those rates to create sales to lease up our park and get the revenue from the lots. And it was a business decision for that.
[32] CPV refers to paragraph 2.01(f) of the sublease and notes that if the sublandlord does nothing at a review date, the rent continues at the existing rate. That, CPV says, does not necessarily mean that the rent is fair market rent. It submits that, "[i]t means that the landlord has simply chosen a rent, which results and made a business determination not to increase it". The defendant maintains that Mr. Eden's evidence stands uncontradicted and that "no evidence has been led by the plaintiffs to suggest that the 1996 rents were not set below market". I disagree.
[33] There is a problem with the defendant's reasoning in relation to paragraph 2.01(f). The evidence indicates that in 1995-1996, the basic rent was $187.96 and additional rent was $78.00 for a total amount of $265.96 per month. In 1996-1997, the basic rent was $206.76 and additional rent was $78.00 for a total amount of $284.76. Paragraph 2.01(f) provides:
The Sublandlord shall endeavour to determine and notify the Subtenant of the Fair Market Rent at least 60 days before the respective Lease Year commences, but may make such determination and notify the subtenant at any time within 60 days after the respective Lease Year commences; PROVIDED HOWEVER that in the absence of or pending such determination and notice, the Subtenant shall continue to pay annual Rent in the same amount and in the same manner as in the last Lease Year of the Term.
Mr. Eden, in correspondence to the Country Park homeowners dated April 29, 1996, informed the subtenants that their rent would be adjusted and that CPV would be advising them of the new rate. By correspondence dated June 17, 1996, Mr. Eden notified the subtenants of a 10% increase in basic rent. He "waived [the] arrears for the increase for March, April, May and June, 1996" and requested payment of the increased amount commencing July 1, 1996 through February 1, 1997. Although CPV did not comply with the time limitation contained in paragraph 2.01(f), it did comply with the proviso. I fail to see how this aspect of the defendant's argument assists in determining whether the rent established in 1996 was fair market rent.
[34] There is no question that Mr. Eden testified that the CPV directors made a business decision to set the 1996 rent below market value. However, his evidence