British Columbia's highest court has sided with a landlord in a messy dispute with a Victoria-area cannabis producer.
On December 23, B.C. Court of Appeal justices Joyce DeWitt-Van Oosten, Anne W. MacKenzie, and G. Bruce Butler unanimously dismissed an appeal by Evergreen Medicinal Cannabis Supply Inc.
Therefore, Evergreen Medicinal must vacate its leased space by January 31 in Central Saanich, where it grew weed in a windowless concrete building.
On its website, the company describes itself as "Victoria's own environmentally responsible federally licensed producer of medical cannabis".
However, Health Canada suspended the licence of Evergreen Medicinal in August due to noncompliance with the Cannabis Act and Cannabis Regulations.
The company is not connected in any way to a provincially licensed private retail store in Vancouver called Evergreen Cannabis.
Dispute related to rent in arrears
The B.C. Court of Appeal decision revealed that in 2013, businessman Shawn Galbraith asked a Victoria real-estate agent, Philip Illingworth, for help in finding a location for a commercial cannabis company.
Galbraith's firm, Evergreen Medicinal, hoped to obtain a federal licence to produce cannabis.
Illingworth bought land at 6922 Lochside Drive, putting $129,000 down on the $350,000 property. A construction company associated with Illingworth agreed to build a facility for Evergreen Medicinal.
A five-year lease was negotiated starting $90,000 per year and rising to $114,000 per year. As the dispute escalated, they disagreed on the expiration date.
According to the B.C. Court of Appeal decision, Evergreen Medicinal was on the hook in the lease for all taxes related to its occupation of the premises, as well as prime plus five percent per year on any overdue rent.
Evergreen Medicinal didn't get a Health Canada medicinal-growing licence until March 16, 2017, and didn't start paying rent until that time.
Illingworth, however, demanded rent in arrears, claiming that the company owed him $293,372.55 as of November 1, 2016.
After the District of Central Saanich issued a stop-work order in January 2017, Illingworth issued an eviction notice.
Evergreen Medicinal claimed that because construction had not been completed on the facility, no rent was due.
And in December 2016, Evergreen Medicinal sent an invoice to Illingworth for more than $1.2 million in construction costs, minus funds already paid.
"Mr. Illingworth disagreed with Evergreen’s position on construction costs," DeWitt-Van Oosten wrote in the December 23 ruling. "He acknowledged that he made payments toward the construction, but not pursuant to a collateral agreement. Instead, it was his position that he made the payments because the building and other improvements would remain with the land.
"He also disputed the numbers put forward by Evergreen, deposing that Mr. Galbraith initially told him the construction would cost $298,863," the judge continued. "However, Mr. Illingworth had already paid a total of $757,815. Mr. Illingworth denied there was any agreement with Evergreen to defer rental payments."
Several court actions followed
In November 2017. B.C. Supreme Court Justice Frank Cole issued a ruling that rent was not due until March 2017. He based this on a clause that stipulated rent was abated until the premises were available for occupancy.
Evergreen Medicinal and Illingworth then sued one another, with Evergreen Medicinalseeking construction costs. Illingworth claimed an ownership interest in Galbraith's company.
Then in August 2018, Evergreen Medicinal issued notice to Illingworth that it planned to renew its lease for another five years.
Illingworth declared that he would not grant this because the tenant was in "habitual default".
Illingworth then filed another lawsuit against Evergreen Medicinal, claiming unpaid rent of $348,6000 from January 2014 to February 2017, along with $97,903.83 in interest.
And in an appeal of Justice Cole's earlier ruling, Illingworth was able to get the finding on rent abatement set aside. This meant that Illingworth could claim rent dating back to 2014.
"However, the Court found no basis on which to interfere with the decision that Mr. Illingworth was estopped from terminating the lease," DeWitt-Van Oosten wrote.
More litigation followed, with Illingworth filing petitions in court seeking a writ of possession under the Commercial Tenancy Act.
Evergreen Medicinal claimed that a second petition amounted to "abuse of process". The company sought relief from forfeiture under the Law and Equity Act, claiming it would lose its federal licence and the business would collapse without the benefit of the lease.
But in July, B.C. Supreme Court Justice Brian D. MacKenzie rejected that argument.
In his ruling, he found that there was no abatement of rent.
The judge also concluded that the lease ended on December 31, 2018, notwithstanding Evergreen Medicinal's claim that the lease expired at the end of 2019.
Evergreen Medicinal appealed that ruling, which is how this ended up before the B.C. Court of Appeal.
Among other points, Evergreen Medicinal alleged that the MacKenzie erred by finding that the second petition was not an abuse of process, the lease had expired at the end of 2018, and relief from forfeiture was not available under the Law and Equity Act.
All of these arguments were dismissed by the three B.C. Court of Appeal judges.
"In summary, I have concluded...the judge was correct to find that relief from forfeiture was not available to Evergreen under the Law and Equity Act because the lease had expired," DeWitt-Van Oosten wrote.