Wesbild Holdings v., 2011 BCPC 365

Citation: Wesbild Holdings v. 0899360 B.C. Ltd. & Nijjar Date: 20111215 2011 BCPC 0365 File No: 1136100 Registry: Vancouver IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: WESBILD HOLDINGS LTD. CLAIMANT AND: 0899360 B.C. LTD. and RAJEEV SINGH NIJJAR DEFENDANTS REASONS FOR JUDGMENT OF HIS WORSHIP L.A. KAHN Appearing for the Claimant: Sarah Pedlow, Articled Student Appearing for the Defendants: Rajeev Nijjar Place of Hearing: Vancouver, B.C.

Date of Hearing: November 23, 2011 Date of Judgment: December 15, 2011 [ 1 ] This matter came before me on November 23, 2011 pursuant to the Simplified Trial Rules under the Small Claims Act . [ 2 ] This claim concerns a dispute arising from the purchase by the Claimant from the Defendant, 0899360 B.C. Ltd. (the “Defendant”), of 2 parcels of real estate. [ 3 ] Each of the parties filed Trial Stateme nts and agreed that the essential facts are not in dispute.

For the sake of convenience, the facts are conveniently set out in the Claimant’s Trial Statement which are reproduced below: On or about April 20, 2011, a Contract of Purchase and Sale was made between the Claimant, as the purchaser, and the Defendant 0899360 B.C. Ltd. (the “Company”), as the vendor, for two properties (the “Properties”) situated at 1534 and 1540 Grant Street in Vancouver, B.C., being more particularly known and described as: PID: 007-268-050; LOT 5 BLOCK 55 DISTRICT LOT 264A PLANS 393 AND 1771; and

PID: 015-313-239; LOT 6 BLOCK 55 DISTRICT LOT 264A PLANS 393 AND 1771 At all material times, the Defendant, Rajeev Singh Nijjar (“Nijjar”), was the sole director of the Company. Paragraph 6 of the Contract of Purchase and Sale states that the Company will assume and pay all taxes, rates, local improvement assessments, fuel, utilities and other charges from, and including, the date set for adjustments, and all adjustments both incoming and outdoing of whatsoever nature will be made as of May 31, 2011. Nijjar, on behalf of the Company, executed the Vendor’s Statement of Adjustments (the “VSA”) on May 30, 2011.

The transfer of title completed on May 31, 2011. At all relevant times, the Properties were being rented out to tenants, who, subject to Residential Tenancy Agreements, paid security deposits totalling $2,225.00 (the “Security Deposits”) to the previous landlord. The original VSA did not adjust for the Security Deposits or one day of rent at $141.94. The Claimant, upon learning of the Security Deposits and the rent, contacted the Defendants with the 2 nd Revised Vendor’s Statement of Adjustments (the “Amended VSA”) accounting for these amounts. The Defendants refused to execute the Amended VSA.

On or about June 8, 2011, the Claimant’s solicitor demanded payment of the above-noted indebtedness, and does by this claim again demand payment of the indebtedness, but the Defendants have failed or neglected and continue to fail or neglect to pay all or any such indebtedness to the Claimant. [ 4 ] Accordingly, the issues are as follows: (

a) Are the Claimants entitled to recover $2,225?

(

b) Are the Claimants entitled to the rent adjustment for one day? (

c) Are the Claimants entitled to judgment against Nijjar? (

a) Are the Claimants entitled to recover $2,225? [5] Some of the tenants did not pay rent and, therefore, they forfeited security deposits for May 2011. The Defendant says that theClaimants are not entitled to the security deposits because the Vendor’s Statement of Adjustments, which was signed by the Defendant,did not adjust for the security deposits. On May 30, 2011, the Defendant executed closing documents in the form prepared by theClaimant’s solicitors (this is the first Vendor’s Statement of Adjustments). On May 31, 2011, the Claimant’s (Purchaser’

s) solicitorsregistered the transfer documents and, therefore, the transaction completed. [6] As well, the Defendant says that the Contract of Purchase and Sale did not provide for adjustments for the security deposits, norfor post closing adjustments. [7] Paragraph 3 of the notes to the Vendor’s Statement of Adjustments says as follows: Any matter not adjusted herein shall be adjusted directly between the parties hereto. [8] The Claimant takes the position that the security deposits are “trust monies” held on behalf of the tenants, and that the Defendantis unable to set off the security deposits against outstanding rent. [9] The Residential Tenancy Act [SBC 2002]

Chapter 78, in

Section 1 provides as follows: “rent” means money paid or agreed to be paid, or value or a right given or agreed to be given, by or on behalf of a tenant to a landlord inreturn for the right to possess a rental unit, for the use of common areas and for services or facilities, but does not include any of thefollowing: (

a) a security deposit; (

b) a pet damage deposit; (

c) a fee prescribed under section 97(2)(k) [regulations in relation to fees]; “security deposit” means money paid, or value or a right given, by or on behalf of a tenant to a landlord that is to be held as security forany liability or obligation of the tenant respecting the residential property, but does not include any of the following: (

a) post-dated cheques for rent; (

b) a pet damage deposit; (

c) a fee prescribed under section 97(2)(k) [regulations in relation to fees]; [10] The Residential Tenancy Agreement between the Defendant and the tenants provides in

Section 4(B)(1) as follows: 1) The landlord agrees (

a) that the security deposit and pet damage deposit must each not exceed one half of the monthly rent payable for the residentialproperty, (

b) to keep the security deposit and pet damage deposit during the tenancy and pay interest on it in accordance with the regulation, and (

c) to repay the security deposit and pet damage deposit and interest to the tenant within 15 days of the end of the tenancy agreement,unless (

i) the tenant agrees in writing to allow the landlord to keep an amount as payment for unpaid rent or damage, or (ii) the landlord applies for dispute resolution under the Residential Tenancy Act within 15 days of the end of the tenancy agreement toclaim some or all of the security deposit or pet damage deposit. [11] There was no evidence that the tenant agreed that the security deposit could be applied towards unpaid rent. [12] The Claimant referred to the decision of the Honourable Judge V. Romilly in Cerelle Corporation v.

Bebe Cece Ventures Ltd. etal 2002 BCPC 225 , 2002 BCPC 0225. [13] At paragraphs 55 and 56, Judge Romilly states: [55] A plain reading of the above sections suggests that distress can only be authorized for rent arrears and not for any other moniesowing, except of course if the terms of the lease deems a certain payment required under the lease as rent. However I question whetherunder any circumstances a damage deposit can be converted to “deemed rent” due the very nature of the damage deposit.

In this case itis to be noted in any event that none of the agreements even mention the requirement of a damage deposit. [56] It strikes me therefore that the damage deposit in this case cannot be construed as rent and added to an amount claimed under a

Distress Warrant. A damage deposit is merely a security deposit to be held in trust for the benefit of the tenant and to be returned to thetenant at the end of the tenancy less the cost of remedying any damage to the premises caused by the tenant. The issue remains whetherthis inclusion of the damage deposit in the amount claimed under the Distress Warrant nullifies the Warrant or merely makes itenforceable to the extent of the rent arrear. [14] Also, the Claimant relies upon Yale Fisher et al v. Pacific Sunset Development Corporation et al, (BC SC).

This case concerned a claim by the purchasers for unpaid property taxes. At paragraphs 2, 3 and 4 of the Reasons of Mr. JusticeEdwards says as follows: [2] The purchase was agreed under a standard form real estate agreement dated March 11, 1999 [“the March agreement”]. [3] A Vendor’s Statement of Adjustments dated April 16, 1999, adjusted the 1999 taxes in accordance with normal real estatetransfer practice. It was prepared by the plaintiff’s (purchasers’) solicitor. Once the deal had closed he realized there were 1997 and1998 taxes outstanding.

He acknowledges that he did not place the defendants’ solicitor under an undertaking to pay taxes when headvanced funds on closing. [4] When the plaintiffs’ solicitor asked the defendants’ solicitor for payment of the 1997 and 1998 property taxes the defendants’solicitor responded that “…the statement of adjustments dealt with the same, accordingly, this is not subject to further adjustment…” [15] This case was complicated by foreclosure proceedings.

The essence of the decision is found at paragraphs 14 and 15: [14] Once the defendants had that right by virtue of the vesting order, the interest or title they agreed by the March agreement totransfer was subject to a statutory charge for the property taxes then outstanding. They were obliged under the March agreement toconvey clear title. That was not altered by the means of effecting the transfer of the defendants’ interest agreed by the parties under theApril agreement. [15] It is a telling point that the defendants accepted the statement of adjustments, which dealt with the 1999 property taxes.

They didnot advance their present position that they were not obliged to pay property taxes on closing until the omission of the 1997 and 1998property taxes from the statement of adjustments was discovered by the plaintiffs’ solicitor and became a subject of dispute. [16] The principles in Cerelle Corporation v. Bebe Cece Ventures Ltd. et and Yale Fisher et al v. Pacific Sunset DevelopmentCorporation et al apply to the case at bar.

Neither the Contract of Purchase and Sale, nor the Vendor’s Statement of Adjustmentsprecludes the Claimant or, for that matter, the Defendant, if there had been an incorrect adjustment in favour of the Claimants, fromseeking redress. The Claimant did not make an enquiry about security deposits and, after having realized its oversight, the Claimant wasentitled to seek recovery from the Defendant. [17] It is not a defence, in my opinion, for the Defendant to say it used those monies to offset outstanding rent.

Rather, I am of theopinion that the security deposit is exactly as the term implies, security for damage to the premises. It is held “in trust” for the benefit ofthe tenant to be returned to the tenant, unless there has been damage to the rented property. Therefore, the Defendant did not have theright to set off those monies against outstanding rent. [18] The risk of collecting rent to the date of adjustment fell to the Defendant. The fact it did not collect the rent cannot be visitedupon the Claimant. [19] Accordingly, the Claimant is entitled to recover $2,225 from the Defendant. (

b) Are the Claimants entitled to an adjustment for one day of rent of $141.94? [20] The adjustment date in the Contract of Purchase and Sale was May 31st and the possession date was on May 31st at 5 pm. In myopinion, the Claimant’s position must fail. [21] It makes little sense that the one day of rent should be divided between the parties based upon the time the Claimant becameentitled to possession. Rather, on the plain reading of the contract, the Defendant is entitled to the rent for the full month of May.

Hadthere been any different intention, there would have been a different adjustment date, or a specific term in the contract to specify theapportionment of rent. [22] In my opinion, even though the Claimant assumed risk as of 5 pm on May 31, 2011, it does not follow that the Claimant must beentitled to the rent for that day. Surely, if the possession date had been at 11:59 pm, no one would have suggested that assumingresponsibility for 1 minute of the day would support the Claimant’s argument. (

c) Are the Claimants entitled to judgment against Nijjar? [23] As I indicated at the hearing in this matter, I reject this claim. [24] Although the Defendant was holding security deposit “in trust” for the benefit of the tenants, this is not a circumstance such as inthe Air Canada v. M & L Travel Ltd., (SCC), [1993] 3 S.C.R. 787 to support personal judgment against Nijjar. Thecircumstances cannot be characterized as a breach of trust. Air Canada v. M & L Travel Ltd. was not decided upon trust principles anddid not raise the general question of personal liability of directors for the acts of corporations.

Summary [25] There will be judgment in favour of the Claimant against the Defendant, 0899360 B.C. Ltd., as follows:

(

a) Damages $2,225.00 (

b) Filing fees $100.00 (

c) Service fees $100.00 Total: $2,425.00 [ 26 ] The Claimant is entitled to pre-judgment interest from June 1, 2011 to the date of this judgment, which will be calculated by the Registry. [ 27 ] The claim against Nijjar is dismissed. ____________________ Lawrence A. Kahn