2012 MBCA 32, 2012 MBCA 32

Citation: The Children’s Clubhouse v. Helgason et al., Date: 20120404 2012 MBCA 32 Docket: AI 11-30-07691 IN THE COURT OF APPEAL OF MANITOBA B E T W E E N: THE CHILDREN’S CLUBHOUSE ) L. Helgason ) on behalf of theApplicants (Landlord) Respondent ) ) J. P. O’Brien ) for the Respondent- and - ) ) T. D.

Gisser ) for The Residential TenanciesLAURIE HELGASON and JOHN ) CommissionSPEELMAN ) ) Chambers motion heard: (Tenants) Applicants ) March 8, 2012 ) ) Decision pronounced: ) April 4, 2012 SCOTT C.J.M. 1 The applicants (tenants) apply for leave to appeal from the decision of The Residential Tenancies Commission (the RTC)granting an order of possession in favour of the respondent (landlord).

Section 175(2) of The Residential Tenancies Act, C.C.S.M., c.R119 (the Act), permits an appeal to be taken from an order of the RTC on a question of jurisdiction or law, with leave of the court. 2 The principles to be applied on such an application are conveniently summarized in the brief of the RTC as follows: The principles concerning the discretionary grant of leave to appeal to the Court of Appeal have been canvassed on numerous occasions. A recent example may be found in Edison Rental Agency v.

Klippenstein, 2011 MBCA 3, leave to appeal to Supreme Court of Canadadismissed, (May 5, 2011, No. 34102) … where Monnin J.A. observed (at paragraph 7 …): The test that an applicant must meet in order to be granted leave to appeal from a decision of the Commission is well settled and has beenset out in numerous decision[s] of this court. See 4469667 Manitoba Ltd. v. Thomas, 2009 MBCA 20 (in chambers); Manitoba HousingAuthority v. Bertram, 2006 MBCA 49, 205 Man.R. (2d) 61 (in chambers); Procak v. Hayward, 2006 MBCA 84, 205 Man.R. (2d) 150 (inchambers); and 3391397 Manitoba Ltd. v.

Winnipeg City Assessor (1998), (MB CA), 126 Man.R. (2d) 63 (inchambers). A recent enunciation of the test is to be found in the reasons of Freedman J.A. in Manitoba Housing Authority v. Horvat,2010 MBCA 43, 255 Man.R. (2d) 42 (in chambers), where he wrote (at para. 3): The Act provides the applicant with a very limited opportunity to appeal a decision or order of the Commission to this court. Appeals arelimited to questions of jurisdiction or law, and an applicant needs leave to appeal. Three factors are considered by a judge in determiningwhether to grant leave. See Pelchat v.

Manitoba Public Insurance Corp., 2006 MBCA 90, 40 C.C.L.I. (4th) 46 (at para. 2): 1. The question must be truly one only of jurisdiction or of law, and not one which “involve[s] the court in an assessment or analysis ofconflicting factual issues” (Shersty v. Manitoba Public Insurance Corp. (2002), 43 C.C.L.I. (3d) 35, 2002 MBCA 108 (Man. C.A. [InChambers]), at para. 2, Fillion v. Manitoba Public Insurance Corp. (2004), 10 C.C.L.I. (4th) 182, 2004 MBCA 61 (Man. C.A.), andcases cited therein). 2.

The case must be one that warrants the attention of the court. “The issue must be one of importance; not just for the immediate case,but in determining other similar disputes which are apt to arise in [the] future” (Wuziuk v. Manitoba (Director of Social Services) (No. 2)(1979), (MB CA), 3 Man.R. (2d) 81 (Man. C.A.), at para. 7).

3. There must be an arguable case of substance; i.e., one with a reasonable prospect of success (see Lejins v. Manitoba Public Insurance Corp. (2003), 50 C.C.L.I. (3d) 1 , 2003 MBCA 95 (Man. C.A. [In Chambers])). 3 About five years ago, following execution of a standard residential tenancy agreement, the tenants, both of whom are physically handicapped, moved into the rental premises, which is a mixed commercial and residential building. Clause 7 of the tenancy agreement states: Use of Rental Unit for Residential Purposes only 7.

The tenant agrees to use the rental unit and residential complex for residential purposes only and shall not carry on, or permit to be carried on, any trade or business in the rental unit without the written consent of the landlord. 4 In 2008, John Speelman began to collect and sell used books. The advertising for this activity was conducted almost exclusively online. 5 Beginning in 2011, the tenants were served with a multiplicity of proceedings by the landlord requesting an order of possession.

Eventually, every allegation was dismissed in favour of the tenants by the RTC, except for that of operating a business, which the RTC found to have been proven.

In the result, an order of possession was granted on November 21, 2011, with reasons on December 28, 2011. 6 In its extensive and thoughtful reasons for decision, it is patent that the RTC was well aware of the principal issue before it; namely, whether the tenants were in breach of clause 7 of the standard residential tenancy agreement. 7 The RTC found: The panel had little difficulty in concluding that what was going on here was the operation of a business. It is not a relevant consideration alone as to whether or not the enterprise was a profitable one. According to Dr. Penner, Ms.

Helgason told him that they were operating a business. Mr. Speelman himself describes what he was doing in numerous websites, including his blog, as operating a business in various forms. This is repeatedly confirmed in the documentary evidence. …. 8 The important consequential question that the RTC was then obliged to decide was whether the breach of clause 7 of the tenancy agreement was material (see s. 96(1) (

b) of the Act ). The RTC considered the onus in this respect to be on the landlord. As the reasons state, the majority came to the conclusion that the breach was material because it was “more than inconsequential or trivial. ….

Given the sheer volume of the product being sold, the extensive advertisement of this business on the internet which provided an international consumer base, which revealed the tenants’ address, inviting customers to attend and save shipping and handling costs, did in sum, have a material impact on the landlord.” 9 The single dissenter, while agreeing that the tenants were operating a business, concluded that since it was a home business being operated in a mixed-use complex, “it is not reasonable for the landlord to insist on enforcing clause 7 of the lease.” Standard of Review 10 The tenants submit that the standard of review of the RTC’s decision, should leave be granted, is correctness.

They rely on the decision of this court in Southglen Mobile Home Community v. Closson et al. , 2005 MBCA 119 . But, as I indicated during argument, in my opinion, that decision has clearly been supplanted by the landmark decision of the Supreme Court of Canada in Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190. In circumstances such as this, should the issue before the RTC fall squarely within the four corners of its enabling statute and expertise, any question of law that might arise in the context of these proceedings would mandate the “reasonableness” standard of review.

This deferential standard of review is, of course, a relevant consideration on any leave application as it directly impacts on the “reasonable prospect of success” criterion (see Sterling O & G International Corp. (Re) , 2012 MBCA 18 at para. 18 ).

Argument 11 The tenants argue that three errors in law were made by the RTC: (1) the RTC made an error of law by using the wrong test in determining that the tenants were carrying on a business within the meaning of clause 7 of the tenancy agreement; (2) the RTC made a determination of an issue which falls outside its specific expertise; and (3) the RTC made an error of law when it failed to interpret clause 7 of the tenancy agreement correctly, having regard to the meaning of the phrase “in the rental unit.”

12 Before the RTC and this court, the tenants submit that “this was not a business in any event but a hobby which was a large collection of books that are sold strictly online.” In her oral submission, Ms Helgason argued that the RTC erred in law in relying on provisions of the Income Tax Act and tax concepts in determining whether the tenants were carrying on business within the meaning of clause 7 of the tenancy agreement. The fact that the tenants were not making a profit and had no intention of doing so should have been conclusive.

As noted in the tenants’ brief, “[i]f profit is an irrelevant consideration, then it is an error of law to apply a test for use in a scheme whose entire purpose is the taxation of profit.” The tenants also argue that since the RTC has no expertise in matters of income tax, deference should not be shown to the RTC’s findings in this area.

Finally, the tenants note, the key question when considering clause 7 of the tenancy agreement is whether the “business” was conducted in the unit; it is irrelevant if the tenant Speelman was carrying on business if it did not take place in the rental unit; they suggest that when a tenant conducts business primarily or wholly online, it cannot be said that it occurred substantially within the unit, and therefore is not a breach of clause 7. 13 Counsel for the landlord, not unexpectedly, emphasized that the RTC made firm findings of fact supported by evidence, most notably Ms Helgason’s admission that business was being carried on from the premises.

A high level of deference is due to the decision of an experienced administrative tribunal operating within the boundaries of its constating statute. 14 Counsel for the RTC pointed out that the argument that any “business” that may have occurred was not taking place within the rental unit was not raised before the RTC and should not be considered at the leave stage (see Manitoba Housing Authority v. Young , 2011 MBCA 68 , 268 Man.R. (2d) 294, and Dorge v. Cummine et al. , 2004 MBCA 86 ). In any event, an administrative tribunal’s

interpretation of its home statute, including statutory forms, is entitled to deference on judicial review (see Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association , 2011 SCC 61 , [2011] 3 S.C.R. 654). Decision 15 In my opinion, the tenants’ application must fail for one simple reason: they have failed to identify a question of law or jurisdiction.

At best, the determination by the RTC that the impugned activities of the tenants constituted carrying on a trade or business in the rental unit is a mixed question of fact and law since the RTC’s conclusion is demonstrably dependent upon the factual findings, as earlier described in these reasons.

The crucial contest between the landlord and the tenants over this issue was thoroughly analyzed by the RTC and, as pointed out by the landlord’s counsel, a key consideration in the RTC’s decision was the admission by Ms Helgason that a business was in fact being carried on. 16 Nor am I satisfied that the RTC’s conclusion that clause 7 of the tenancy agreement had been breached as a result of business being carried on “in the rental unit” raises a question of law alone or, for that matter, that it was in error. Here again, there is a clear factual explanation for this conclusion set forth in the reasons.

The RTC was obviously aware that Mr. Speelman’s “business” could not have had a material impact if the activity took place entirely outside the confines of the rental unit. At best, this question is one of mixed law and fact, not one of law alone. 17 While I disagree with the landlord’s counsel that the

interpretation of clause 7 of the standard residential tenancy agreement is of little interest outside the particular facts of this case (thus potentially satisfying the second of the three criteria for granting leave), this conclusion does not, in isolation, justify granting leave to appeal. 18 While the tenants are deserving of a great deal of sympathy for the predicament that they face following eviction from the premises, this court can only grant leave to appeal in certain narrow and defined circumstances, which, unfortunately for the tenants, are not present in this case. 19 The leave application is accordingly dismissed without costs. _____________________________ C.J.M.