1743 Pendrell Ltd. v. Ewin Estate, 2017 BCCA 240 (CanLII)
Date:
2017-06-16
File number:
CA43495
Citation:
1743 Pendrell Ltd. v. Ewin Estate, 2017 BCCA 240 (CanLII), <http://canlii.ca/t/h522d>, retrieved on 2019-07-10
COURT OF APPEAL FOR BRITISH COLUMBIA
Citation:
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1743 Pendrell Ltd. v. Ewin Estate,
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2017 BCCA 240
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Date: 20170616
Docket: CA43495
Between:
1743 Pendrell Ltd.
Appellant
(Plaintiff)
And
Muriel Prudence Cooper, Executrix of the Last Will and Testament of
Florence Dorothy Ewin, deceased
Florence Dorothy Ewin, deceased
Respondent
(Defendant)
Before:
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The Honourable Mr. Justice Groberman
The Honourable Madam Justice Bennett
The Honourable Mr. Justice Harris
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On appeal from: an order of the Supreme Court of British Columbia, dated
February 11, 2016 (1743 Pendrell Ltd. v. Cooper, 2016 BCSC 208,
Vancouver Docket No. S151415)
February 11, 2016 (1743 Pendrell Ltd. v. Cooper, 2016 BCSC 208,
Vancouver Docket No. S151415)
Oral Reasons for Judgment
Counsel for the Appellant:
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R.J. Argue
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Counsel for the Respondent:
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D. Moonje
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Place and Date of Hearing:
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Vancouver, British Columbia
June 16, 2017
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Place and Date of Judgment:
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Vancouver, British Columbia
June 16, 2017
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Summary:
The appellant corporation owns and operates a cooperative apartment building in Vancouver. The tenants of the building are the corporation’s shareholders, and they occupy their individual units under 99-year leases. The corporation’s articles provide that leases may only be assigned along with a transfer of the assignor’s shares in the corporation, and that the assignee must be approved by the corporation’s directors. The leases themselves contain specific provisions governing assignment and transfer of shares on the death of a tenant. The deceased was a tenant in the building and Ms. C. is both the executrix of the deceased’s estate and its sole beneficiary. On behalf of the estate, she sought consent of the directors to transfer the deceased’s shares and lease to herself in her personal capacity. The directors withheld consent. The corporation then sought an order that the estate sell the shares and transfer the lease to a person approved by the directors. The estate made a cross-application, seeking an order that the shares be transferred and the lease assigned to Ms. C. The chambers judge ruled in favour of the estate and the corporation appealed. Held: Appeal dismissed, except for technical modifications to the order. The judge correctly interpreted the lease document as allowing the executrix to transfer the shares and assign the lease to the estate’s beneficiary in the circumstances that prevailed in this case.
[1] GROBERMAN J.A.: This appeal arises out of a dispute between a corporation that owns and operates a cooperative apartment building in Vancouver and the estate of a deceased tenant of the building. The issue is whether the beneficiary of the estate may, in the circumstances of this case, become a tenant in the building despite the fact that the corporation’s directors have refused to grant their approval.
Provisions of the Articles and the Lease
[2] The appellant corporation owns and operates a 19-unit apartment building in Vancouver. The building is operated as a cooperative. The tenants own shares in the corporation in proportion to the size of their suites. They occupy their individual suites pursuant to long-term leases that expire on April 30, 2067.
[3] The articles of the corporation contemplate that the shareholders will also hold leases of individual units. They stipulate that all leases must be in similar terms, and that their termination dates must all be the same:
Part 21 – Leases and Occupation
…
21.02 [T]he Directors will be empowered to grant to each shareholder owning the required number of shares and having the qualifications determined from time to time by the directors, the right of occupancy of one suite or apartment in the building … The terms and conditions of occupancy by each shareholder will be set out in a form of agreement (hereinafter referred to as the “lease” of such apartment …) in such form as will be approved and determined by the Board of Directors and all leases of apartments will be similar in their terms and tenor … and every lease … will expire on the same day, being ninety-nine years from the date of the granting of the first lease or leases made for any part of the … building. Each lease will be issued subject however to the terms, conditions and stipulations more particularly set out and declared in the said lease ….
[4] Several provisions of the articles restrict the transfer of shares and the assignment of leases:
Part 20 – Restriction on Share Transfer
20.2 No shares may be … transferred … without the consent of the directors and the directors are not required to give any reason for refusing to consent to any such … transfer ….
…
Part 26 – Assignment of Shares
26.01 Upon the transfer of the unit of shares or any part thereof held by any shareholder, all rights of such shareholder, as a lessee under the terms and provisions of any agreement or lease entered into between the Company and the shareholder and all rights of persons claiming through, or under, the said shareholder, will forthwith cease and determine and all such rights of all persons claiming through, or under, the said transferor, will pass to the transferee.
…
Part 27 – Assignment of … Leases
27.01 [L]eases entered into between the Company and the shareholder, pursuant to the provisions herein contained, will be assigned only to an assignee approved by the Directors, which assignee will simultaneously acquire all the shares in the capital of the Company held by the assignor. An assignee will, in writing, assume all the obligations of the assignor under the … lease. Each assignment of lease will be conditional upon and subject to the consent of the Board of Directors to be granted in the same manner as is herein provided for the transfer of shares. A shareholder wishing to assign a lease will proceed in the same manner as an applicant for the transfer of shares.
27.02 Upon approval by the Directors of an application to assign a lease, the applicant will surrender to the secretary of the Company the applicant’s lease and share certificate or certificates, and the secretary will issue a new certificate transferred shares and enter into a new lease with the assignee.
[5] These provisions are duplicative and not entirely consistent. It is quite clear, however, that they contemplate share transfers and lease assignments taking place simultaneously, and that such transactions can only proceed if the corporation’s directors grant their consent.
[6] The articles also contain provisions specifically directed to the transmission of interests in the shares on the death of a tenant:
Part 4 – Share Transfers
…
4.5 [I]n the case of the death of a member … the legal personal representative of the deceased … will be the only person … recognized by the Company as having any title to his interest in the shares. Before recognizing any legal personal representative the Directors may require him to obtain a grant of probate or letters of administration in British Columbia.
4.6 Any person becoming entitled to a share in consequence of the death … of a member, will, upon deposit of the documentation required by the relevant federal or provincial enactments and upon such evidence being produced as may be required by the directors, have the right either to b[e] registered as a member in respect of such share or to make such transfer of the share as the deceased … could have made, but the directors will … have the same right to decline registration as they would have had in the case of a transfer of the share by the deceased … before such death….
[7] In short, the articles allow shares to be transmitted to the personal representative without restriction, but provide that transfer of the shares to a beneficiary can be declined by the directors of thecorporation.
[8] The articles do not include any express provisions directed to the transfer of leases to beneficiaries on the death of a tenant, but the transfer of shares to a beneficiary would, it seems, bring article 26.01 into play, resulting in the new shareholder acquiring rights under the lease.
[9] Importantly, provisions dealing with the assignment and transmission of tenant’s interests are also present in the leases themselves. These largely mirror and incorporate the provisions of the articles:
Article IV [of the lease]:
…
5.(a) This demise is made to the Lessee as the owner of the unit of shares of the Lessor (which unit consists of the number of shares evidenced by the share certificate of the said Lessee) applicable to the said numbered suite, and neither this lease, nor the rights of the Lessee hereunder, shall be assigned or transferred, except upon the transfer of the said unit of shares and except to the transferee thereof.
(b) The said shares shall only be transferred as a unit and such transfer shall be pursuant to the provisions of the Articles of Association of the Lessor.
(c) Upon the transfer of the unit of shares represented hereby, or any part thereof, all rights of the Lessee hereunder shall cease and determine forthwith.
6.(a) The Lessee shall not assign this lease … except in accordance with the terms and conditions more particularly set out in the Articles of Association of the Lessor.
[10] A more specific provision of the lease governs the transmission of interests in the lease on the death of a tenant. It is this provision that the judge found to be the one that governs this case:
Article II:
[T]his Lease and the term hereby created shall cease and determine at the option of the Lessor on the happening of any one of the following events or contingencies:
1. IN THE EVENT that the Lessee … shall at any time during the term hereby demised cease to be the holder alone or jointly of all the said shares in the capital of the Lessor; PROVIDED HOWEVER, that in case of the death of the Lessee, … [i]n the event that the said decedent Lessee shall have … bequeathed his shares and lease to some designated person …, the Lessor shall within thirty (30) days after written request to do so accompanied by proper evidence of rightful designation, express its refusal or acceptance as tenant or shareholder the person so designated. If the Lessor shall consent, the said shares and Lease may be transferred to the person designated, who shall thereupon take over all rights and obligations of the decedent … but if the Lessor shall refuse to consent, the then shareholders of the Lessor shall be given an opportunity during thirty days, next after the said last above mentioned thirty days, to purchase for cash the said shares and lease at the then fair market value thereof and should the parties hereto fail to agree on the value of such shares and lease, the same shall be determined by appraisers, one appointed by the Lessor and one by the said designated person, or the legal representative of the Lessee, who, failing to agree, shall choose a third; whereupon the value shall be fixed by any two of such appraisers and the expense of the appraisal shall be paid by the said designated person or the legal representative of the Lessee out of the amount realized from the said shares and lease. If the then shareholders shall not exercise the privilege of purchasing the said shares and lease within such period and upon such terms, the person so designated, or the legal representative of the Lessee, may sell, transfer and assign the said shares and lease to any party or parties and the party or parties so receiving the same shall have all the rights and be subject to all the obligations of the original shareholder and lessee and to all the covenants, conditions and provisions of this lease, and of the Articles of Association of the Lessor.
[Emphasis added]
[11] Unlike the other provisions in the articles and lease, which unequivocally require the consent of the directors before a transfer can take place, the chambers judge found that this lease provision can allow transfers without the directors’ consent. While the personal representative of the deceased must seek the directors’ consent before transferring shares and assigning the lease to a beneficiary, it also provides a procedure for resolving the impasse if consent is not forthcoming. For a brief period, other tenants have the right to purchase the shares and lease at fair market value. If no one steps forward to do that, the personal representative may transfer the shares and lease to anyone. The judge found that such a transfer may take place without the consent of the directors.
Background to the Dispute
[12] Ms. Ewin bought into the co-op in 1994. She took an assignment of a lease over a particular unit, and concurrently acquired the shares associated with that unit.
[13] Ms. Cooper is Ms. Ewin’s cousin. She is now 79 or 80 years old. She resides in Scotland, though she has spent long periods in Canada, and intends to immigrate to this country. Ms. Cooper began to live with Ms. Ewin in her unit for extended periods of time in 2006. In the fall of that year, Ms. Ewin executed her last will, which appointed Ms. Cooper as her executrix, and made Ms. Cooper the sole beneficiary of her estate.
[14] Beginning in 2009, Ms. Ewin commenced efforts to make Ms. Cooper a joint tenant. She obtained the consent of the directors of the corporation to do so, but the plan stalled because of difficulties in having Ms. Cooper added as a covenantor on the mortgage of the lease. The matter became more urgent when, In April 2010, Ms. Ewin’s health deteriorated to the point where she was no longer able to reside in the unit. In June 2010, the mortgagee indicated that it no longer insisted on Ms. Cooper signing the covenant, but did require a certificate showing that Ms. Ewin had taken independent legal advice before making Ms. Cooper a joint tenant. Unfortunately, Ms. Ewin died in October, 2010, before the transaction to make Ms. Cooper a joint tenant had completed.
[15] Between 2010 and 2014, Ms. Cooper resided in the suite, though she also spent time in Scotland. Ms. Cooper had a dispute with her solicitor over fees and an alleged conflict of interest, and, up to the date of the hearing before the chambers judge, she had not probated the will. At times, she has been in arrears in respect of the corporation’s assessments.
[16] Relations between Ms. Cooper and thecorporation and its solicitor soured, to the point where, in September 2014, the corporation insisted that Ms. Cooper leave the suite, and it denied her access to it. Its directors have refused to consent to her becoming a tenant and shareholder.
[17] The corporation commenced the current proceedings in February 2015. They were initially commenced with a view to forcing the sale of the unit in order to pay the arrears. The character of the litigation changed by the time this matter was heard in Supreme Court, though the pleadings have never been properly amended. Ms. Cooper was able to pay off the arrears, and the parties agreed to deal with this matter as one of interpreting the articles and the lease. The corporation took the view that once its directorsrefused to accept Ms. Cooper as a shareholder and assignee of the lease, she was required to sell or transfer the shares and the lease to a person acceptable to the directors. Ms. Cooper took the position that she was entitled to take beneficial title to the shares and take an assignment of the lease without consent of the directors, because after the initial rejection, no shareholder had come forward with an offer to purchase the shares and the lease at fair market value.
[18] After hearing an application by the corporationand a cross-application by Ms. Cooper, the judge held in favour of Ms. Cooper.
[19] We are told that subsequent to the judge’s order, on August 26, 2016, Ms. Cooper received a grant of probate of the estate.
Analysis and Conclusion
[20] I agree with the judge’s interpretation of the lease and articles. The lease is incorporated by reference in the articles, and its provisions, to the extent that they depart from the provisions of the articles, constitute a contract by which the corporation has agreed not to rely on its strict rights to reject a tenant under the articles in certain circumstances.
[21] The lease provides a mechanism for resolving an impasse in the event that a person designated as a beneficiary in a will is not accepted by the directors as a tenant. In such a situation, any shareholder is entitled, within a 30 day period, to buy the estate’s interest at fair market value. If no shareholder exercises that right, the personal representative may transfer the shares and assign the lease “to any party”.
[22] The corporation contends that the judge erred in finding that the personal representative of the estate had the right to transfer the shares and assign the lease to herself. In its factum, it says:
It is nonsensical to conclude that “… the person so designated, or the legal representative of the Lessee …” could “sell, transfer and assign the said share and lease …” to herself as “any party” (as provided in Article II(1) of the Lease) when the Appellant refused to accept her initially as a tenant and shareholder.
[23] I am unable to agree with the characterization of this interpretation as “nonsensical”. “Any party” means just what it says. It includes Ms. Cooper in her personal capacity.
[24] The corporation also contends the procedure under Article II(1) of the lease does not obviate the need for the new tenant to be approved by the directorsof the corporation. I am unable to accept that interpretation of the article. The provision allowing shareholders to purchase the estate’s interest in the event that the directors reject the designated successor of the deceased as a tenant is clearly designed as a fair way to break an impasse. In essence, the members of the corporation are given a choice, to use the vernacular, “to put up or shut up”. If the members are not prepared to purchase the interest at fair market value, the interest may be transferred, without the consent of the directors, in a manner consistent with the law of succession.
[25] It follows that Ms. Cooper, in her personal capacity, is entitled to take a transfer of the shares and an assignment of the lease. The operative part of the formal order entered in the court below is in the following terms:
THIS COURT ORDERS that:
1. The legal title to [the suite] be and are transmitted to Muriel Prudence Cooper, executrix of the Last Will and Testament of Florence Dorothy Ewin, Deceased.
2. The shares owned by the Deceased in the Plaintiff be and are transferred to Muriel Prudence Cooper, sole beneficiary of the estate of Florence Dorothy Ewin, Deceased.
[26] The terms are not, in my view, reflective of the judge’s reasons, nor are they appropriate. With respect to item (1), the evidence does not establish that there is any separate legal title to the suite. More importantly, the estate’s interest in it is a leasehold, not a fee simple interest. What is in issue is not title to the suite, but rather the right to take an assignment of the lease.
[27] With respect to item (2), I note that at the time the order was made, probate had not issued. It remains conceivable that there are third parties who might have claims against the estate, or who might have a right to apply for variation of the will. In the circumstances, it is not appropriate for the court to order a transfer of the shares without the estate being formally administered.
[28] It seems to me that the appropriate orders are a declaration that Ms. Cooper, in her capacity as executrix, is the legal owner of the shares and is entitled to the rights Ms. Ewin enjoyed under the lease. Further, Ms. Cooper is entitled to a declaration that she is not required to obtain the consent of the directors of the corporation before transferring the shares and assigning the lease to the person or persons beneficially entitled to them in the ordinary course of administering the estate (which person may be herself in her personal capacity). I would allow the appeal to the extent of deleting the two paragraphs of the formal order cited above, and substituting therefor these declarations.
[29] The corporation’s articles include procedural provisions that require share certificates to be surrendered and reissued when shares are transferred. Some provisions also suggest that when leases are assigned, the corporation may choose to have a new lease executed by the assignee. Nothing in this judgment should be taken as exempting transfers of shares and assignments of the lease from the procedural provisions of the lease and articles.
[30] Apart from the modifications that I have mentioned to the formal order, I would dismiss the appeal. The estate is substantially successful on the appeal, and is entitled to its costs from the corporation.
[31] BENNETT J.A.: I agree.
[32] HARRIS J.A.: I agree.
[33] GROBERMAN J.A.: The appeal is dismissed except as stated in the reasons.
“The Honourable Mr. Justice Groberman”
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