A Supreme Court of British Columbia judge has ordered a medical marijuana producer vacate its property in Central Saanich due to unpaid rent and an expired lease following a lengthy court battle in a decision posted online on July 15.
Evergreen Medicinal Supply Inc. has operated a bunker-like facility to grow cannabis near Michell’s Farm since January, 2014.
Philip Illingworth, owner of the land, filed multiple petitions — one in 2017, one in 2018 and the final petition in January 2019 — asking for a declaration that Evergreen is wrongfully in possession of the lands and premises.
The hearing, June 4 to 7 and 10 before Justice B.D. MacKenzie, found due to the totality of evidence Evergreen is wrongfully in possession of the lands and an order for a writ of possession will be made stating Evergreen will deliver possession of the premises to Illingworth no later than Aug. 31.
On Sept. 21, 2013 Illingworth and Evergreen’s director Shawn Galbraith signed a lease that would start on Jan. 1, 2014 and run for a term of five years, with an option to renew a further term of five years.
According to the judgment, Illingworth asserted Evergreen had failed to pay back rents owed from January 2014 to February 2017. However, Evergreen argued its’ obligation to pay rent began in August 2017 once the company was issued a municipal occupancy permit. Evergreen has paid $9,500 per month since then, adding there were no arrears and the petition should be dismissed.
This submission departs from an earlier position taken by Evergreen which stated that rent became payable in March 2017, following Evergreen receiving a Health Canada licence to produce marijuana.
Evergreen asked the judge that if he did find rent prior to August 2017 payable, they should be granted relief from forfeiture.
Two years ago, Illingworth filed his first petition on the basis Evergreen had breached the lease by not paying rent, “amongst other breaches.”
Justice Cole concluded Evergreen’s “rent was not due until March 2017 at the earliest” when construction of the building was completed and when Evergreen received a medical marijuana licence.
Illingworth appealed the decision in the Court of Appeals and on Nov. 27 2018 the judgment was upheld by Justice Smith but conclusions that there had been an abatement of rent were set aside as this issue was not properly before him.
Justice Smith stated Evergreen took possession of the lands on Jan. 1, 2014 and oversaw construction and management of the facility through an affiliated company — Welton Construction Ltd. An invoice from Welton, dated Dec. 31 2013, showed that before the start of January 2014, 100 per cent of the building’s exterior shell, and between 60 to 100 per cent of its interior components were completed. “In short, the structure of the building was substantially completed that month, with Evergreen occupying the premises.”
Illingworth then delivered a demand to Evergreen for payment of the rent arrears, amounting to $348,000 in principal, plus $98,000 or so in interest.
Illingworth served Evergreen with a notice on Dec. 5, 2018 stating that if rent arrears were not paid within 15 days he would terminate the lease without further notice.
Evergreen did not respond or pay any arrears. As a result, on Dec. 21, 2018 Illingworth hired a bailiff who served a termination notice, took possessions of the premises and changed the locks. Galbraith and police attended the scene. Police stated they could not remove the locks, as requested by Galbraith, and the two should leave the property and consult their lawyers “as this was clearly a landlord/tenant dispute.”
The differing positions:
Illingworth filed the current petition on Jan. 3, 2019 and in his second affidavit alleged that Evergreen cut the locks that day or the next and “physically and forcibly re-took possession.”
Illingworth stated Evergreen owes a total of $425,061 dating back to Jan 1, 2014 when he says the building was available for occupancy. He also asserts the five year lease ended on Dec. 31, 2018 and due to Evergreen’s continued breaches of the lease he advised Evergreen the lease would not be renewed. Illingworth also alleges Evergreen did no pay property tax or insurance premiums on time or at all, adding Evergreen did no permit an authorized agent to inspect the premises on Illingworth’s behalf after he provided proper notice. However, rent arrears are Illingworth’s primary focus.
In their initial response, Evergreen stated it is not in breach by failing to pay rent because the alleged arrears were not due, adding that it was agreed that rent would be differed and not payable until they obtained a marijuana production licence — which occurred in March 2017 and rent has been paid since then. Evergreen also added that property taxes and insurance premiums have been paid and none are due or outstanding.
Evergreen amended their response in March 2019, stating occupancy of the premises was not possible until August 22, 2017 at which time the occupancy permit was issued. As a result, Evergreen say no rent was due to be paid until August 2017 when it received an occupancy permit and had paid rent from March through July 2017 when they should not have.
Evergreen added they want relief from forfeiture if MacKenzie ruled in Illingworth’s favor, or else “Evergreen’s lucrative medical marijuana license would be canceled, resulting in irreparable loss to the business.” Adding that if relief was granted, Illingworth would “continue to enjoy the substantial income from the premises.”
They also state the lease did no expire until Dec. 31, 2019 not 2018 as alleged by Illingworth.
MacKenzie stated in his judgment he “has no hesitation concluding that as of January 1, 2014, the premises were available for occupancy and, further Evergreen was in occupancy and benefited from that occupancy throughout the alleged abatement period. I further find that Evergreen was not deprived of a benefit it could reasonably have expected to receive at that time. As a result, there was no abatement of rent and Evergreen is in default of the Lease by not paying the full rent due from January 2014 to March 2017.”
Adding that in accordance with the lease interest is to be paid on any outstanding arrears. “In my view Evergreen is indebted to Mr. Illingworth in the principal amount plus interest. However, this petition only seeks a writ of possession. Any claim for compensation must await a separate application,” he writes.
MacKenzie also found the termination date of the lease was Dec, 31, 2018.
“I will add, for the sake of completeness, that even if relief from forfeiture were possible in the circumstances, I would not be persuaded Evergreen should be granted this equitable remedy in light of the extent of its unlawful failure to pay rent for three years of a five year lease,” MacKenzie said in the judgment.
“Finally, Evergreen says it still has an argument that it properly gave notice in 2018 it intended to renew the lease for another five years, and is therefore entitled to that renewal unless it was “habitually in default” of its obligations under the lease. I find Evergreen’s unlawful failure to pay over three years of back rent amounts to habitual default. As a result, Evergreen is not entitled to a renewal.”
To read the full judgment click here.
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