Executive Summary: Key Legal and Evidentiary Issues

• Judicial review focused on whether a Residential Tenancy Branch (RTB) arbitrator could unilaterally amend a landlord’s application from s. 56 to s. 56.1 of the Residential Tenancy Act (RTA) after the hearing had concluded.

• The court found a breach of procedural fairness where the tenant was not clearly told during the hearing that the arbitrator was treating the case under s. 56.1, which has different requirements than s. 56.

• Evidentiary emphasis at the RTB hearing was on the tenant’s conduct and alleged safety risks under s. 56, not solely on whether the unit was “uninhabitable” under s. 56.1, and the tenant was deprived of a fair chance to tailor evidence and submissions to that different legal test.

• The arbitrator’s interpretation of s. 56.1(1)(a)(i) as requiring only a bare factual finding of uninhabitability, without engaging with the doctrine of frustration or the Frustrated Contract Act, was held to be patently unreasonable.

• The court confirmed that uninhabitability under s. 56.1 is an example of contractual frustration, requiring consideration of whether either party’s conduct caused the circumstances and whether frustration, in law, is made out.

• The RTB decision ordering early termination and vacant possession was quashed and the matter was remitted for a new hearing, with no specific damages or costs amount identified in favour of any party.

Facts and procedural history

Margaret Ferguson is the tenant and Candou Industries Ltd. is the landlord. The petitioner has been a tenant at the rental property since 1988. On June 17, 2025, a building inspection report obtained by the landlord determined that the property was heavily deteriorated with serious risks for the health and safety of occupants. On July 22, 2025, the landlord applied to the Residential Tenancy Branch (RTB) under s. 56 of the Residential Tenancy Act, S.B.C. 2002, c. 78, for dispute resolution on an expedited basis and for an order for possession, claiming it would be unreasonable or unfair to wait for a One Month Notice to End Tenancy for Cause to take effect. A hearing before an RTB arbitrator was held on multiple dates in September 2025. On September 24, 2025, the arbitrator issued a decision. In that decision, the arbitrator exercised discretion to amend the application from a claim under s. 56 to a claim under s. 56.1 of the RTA, and ultimately granted the landlord an order for possession and a monetary order against the tenant for the filing fee, requiring the tenant to deliver vacant possession effective two days after service of the order. The respondent noted that this was the second judicial review brought by the petitioner in relation to RTB decisions involving this tenancy; a previous RTB decision had been set aside by consent and remitted for redetermination. The petition for the present judicial review was filed on October 15, 2025. The landlord expressed concern that, if the RTB decision was set aside again, directions should be given to ensure an expedited reconsideration due to urgency concerns related to the unsafe state of the rental unit and questions about its inhabitability.

Issues before the court

The court first determined which RTB decision was subject to judicial review: the September 24, 2025 decision or the September 29, 2025 review consideration decision. Relying on authority concerning RTB decisions, the court held that where the review consideration decision does not address the merits of the underlying decision, it is the initial decision that is judicially reviewed, with the review consideration reasons providing context. The petitioner raised two grounds: breach of procedural fairness and patent unreasonableness. On procedural fairness, the complaint was that the arbitrator amended the application from s. 56 to s. 56.1 after the hearing had concluded, without allowing submissions on that change. On patent unreasonableness, the petitioner argued that the arbitrator’s approach to s. 56.1 failed to consider the doctrine of frustration of contract as required by the RTA and related legislation.

Court’s analysis of procedural fairness

The court referred to the Administrative Tribunals Act, S.B.C. 2004, c. 45, which provides that the standard of review for procedural fairness is whether, in all of the circumstances, the tribunal acted fairly, and cited factors identified in cases such as Hollyburn Properties Limited v. Straehli and Canada (Minister of Citizenship and Immigration) v. Vavilov. The court also considered the RTB Rules of Procedure. Rule 6.2 states that a hearing is limited to matters claimed on the application unless the arbitrator allows an amendment, and Rule 7.12 states that an application can be amended “at the hearing” only in specified circumstances. In the decision, the arbitrator cited Rule 7.12 and concluded that an amendment to rely on s. 56.1 rather than s. 56 was reasonably anticipated. The court observed that the arbitrator appeared to ignore the phrase “at the hearing” in Rule 7.12. In the review consideration decision, the arbitrator stated that the purpose of Rule 7.12 is to ensure the parties are aware of any modification to a claim and have an opportunity to respond, and found that specific reference to s. 56.1 was unnecessary because uninhabitability was mentioned in the claim. The arbitrator also concluded that the tenant reasonably anticipated the amendment and consented by making submissions concerning habitability. The court found this reasoning misleading because the tenant had directed evidence and submissions to the requirements of s. 56, not s. 56.1. The decision itself acknowledged a significant difference between s. 56, which requires a determination of responsibility for certain conduct and unfairness in waiting for notice, and s. 56.1, which allows a landlord to apply for an order ending a tenancy if the rental unit is uninhabitable. The court held that, had the tenant known during the hearing that the arbitrator was considering s. 56.1 instead of s. 56, the evidence and submissions might have been different, and an adjournment might have been sought due to insufficient time to respond to the amendment. The court emphasized that parties, often unrepresented, are entitled to clarity on the grounds for an application at a hearing, and cited Parkland Manufactured Home Park. v. Mcalpine as recognizing the importance of knowing a landlord’s grounds when preparing to dispute a notice to end tenancy. The court concluded that, in the circumstances of this case, recording and relying on an amendment outside the parameters of Rule 7.12 was contrary to the duty of procedural fairness owed to the petitioner.

Court’s analysis of patent unreasonableness

The court turned to the second ground, patent unreasonableness, under s. 58(2) and (3) of the Administrative Tribunals Act, which set a standard requiring the decision to be “openly, evidently, and clearly irrational” or to fail to take statutory requirements into account. The petitioner argued that, although the arbitrator purported to decide under s. 56.1 of the RTA, the decision did not grapple with the doctrine of frustration of contract. The court noted that s. 92 of the RTA provides that the Frustrated Contract Act, R.S.B.C. 1996, c. 166, and the doctrine of frustration of contract apply to tenancy agreements. The court referred to Residential Tenancy Policy Guideline 34 – Frustration, which explains that a contract is frustrated where, without the fault of either party, an unforeseeable event makes performance impossible in a way that radically changes the contract, and that a party cannot argue frustration if the frustration is the result of that party’s own deliberate or negligent act or omission. The court also noted that there are other RTB policy guidelines, such as Policy 2B – Ending a Tenancy to demolish, Renovate or Convert a Rental Unit to a Permitted Use, which describe the landlord’s onus and compensation provisions. The respondent submitted that proceeding under s. 56.1(1)(a)(i) did not require a frustration analysis and only required a factual determination that the property was uninhabitable. The court rejected this interpretation. It found that such a reading of s. 56.1(1)(a)(i) would allow a landlord to obtain a finding of uninhabitability without considering whether the landlord’s own conduct caused the uninhabitability or whether the Frustrated Contract Act and the doctrine of frustration applied. The court held that s. 56.1 concerns frustration and that s. 56.1(1)(a)(i) is an example of how a tenancy agreement may be frustrated because the rental property is uninhabitable, a reading supported by s. 56.1(1)(a)(ii), which refers to a tenancy agreement being “otherwise frustrated.” The court also found support in the RTB’s Guideline 34, which states that the doctrine of frustration cannot be utilized by a party whose actions have frustrated the agreement. The court concluded that treating s. 56.1(1)(a)(i) as requiring only a factual finding of uninhabitability, without applying the doctrine of frustration, was patently unreasonable.

Ruling and overall outcome

For the reasons given, the court quashed the RTB decision and remitted the matter under RTB file 910206532 to the RTB for a new hearing. The respondent asked the court to make directions to the RTB, including that the respondent’s original notice of dispute resolution be set for hearing and that the hearing be expedited due to safety risks associated with the rental unit. The court declined to make such directions, stating that the RTB is best placed to determine the proper procedure available and necessary to address the application or applications. In the result, the petitioner, Margaret Ferguson, was successful in having the RTB decision set aside and the matter returned to the RTB for reconsideration.