Executive Summary: Key Legal and Evidentiary Issues

• Appeal concerned a tenant's claim for 12 months' rent compensation after vacating for landlord's use where the landlord delayed occupation by 14 months, triggering s. 51(2) of the Residential Tenancy Act (RTA).

• The RTB arbitrator misapplied the statutory test by repeatedly invoking "exceptional circumstances" instead of the legislated "extenuating circumstances" standard in s. 51(3), creating the wrong threshold for the landlord's defence.

• In assessing liability, the arbitrator improperly mixed two distinct concepts: (a) good faith to end tenancy under s. 49(4) and (b) extenuating circumstances excusing failure to occupy under s. 51(3), relying on irrelevant considerations, including an analogy to s. 49.2 (renovation notices).

• The Supreme Court had already found the arbitrator's decision patently unreasonable and remitted the matter to the RTB; the Court of Appeal agreed on patent unreasonableness but held the case must now be reheard in the Supreme Court because the Director's monetary jurisdiction is capped at $65,000.

• A practice issue arose: the Director of the RTB, although a proper respondent, must be formally added as a party to an appeal under the Court of Appeal Rules if not named in the notice of appeal, rather than simply appearing via registry practice.

• The ultimate outcome is that the tenant's compensation claim (initially fixed at $102,000 by the arbitrator) will be decided afresh in the Supreme Court; no final determination was made on quantum, good faith, or extenuating circumstances at the appellate level.

Factual background and the tenancy

The landlord, 1129728 B.C. Ltd., is a family-owned company held in part by Yi He. It owned a residential apartment on West Cordova Street in Vancouver, which was rented to the tenant, Tariq Kassam. The initial term of the tenancy was from November 1, 2019 until October 31, 2021, and thereafter the tenancy continued on a month-to-month basis. The unsigned tenancy agreement stated a monthly rent of $8,500, although the landlord contended that the rent never exceeded $8,400.

In late 2021, Ms. He and her husband, Fuhan Zhang, decided to demolish and rebuild their home in West Vancouver. Their evidence was that they planned to go to China for the first six months of their home renovation so Mr. Zhang could undergo tests for medical issues he was experiencing at the time. They intended to return to Canada and move into the unit from May 2022 until the renovations were completed.

After Ms. He and Mr. Zhang had spent four months in China, and in anticipation of their occupation of the unit, the landlord delivered to Mr. Kassam a Two Month Notice to End Tenancy for Landlord's Use of Property under s. 49(4) of the RTA. The effective date of the notice was April 29, 2022. The notice advised that, if the landlord did not take steps toward the stated purpose within a reasonable period after that date, the landlord must compensate the tenant an amount equal to 12 months' rent, and that the landlord may be excused from paying this amount if there were extenuating circumstances that prevented the landlord from accomplishing the purpose. Mr. Kassam did not challenge the landlord's good faith in issuing the notice; he vacated the unit and moved into another unit in the same building.

Ms. He and Mr. Zhang did not occupy the unit until June 2023, nearly 14 months after the notice came into effect. They provided two reasons why they did not move into the unit in May 2022, as initially planned. First, their time in China was extended until August 2022, when Mr. Zhang received a diagnosis for the medical issues he was experiencing. Second, when they returned to Vancouver, there was construction taking place on the exterior of the unit. They decided that the construction would interrupt Mr. Zhang's ability to rest and recover from his medical issues. Consequently, they lived in their daughter's apartment instead of the unit from August 2022 until June 2023, after the construction was completed.

The RTB arbitration decision

After the landlord failed to occupy the unit within what both sides agreed was not a reasonable time, Mr. Kassam applied to the Residential Tenancy Branch for compensation under s. 51 of the RTA. The issues before the arbitrator were: (a) under s. 51(3) of the RTA, were there extenuating circumstances that prevented Ms. He and Mr. Zhang from moving into the unit; and (b) what was the amount of monthly rent actually payable by Mr. Kassam to the landlord for the purpose of calculating compensation.

The arbitrator began her reasons by correctly quoting the entirety of s. 51 of the RTA, which provides that under extenuating circumstances the Director may excuse a landlord for not occupying a unit for a reasonable time in accordance with the section. Thereafter, however, the arbitrator erroneously stated the test as being exceptional circumstances—and, in several instances, italicized the phrase for emphasis. She made the same error verbally several times during the hearing when articulating the relevant test to the parties.

The arbitrator reasoned that exceptional circumstances did not exist in this case. She accepted that Ms. He and Mr. Zhang had an intention to occupy the unit during the renovation of their West Vancouver home, but found that Mr. Zhang's health did not delay those renovations and was thus not the reason for the delay in occupying the unit.

The arbitrator found that the delay in occupation of the unit was because the landlord should have waited until the building permits had been obtained for the renovation of Ms. He and Mr. Zhang's West Vancouver home before issuing the notice. On this point, she referred, by analogy, to s. 49.2 of the RTA, which describes a tenant's rights when a tenancy is terminated for the purpose of performing renovations on the unit in which that tenant resides. The arbitrator held that s. 49.2 provides that construction permits must be in place before issuing a four-month notice to end tenancy in order for a landlord to have acted in good faith. The arbitrator reiterated that she was not applying s. 49.2, but merely referring to it to determine whether exceptional circumstances had been established by the landlord in this case. She reasoned that—since Ms. He and Mr. Zhang were not ready to begin construction on the West Vancouver home until they received construction permits on July 12, 2022 and it would have taken time to organize contractors and tradespeople—they could have issued the notice to Mr. Kassam in July 2022 and allowed him to continue living in the unit in the meanwhile.

Mr. Kassam testified that the construction on the exterior of the unit did not begin until May or June 2023. This testimony conflicted with the landlord's evidence that the construction commenced in August 2022, and caused Ms. He and Mr. Zhang to live with their daughter upon their return from China. The arbitrator accepted Mr. Kassam's evidence, observing that he had continued to live in the building during this timeframe. She then found that the exterior construction was not a reason for Ms. He and Mr. Zhang's delay in moving into the unit since the construction did not begin until long after their return to Canada.

As for the quantum of rent to be paid as compensation, the arbitrator held that the amount of rent in the unsigned tenancy agreement—$8,500 per month—was binding on the parties. She held that the parties had otherwise acted on the agreement as if it were binding. Any reductions in rent to $8,400 were temporary and to compensate for Mr. Kassam being inconvenienced due to frequent showings during a timeframe when the landlord was attempting to sell the unit.

Accordingly, the arbitrator found that the landlord was liable to compensate Mr. Kassam the amount of 12 months' rent at $8,500 per month, for a total of $102,000.

The judicial review

The landlord applied to the Supreme Court of British Columbia for judicial review of that decision. The judge found that the arbitrator's decision was patently unreasonable—the standard of review mandated by s. 58(2)(a) of the Administrative Tribunals Act. She remitted the matter back to the RTB for a rehearing.

First, the judge found that the arbitrator based her decision on predominantly irrelevant factors. The arbitrator's inquiries into s. 49.2 of the RTA caused her to look erroneously at the timeline of permits, rather than what the judge viewed to be the real questions required by the statutory framework: whether the landlord had a good faith intention to occupy the unit when issuing the notice, or if there were other extenuating circumstances.

Second, the arbitrator applied the incorrect legal framework by considering whether the landlord had established exceptional rather than extenuating circumstances in determining the cause of Ms. He and Mr. Zhang's delayed occupation of the unit. The judge referred to the RTB's Residential Policy Guidelines which define "exceptional" circumstances (to determine whether a party is entitled to an extension of time under s. 66 of the RTA) and "extenuating" circumstances (to determine the persuasiveness of a landlord's excuse for failing to accomplish a stated reason to end tenancy under s. 51(3) of the RTA) differently. Since the arbitrator repeatedly referenced the incorrect legal threshold, her decision was patently unreasonable.

Third, the judge found that the arbitrator's calculation of compensation was arbitrary and inconsistent with the documentary evidence. There was evidence on the record to the effect that Mr. Kassam never paid more than $8,400 of monthly rent. However, the arbitrator did not explain why she preferred Mr. Kassam's testimony and the unsigned tenancy agreement to the rental income statements, which were to the contrary. Nor did the arbitrator explain why the unsigned tenancy agreement governed the parties' relationship. Accordingly, without further explanation, those findings were arbitrary, and thus patently unreasonable.

Fourth, the arbitrator's reasons were inadequate. She considered irrelevant factors, overlooked relevant evidence (given that every rent receipt before her was for less than $8,500), and failed to apply the "extenuating circumstances" test under s. 51(3) of the RTA.

Issues on appeal

The parties advanced many of the same arguments as to whether the decision was patently unreasonable as they did before the judge. The landlord also argued, for the first time on appeal, that the decision arose from a hearing that was procedurally unfair. Mr. Kassam submitted that procedural fairness is a new issue on appeal which should not be entertained by the Court.

The Director took no position on the merits of the appeal. But they submitted that they no longer have jurisdiction to rehear this matter due to amendments to the RTA. The Director said that the two options before the Court were to remit the decision to the Supreme Court, or to make an order under s. 58(4)(a) of the RTA to expand the jurisdiction of the Director to hear this matter.

Standard of review

The Court of Appeal confirmed the framework: on an appeal from a judicial review of an RTB decision, the Court's task is to determine whether the chambers judge identified the correct standard of review and applied it correctly. For that purpose, the appellate court is to "step into the shoes of the lower court" such that the appellate court's focus is, in effect, on the administrative decision. The standard of patent unreasonableness requires the decision under review be accorded curial deference, absent a finding of fact or law that is patently unreasonable. A patently unreasonable decision is one that is "so flawed that no amount of curial deference can justify letting it stand."

The Court discussed the relationship between earlier BC case law (Laverdure) and the Supreme Court of Canada's modern reasonableness framework in Vavilov. It held that Laverdure's articulation—that a decision is patently unreasonable if it fails to: (1) set out the legal test to be met; (2) set out the adjudicator's findings of fact and the principal evidence upon which those findings were made; and (3) apply those findings of fact to the test—is still a useful tool for assessing reasoning. Laverdure must be read consistently with the holistic Vavilov reasonableness framework. The factors in Laverdure are no more than a tool to evaluate whether one can trace the decision maker's reasoning without encountering any fatal flaws in its overarching logic.

Errors in the arbitrator's application of the statutory tests

The Court of Appeal found that the arbitrator's decision was patently unreasonable in two ways.

First, she confused the relevant legal test she was applying under s. 51 of the RTA. By articulating the test in two different ways—in terms of both "exceptional" and "extenuating" circumstances—she created an unclear bar for the landlord to meet. Reading the decision contextually and as a whole, it is impossible to discern whether the standard she actually applied was "exceptional" or "extenuating" circumstances. This conclusion is reinforced by a review of the portions of the transcript which formed part of the record, in which the arbitrator repeats the phrase "exceptional circumstances" when referring to the case to be met.

Second, she combined the analysis under s. 49(4), which encompasses a good faith requirement, with the analysis under s. 51(3), which does not. The question as to whether the landlord had a good faith intention to occupy the unit relates to the validity of the notice under s. 49(4) of the RTA but does not form part of the test to excuse unexpected circumstances under s. 51(3). Mr. Kassam did not challenge the notice under s. 49(4), and vacated the unit in compliance with its requirements. By referring to findings that went to the good faith requirement to assist in resolving the extenuating circumstances issue, the arbitrator failed to properly consider the extenuating circumstances standard of proof.

The Court added that the judge made a related error when she stated that the arbitrator should have considered whether the landlord had a good faith intention to occupy the unit. The only question the arbitrator should have analyzed in her reasons was whether extenuating circumstances existed.

The errors in the arbitrator's decision were compounded by her references to s. 49.2 to ground a finding that there were no extenuating circumstances under s. 51(3). The question that arises under s. 49.2 is whether "the landlord intends in good faith to renovate or repair the rental unit." But s. 49.2 does not apply where the question is whether there are extenuating circumstances under s. 51.4(5) of the RTA. The arbitrator relied upon the portions of s. 49.2 concerning good faith—not those relating to extenuating circumstances (in s. 51.4(5)), which would be applicable to the question she was attempting to answer.

Impact of the factual findings

Mr. Kassam submitted that the findings of fact were such that the arbitrator's lack of clarity in articulating the requisite test was irrelevant and the decision should still be upheld. He said the decision would have been the same regardless of whether the "exceptional" or "extenuating" circumstances framework was used because the arbitrator did not accept the landlord's explanations for Ms. He and Mr. Zhang failing to occupy the unit within what was admitted to be an unreasonable period of time.

The Court of Appeal rejected this argument. In its view, the findings of fact were made at least partially to consider irrelevant legal tests—namely those in ss. 49(4) and 49.2. The arbitrator's references to s. 49.2 of the RTA, including the requirements that permits be in place and the like, colour the fact-finding exercise and cannot be artificially segregated from what the landlord needed to establish to meet the extenuating circumstances standard.

The Court was not persuaded that findings of fact that were made for reasons other than determining whether extenuating circumstances existed—and that were made at least partially with an irrelevant legal test in mind—should ground a conclusion that the landlord's conduct would inevitably not be excused under s. 51(3). The findings of fact that resulted in such an analysis are tainted by the arbitrator's erroneous application of s. 49.2. It was neither rational, nor necessary for the arbitrator to analogize to s. 49.2 under these circumstances. As a result, her findings were patently unreasonable.

Standing of the Director

In the proceedings in the Supreme Court, the landlord's petition named the "Residential Tenancy Branch" as a respondent. The Director filed a response stating that the "Residential Tenancy Branch" is not a legal entity, nor is it a decision maker subject to judicial review, and that the statutory authority to resolve disputes under the RTA is granted to the Director. At the hearing of the petition the judge made an order, by consent, removing the RTB as a respondent. The order did not add the Director as a party.

Mr. Kassam's Notice of Appeal, filed on February 4, 2025, only named the landlord as a respondent. Notwithstanding the fact they had not been named as a respondent on the appeal, on March 10, 2025 the Director filed a notice of appearance and on July 17, 2025, without objection, filed their factum.

The Court of Appeal held that s. 15(1)(b) of the Judicial Review Procedure Act, which provides that a decision maker "may be party to the application," cannot be interpreted to include further proceedings on appeal in the Court of Appeal. The Court of Appeal Act and Court of Appeal Rules determine the Director's standing in this Court. Where an appellant fails to properly name a respondent on appeal, Rule 18 provides a process by which a proper respondent may be added.

The Court was advised of a practice that has been followed in the Court's registry, in which the Director, if they were not named as a respondent in this Court, could file a notice of appearance on appeals of judicial reviews of RTB arbitrator decisions, regardless of whether the Director participated in the judicial review petition before the Supreme Court or was not named as a respondent in the relevant notice of appeal. While this practice was well-intentioned, the Court concluded it cannot be reconciled with the Rules. If the Director is not named in the notice of appeal, they must file a notice of application under Rule 18(2) in order to be added as a respondent on the appeal.

In this case, the Director ought to have been named as a respondent on the appeal but was not. The application to add them was thus granted.

Changes to the RTA and the appropriate forum for rehearing

In the proceedings below, the Director did not raise any issues as to the appropriate remedy. In fact, they did not attend at the hearing of the petition to advise the judge of recent amendments to the RTA.

In the Court of Appeal, the Director argued that amendments to the RTA, which came into effect on July 18, 2024, have removed this matter from the Director's monetary jurisdiction. The amendments came into effect after the landlord filed its petition for judicial review on February 26, 2024, but four months before the judicial review hearing occurred on November 24, 2024.

The amended s. 58(2)(a.1) of the RTA provides that the Director must not resolve a dispute if the amount claimed under s. 51(1) or (2) is more than $65,000. Section 58(2) does not apply where ss. 58(2.2) or 58(4)(a) apply. Subsection 58(2.2) provides jurisdiction to the Director in circumstances where the amount above $65,000 is abandoned by the applicant. Subsection 58(4)(a) provides, on petition, for the Supreme Court to order that the Director has extraordinary jurisdiction to resolve the dispute.

Section 44 of the Tenancy Statutes Amendment Act, 2024 states that if, on the date the section comes into force, an application for dispute resolution has been made but a final determination has not been made in respect of the application, the amended s. 58 of the Residential Tenancy Act applies in respect of the application.

The Director argued that, as a result of the transition provision in s. 44 of the Tenancy Statutes Amendment Act and the application of the new s. 58(2)(a.1), this case is no longer within their jurisdiction. Section 58(2)(a.1) removes the jurisdiction of the Director in this case, as the case involves a claim of $102,000, which exceeds the Director's limit of $65,000 under s. 51(2) of the RTA.

Since Mr. Kassam is not prepared to abandon the amount of his claim in excess of $65,000, s. 58(2.2) does not apply. Since there is no application properly before the Court pursuant to s. 58(4)(a), the only available remedy is for the Court to remit the matter to the Supreme Court for a rehearing.

For the purposes of this appeal, Mr. Kassam stated that he was prepared to reduce his claim by $1,200 (the difference between 12 months' rent at $8,400 and at $8,500) in order to resolve the issue of compensation. However, the Court stated that there are no restrictions on the submissions the parties can make when this case is heard afresh by the Supreme Court. In particular, Mr. Kassam's acknowledgment at the hearing of this appeal to reduce his claim by $1,200 does not preclude him from arguing that he is entitled to the full $102,000 as ordered by the arbitrator.

Ruling and overall outcome

The Court of Appeal found that the decision of the RTB arbitrator was patently unreasonable because the arbitrator's repeated references to the wrong legal test in the analysis caused her not to address the landlord's onus under s. 51(3) of the RTA. The Court allowed the appeal to the limited extent of remitting the matter to the Supreme Court for a rehearing. Accordingly, the Court did not need to address the additional grounds of appeal—being an alleged lack of procedural fairness or the reasonableness of the arbitrator's calculation of the compensation awarded to Mr. Kassam.