Of the Origins and Legitimacy of Mr. Mulek’s Lease

To those who have scrutinized the May 1st 1974 Lease with a serious concern for moral and public policy issues, that document is simply and plainly a reprehensible piece of work. Its intent, though easily discernable in retrospect, is not readily clear from the so-called “plain text” of the document itself. There are numerous errors, ambiguities and omissions in it that render its meaning open to dispute. In order to convey something of its veiled purposes it will be necessary to reveal how and why it came into existence in the first place. This can best be accomplished by enlarging upon the origin and activities of the corporate entities which preceded and are intimately connected with it in British Columbia: Westsea Construction Ltd and Capital Construction Supplies Ltd.—the first two companies whose names would be affixed to the document. After so many decades the prospect of coming to a deeper understanding of the lease might have proven an insuperable task were it not for a 1975 debate in in the Legislature condemning the practices of the man who ushered it in and the fact that the annual reports of the above companies for the key years 1973, 1974 and 1975 have long been available on the internet for everyone to peruse and evaluate at their leisure. The value of making that debate and those particular annual reports available lies primarily in the information that they provide about the officers, activities, purposes and moral proclivities of the companies that were incorporated at the time the Lease was being drafted. In order to understand the May 1st 1974 Lease at a level less superficial than has generally been comprehended in courtroom litigation, it will be instructive to review some facts relevant to its formation.

 

But before the BCLA undertakes to comment on them, it should be pointed out that the purpose of this analysis is not to malign those who created the May 1st 1974 Lease—all of whom are likely long dead and gone—but to clarify something of the nature and workings of a legal contract that has caused so much harm both to those against whom it is still being used and those who have felt obliged or justified in putting it to that use. It will do well at this juncture to speak directly—as the Hon. MLA Harold Steves had done in 1975—of the actions of Mr. George Mulek rather than the activities of any of the various companies he created; which were, after all, merely his avatars. In its analysis of this Lease, the BCLA has also elected to make all relevant legal documents at its disposal available to the general public with the express purpose of exposing something of the moral predisposition of the companies intimately associated with the document; and thereby curtailing the ongoing mischief perpetrated by it. Both of these objectives are fully in keeping with the BCLA’s social obligations and its mandate to define and affirm the rights of leaseholders in British Columbia. Fortunately the BCLA can do what the BC courts cannot: it can dispense with the principle in law which holds that a corporation is an entity distinct and separate from its shareholders, a fact which in the real world is often merely a convenient fiction to protect the culpable. By focusing on information already available on the internet, the BCLA can provide vital data upon which those who actually do effect legislative change will be better able make their own judgments and act upon them. Providing such information to all who require it is as important and appropriate an obligation as providing full transparency to leaseholders should have been by those whose companies have had virtually all their expenses paid by them. To this end it will be necessary to utilize and make more accessible many documents that may implicate specific corporate entities and/or relevant individuals. Doing so will facilitate what is intended to be a serious and justified enquiry by the BCLA. There is no malice, slander or denigration intended in this objective, only a sincere desire to see the truth revealed and justice accorded to those who have so long been denied it.

 

A number of things are immediately apparent from all these particular annual reports. First, both the companies would appear to be relatively recent corporate entities in the Province of BC at the time the May 1st 1974 Lease was being created. As the dates on the documents indicate they were both incorporated within a few years of each other at a time when excessive residential rents were in hot debate and rent controls clearly in the offing. What is not immediately apparent from the documents is the veiled purpose to which they might be put on the one hand, or the exact nature or classification of these companies on the other. It is now obvious that, whatever the date or intent of their incorporation, these two companies were ultimately utilized pretty much for the same specific purpose: to permit a registered land owner to become at once his own Landlord (lessor) under one of his companies and his own tenant (lessee) under another. Thus, by converting his rental apartments to 99-year leases in which leasehold “rents” could be “assigned” at unregulated fixed rates, it became possible for Mr. Mulek to flout the NDP government’s rental legislation without relinquishing any control over his property or tenants. In other words, the sole purpose of coordinating these two companies was to thwart the provincial government in its attempts to the help the very people that Mr. Mulek was intent on subjecting to even greater rent increases and control. To frame all this in a broader social context, it should be emphasized that the above mentioned companies (along with all the others that adopted Mr. Mulek’s Lease during the brief window of opportunity permitting it,) are classified as “close corporations”. In other words all are owned and operated entirely by a relatively small number of officers who do not offer or trade company shares with the general public. (In Mr. Mulek’s case these officers were always, and have as a rule remained, the members of his own family.) The inference to be taken from this is that all the abuse and manipulation suffered by the thousands of tenants under the tyranny of May 1st 1974 Lease is generally not the work of an impersonal Board of Directors and shareholders so removed from their actions as to be ignorant of the plight of all those being hurt by them, but can, in fact, be seen, (especially in the case of leases held in Mr. Mulek’s properties in particular) as the callous indifference of a very small number of enormously wealthy individuals who, without conscience and in every case fully aware of the circumstances at hand, would seem to have lost all regard for anyone’s welfare but their own.

 

These particular annual reports trace the frenetic history of the two above mentioned companies immediately before and after the creation of the May 1st 1974 Lease. They hint at the directorial turmoil underlying the removal or resignation of Russell Lewis from the directorship of both companies just before or soon after the Lease was drafted. They also bring to the fore the implied nepotism of control evident in Mr. Lewis being replaced by George Mulek’s own sister Violet Hitchon—both of whom are expressly identified with Westpark Investments Ltd. in MLA, Harold Steves’ condemnatory address to the BC Legislative Assembly on March 12 1975. The utility of Violet Hitchon is of interest in this context and can perhaps be best surmised by a sworn affidavit made and filed by her in regard to a civil action in which Westpark had refused to grant leaseholders an implied freehold option by withholding the assignment of one of its apartments in Richmond, BC. In it Mrs. Hitchon (now also demised,) deposed:

 

“I was also a director of several other companies but my brother George Mulek provided the management of all of these companies.  I was not involved in the management of the companies … I am now retired and I can’t remember if Westpark Investments Ltd. made any efforts to assign Suite 317, if I ever knew.”

 

This extract, gleaned from the 2007 transcript of the Edgington v. Trache, civil action (BCSC Docket: S035597) provides data particularly germane to the objectives of this inquiry. While the case is only incidentally relevant to the matters at hand it does provide valuable evidence as to the Officers and nature of their interactions in the corporate entities involved. The only other time the BCLA has found Mr. Mulek to be associated with a corporate officer other than a member of his own family is on the head lease of Surfcrest Apartments in Vancouver, dated May 16, 1974, in which George Mulek and Edward Sully appear as joint lessor and lessee on exactly the same standardized Lease. MLA Steves’ criticism of Mr. Mulek’s policies is pertinent here because, in essence, it embodies the ongoing attitude and tactics of all of Mr. Mulek’s various companies—practices which have continued unchecked since the creation of the May 1st Lease and which have since been perpetuated in the analogous practices of his heirs, Julie Trache and Bruce Sembaliuk.

 

When, in the Summer of 1975, the Hon. MLA Harold Steves protested to the BC Legislature George Mulek’s unconscionable policy of displacing his regular renters with newly assigned 99-year term leaseholders, he could never have imagined the excesses of abuse that Mr. Mulek’s scheme would cause those holding the very same leases a quarter of a century later. Succinctly abridged the transcript of his address to the Legislature runs as follows:

 

“I would like to refer to specifics regarding landlord and tenant matters which apply to my riding. The landlord in particular that I am referring to is George Mulek of West Park Investments. Basically, he wants more rent than what he is able to get under the Landlord and Tenancy Act. He’s converting suites to 99-year lease accommodation in order to avoid the rent controls brought in by this government a year ago. The apartment blocks that he has converted to 99-year lease are on Buswell Road in Richmond. Under Bill 155, it’s illegal to evict a tenant for refusing to sign a 99-year lease. But the tenants are being told that they are not being evicted but that their apartment is going to be sold to somebody else if they don’t purchase the apartment themselves. Then the person who purchases that apartment can evict them.

 

Here’s what they were offered. Tenants who had been paying rent in the neighbourhood of $195 a month in 1973, in February were asked to pay $225 a month, which was over and above the 8 per cent. In July, in order to get around the 8 per cent limitation, the landlord said: “Okay, your suites are now 99-year lease and the rents you will pay are in the neighbourhood of $298 a month, plus $5,000 down payment.” The total would be then roughly $350 a month, or an increase in one year from $195 to about $350 a month — an increase of around between 75 to 80 per cent. This is what is happening to tenants in my riding, and it’s happening elsewhere in the province as well.

 

The landlord was criticized by myself and by the tenants, and we got a lawyer in the case. The next thing he did was file a libel suit against the lawyer that the tenants had and against the local newspaper which was carrying the stories. That stifled the press, and the press then was afraid to carry any further stories. We hear that we have a free press in British Columbia. But when somebody is able to slap a libel suit on them simply for carrying a story about what is happening, I think that’s pretty despicable. That’s what happened in Richmond.

 

Anyway, the landlord has deliberately, and I think quite methodically, searched out loopholes to avoid the rent control Act. We find that while the legislation was being drafted and going through this Legislature last year to ban 99-year leases without the consent of the local council, Mr. Mulek went and transferred his property from property being owned by George Mulek and Brian and Violet Hitchon to West Park Investments. He did that last May, [before] the Act banning transfers under the Landlord and Tenant Act was proclaimed on August 9. He did it while the legislation was going through this Legislature but before it was actually proclaimed by cabinet.

 

Recently he proceeded to give eviction notices to the tenants who are very much concerned about what rights they really have, because he has been able to bypass the provisions of the Landlord and Tenant Act by leasing the apartments to himself.

 

As has since become evident, Hon. MLA Steves’ grievances at the time were actually quite modest compared to the extremes of intimidation, exploitation and abuse that, in the last decade especially, have confronted the very leaseholders to whom those first 99-year leaseholds were assigned. Beginning about the middle of 1974, Mr. Mulek’s legal instrument began forcing unprotected tenants out into the streets—effectively increasing his profits by up to 80% rather than the 8% limit the government had legislated. (Forcing tenants out onto the streets would not appear to be an uncommon practise for Mr Mulek’s corporations, as was indicated by the 2014 scandal at View Towers in Victoria in which 85 low-rent tenants, largely old age pensioners, were callously and needlessly renovicted from their homes on a “frustrated contract” technicality.) From the very start the implementation of Mr. Mulek’s policies reflected a truly Machiavellian disregard for the rights and well being of the many distraught tenants who were being displaced by his newly subscribed leaseholders. This the BCLA plainly and unequivocally considers reprehensible behaviour; but perhaps even more offensive, (because a serious affront to benign social practise generally,) was the deliberate and flagrant contempt it demonstrated in subverting sympathetic government legislation that was intent on assisting the very tenants whose rights Mr. Mulek was actively abusing. In fact—as the mounting lawsuits, public reproaches and adverse publicity against Mr. Mulek’s companies and policies will show—this disturbing pattern of behaviour would in the coming years become the rule rather than the exception, its arrogance and tyrannical stance becoming ever more entrenched with each unjust victory in the courts.

Over the past two years the BCLA has gathered considerable information in its research and evaluation of the various companies using Mr. Mulek’s lease. Though few in number their signatories in every case reflect the same pattern of corporate collaboration in which two companies are utilized, through the agency of the May 1st 1974 Lease, to make the same person(s) simultaneously both landlord and tenant. In every case, the same configuration of corporate directorship is evident. In addition to Edward Sully who appears as co-director with George Mulek on Mr. Sully’s own company, Sheridan Investments Ltd., the names of V.M. Prescott and John Cogdon also figure prominently on these contracts. Although Hon. NDP MLA Steves’ address to the legislature in 1975 attests to the existence of others in Richmond, (in connection with Westpark Investments Ltd.,) the head leases of only nine leasehold buildings have surfaced so far among the early contracts unearthed by the BCLA. A decade later when rental controls were rescinded by the Social Credit government, Mr. Mulek would modify his leasehold contract to accommodate a new group of leaseholders in Richmond BC.

 

On the face of it, Mr. Mulek’s propensity for generating new corporations is indeed a curious phenomenon. After all, why should two separate companies need to be used simultaneously where ostensibly one company with the same signatories would usually be enough for any normal corporate activities. But then, the real objective of establishing the functionality of two such companies in the manner Mr. Mulek intended was not generally within the parameters of normal corporate activities. The NDP government had enacted compassionate legislation to alleviate a serious problem: the unreasonable and unsustainable increase in rents by landlords whose only concern was for the bottom line. The purpose of Mr. Mulek’s “merged” legal entities was clearly intended to bypass the NDP’s practical and much needed legislation. Thus, in the strictest sense, the lease’s intent was unlawful.

 

Because of the complexity—one could almost say promiscuous multiplicity—of his own various corporate enterprises, it is virtually impossible to regard them collectively as anything but a single multi-faceted aggregation which, despite the initial proliferation typifying it, has always been centered in same industry: Apartment Rental, Apartment Leasehold, and Building Management. As the many civil actions against Mr. Mulek’s companies have revealed, its officers have always been the same individuals. Although his buildings in BC number in the vicinity of a dozen (with even more in Alberta,) to speak at all rationally of Mr. Mulek’s multi-corporate aggregate demands it be conceived as a single entity. Today it is operated largely under the tight control of just two individuals: George Mulek’s daughter, Julie Trache and Violet Hitchon’s nephew Bruce Sembaliuk—both of whom, it might be pointed out with some irony, officially reside in Edmonton, Alberta, where leasehold legislation is firmly in place to prevent such abuses as exist in BC. As near as can be determined Mr. Mulek’s overall legacy to them may very well be estimated in the hundreds of millions of dollars. His policy in the past seems to have been never to sell land once acquired. However, many astute leaseholders have now begun to suspect that all the systematic renovation currently underway, (and for which they are paying in its entirety,) may well just be preparation for its disposal at the highest possible profit.

 

The purpose in assembling the above information about the origin and policies of Mr. Mulek’s May 1st 1974 Lease is not to denigrate in any way his heirs, who like the rest of us will only claim to be acting in accordance with the natural dictates of conscience and inherited circumstances. It serves no purpose for the BCLA to be vindictive or defamatory in this matter, for its only interest resides in the honest dissemination of information intended to effect positive change and remedy what it considers a gross miscarriage of justice that has been permitted to continue unchecked by the incapacity of our courts to stop it. To the BCLA the real villain is the lease itself. It should not be necessary to elaborate too expansively here on the activities of the various corporate entities created or influenced by Mr. Mulek; but it will be instructive to speak briefly of the adverse consequences reflected in the current use of a contract that has so often been (and currently is,) the source of ceaseless lawsuits in the BC Courts.

 

In 1975 Mr. Mulek used his arguably ill-begotten and unconscionable leasehold contract to effect apartment conversions that underhandedly forced low-paying renters out of their homes—an act which provincial legislation had been sanctioned to prevent. Thus, driven solely by corporate profit motives, he was able, if with limited success, to undermine the NDP’s government legislation aimed at preventing the exploitation of short term renters. All this he achieved by means of a lease that is now widely believed to have doubtful legitimacy but is still irrationally and unjustly given the benefit of the doubt by the courts. Since about 2005, and particularly in the last decade, Mr. Mulek, under the auspices of the same illicit contract, is still gouging his tenants from beyond the grave. This time, however, the the tenants to whom the 99-year term leases were assigned are being forced to endure abuses even more onerous than those of their predecessors. Compelled to finance massive capital cost enhancements that they could never have foreseen from the lease as drafted (and certainly could not be expected to sustain indefinitely,) they are given no say whatever as regards the implementation of these inordinately expensive projects and no transparency at all as regards incurred costs. (As the value of their leaseholds dwindle away to nothing, they will be expected to pay ever increasing future “operating” expenses.) Not only are they denied transparency—which the landlords refuse because it would fundamentally change the nature of their lease—but they are forced to pay imprudent and unreasonably incurred costs within unrealistic spans of time, just so their landlords can rationalize writing them off as Operating expenses and thereby get them quickly paid in full without capitalizing them. If leaseholders question any aspect of these expenditures, they are treated with the utmost rebuke and disrespect. If they even attempt to protest their adversary’s excessive and irresponsible policy decisions they are forced—on the strength of their Landlord’s reading of their lease alone—to pay all of the unrestrained legal expenses incurred by their landlords to prostrate and stifle them.

 

There is a clear and disquieting analogy between the culpable behaviour evident in the actions of these landlords over forty years ago and their equally unconscionable behaviour now. The abuses addressed above are so blatant, so offensive, that they would indeed be a serious indictment against the BC Judiciary but for the fact that—being ill-prepared to oppose such mischief of its own accord, and thus forced to turn a blind eye to it—the Supreme Court of BC cannot be held solely responsible for it. Sadly, opposing such injustice unilaterally is not a function of the judiciary in itself, it is a function of the legislature which must dictate the criteria that guide the courts in these matters. While it is not the BCLA’s objective in this article to analyze the May 1st 1974 Lease, (a task undertaken elsewhere on this website,) it should nonetheless be pointed out in passing, that, according to the Sept. 9, 2008 amendment of the Residential Tenancy Act, it was determined—for the purposes of defining unenforceable terms in a lease—that anything in a residential lease which is “oppressive or grossly unfair to one party.” must be considered “unconscionable”. The BCLA is of the opinion that the actions recounted in the above paragraphs are clearly and plainly sufficiently onerous to validate bringing a charge of unconscionability against corporations implementing the May 1st 1974 Lease.

 

Civil actions brought against Leasehold companies using Mr. Mulek’s Lease have always proven problematical. They have, as a rule, been a losing proposition for leaseholders. In the Summer of 2017 the BCLA consulted a half dozen Legal firms in Vancouver  in an attempt to bring an injunction to halt an illicit work project identical to one currently in litigation in Victoria, BC. After consulting the litigation history surrounding Mr. Mulek’s lease none of the firms was anxious to get involved—even though all criteria supporting an injunction were overwhelmingly in order. Because of the landlords’ inflexible presumption of “rightful” contractual control under the lease, they have repeatedly ignored the desperate yet just appeals voiced by leaseholders to reconsider their actions. Since the only opinion these Landlords respect is their own, they exercise the prerogative of doing exactly what they please. The firm conviction of  astute leaseholders is that civil actions against such landlords will ultimately be won in the courts. There is every reason to grant the credibility of this conjecture since so much evidence—as the BCLA will provide on this website—is clearly in their favour. Unfortunately the balance of power has always been  overwhelmingly in favour of the landlords, who have the psychological edge, and unequal legal resources to win. But even with that disadvantage it might still be a fair battle for leaseholders except for one fact. Those implementing the lease, have taken the liberty of interpreting every aspect of it entirely to their own advantage. They do not worry about the cost of legal battles because they have so interpreted the lease as to assume they have the ability to force their tenants to pay all of their own legal expenses as “operating” expenses. Even though it was wisely refused them in a decision by Hon. Justice Mackenzie in 2016, they continue to do so. By compelling their tenants to pay both their own and their landlords unconstrained legal expenses they virtually eliminate any likelihood of leaseholders defending themselves in the courts. Secure in that knowledge they are able to intimidate leaseholders and thus manipulate them with relative ease. Unless a litigant is self-represented, experienced and resourceful, it is virtually impossible to fight these landlords because they never have to worry about paying their own legal costs and can be as extravagant as they please.

 

Fortunately for leaseholders, it is not just the “interpretation” of the lease that is at issue. The other level of dispute with the lease and the activities it encourages is entirely a moral one, justifiably contesting the very legitimacy of the lease itself and the ethical predisposition of the corporations illicitly maneuvered to implement it. Irrespective of the legal protocols availing these landlords in the courts, there are prerequisite overriding considerations that must be addressed to legislators and superior court officials, who, because of the limitations of the legal system generally, cannot perceive the real issues in the fullness of their broader social context. To those who have studied the lease entirely from the perspective of its adverse effects, it is manifestly clear that the sole and incontestable function of the lease is to allow those who adopted and implement it to reap all the benefits of their property without ever having to pay a single penny of the costs. Though this was never entirely clear to leaseholders from the lease itself, it is an indisputable tenet of the lease which, though intentionally obscured by the text in many respects, can be interpreted in no other way under intensive analysis of the lease.  It is a fact to which the landlords’ legal advocates strictly adhere in enforcing the articles of the Lease. Those who proffered and enforce the lease are, in many respects, not actually “interpreting” it; they are simply allowing it to fulfill its intended function. And that function its leaseholders, and the BCLA. hold to be inherently deceptive, abusive of natural human rights and patently contrary to public policy. The chief objective in exposing the origins of this lease to such extensive critical scrutiny in this manner is to suggest to the judiciary and the legislature that, perhaps, the sole plausible reason for supporting the “legitimacy” of Mr. Mulek’s Lease, can only be attributable to the deeply imbedded presumption of the primacy of “Contractual entitlement under the Law”—a notion that is by no means universally true; and for which, in this particular case, there is clearly not sufficient reason for the courts to continue blindly tolerating the disreputable behaviour that this lease inevitably evokes.

 

Before concluding this survey of the problematic origins and legitimacy of Mr. Mulek’s May 1st 1974 Lease and the various companies instrumental in putting it into practice, it will be worthwhile for the BCLA to make a few pertinent remarks about the nature of corporate responsibility for the benefit of the BC legislature and judiciary, to whom this missive is partly addressed. The very notion of corporate legitimacy is founded on the premise that, despite its own practical directives to pursue profit maximization and self-benefit, no company can ever permit itself to allow those pragmatic motives to supersede the normative demands of society. In other words every corporate entity, irrespective of what it may suppose itself contractually permitted to do, has a prior moral responsibility to conduct its activities in accordance with the norms, values, beliefs and ethical standards of the society within which it functions. It is the BCLA’s contention that by the very submission to the questionable intent of the May 1st 1974 Lease, the corporate form of the companies adopting it was being abused. In the opinion of the BCLA the creation and/or use of a corporate entity to subvert sound government legislation genuinely aimed at preserving the public good cannot be considered either a prudent or legitimate use of that corporate entity. Moreover, to utilize it in this manner is to render it illegitimate or its offensive articles unenforceable. The fact that the ill-intent of all these rogue corporations was not recognized by the Registrar of companies—whether due to lack of discrimination, foresight or vigilance on the part of an attending official—does not eliminate the duty of Registrar‘s Office to review, modify or dismiss the corporate status of such entities as circumstances dictate. The BCLA questions the legitimacy of Mr. Mulek’s various and allied leasehold corporations not on the basis of their absurd utility in realizing the dubious legal contracts by which the same officer could be considered at once both his own landlord and tenant, but founded on the fact that the purposes for which those corporations were put to use were not proper, desirable, or appropriate within the context of the commonly acceptable norms of the society into which they were introduced. These companies like the contracts spawned for them were made solely to countermand the sound social principles and practices instituted to serve and maintain the public welfare.