Delta Hotel, Whistler: Court of Appeal confirms damage award favoring limited partners

Citation: Village Gate Resorts Ltd. v. Moore et al

Date: 19991022

  1999 BCCA 626

Docket:

CA025509

Registry: Vancouver

COURT OF APPEAL FOR BRITISH COLUMBIA

ORAL REASONS FOR JUDGMENT
Before:
The Honourable Mr. Justice Lambert

October 22, 1999

The Honourable Madam Justice Rowles  
The Honourable Mr. Justice Braidwood

Vancouver, B.C.

   
 
BETWEEN:

VILLAGE GATE RESORTS LTD.

PLAINTIFF
(APPELLANT)

AND:

ANDREW MOORE, THOMAS MORRISON, ROLF GILLARDON, FRANCIS CHANG, SAITOH HOLDINGS LTD., DONALD J. EGGERTSON, MR. AND MRS. R. LEMP, TUDOR SALES LTD., PATRICK ROBINSON, NORTHSHORE CREDIT UNION, AUSTERVILLE PROPERTIES LTD., WILLIAM ROBINSON, AMELIA MAINARDI, DOUGLAS ALLEN, JACK RIDLEY, PETER R. KEARNEY, TERRY LAMB, EDWARD G. BYRD, MRS. ROY CARROLL, DONALD CARR, BORDON UGGLA, DAVID DANSKIN, ALICE-MARIE MAUGHAN, ARTHUR GRIFFITHS, FRANK MOSER, MR. AND MRS. MAURICE LE GALLAIS, DAVID CHAN, IVY CHAN, CALVIN EDWARDH, JAMES PERKINS, LYNDA BURROUGH, GERALD TRODDEN, ORVILLE WRIGHT, DORIS BURROUGH, HARRY NATAROS, DOUGLAS BRAWN, HELEN JENKINS, JOHN FLEMING, SQUAMISH MUSIC LTD., KATRIN ANN TURU, NORMA LOUGHEED, CHARLES B. STEWART, EDDISON SINANAN, JAMES BULLARD, ALLAN TONE, WILLIAM LOUGHEED, DESMOND COCKROFT, IAN ELLIOTT, MR. AND MRS. DONALD STEWART, KENNETH STEVENSON, GEOFFREY G. COLESHILL, FRANK KAPLAN, DAVID SPICER, HECTOR G.N. FRITH, JOHN ROSS, GRAHAM C. MORLEY, DAVID WILLIAMS, UTA WILLIAMS, THOMAS BRENEMAN, PHILLIP KUEBER, LOUIS METZNER, B. JUSTICE, ZALICK PERLER, ROBERT SIMMNS, DAVID GALPIN, HOWARD FENSTER, CLARK MACDONALD, ROBERT L. WAY, ANGELYN CHAN, JEFFREY WERRY, ROBERT F. EDWARDS, CYRIL CHAN, NIZARALI DAMJI, REG G. HUMPHREYS, WALTER R. LAYZELL, BARRY DOWNS, ALISTAIR I. MUNRO, AVCO FINANCIAL SERVICES, RICHARD ARCHAMBAULT, B.P.Y.A. 138 HOLDINGS LTD., carrying on business as WHISTLER MOUNTAIN INN, LIMITED PARTNERSHIP, and the said Partnership WHISTLER MOUNTAIN INN, LIMITED PARTNERSHIP

DEFENDANTS
(RESPONDENTS)

 

W.B. McAllister, Q.C.

appearing for the Appellant

D.G. Rae and A.D. Borrell

appearing for the Respondents

[1] BRAIDWOOD J.A.: This appeal involves the proper principles to be applied when calculating the damages suffered by a party by reason of the wrongful granting of an injunction. In this case, the appellant Village Gate Resorts Ltd. was granted injunctions on 24 May 1989 and 12 July 1995 to prevent the respondents from dissolving a limited partnership. At each application for an injunction, the appellant gave an undertaking as to damages. When the litigation between the two parties concluded in 1997, it was determined that the granting of the injunctions was inappropriate.

[2] The issue before this Court is whether the trial judge properly assessed the damages incurred by the respondents by reason of the injunctions.

FACTS

[3] An entity known as Whistler Mountain Inn Limited Partnership was formed in 1980 as part of a financing package to build and operate Phase 1 of what is now known as the Delta Whistler Resort. Phase 1 is comprised of 163 guest rooms that are registered in the Land Title Office as strata lots. The original developer leased those rooms to the general partner, Village Gate Resources Ltd., the appellant in this case. The lots, together with the limited partnership interest, were then marketed. A purchaser obtained a fee simple in a hotel room subject to a long-term lease in favour of the general partner. A purchaser also obtained as an interest in the limited partnership through which the profits of operating the hotel were distributed. The limited partnership agreement provided for management fees to be paid to the general partner.

[4] Less than half the strata lots were sold and the developer continued to hold the rest. In 1988, Phase 2 was constructed and contained 126 rooms. The two phases are operated as one hotel although Phase 2 was not a partnership asset.

[5] In 1989, B.P.Y.A. 138 Holdings Ltd. acquired the interests of the developer in the hotel. That company thereupon became the owner of all of the rooms in Phase 2, approximately 55 percent of the rooms in Phase 1, certain retail and other space in the hotel complex, and the shares of the appellant Village Gate Resorts Ltd.

[6] Upon acquisition of the hotel by B.P.Y.A. 138 Holdings Ltd., the limited partners convened a meeting for the purpose of winding up the partnership. The appellant then commenced Action No. C891212 seeking inter alia a finding that the general partner was not in breach under the Limited Partnership Agreement as well as an interlocutory injunction restraining the limited partners from proceeding with the meeting. An injunction was granted by the Supreme Court of British Columbia on 24 May 1989.

[7] From the time of its taking over ownership of the hotel, B.P.Y.A. 138 Holdings Ltd. continued a practice that had already been put into place by the previous owner. That practice was to deposit all revenues from Phases 1 and 2 of the hotel into bank accounts and to pay all expenses of the hotel from those bank accounts. Subsequently, financial statements were produced that determined the respective interests of the partnership and the Phase 2 holdings of B.P.Y.A. 138 Holdings Ltd. in the monies in the accounts.

[8] The Partnership Agreement provided that the assets of the partnership were to be held by Village Gate Resorts Ltd. in trust. However, given that the hotel was operated as a single entity, the appellant did not attempt to maintain the partnership funds in a separate trust account. Ultimately, this practice was found to be a material breach of the Limited Partnership Agreement. The Chambers judge, hearing this matter in 1995, did not order dissolution of the partnership but vacated the injunction.

[9] The respondent limited partners immediately requisitioned another meeting for the purpose of dissolving the limited partnership. The appellant then devised a method of separating partnership funds from the funds of the hotel and maintaining them in a separate account. It put this system into operation and then applied for another injunction to prevent the second meeting from proceeding. The Chambers judge granted that injunction on 12 July 1995.

[10] Ultimately, both judgments were appealed to the Court of Appeal. This Court found, in essence, that the breach of trust committed by the appellant could not be cured and discharged the second injunction: Village Gate Resorts Ltd. v. Moore (1997), 47 B.C.L.R. (3d) 153 (C.A.). The limited partners thereupon convened a meeting and on 16 November 1997 voted to dissolve the limited partnership.

[11] A hearing was then held to determine the damages suffered by the respondents because of the injunctions.

PROPER APPROACH TO MEASURING DAMAGES

[12] I am of the opinion that the trial judge correctly stated the principles to be applied. I agree with the reasons for judgment found in paragraphs 6 and 7 which read as follows:

The principle to be applied in the assessment of damages for an injunction mistakenly granted is as stated by the defendant. As described in textbooks, the damages are limited to those losses which are the natural consequence of the injunction of which the party obtaining the injunction has notice at the time (Halsbury's Laws of England, 4th ed.(reissue), v. 24 (London: Butterworths, 1991) at para. 987; Kerr & Paterson, Kerr on Injunctions, 6th ed. (London: Sweet & Maxwell, 1927) at 667). These principles are fixed and clear according to Lord Diplock who said in Hoffmann-La Roche v. Secretary of State for Trade & Industry, [1975] A.C. 295 at 361(H.L.):

... if the undertaking is enforced the measure of the damages payable under it is not discretionary. It is assessed on an inquiry into damages at which principles to be applied are fixed and clear. The assessment is made upon the same basis as that upon which damages for breach of contract would be assessed if the undertaking had been a contract between the plaintiff and the defendant that the plaintiff would not prevent the defendant from doing that which he was restrained from doing by the terms of the injunction: see Smith v. Day (1982) 21 Ch.D. 421, per Brett L.J., at p. 427.

The few cases on this point were carefully considered by Spencer, J. in Fletton Ltd. v. Peat Marwick Ltd., supra. at 310-312. He cited the following passage from Smith v. Day (1882), 21 Ch.D. 421 at 428 (C.A.):

If damages are granted at all, I think the Court would never go beyond what would be given if there were an analogous contract with or duty to the opposite party. The rules as to damages are shewn in Hadley v. Baxendale [9 Ex. 341]. If the injunction had been obtained fraudulently or maliciously, the Court, I think, would act by analogy to the rule in the case of fraudulent or malicious breach of contract, and not confine itself to proximate damages, but give exemplary damages. In the present case there is no ground for alleging fraud or malice. The case then is to be governed by analogy to the ordinary breach of a contract or duty, and in such a case the damages to be allowed are the proximate and natural damages arising from such a breach, unless as in Hadley v. Baxendale, notice had been given to the opposite party, of there being some particular contract which would be affected by the breach.

 

In Fletton Ltd. v. Peat Marwick Ltd., supra., the court awarded as damages the continuing costs of preserving certain washer units because of the injunction, costs that would not otherwise have been incurred if the injunction had not been given and if the defendants had been allowed to go ahead with plans to destroy the units. These included storage, insurance, and lost interest costs.

 

I also refer to the judgment of Spencer J. in Fletton Ltd. v. Peat Marwick Ltd.(1986), 7 B.C.L.R. (2d) 307 (S.C.), mentioned by the trial judge as well as the English Court of Appeal decision in Cheltenham & Gloucester Building Society v. Ricketts, [1993] 4 All E.R. 276. I also agree that since the proceeding is of an equitable nature, the principle adopted must be fair and reasonable in all of the circumstances rather than a slavish application of the rule to be applied: Air Express Ltd. v. Ansett Transport Industries (Operations) Pty. Ltd. (1979-1981), 146 C.L.R. 249 at 261 (Aust.H.C.).

[13] The appellant argued at paragraph 19 of its factum that the learned trial judge erred as follows:

It is submitted that the profit earned by the Plaintiff from the management fees which would not have been paid had the partnership been dissolved is not the proper measure of damages. The proper measure of damages is the amount lost by the Defendants as a result of the injunction, not the amount gained by the Plaintiff. The two are not the same. The changed circumstances following the dissolution of partnership must be taken into account. [Emphasis in original]

 

In other words, the appellant argues that the learned trial judge assessed damages according to the law of restitution, not the law of contract. Paragraph 22 of the appellant's factum states as follows:

It is submitted that in order to determine the damage or loss suffered by the Defendants as a result of the continuation of the limited partnership, the Court must compare the circumstances as they would have existed had the limited partnership been dissolved with the circumstances which actually existed as a result of its continuation.

 

[14] I am of the opinion, in the very peculiar circumstances of this case, that the learned trial judge did not make the error stated in the appellant's factum.

 (More)

New Westminster, Rialto: Court rules owners of leaky condo complex developed by Molnar can sue subcontractors

Date: 19991015
Docket: C981500
Registry: Vancouver

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

 

 

BETWEEN:

THE OWNERS, STRATA PLAN LMS 0283

PLAINTIFF

AND:

QUAY DEVELOPMENTS LTD., MOLNAR CONSTRUCTION LTD.,
ANDRE MOLNAR, NEW HOME WARRANTY OF BRITISH COLUMBIA INC.
AND JOHN DOE AND OTHERS, CITY OF NEW WESTMINSTER,
PAUL MERRICK AND PAUL MERRICK ARCHITECTS LIMITED

 

DEFENDANTS

AND:

PRICE & WHALLEY PLASTERING AND STUCCO CONTRACTORS LTD.

 

THIRD PARTY

 

 

REASONS FOR JUDGMENT
OF THE
HONOURABLE MR. JUSTICE LOWRY

  

 

Counsel for the Plaintiff:

G. Walker

Solicitors for the Third Party, Price & Whalley Plastering and Stucco Contractors Ltd.:

 

D.H. Murray

Place and Date of Hearing:

Vancouver, B.C.

October 8, 1999

 

 

[1] The plaintiffs, who are the owners of what they allege to be a "leaky condo", appeal from the order of a Master dismissing their application to add various subcontractors as defendants to this action against the developer and the contractor who constructed the building. They maintain that the Learned Master erred in holding as he did that, because there was a potential limitation problem, the plaintiffs were required to commence a separate action against the proposed new defendants. The question is whether the Master was clearly wrong in disposing of the application as he did.

[2] The building, called the "Rialto" in New Westminister, was completed in 1992 and fully occupied by the end of 1993. Discreet incidents of water ingress were addressed as they arose until 1995 when the plaintiffs engaged a consultant to make an assessment of what was seen by then to be a substantial problem. Various deficiencies in the building envelope were subsequently identified. Remedial work began in mid 1997 and this action was commenced. The plaintiffs found it necessary to change counsel in 1998 and did not conduct discoveries until the beginning of this year. The action is now set to be tried in six months time. The trial is expected require 50 days to complete.

[3] During the course of discoveries, the plaintiffs determined the identity of 17 subcontractors that had worked on the building. They applied before the Master to add them as well as the provincial Crown as defendants. The application was entirely ex parte save for the appearance of the developer and Price & Whalley Plastering and Stucco Contractors Ltd., a subcontractor named as a third party by New Home Warranty of British Columbia Inc., a defendant against which the action has been stayed by virtue of intervening insolvency proceedings.

[4] The addition of parties is governed by Rule 15(5). In particular, Rule 15(5)(a)(iii) affords a discretion to order the addition of any person to an action where there may exist an issue relating to the subject matter of the action or the relief claimed between that person and a party which it would be just and convenient to resolve.

[5] It appears clear that there are issues related to the subject matter of the action between the plaintiffs and the proposed defendants. The Master expressed no view as to whether it would be convenient to have them resolved in this action. Rather, as indicated, he took the view that the claims could be time-barred and regarded that as sufficient reason to dismiss the application. In so doing, while he did not say so, he appears to have been following what he understood to be prescribed in such circumstances in Brito (Guardian at litem of) v. Wooley (1997), 15 C.P.C. (4th) 255 (B.C.S.C.). He expressed concern that, if he were to allow the application, the raising of any limitation defence would then be precluded as being res judicata.

[6] While he declined to order that any of the subcontractors be added as defendants, the Master said that his analysis of their position did not apply to the Crown and he ordered that it be added. He then awarded costs of the application payable forthwith to all of the subcontractors, specifically those who were not, and would not become, parties.

[7] On this appeal, the plaintiffs first say that the Master erred in not allowing them to amend to replace "John Doe and others" named in the style of cause with the names of the 17 subcontractors on the basis of a misnomer, employing Rule 24(1). They rely on Jackson v. Bubela and Doe, [1972] 5 W.W.R. 80 (B.C.C.A.) and Oldridge v. North West Vancouver Hospital Society (c.o.b. Lions Gate Hospital), [1997] B.C.J. No. 2639 (S.C.). However, the application was not framed as one to cure a misnomer, and, more importantly, no evidence to the effect that the identity of the subcontractors could not be determined when the action was commenced has been adduced. On the authority cited, it appears clear that a plaintiff must establish that no reasonable exercise of diligence would have revealed the true identity of the defendant very long before the application is made. I do not consider that the application could have succeeded as one to cure a misnomer.

[8] The plaintiffs then say that the Master was clearly wrong in dismissing the application as one to add defendants under Rule 15(5) and, in my respectful view, there they are on much better ground. I consider the Master was in error in expressing the concern that, if the application was allowed, subcontractors who had not been served and did not appear could be precluded from raising a limitation defence without ever having been heard. The cases where the inability to raise a limitation defence was viewed as a consequence of a Rule 15(5) order are cases where, as in Brito, the proposed defendant appeared. Here only one of the 17 subcontractors was served and appeared and, as it appears from the reasons, counsel say that the question of what, if any, limitation defence may be applicable to Price & Whalley was not fully argued. The Master appears to have simply determined that there may be a limitation problem and dismissed the application with respect to all of the subcontractors but, as indicated, not with respect to the Crown.

[9] In my view, it was open to the Master to make the order sought if, on the face of the material, it appeared to him that there were issues between the owners and the subcontractors that are convenient to be resolved in this action. Under Rule 44(8), those affected could then have applied to have it set aside and may then have raised such limitation issues as there may be. Given that this might have led to a large number of applications being brought by various of the subcontractors at different times before different judges, it appears to me the better course would have been to direct the plaintiffs to serve all of the proposed defendants with sufficient notice of the application to enable them to obtain and brief counsel.

[10] I conclude that the plaintiffs are entitled to succeed on this appeal. The Master's order is to be set aside in its entirety. The plaintiffs will be directed to give appropriate notice of their application to all of the proposed defendants.

[11] There will be an order accordingly.

[12] Costs in the cause.

"Lowry J."
 
 
 

 

Galleria II (Vancouver): Court rules that architects who designed Molnar leaky condo complex can be sued

Citation:  The Owners, Strata Plan No. VR 1720   Date: 19991007
v. Spaceworks Architects et al Docket: CA024327
1999 BCCA 585 Registry: Vancouver


COURT OF APPEAL FOR BRITISH COLUMBIA



ORAL REASONS FOR JUDGMENT:


Before:

THE HONOURABLE MR. JUSTICE ESSON October 7, 1999
THE HONOURABLE MADAM JUSTICE PROWSE
THE HONOURABLE MR. JUSTICE MACKENZIE Vancouver, B.C.



BETWEEN:


THE OWNERS, STRATA PLAN NO. VR 1720

PLAINTIFF
(RESPONDENT/APPELLANT)

AND:

SPACEWORKS ARCHITECTS (A PARTNERSHIP), PETER REESE,
THADDEUS YOUNG, GORDON SPRATT & ASSOCIATES LTD.

DEFENDANTS
(APPELLANTS/RESPONDENTS)

AND:

BART DEVELOPMENTS LTD., GALLERIA II DEVELOPMENTS LTD.,
PARTNERSHIP, MOLNAR CONSTRUCTION LTD., GORDON SPRATT &
ASSOCIATES LTD., SCOTT CALVERT, TAMM/TACY AND ASSOCIATES LTD.,
SPECTRUM INDUSTRIES LTD. (FORMERLY WESTERN WATERPROOFING &
MEMBRANES LTD.), CSA BUILDING SCIENCES LTD.,
CSA BUILDING SCIENCES WESTERN LTD.,
RALPH JECK, MURRAY FRANK and CHRISTIAN SKENE

DEFENDANTS


C.A. Wallace appearing for the Appellants/Respondents
Spaceworks Architects (a partnership)
Peter Reese, and Thaddeus Young

D.A. Garner appearing for the Appellant/Respondent
Gordon Spratt & Associates Ltd.

D.P. Church appearing for the Respondent/Appellant
and I.G. Schildt


[1] ESSON, J.A.: This is an action in which the plaintiffs,
who are owners of a substantial condominium structure, seek
damages arising from a serious case of the leaky condo
syndrome. The defendants include the developers, contractors,
and a consultant consulted by the owners before the action was
brought. For present purposes, I need refer only to the
appellants who are respectively the architects and an
engineering firm which was involved in some aspects at least of
the design of the building and in inspection during
construction. The architects were the overall designers.

[2] Those defendants applied under Rule 18A for a ruling that
the action as against them was barred by limitation. The
building was completed in 1986. The writ was issued in
December 1995. It is clear then that the action can be held to
be brought within time only by invoking the postponement
provisions set out in s. 6(4) of the Limitations Act.

[3] The application under Rule 18A was heard by Madam Justice
Humphries who reserved her decision and ultimately gave a
ruling which is somewhat unusual. She found that two discrete
aspects of the plaintiff's claim, one dealing with the roof of
the building and one with the stucco surface, were indeed
barred, i.e., that the plaintiffs were unable to establish that
they could meet all of the conditions of s. 6(4), and
particularly the provision regarding their means of knowledge.

[4] With respect to the balance of the claim, which is the
bulk of the overall claim, the summary trial judge found that
it would be unfair or unjust to rule on the basis of the
evidence which she had heard. She therefore referred those
aspects of the limitation issue to the trial judge for
determination. That ruling of course was an exercise of the
discretion conferred upon her by the plain words of Rule 18A.
The judge gave extensive reasons for that decision. In spite
of the vigourous submissions of counsel for the appellants, I
am satisfied that was an appropriate exercise of the discretion
and that there is no basis upon which this Court can interfere.

[5] That brings me to the cross-appeal by the plaintiffs. It
is directed to the ruling that two aspects of the claim are
statute-barred. The submission essentially is that, if the
plaintiffs had sought legal advice in November 1989, they would
not have been advised that there was a reasonable prospect of
success in an action in negligence for repairs to a defective
building. On this point, the judge held that the cost of
replacement, which is the basis for those two aspects of the
claim, was not one for pure economic loss but rather, as she
put it, were actual repair costs resulting from physical
damage. In this Court, the defendants have not sought to
uphold that basis of decision, but nevertheless contend that
the decision was correct in substance. In their factum, the
plaintiffs put the matter this way:

In light of these cases, the reasonably
competent notional legal advisor in November 1989
would not have provided a favourable opinion
concerning the prospects of a successful legal
action. Indeed, this would likely have remained the
gist of any legal advice provided to the Respondent
prior to the decision of the Supreme Court of Canada
in Winnipeg Condominium (1995), 121 D.L.R. (4th) 193
(S.C.C.) in which the Supreme Court of Canada held
that the cost of remedying such defects would be
recoverable if the defects were such that they caused
a reasonable apprehension of danger. That is the
Respondent's allegation in this action. In this
respect, it should be noted that Manitoba Court of
Appeal in Winnipeg Condominium dismissed the
plaintiff's claim largely on the basis of the
decision in D&F Estates.

[6] Accepting that the claim is one for pure economic loss, I
do not accept that a reasonably prudent legal advisor in 1989
would have advised against joining the architect and engineer.
The argument based on Winnipeg Condominium is essentially based
on the contention that the law was settled in 1973 in Rivtow
Marine Ltd. v. Washington Iron Works et al (1973), 40 D.L.R.
(3d) 530 (S.C.C.) and that a prudent lawyer would not have
considered it to have been changed until the decision of the
Supreme Court in Winnipeg Condominium was known. That argument
essentially ignores the general thrust of Canadian tort law in
the years since Rivtow was decided. I need only refer to
Kamloops v. Nielsen, [1984] 2 S.C.R. 2 (S.C.C.) as an example
of the case authorities and writings which any prudent advisor
would have had in mind in 1989. As a matter of interest, I
note that the Winnipeg Condominium case itself was begun in
1989 considerably earlier in the year than the relevant date in
this case. I do not suggest that is an important circumstance,
but is part of the picture.

[7] I would therefore dismiss the appeal and the cross-appeal.

[8] PROWSE, J.A. I agree.

[9] MACKENZIE, J.A. I agree.

[10] ESSON, J.A. The appeal and cross-appeal are
dismissed.

"The Honourable Mr. Justice Esson"