Pitt Meadows, Woodford Manor: Court orders owners of Phase I to pay for repairs

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners, Strata Plan LMS 1934 v. Westminster Savings Credit Union et al

 

2004 BCSC 1718

Date: 20041230
Docket: L001769
L023862
L023863
L023864
L023865
L030462
L033250
Registry: Vancouver

Between:

THE OWNERS, STRATA PLAN LMS 1934

 

PETITIONERS/RESPONDENTS

And:

WESTMINSTER SAVINGS CREDIT UNION
WILLIAM MCKINLAY MCSEVENY
KATHRYN ELIZABETH MCSEVENY
SORINA RODICA HORGA
CANADIAN IMPERIAL BANK OF COMMERCE
GRIFFIN MANAGEMENT CORPORATION
RICHARD JOSEPH DENIS CASSIDY
LISA JOAN WINTERS
405075 B.C. LTD.

 

RESPONDENTS/PETITIONERS

 


 

The Honourable Madam Justice Morrison

Reasons for Judgment

Counsel for The Owners, Strata Plan LMS 1934

R. Glen Boswall
Patrick A. Williams

 

Counsel for Westminster Savings Credit Union, William McKinlay McSeveny, Kathryn Elizabeth McSeveny, Griffin Management Corporation and Lisa Joan Winters

 

Tannis D. Braithwaite

Counsel for 405075 B.C. Ltd.

Dave Dahlgren

Richard Joseph Denis Cassidy appearing In Person

 

 

Counsel for Sorina Rodica Horga

Shawn M. Smith

 

Date and Place of Hearing:

May 3 and 4, 2004

 

Vancouver, B.C.

 

[1]                 This involves a number of disputes within a strata corporation to recover common maintenance and repair levies from certain owners of commercial lots within the strata corporation.

[2]                 Between December, 1994 and June, 1997, three buildings that comprise the strata corporation were constructed.  The developer was 405075 B.C. Ltd.; one of the three principals of the company was Brad Focken.  A management company was formed, New Pacific Construction Ltd.  Mr. Focken was also a principal of that company. 

[3]                 Phase I of Strata Plan LMS 1934 is referred to as the Edgewood Centre building.  It is a concrete frame building and has nine commercial units, numbers one to nine.  It shares a common underground parking garage with Phase II and Phase III.

[4]                 Phase II is the Woodford Manor, with 6 commercial lots and 52 residential lots.

[5]                 Phase III is Edgepark Manor, with 62 residential lots and 14 commercial lots. 

[6]                 The commercial lots are concrete framed, while the residential lots, which are on top of the commercial units, are of wood frame and stucco.  The balcony decks of the lower residential lots are on top of the commercial lots.  Which means some residential balconies are, in effect, the roofs of the commercial units.  There are no waterproof barriers between the two.

[7]                 These petitions arose because of leaks and repair expenses of Phase III, Edgepark Manor.  The respondents to the action brought by The Owners are all registered owners of commercial units within Edgepark.  Lot 80 registered to 405075 B.C. Ltd. was a developer’s lot.  Commercial lot 135 in Edgepark is in the name of Cassidy/Winters who became registered owners on January 24, 2000.  Lots, 130, 131, 132 and 133 were registered in the name of Griffin Management Corporation on February 27, 1997.

[8]                 Commercial lot 136 was registered in the names of William and Kathryn McSeveny on August 16, 2000 and commercial lots 134 and 137 were registered in the name of Sorina Horga on January 7, 1999.  The Canadian Imperial Bank of Commerce registered its first mortgage on lots 134 and 137 on January 7, 1999.

[9]                 Commercial lots 127, 128, 129, 138, 139 and 140 were transferred to Westminster Savings Credit Union following an order absolute granted October 9, 2002.  Although subsequently transferred to a third party in November, 2002, Westminster Savings Credit Union remains responsible for any amount found owing on the Westminster and Griffin lots.

CHRONOLOGY

[10]             On June 28, 1995, the developers executed a Disclosure Statement which indicated that the bylaws for the strata corporation were those contained in the Condominium Act, R.S.B.C. 1996, c. 64 with the exception of some amendments which were attached as an exhibit to the Disclosure Statement.  That exhibit was a form under the Condominium Act, “Notice of Change of Bylaws”.  That change stated that the residential and commercial lots would be divided into separate sections, with separate councils and separate obligations for payment of monies or accounts owing for the benefit of that separate section.

[11]             In 1996, leaks were first noticed in the residential units of the Woodford Manor building, Phase II. 

[12]             On June 24, 1997, the developer, as a strata corporation, passed a resolution adopting bylaws under the Condominium Act.  In the following year, 1998, engineers were hired for a building envelope repair estimate because of continuing leaks.

[13]             Bylaws were filed on July 17, 1998, and the strata was divided into three sections, with each section to operate as a separate entity.  The three sections were as follows:  First, all commercial units in Phases I, II and III would be a separate group.  Second, all residential units of Phase II, Woodford, would operate as a separate entity.  Third, all residential units of Phase III, Edgepark, would operate separately. Those three groups began operating in that fashion in July, 1998.

[14]             When the special resolution was passed by the developer, acting as the strata corporation on June 24, 1997, the bylaws registered as part of the Disclosure Statement were confirmed.

[15]             Thus, from the beginning, the three separate sections of strata lot owners have each been responsible for themselves as separate sections.  That is, the one section which is comprised of all commercial units in Phases I, II and III; secondly, the residential units in Phase II; and third, all the residential units in Phase III. 

[16]             Further, the residential sections of Phases II and III have, from the beginning, had their own strata councils, held their own general meetings, been governed by their own budgets for expenses pertaining to their separate section, and had their own property management arrangements. 

[17]             There is no information as to whether the residential owners in Phase III, Edgepark Manor, ever appointed a strata council, held meetings or prepared budgets for expenses unique to their group.  The same lack of information pertains to the commercial units of Phases I, II and III.  However, management of all commercial units in Phases I, II and III was assumed in July, 1998 by a company whose principals included Brad Focken.

[18]             Water leaks were increasing, with Phases II and III experiencing leaks soon after their completion.

[19]             On April 27, 1998, the residential unit owners of Phase III, Edgepark, held an Extraordinary General Meeting (“EGM”).  They invited council members from the Phase II residential owners.  Legal advice to the owners at that meeting was that because of the bylaws filed at that time, owners in Phases II and III could be jointly responsible for any construction deficiencies and repair costs in either building.  This concerned the owners of both buildings, as they had always understood that each section operated as a separate strata corporation.  The lawyer present was instructed to do whatever was necessary to ensure that the residential owners of Phase II and the residential owners of Phase III, as well as the commercial owners of all three phases, would be separate sections.  That would mean each would be responsible for their own strata council, budget, bylaws, and repair costs only for their own separate section.

[20]             On July 6, 1998 there was a combined Annual General Meeting of the residential unit owners in Phases II and III.  The commercial unit owners were also invited to the meeting.  The notice of the meeting indicated there would be a special resolution vote to approve an amended bylaw package and a proposed operating budget. 

[21]             The bylaws attached to the notice and the invitation to the commercial units set out the division of the strata corporation lots into the three sections that had originally been operating:  (1) The commercial section which would be all commercial units in all three buildings, Phases I, II and III.  (2) All residential units in Woodford Manor, Phase II.  (3) All residential units in Edgepark Manor, Phase III.  The proposed bylaws also included the following provision:

19.3      The expenses common to a separate Section shall be apportioned by the Section Executive in the following manner:

            (e)        expenses, if any, attributable to or reasonably allocable to property common to commercial strata lots situate within the buildings forming Phase 2 (Woodford Manor) or Phase 3 (Edgepark Manor) together with Woodford Manor or Edgepark Manor, as the case may be, shall be borne by all the owners of Phase 2 or Phase 3, as the case may be, in the proportion that the unit entitlement of each of the Phase 2 or Phase 3 strata lots bear to the aggregate unit entitlement of all Phase 2 or Phase 3 strata lots;

[22]             At that meeting, Mr. Focken was present, apparently representing the nine commercial units in the centre building, Edgewood Centre, Phase I.  There was no one representing the two commercial units in Phase II, Woodford Manor.  Mr. Phillip Bradshaw represented 2 of the 14 commercial units in Phase III.  There were also a number of residential owners present from Phase III, Edgepark Manor.

[23]             The bylaw resolution received the required greater than 75% vote.  The amended bylaws were filed at the Land Title Office on July 17, 1998.  The residential unit owners of Woodford Manor and Edgepark Manor now assumed that with the bylaws filed, expenses common to one building would be borne by the strata lots in that building.

EdgePark Manor, Phase III

[24]             Throughout 1998, as the Phase III Edgepark Manor owners attempted to deal with leaks in their building, they were negotiating with the developer; in August of that year, the Phase III residential owners retained a consulting firm to conduct an assessment of the building envelope.  That report revealed extensive deficiencies.  The consultants later recommended a mock up repair on one section of the building to give a better assessment of the extent of damage and a more accurate estimate of what total repairs would cost.

[25]             An EGM was held May 20, 1999 for all unit owners of Edgepark Manor, both residential and commercial.  A special resolution was passed authorizing $53,500 for the mock up repair and each owner, residential and commercial, was assessed on a unit entitlement basis.  The management company for the commercial owners, through its spokesman Brad Focken, advised that the commercial owners would not be paying that special assessment.  The commercial owners took the position that because their units were of concrete construction, it was not fair that they should have to contribute to the wood frame unit repairs for the residential lots.

WOODFORD MANOR, PHASE II

[26]             Meanwhile, in November, 1999 the Woodford Manor water leaks were being dealt with by the owners of Woodford Manor.  Eventually a total payment of $295,548 was paid for by all residential and commercial lot owners of Woodford Manor.  Mr. Focken was part of the company that investigated and repaired the water leaks in that building.

CHRONOLOGY CONTINUED

[27]             Mr. Focken deposes he requested information with regard to Edgepark and the cost and extent of repairs for that building, but he did not receive answers to his requests.  The petitioners deny those assertions by Mr. Focken.

[28]             An EGM was held February 26, 2000 to deal with the problems of the water leaks of Edgepark Manor.  The purpose of the meeting was to vote to raise money for extensive repairs required on the building.  There is some dispute in the material filed as to whether the commercial owners received sufficient advance notice of the information to be presented at the meeting. 

[29]             The lawyer for Edgepark also advised the owners that any outstanding fees and assessments must be paid before an owner could vote at the EGM.  Counsel for Westminster Savings wrote on February 25, 2000 that the EGM was not properly convened for a number of reasons. 

[30]             But primarily, the respondents were taking the position that there was no jurisdiction to issue a special levy for the cost of repairs and to impose these on any of the commercial units.  That, in effect, the residential unit owners had no authority to impose levies on the commercial lot owners within Phase III, Edgepark Manor.  The commercial unit owners maintained that any repairs which were to be done were for the exclusive benefit of the residential owners only of Phase III.

[31]             The EGM was held and 75% of those present and eligible to vote voted to assess $1,474,175 among all residential and commercial owners for building envelope repair costs.  There was also a special resolution to assess all owners, residential and commercial, for an additional $60,000 to fund the ongoing legal costs of pursuing the developer and the builders for the costs of the repairs.

[32]             The commercial lot owners remained adamant in denying responsibility for any payments; so the full amount was collected from the residential owners to ensure funds were available for payment of repairs.

[33]             Effective July 1, 2000, the Condominium Act was repealed, replaced by the Strata Property Act S.B.C. 1998, c.43. 

[34]             In accordance with s. 128 and Regulations under the new Act, a majority of the residential owners of Strata Plan LMS 1934 held a vote on December 12, 2001 to further amend their Bylaw Amendment of July 17, 1998.  That further amendment sought the following division:  (1) Strata lots 1 to 9 inclusive shall be “one type of strata lot” to be referred to as the “Edgewood Strata Lots”.  (The original Phase I, all commercial lots.) (2) Strata lots 10 to 63 inclusive “shall be a different type of strata lot” and shall be referred to as the “Woodford Strata Lots”.  (The original Phase II, 6 commercial and 52 residential lots.)  (3) Strata lots 64 to 140 inclusive “shall be a further different type of strata lot” to be referred to as the “Edgepark Strata Lots”.  (The original Phase III, 14 commercial and 62 residential lots.)

[35]             At the vote on December 12, 2001, one of the Phase III commercial owners, Horga, had proxies on behalf of some of the commercial owners, but they were not eligible to vote as they were in arrears as a result of refusal to pay assessment and shared common area costs.  The end result was that no one who was eligible to vote voted against the resolution.  That bylaw amendment was filed at the Land Title Office on December 14, 2001.

[36]             Meanwhile, between 2000 and 2003, Edgepark Manor was involved in a number of lawsuits over leaks, with the developer, designers, builders and inspectors.  The lawsuits were finally resolved late in 2003.

POSITION OF THE PETITIONER, THE OWNERS, STRATA PLAN LMS 1934

[37]             The petitioners are claiming strata fees, assessments and fines payable for the 14 commercial lots in Phase III, plus the developer’s lot in amounts that total $209,764.20.  According to the petitioners, the Condominium Act governs the rights and obligations of these parties with regard to these assessments, fees, fines and interest.  This is with regard to sums that accrued before July 1, 2000. 

[38]             Further, that the Strata Property Act applies to those sums which arose after July 1, 2000.  That pursuant to s. 28(5) of the Condominium Act, bylaws are a binding contract between the owners and strata corporation.  And that the statute did not prohibit strata corporations from employing methods beyond sections and types set out in the Act for dividing expenses.

[39]             Counsel for the petitioners argue that fairness and the history of sharing costs is central to this case.  The strata corporation had set up three separate sections, one for the combined commercial lots of all three buildings, a second one for the residential lots in Phase II and a third one for the residential lots in Phase III.  Common expenses for more than one of these groups were budgeted amongst all three.  But the arrangement did not force anyone to pay who might not benefit from the repairs which had to be done.

[40]             The legislative policy behind provisions governing strata property is to protect owners of one type of strata lot from having to pay costs which would be exclusively for the benefit of another type of strata lot.

[41]             While there may be some objections to the technical validity of the separation of the combined commercial lots and residential lots, the owners of the three buildings have a history of carrying on with their own budgets, their own strata plans, and paying for their own maintenance and repairs.  They have done it on the basis of unit entitlement.

[42]             The petitioners also argue estoppel, that all owners approved the 1998 bylaws which divided the strata corporation into sections.  Based on that, the Phase II building owners went ahead with their own repairs, and did not attempt to look to the other sections for contribution.  And that is all that the residential owners of Edgepark, Phase III are attempting to do.  It is submitted that the commercial owners and the owner of lot 80 should be estopped from demanding apportionment to only the residential owners of Phase III, or alternatively, to all owners of the strata corporation, Phases I, II and III.

[43]             There is a further argument that sorting out such entitlement would be a complex and disruptive exercise.  There has been the usual turnover of owners from the time that the leaks arose until the present time.  Presumably that would also involve reapportioning the repair expenses that occurred and have been paid with regard to Phase II.

[44]             If the petitioners are successful, they acknowledge there will be a credit against the sums that they are seeking of the net recovery of actions taken against the developers, builders, designers and municipality.  The figures of that net recovery have not been finalized as of this date.

POSITION OF THE RESPONDENTS

[45]             Counsel on behalf of Westminster Savings Credit Union and the McSevenys argues that the legislation will not allow this court to do as the petitioner asks.  While the owners, the petitioners, argue that the special levies voted for the repair of water damage to Edgepark Manor should be divided among all owners of that building, both residential and commercial, Westminster Savings and the McSevenys argue that those levies should be divided and payable by all owners in the strata corporation, Phases I, II and III, commercial and residential owners.

[46]             These respondents rely on the Disclosure Statement of the strata corporation which created only two sections, a commercial section and a residential section.  They claim subsequent attempts by the strata corporation to re-divide the sections are invalid.  Alternatively, if the court decides that the re-division of sections was valid, these respondents argue that all the units of the strata corporation benefited from the repairs, and therefore all should be responsible for their cost.  They also object to any penalties or interest charged, along with the filing of any liens.

[47]             Finally, these respondents argue that strata fees should not be assessed against the commercial owners on a straight unit entitlement basis because the commercial owners do not use several of the common facilities which incur ongoing costs.  Because the residential units have wood frame construction, while the commercial are constructed of concrete, and since no repairs were undertaken to the commercial units, the commercial units did not benefit from any repairs.  The only benefit would be to all of the strata units inasmuch as the strata corporation would no longer be termed a leaky condo development.

[48]             The affidavit of Brad Focken points out that part of the repairs made to the Edgepark Manor building involved replacing the stucco finish with vinyl siding.

[49]             On behalf of the respondent 405075 B.C. Ltd., counsel opposes the petitioner’s application for payment, pointing out that the EGM of February 26, 2000 passed a resolution before the Strata Property Act came into effect on July 1, 2000.  Thus, counsel argues that the special assessment passed on February 26, 2000 is void and unenforceable and that the Edgepark Manor section was improperly constituted pursuant to s. 51 of the Condominium Act, and thus did not have the power or authority to pass a special assessment.  Further, that the expenses associated with the repairs for water damage to the Edgepark building should have been allocated to all residential units within the entire strata plan, in accordance with s. 128 of the Condominium Act, including the residential owners of Woodford Manor, as they are all of a similar “type” of strata lot.

[50]             The numbered company argues that the court should make an order that all residential owners of Woodford Manor, Phase II and Edgepark Manor, Phase III, should contribute to the expenses for the repair of water leaks to Edgepark Manor.  That it was unfair for the strata corporation to try and establish two residential sections in violation of ss. 51 and 128 of the Condominium Act.  Further, it was discriminatory and unfair to the residential owners of Edgepark Manor because it attempted to place all of the expenses with them, rather than being shared with the residential owners of Woodford Manor.

[51]             Counsel for Sorina Horga argues that the special levy approved at the May 20, 1999 meeting was invalid and unenforceable, as was the special levy approved at the February 26, 2000 meeting.  Further, that the bylaw amendments filed December 14, 2001, purporting to create three types of strata lots, were invalid pursuant to ss. 128 and 191 of the Strata Property Act.

[52]             On behalf of Horga, it is argued that the expenses should be borne exclusively by all residential units in the entire strata corporation; or alternatively, exclusively to the Edgepark Manor section, or alternatively, to the residential type of strata lot only.

[53]             This respondent seeks an accounting of all levies and payments for each of the petitioner’s strata lots; that the fines, penalties and interest charges be declared null and void.  Leave is sought to amend their petition to seek an order that certain bylaws were at material times invalid as contrary to the provisions of the Condominium Act and the Strata Property Act.

AUTHORITIES CITED

[54]             Some of the authorities cited include the following:

Ernest & Twins Ventures (PP) Ltd. v. Strata Plan LMS 3259, [2003] B.C.J. No. 2710 (B.C.S.C.); Oakley v. Strata Plan VIS1098, [2003] B.C.J. No. 2571 (B.C.S.C.); Strata Corp. LMS 509 v. Andresen, [2001] B.C.J. No. 225 (B.C.S.C.); Strata Corp. VR1767 v. Seven Estate Ltd., [2002] B.C.J. No. 755 (B.C.S.C.); Oakley v. Strata Plan VIS1098, 2003 BCSC 1700; Strata Plan LMS 608 v. Strata Plan LMS 608, [2001] B.C.J. No. 2116 (S.C.); Strata Plan VR 1767 v. Seven Estate Ltd., 2002 BCSC 381; Smith v. Read 1993 WL 1442486 (B.C.S.C.); Lim v. Strata Plan VR2654, 2001 BCSC 1386; Coupal v. Strata Plan LMS2503, 2002 BCSC 1444; Strata Plan LMS1537 v. Alvarez, 2003 BCSC 1085; Wilfert v. Ward, 2004 BCSC 289; Owners, Strata Plan VR 2654 v. Mason, 2004 BCSC 685; Butterfield v. The Owners, Strata Plan NW 3214, 2000 BCSC 1110; Strata Corp. LMS 509 v. Andresen et al, 2001 BCSC 201; Strata Plan LMS 608 v. The Apartment Owners of Strata Plan LMS 608 et al, [2001] B.C.J. No. 2116; Primero Cigar Imports Ltd. v. Strata Plan VR 2327, 2003 BCSC 175; Coupal et al v. The Owners Strata Plan LMS 2503, 2002 BCSC 1444.

THE INTERPRETATION ACT

[55]             The Condominium Act has been repealed, replaced by the Strata Property Act.  Section 35 of the Interpretation Act was referred to in argument.  That states, in part:

35(1) If all or part of an enactment is repealed, the repeal does not ... (c) affect a right or obligation acquired, accrued, accruing or incurred under the enactment so repealed.

[56]             Counsel for the petitioners is relying on a decision of Mr. Justice Preston in the Butterfield case where the court had to decide which of the two Acts applied.  Mr. Justice Preston found that because all of the relevant events occurred while the Condominium Act was in force, and the claim involved rights that had accrued under the Condominium Act, that Act applied.  In that case, the hearing was originally to take place before the Strata Act came into force, but was not heard until after that date, after July 1, 2000. 

[57]             In the subsequent case of Andresen, the court ruled that the Strata P

Westin Grand Hotel (Vancouver): Investor owners sue Cressey developers and managers

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

LMS 3851 v. Homer Street Developments et al,

2004 BCSC 1654

Date: 20041215
Docket: S76792
Registry: New Westminster

Between:

The Owners, Strata Plan LMS 3851,
Chong Ping Wong and others

Plaintiffs

And

Homer Street Developments Limited
Partnership, (formerly Cressey (Homer) Limited
Partnership) and others

Defendants

And:

O’Neill Hotels & Resorts Ltd. and others

Third Parties


Before: The Honourable Mr. Justice Truscott

Reasons for Judgment

Counsel for the plaintiffs:

B.W. Dixon

Counsel appearing for the defendants other than MM&R Valuation Services plc:

D.C. Harbottle

Counsel for the third parties:

D.G.S. Rae, Q.C.

Date and Place of Trial/Hearing:

November 19, 2004

New Westminster, B.C.

[1] The individual plaintiffs are investors in a hotel development in downtown Vancouver called the Westin Grand Hotel, and are the owners of strata lot hotel suites in the development. The Owners, Strata Plan LMS 3851 is the strata corporation whose members are the individual owners of the strata lots in the development. Hereafter the individual plaintiffs will be referred to as “the investors”.

[2] The plaintiffs sue a group of corporations and partnerships that they allege constitute the Grand Development Partnership and who managed construction and brought the project to market. In addition the plaintiffs sue the directors of the corporate entities involved. Hereafter the group of corporations and partnerships and the directors will collectively be referred to as “the developers”.

[3] The plaintiffs also claim against the hotel valuation company retained by the developers, being MM&R Valuation Services Inc., doing business as HVS Hospitality Valuation Services, Canada, referred to as “HVS”.

[4] The investors allege that the developers misrepresented the expected returns on their investments, through a disclosure statement that was provided to each of the investors under the Real Estate Act, R.S.B.C. 1996 c. 397, and through the sale agreements that the investors executed in 1996 that incorporated the disclosure statement.

[5] HVS is sued for providing an opinion about the projected returns, that also formed part of the disclosure statement.

[6] The plaintiffs now bring three applications before me for the following orders:

1. to add as defendants the existing third parties in the action, O’Neill Hotels & Resorts Ltd. and OHR Grand Management Ltd. (collectively referred to hereafter as “OHR”) and to make consequential amendments to the statement of claim;

2. to add 16 additional plaintiffs and to correct other mistakes made in the names of existing plaintiffs; and

3. to add a claim that the representations and warranties alleged in the disclosure statement were also made by agents of the developers to the investors when marketing the strata units.

[7] The developers oppose the applications to add 16 new plaintiffs and to add the claim of misrepresentation by the agents, but support the application to add OHR as defendants. The developers do not oppose the correction of mistakes made in the names of existing plaintiffs. HVS does not oppose any of the applications and did not appear at the hearing.

[8] The proposed new defendants OHR oppose their addition as defendants and I assume also oppose the addition of 16 new plaintiffs.

[9] I will deal with each of the motions in turn as I have set out above.

1. The plaintiffs seek to add as defendants the existing third parties in the action, O’Neill Hotels & Resorts Ltd. and OHR Grand Management Ltd. (collectively referred to hereafter as “OHR”) and to make consequential amendments to the statement of claim.

[10] In the present statement of claim the investors have sought to blame their losses on the misrepresentations and warranties that they allege were made to them before they took possession of their strata units. It is now sought to add these two new defendants OHR to allege that if the projections were not negligently misrepresented or warranted in the first place causing their losses, then the actual management of the hotel was negligently carried out, causing their losses, or it was a combination of the two causes.

[11] The proposed claims against OHR are the same as the claims presently made against them in the third parties proceedings brought against them by the developers.

[12] Rule 15(5)(a)(iii) of the Rules of Court states:

At any stage of a proceeding, the court on application by any person may

(iii) order that a person be added as a party where there may exist, between the person and any party to the proceeding, a question or issue relating to or connected

(A) with any relief claimed in the proceeding, or

(B) with the subject matter of the proceeding,

which in the opinion of the court it would be just and convenient to determine as between the person and that party.

[13] The plaintiffs submit that it would be just and convenient that OHR be added as defendants and the proposed claims are clearly connected. They say the misrepresentation claims made against OHR in respect of the projections are claims already made against the developers as a result of OHR’s preparation of the projections for disclosure to the investors, and the proposed claims of breach of the hotel management agreement or breach of duties arising out of OHR Grand’s role as manager of the hotel are clearly connected to the subject matter as the essence of the claim is the loss of value suffered by the investors as a result of the diversions between the actual financial results of the hotel operations and the financial results projected.

[14] The proposed defendants OHR do not oppose their addition as defendants on the basis of any limitation period having expired. The only opposition they appear to raise is that certain of the proposed amended pleadings that would be applicable to them as defendants, do not disclose a reasonable cause of action against them.

[15] Paragraph 19 of the proposed amended statement of claim states:

Since at least April of 1999, the Project has been managed and operated as a hotel by OHR Grand, a wholly owned subsidiary of OHR. At all relevant times, OHR and OHR Grand were operated as a single entity, with OHR Grand under the effective influence and control of OHR and exercising no independent discretion. As such, OHR Grand is the alter ego of OHR and OHR is liable for the acts or omissions of OHR Grand.

[16] The proposed OHR defendants submit that this is only a pleading of the legal test for a finding of “alter ego”, without any pleading of the facts that would form the basis for such a finding. Reliance is placed upon the decision of our Court of Appeal in Hunt v. T & N plc (1989), 41 B.C.L.R. (2d) 269 (C.A.), where the court gave examples of proper pleadings for an allegation of “alter ego”, from the cases of Agawam Oil Co. v. Scurry-Rainbow Oil Ltd. (1962), 32 D.L.R. (2d) 298, and Quintette Coal Ltd. v. Bow Valley Resource Services Ltd. (1986), 6 B.C.L.R. (2d) 347.

[17] The plaintiffs submit that ¶19 does meet the requirements of the court in Hunt for a pleading of “alter ego” and point to that portion of the judgment where it was stated:

Before the parent is liable in law for the acts and omissions of the subsidiary, one must show that control existed and was exercised. That would be the material fact to be pleaded and at trial proved by evidence.

[18] I have reviewed the Hunt decision and compared the proposed ¶19 to what I consider to be the ratio of that decision, and I do not see any difference between ¶19 and the ratio or the pleadings referred to in Hunt from the Agawam and Quintette cases.

[19] I find that the proposed pleading in ¶19 is a sufficient pleading of the material facts to support the claim of “alter ego”.

[20] The proposed defendants OHR also submit that the proposed amended ¶54 does not meet the requirements of Rule 19(1) which requires that a pleading must contain a statement in summary form of the material facts on which the party relies, but not the evidence by which the facts are to be proved.

[21] The proposed ¶54 states:

The Representations and Warranties, the Projections and the HVS Representations were made negligently in that:

(a) the Developers, the Directors, OHR and HVS knew or ought to have known that the Projections would not, or could not, be achieved;

(b) the Developers, the Directors, OHR and HVS knew or ought to have known that the assumptions and hypotheses on which the Projections were based were unreasonable and reflected circumstances that were not likely to exist; and,

(c) further, or alternatively, the Developers, the Directors, OHR and HVS failed to review and change the Projections before the Investors completed their purchases to reflect changes in circumstances that they knew or ought to have known made the Projections unreliable or increased the risk that they would not be achieved.

[22] The proposed defendants OHR submit that full particulars are not given in the proposed pleading because material facts, with dates and times, are not included.

[23] It is my conclusion that the proposed ¶54 provides sufficient material facts upon which the investors rely. The pleading refers to the representations, warranties and projections which have previously been identified in the statement of claim as coming out of the disclosure statement and there are sufficient particulars of the disclosure statement to make it clear to the proposed defendants OHR what the material facts are.

[24] These proposed defendants also submit that proposed ¶63 and 64 that allege a fiduciary duty against OHR Grand also do not sufficiently set out the material facts supporting the claim of fiduciary duty.

[25] Proposed ¶63 and 64 state:

[63] Alternatively, as OHR Grand’s fees are based on gross revenue while the return to Investors is based on net revenue, if actions are taken or expenses incurred to increase or maintain the gross revenues, OHR Grand benefits through its fees, even if those actions or incurred expenditures provide no incremental return to the Investors, or if they result in a decreased net revenue. In such circumstances, in incurring expenses and operating the hotel, OHR Grand must act so as to avoid a conflict of interest. The Investors say that OHR Grand owed a fiduciary duty because:

(a) OHR Grand had discretion or power with respect to the expenditures made and revenue obtained in the hotel operation;

(b) OHR Grand, in exercising its discretion, affected the economic interests of the Investors; and

(c) the Investors were vulnerable to or at the mercy of OHR Grand.

[64] In the result, OHR Grand owed a fiduciary duty:

(a) to operate the hotel in the best interests of the Investors;

(b) not to allow its own interest to conflict with its duty to Investors; and

(c) not to profit at the expense of the Investors.

[26] Again, I have concluded that these paragraphs do provide the necessary material facts to support the claim.

[27] In conclusion, as there is no limitation period to be concerned about with respect to adding OHR as defendants, I find it just and convenient to add them as defendants and for the plaintiffs to amend their statement of claim to make the allegations against those defendants as set out in the proposed amended statement of claim attached as Schedule “A” to the further amended notice of motion dated October 29, 2004 (original dated April 29, 2004).

2. The plaintiffs seek to add 16 additional plaintiffs and to correct other mistakes made in the names of existing plaintiffs.

[28] The developers and OHR do not oppose the misnomers with respect to the existing plaintiffs set out in ¶2 – 5 of the amended notice of motion dated August 19, 2004 (original dated June 23, 2004) and accordingly I grant those orders.

[29] Again, Rule 15(5)(a)(iii) is applicable to the addition of more plaintiffs. The developers and OHR oppose the addition of these individuals on the basis that it is not just that they be added because their addition would deprive the defendants of two limitation defences and because the proposed plaintiffs have no reasonable excuse for not suing from the outset when the action was commenced on November 7, 2002.

[30] The developers submit that with few exceptions the investors entered into agreements to purchase their strata units in November, 1996, and took title to the units in April, 1999. The developers submit that the limitation period to sue is six years from the date each purchaser signed their agreements to purchase or sale agreements in November, 1996 and accordingly the six years would have expired shortly after the writ of summons was filed on November 7, 2002. The developers consider it unjust to allow these 16 individuals to be added now without that limitation period applying to them.

[31] In addition, the developers submit that the statutory limitation period of a maximum of three years set out in the Securities Act, S.B.C. 1985 c. 83, has also expired before now.

[32] The plaintiffs submit that the statutory limitation period set out in the Securities Act has no application because it is only applicable to civil remedies created by that statute for misrepresentations in prospectuses or in circulars, neither of which are involved in this case.

[33] I agree with the plaintiffs that the limitation period in the Securities Act to which the developers refer is not relevant to the offering memorandum or disclosure statement in this case.

[34] The plaintiffs agree that the applicable limitation period for negligence or breach of contract is six years under s. 3(5) of the Limitation Act, R.S.B.C. 1996 c. 266. However they disagree as to when the limitation period started to run in this case.

[35] In the case of a claim in tort for negligent misrepresentation, the plaintiffs’ submission is that the cause of action did not accrue or start to run until damage was suffered and that was not until after the investors took ownership of their hotel units in 1999 and the hotel began to operate, so it has not yet expired.

[36] In the case of the claim of breach of the sale agreements entered into in November, 1996, because of the incorporation by reference of the disclosure statement into each sale agreement, the plaintiffs submit that the cause of action for breach of contract did not accrue until there was a breach of those sale agreements.

[37] I agree with the plaintiffs that the limitation period for the claims in tort did not accrue until damage was suffered after the investors took title in 1999. As a consequence the limitation period has not yet expired.

[38] With respect to the claim for breach of the sale agreements and for breaches of collateral warranties or collateral contracts, I agree that the cause of action accrued when the breaches occurred. Depending upon when the breaches are alleged to have occurred, the cause of action for breach of contract may or may not have expired by now.

[39] Accordingly, I must consider whether it is just and convenient to add these 16 new plaintiffs under Rule 15(5)(a)(iii), taking into account the possibility that the limitation period for claims of breach of contract, has expired.

[40] In Teal Cedar Products (1997) Ltd. v. Dale Intermediaries Ltd., 19 B.C.L.R. (3d) 282, our Court of Appeal considered the proper factors to be taken into account in determining whether it is just and convenient under Rule 15(5)(a)(iii) to add a party. Finch J.A. (as he then was) said:

In the exercise of a judge’s discretion, the length of delay, the reasons for delay and the expiry of the limitation period are all factors to be considered, but none of those factors should be considered in isolation. Regard must also be had for the presence or absence of prejudice, and the extent of the connection, if any, between the existing claims and the proposed new cause of action. Nor do I think that a plaintiff’s explanation for delay must necessarily exculpate him from all “fault” or “culpability” before the court may exercise its discretion in his favour.

[41] Chief Justice McEachern said:

I believe the most important considerations, not necessarily in the following order, are the length of the delay, prejudice to the respondents, and the overriding question of what is just and convenient.

[42] In Teal the plaintiff had originally made a deliberate decision not to sue its insurers on the insurance policy, relying on legal advice, and subsequently applied to amend to make that new claim after the limitation period to do so had expired. It was determined that there was no prejudice to the insurers beyond the expiry of the limitation period, the delay was not long and the new cause of action was allowed.

[43] In this case it is submitted by the developers that most of the proposed new plaintiffs were not named originally because they had not yet been retained by the plaintiffs’ law firm at the time of the original writ of summons. The evidence is that after the writ of summons was issued, from November 28, 2002 to June 22, 2004 when the notice of motion was first filed to add these plaintiffs, contact was being made with the proposed plaintiffs by the strata council and instructions received from the strata council to join them in the actions.

[44] With respect to the proposed plaintiff Dhir, it is stated that counsel always had his instructions to sue but his name was inadvertently omitted from the original writ of summons.

[45] The developers submit that these are not good enough reasons for the delay, because, except for Dhir, the reasons amount to saying no more than that the proposed plaintiffs now want to sue.

[46] The developers submit that these proposed plaintiffs should be forced to start their own separate action to which the developers will plead the limitation period in defence.

[47] The plaintiffs submit that the delay here was only slightly more than one year until counsel for the developers was informed of the intention to add these plaintiffs and the reason for any delay was the bureaucracy involved in having to deal through a volunteer strata council committee on behalf of existing plaintiffs and the staff that was assisting them, with respect to over 100 strata lots in the hotel.

[48] The plaintiffs also submit that the developers can point to no prejudice other than a possible limitations defence for breach of contract. The proposed new claims for these new plaintiffs would be identical to the claims already made and therefore would not expand any defence considerations.

[49] It is my conclusion that it is just and convenient to add these 16 new plaintiffs and to make the appropriate amendments to the style of cause to include them. The delay was not lengthy and there is no prejudice to the defendants beyond a possible limitation period for breach of contract.

[50] In my view if 4(1)(d) of the Limitation Act that allows the addition of plaintiffs after a limitation period has expired, is to have any application, it is in this context.

[51] I therefore grant the order that the 16 proposed plaintiffs be added as plaintiffs in the action and the style of cause be amended accordingly.

3. The plaintiffs propose to add a claim that the representations and warranties alleged in the disclosure statement were also made by agents of the developers to the investors when marketing the strata units.

[52] The plaintiffs propose to add a new ¶34 to the statement of claim that states:

The Representations and Warranties, including the Projections, were also made to the Investors in and by marketing brochures and newsletters distributed in 1996 and the spring of 1998 and by the Developers’ sales agents, full particulars of which will be given at or before trial.

[53] On my reading of the proposed amendment, it refers to no more than the alleged representations and warranties, including the projections, that are allegedly made in the disclosure statement, and which already form the basis of the existing claim. It is now sought to allege that these same representations and warranties, including projections, were made to the investors outside of the disclosure statement and probably beforehand, by the developer’s agents, in the marketing of the development.

[54] The developers submit that this amendment would add a new cause of action in tort beyond a limitation period and without any explanation for the delay, and where they will be prejudiced now, eight years later, by a difficulty in obtaining evidence from the agents as to what was said and provided to each of the purchasers. It is submitted that such allegations are inconsistent with the written documents.

[55] The investors submit that as the claim proposed is one in tort, the limitation period of six years cannot have accrued until damage occurred and that could not have been until 1999.

[56] In any event, the investors submit that ¶34 does not allege a new cause of action as the proposed amendment does not contain any new alleged misrepresentations but simply repeats the same misrepresentations alleged in the disclosure statement. It only alleges that the same misrepresentations came from the agents as well as from the disclosure statement and therefore the duty of care is the same, the breach is the same and the damages are the same.

[57] Teal states that an amendment allowed under Rule 24(1) must meet the just and convenient test as well.

[58] In my view, no limitation period for tort has yet expired and I do not consider this claim of agent misrepresentations to be a new cause of action, because I do not read the proposed amendment as expanding the alleged misrepresentations at all. Even if it is a new cause of action I consider it convenient to add it as I do not see any actual prejudice to the defendants.

[59] I do agree, however, that some time limit should be put on the investors to provide particulars of this alleged negligent misrepresentation by the agents, but that can be taken up in a further case management conference before me.

[60] In conclusion, my orders are as follows:

1. O’Neill Hotels & Resorts Ltd. and OHR Grand Management Ltd. will be added as defendants in this action and the statement of claim amended to raise allegations against them, as set out in the proposed amended statement of claim attached as Schedule “A” to the further amended notice of motion dated October 29, 2004 (original dated April 29, 2004).

2. The 15 individuals named in the amended Schedule “A” to the notice of motion dated August 19, 2004 (original dated June 23, 2004), together with the individual that is the subject of the motion dated November 3, 2004, will be added as plaintiffs in this action and the style of cause amended accordingly.

3. The style of cause will be amended to correct the misnomers set out in ¶2 – 5 inclusive of the notice of motion dated August 19, 2004 (original dated June 23, 2004).

4. The plaintiffs will have liberty to add ¶34 to the amended statement of claim as set out in Schedule “A” to the further amended notice of motion dated October 29, 2004 (original dated April 29, 2004).

Costs

[61] The plaintiffs are entitled to costs in the cause with respect to all applications.

“J. Truscott, J.”
The Honourable Mr. Justice J. Truscott

September 14, 2006 – Revised Judgment

On page 2, paragraph 1, second line should read:

“The individual plaintiffs are investors in a hotel development in downtown Vancouver called the Westin Grand Hotel, …”

Vancouver, Barclay Street, VR 2124: Leaky condo complex constructed in 1987-1988 started leaking in 1988; court rules owners waited too long before suing National Door

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners, Strata Plan VR 2124 v. Rositch et al

 

2004 BCSC 1662

Date: 20041214
Docket: C974955
Registry: Vancouver

Between:

The Owners, Strata Plan VR 2124

Plaintiff

 

And

E. Bryce Rositch, carrying on business as Rositch Hemphill and Associates Architects or Bryce Rositch Architects Inc. or Keith S. Hemphill Architect Inc. and the said Rositch Hemphill and Associates Architects Inc., Viam Holdings Ltd., Newcorp Construction Ltd., Newcorp Properties Ltd., Coast to Coast Management Ltd., Gordon Spratt & Associates Ltd., East and West Alum Craft Ltd., W. Te Bokkel, G.L.A. Enterprises Ltd., Humphrey Aluminum (1977) Ltd., Sertex Plumbing B.C. Ltd., SFC Steelfab Canada Ltd., Westcoast Stucco Inc., Western Cladding Ltd., Bogdonov Pao Associates Ltd., and National Door and Hardware Ltd.

 

Defendants

 

And

E. Bryce Rositch, Rositch Hemphill and Associates Architects (a firm), Bryce Rositch Architect Inc. (formerly Bryce Rositch Architects Inc.), Keith S. Hemphill, Architect Inc., 67219 B.C. Ltd. (formerly Gordon Spratt & Associates Ltd.), East and West Alum Craft Ltd., W. Te Bokkel, G.L.A. Enterprises Ltd., Humphrey Aluminum (1977) Ltd., Sertex Plumbing B.C. Ltd., SFC Steelfab Canada Ltd., Westcoast Stucco Inc., Western Cladding Ltd., National Door and Hardware Ltd., City of Vancouver, Allan Milligan Engineering Ltd., Indal Limited, M & M Insulation Ltd., Cam Glass Inc. and Evans Ventures Ltd.

Third Parties

 


Before: The Honourable Mr. Justice Rogers

 

Reasons for Judgment

In Chambers

Counsel for the plaintiff:

D.C. Creighton

Counsel for the defendant,
National Door and Hardware Ltd.:

R.M. Young

Date and Place of Hearing:

December 3, 2004

 

Vancouver, B.C.

Introduction

[1]                In April 2003 the plaintiff obtained an order adding National Door and Hardware Ltd. as a defendant.  This is National Door’s application to vacate that order and to have the matter reheard and dismissed.

[2]                The application turns on whether there is a connection between National Door and the plaintiff such that the former ought to be added to the latter’s suit; and whether it is just and convenient that National Door should be a defendant.  National Door argued that a potential limitation defence and the prejudice it suffers from the plaintiff’s long delay make it unjust and inconvenient to be added to the action.

The Facts

[3]                This is a leaky-condo case.

[4]                In the course of this hearing I considered the following affidavit evidence from the Chambers Record filed by the plaintiff:

TAB

DOCUMENT

 

 

12

Affidavit #1 of Earl Parton sworn March 29, 2004

13

Affidavit #1 of Mary Kovacs sworn April 5, 2004

14

Affidavit #2 of Colm Place sworn April 30, 2004

15

Affidavit #1 of Karina Park sworn May 7, 2004

16

Affidavit #1 of Pierre E. Gallant sworn May 12, 2004

17

Affidavit #1 of Robert Parton sworn June 16, 2004

18

Affidavit #2 of Earl Parton sworn June 16, 2004

19

Affidavit #2 of Karina Park sworn June 25, 2004

20

Affidavit #3 of Pierre E. Gallant sworn June 25, 2004

21

Affidavit #2 of Mary Kovacs sworn July 5, 2004

22

Affidavit #2 of Robert Parton sworn August 11, 2004

23

Affidavit #3 of Karina Park sworn August 30, 2004

24

Affidavit #1 of Thomas Marquardt sworn October 22, 2004

25

Affidavit #1 of Corina Stockli sworn November 12, 2004

26

Affidavit #5 of Derek C. Creighton sworn November 22, 2004

27

Affidavit #5 of Karina Park swornNovember 29, 2004

 

[5]                For the purpose of this application I find that the plaintiff is the owner of 48 condominiums comprising of a seven story building on Barclay Street in Vancouver, B.C.  The building was constructed in 1987-1988.  National Door supplied five exterior doors to the project.  These doors gave access onto the patios in four of the condominiums.  It is unclear on the evidence and I make no finding of fact that National Door supplied door slabs only or pre-hung doors with jambs and sills.

[6]                Sometime in 1988 water related repairs were done to the exteriors of seven condominiums, the social room, and the garage.  G.L.A. Enterprises did this work.  The work involved fixing leaks, installing flashing, gutter and downpipe systems, and putting hoods up over doors.  G.L.A. also applied caulking to seams on the existing flashings.  Despite this work water problems continued at the building.  In March 1993 the owners sent a delegation to a lawyer in Vancouver to get advice on their options and course of action.  The lawyer wrote a letter to the owners after that meeting.  The lawyer confirmed that the owners had told him the building had experienced major water leakage since its construction back in 1988.  Remediation efforts had not been successful.  The leaks and damage continued to plague the owners.  The lawyer advised the owners to change their strategy by contracting the repairs on their own rather than relying on the owners to affect those repairs.  Oddly, despite mentioning the possibility of taking legal action, the lawyer did not give his client advice about the risk of expiring limitation periods.

[7]                Leaks and damage continued to accrue at the building.  The owners commissioned an expert report for repairs.  They received that report in 1997.  They started action against some of the defendants in that year.  In 2000 the owners had considerable remediation work done.  The five doors were replaced.  The original doors were removed and destroyed.

[8]                In 2003 the plaintiff decided that National Door should be added to their suit for recovery of damage.  This was on the theory that the doors National Door supplied were defective and that defect allowed water to enter the building causing it damage.

[9]                In the years between 1988 and 2003 National Door innocently destroyed their records concerning the plaintiff’s building.  Some of National Door’s personnel who had to do with the original transaction have left the company and are no longer available as witnesses.  G.L.A., the company that did remediation work in 1988, cannot supply meaningful illumination of the single invoice that describes the work it did on the building.  The repair work in 2000 changed not only the original doors, but also much of the wall systems in and around the doors.  The plaintiff did not preserve the original door and wall material.  Neither did the plaintiff compile recordings or samples of the original materials so that forensics might be carried out on them.

Hearing DE Novo

[10]            The original order adding National Door was made ex parte.  The parties agreed that the 2003 order should be vacated and the application to add National Door should be heard by me de novo.  I need not, therefore, concern myself with whether the Rules require that a prospective defendant be served with an application to add it to the suit.  Nor do I need to concern myself with whether the principles of full and frank disclosure apply to such an application if it proceeds without notice to the person affected.

Rule 15(5) Considerations

[11]            An application to add a party under Rule 15(5) engages two main principles and four sub-principles.  They are:

1.    There must be interrelationship between an existing party and the person to be added that relates to the subject matter of the suit or the relief sought;

2.    if that interrelationship exists, adding the person must be just and convenient, the measure of which is determined by the following factors:

(a)    the extent of delay in making the application;

(b)    any explanation for that delay;

(c)    the prejudice caused by that delay; and

(d)   the degree of connection between the existing claims and the claim against the proposed defendant.

1.     Interrelationship

[12]            Although I cannot find as a fact what kind of door or door assembly National Door supplied to the building, the evidence strongly suggests that it did sell some kind of door to the building’s constructor.  The water repair work done in 1988 and 2000 clearly implicated the exterior doors, some of which probably came from National Door.  Accordingly, there is some evidence to connect National Door to the subject of the plaintiff’s suit.

2.     Just and Convenient

2(a) Extent of Delay & 2(b) Explanation for Delay

[13]            It is convenient to collapse extent and explanation into a single discussion.  That is because delay is relevant to two separate considerations.  The first consideration is lapse of a limitation period; the second is practical consequences of delay.

[14]            In this case the limitation issue requires consideration of a large amount of relatively complex evidence.  The central issue is: when did the plaintiff’s cause of action against National Door arise; and was the running of time postponed by factors contemplated by the Limitation Act.  The answers to those questions are by no means clear.  The evidence adduced in this Rule 15(5) application is not up to the task of resolving the limitation question.

[15]            In circumstances like this the proper thing to do is assign the limitation issue to the trial judge (Lui v. West Granville Manor Ltd. (1987) 11 B.C.L.R. (2d) 273). Accordingly, although I have a strong intuition about that issue, it plays no persuasive role in this proceeding.  Whether National Door has a limitation defence may be decided by a trial judge; it will not be decided by me.

[16]            The second consideration is the practical consequence of the plaintiff’s delay.  The evidence on the application made it clear that as long as 16 years ago the plaintiff appreciated that their building was leaky and that the doors were implicated in that problem.  The problem continued through 1993 and was still extant when the plaintiff sued in 1997.  The plaintiff did not act against National Door until 2003.  That is some 15 years after the leaks became apparent.  By any measure that is a considerable delay.

[17]            The plaintiff says that they could not have known that the doors caused the leaks until the building’s exterior was deconstructed during the big repair effort in 2000.  They say they could not have known who supplied the doors until they were alerted that the doors were problematic and they had an opportunity to extract door supply invoices from the building’s constructor.  They say that did not culminate until shortly before they applied to add National Door in 2003.

[18]            Leaving aside questions surrounding limitations, I find the plaintiff’s explanation for delay wanting.  They were aware as early as 1988 that the building leaked and that the exterior portals were a potential locale for aqueous incursion (alas, the Bench admits it is not immune to jargon).  By 1997, when the plaintiff received the report on which their suit and repair efforts were based, they were certainly aware that the doors were part of the problem.  They may not have known precisely what role the doors played in the building’s sieve-like nature, but their expert advisor clearly told them then that the doors needed replacement at a cost of something like $24,000.

[19]            I am not convinced by the plaintiff’s explanation for delay.  I am in no way persuaded that the plaintiff’s delay between 1997 when they had advice the doors were faulty, and 2003 when they applied to add the doors’ supplier, was reasonable.

2(c)   Prejudice from Delay

[20]            National Door has suffered a number of prejudices as a consequence of the plaintiff’s delay, and several as a consequence of the plaintiff’s deliberate actions during that delay.  National Door has destroyed any documents it might have had relating to the doors in question and to its dealings with the building’s constructor.  National Door kept those documents for 10 years.  Had the plaintiff moved against National Door in 1997, National Door might have been alerted to the need to preserve those documents for its defence.  Further, certain personnel who formerly worked for National Door and who might have been able to give evidence about the doors in question are no longer available.  These factors prejudice National Door’s ability to present a defence to the plaintiff’s claims.

[21]            The doors were likely modified sometime between leaving National Door’s warehouse and 1997.  I draw that conclusion because the plaintiff’s expert says he saw some rubber stripping on the doors and National Door says it never supplied or assembled such stripping on any door it ever sold.  It appears impossible to determine now who modified the doors or when.  G.L.A. might have done that modification, but National Door cannot prove it because, due to the passage of time, G.L.A.’s people cannot supply that evidence.

[22]            The plaintiff, despite being embroiled in a lawsuit over the very subject of the repair work underway in 2000, allowed the doors in dispute to be removed and destroyed.  The plaintiff similarly allowed remedial work to go on in and around the door portals, thus removing material that might have supplied some evidence regarding the source, volume, direction, and consequence of leaking water.  National Door asserts that it did not supply the door jambs and sills for these doors.  The doors, jambs, and sills are now gone, and along with them went any realistic opportunity National Door might have had to examine those items and use the product of that examination in its defence.

[23]            The plaintiff says that National Door can examine some photographs of the doors taken in situ and can rely on the plaintiff’s expert’s assessment of the nature and quality of the doors.  National Door is understandably reluctant to base its defence upon photos and reports prepared by the plaintiff at the same time the plaintiff was prosecuting a lawsuit in the hope of blaming someone else for its building’s problems.  

[24]            Given the plaintiff’s actions and the immense gulf of time between supply and suit, I find that National Door has suffered such prejudice as to be unable to mount a meaningful defence to the plaintiff’s claims. This situation exists because the plaintiff dallied too long and because they destroyed the very items they say give rise to National Door’s liability.  This amounts to substantial practical prejudice to National Door.  This prejudice stands apart from any prejudice it might suffer as a consequence of being deprived of a technical defence based on an expired limitation period.

2(d)   Degree of Connection

[25]            The evidence on this application suggested that if the doors National Door supplied were defective then water damage of some sort might have occurred.  National Door made much of its position that it supplied only five doors to only four suites and that in the overall scheme of things any contribution made by those doors to the overall damage must have been small.

[26]            I would not dismiss the application to make National Door a defendant on the ground that there is a minimal connection between the damage claimed and National Doors alleged negligence.  The evidence was not so clear-cut as to lead to the inescapable conclusion that the plaintiff’s claims against National Door are de minimus or are disconnected from other elements of the plaintiff’s claims.  To conclude that they are would be to go too far on too little evidence.

Other Considerations

[27]            The plaintiff argued that because one defendant has issued a third party notice against National Door, it will be part of the suit in any event.  Therefore, so says the plaintiff, National Door will suffer no additional prejudice by being made a defendant too.  There are, of course, significant differences between being a third party answering whatever claims a defendant may have against you and being a defendant answering whatever claims a plaintiff may have.  The plaintiff’s argument on this score must fail.

Conclusion

[28]        The April 2003 order adding National Door as a defendant will be vacated by consent.  The plaintiff’s de novo application to add National Door as a defendant is dismissed with costs on scale 3.

“P. Rogers, J.”
The Honourable Mr. Justice P. Rogers

Vancouver, Barclay Street, VR 2124: Leaky condo owners can appeal without leave decision to exclude Indal as defendant

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Strata Plan VR2124 v.
Indal Ltd.,

 

2004 BCCA 611

Date: 20041206


Docket: CA032354

Between:

The Owners, Strata Plan VR2124

Appellant

(Plaintiff)

And

Indal Limited

Respondent

(Defendant)

 


 

Before:

The Honourable Mr. Justice Donald

(In Chambers)

 

D.C. Creighton

Counsel for the Appellant

D.L. Miachika

Counsel for the Respondent

Place and Date of Hearing:

Vancouver, British Columbia

4 November 2004

Place and Date of Judgment:

Vancouver, British Columbia

6 December 2004

 


Reasons for Judgment of the Honourable Mr. Justice Donald:

[1]            This matter came before me as a motion for directions as to whether leave was required to appeal the order of Mr. Justice Masuhara pronounced 24 September 2004.

[2]            The plaintiff, here the applicant and proposed appellant, moved ex parte to add Indal Limited ("Indal") as a defendant.  Indal manufactured the windows and doors used in the construction of what has become a leaky condominium.  Madam Justice Gill granted the order.

[3]            Indal applied to set aside the order.  The plaintiff brought a cross motion to add Indal in the event Indal's application succeeded.

[4]            Mr. Justice Masuhara set aside the ex parte order on the ground that the plaintiff failed to make complete disclosure of material facts, in particular, expiry of the limitation period and potential prejudice caused to Indal by the delay in adding Indal as a defendant in 2003 to a suit brought in 1997.  He found on the evidence that the limitation defence had accrued before the ex parte motion.  He determined that the plaintiff received an expert report on 3 June 1997 giving notice of the alleged defects in the windows and doors and the time began to run for two years from that date at the latest.

[5]            In dealing with the plaintiff's cross application pursuant to Rule 15(5)(a)(iii), Masuhara J. found it was not just and convenient to add Indal because: (1) the application was brought after expiry of the limitation period; (2) Indal disposed of documents and lost contact with potential witnesses; and (3) Indal lost the opportunity to inspect the windows and doors after they were replaced.

[6]            Accordingly he ordered that:

1.    The Order of the Honourable Madam Justice Gill pronounced July 3, 2003 adding Indal Limited as a Defendants [sic] to this action be vacated and set aside as against Indal Limited;

2.    A Declaration that Indal Limited is not a party or Defendant to this action;

3.    The style of cause and style of proceeding in this action be amended to delete all references with respect to Indal Limited as a Defendant; and

4.    Costs incurred by Indal Limited connected with this action be paid by the Plaintiff at Scale 3 to Indal Limited forthwith after assessment.

[7]            Is this an order requiring leave to appeal?  I have decided that the plaintiff has an appeal as of right from the order because it finally disposed of the rights of these parties in the action.  Although the proceedings below appear to be interlocutory on the surface, it is my view that the order in question has a final dispositive effect because of the determination of the limitation issue.

[8]            This case is unlike The Owners, Strata Plan LMS 1212 v. Winchester Investments Ltd., 2004 BCCA 500 per Smith J.A., where leave to appeal an order refusing to add a party was dismissed because the plaintiff could simply start a separate action and move to consolidate: see para. 11.  Here, although the plaintiff has started a separate action out of an abundance of caution, the plaintiff cannot escape the limitation finding if it stands up.

[9]            This is a dual effect case, i.e. if the issue is decided one way the rights of the party are determined and if decided the other way the action carries on.  Earlier jurisprudence of this Court would suggest that the question of whether leave is required can be answered by reference to the nature of the process and therefore dual effect cases should have leave.  I think the more contemporary focus is on the effect of the order rather than the nature of the process from which the order emerged: see Zanetti v. Bonniehon Enterprises Ltd. (2002), 177 B.C.A.C. 165, 2002 BCCA 555 per Ryan J.A. in chambers.  See also the thorough review of this vexed question in Lions Gate Marketing Co. Ltd. v. Used Car Dealers Assn. of Ontario (2004), 242 D.L.R. (4th) 332, 2004 BCCA 354 per Finch C.J.B.C. in chambers, in particular his adoption of the finality test formulated by Lambert J.A. in Topgro Greenhouses Ltd. v. Houweling (2002), 171 B.C.A.C. 209, 2002 BCCA 387.

[10]        In Strata Plan LMS 989 v. Redekop (2003), 193 B.C.A.C. 4, 2003 BCCA 613, Smith J.A. in chambers directed that leave was required from an order adding defendants to an action in circumstances where the chambers judge refused to give effect to a limitation defence.  However in obiter dicta Smith J.A. said at para. 6:

Had the application been dismissed, it would have finally disposed of the rights between the parties.

[11]        In the present matter the order leaves nothing in the action between these two parties and accordingly I determine that it has a final effect.  The plaintiff has an appeal as of right.

“The Honourable Mr. Justice Donald”