Legal: Owners failed to exercise due diligence; used wrong unit entitlement for 19 years

Here's a case from 2005 in which several condo owners sued their own strata corporation because, they claimed, the strata corporation used an unlawful schedule of unit entitlement for 19 years in calculating money owed by owners to the strata corporation for annual budgets and special assessments.

Although the property manager had sent all the owners a letter stating that the strata corporation was calculating strata fees correctly, Judge Valmond Romilly determined that the owners - all the owners - had failed to exercise due diligence.

The Judge found it impossible to determine who had paid too much and who had paid too little.

This case sends the following clear messages to all condo owners:

(1) Do not trust the strata council:

(2) Do not trust the strata property manager;

(3) Check every thing to do with your strata corporation yourself including: every fact, statement, demand for money, and every expenditure.


Some excerpts from the case:

13. By letter dated May 5, 2003, the Strata Corporation, through its agent, asserted that it was calculating strata fees correctly.

14. By letter dated May 7, 2003, Baker explained in more detail the provisions of the legislation and suggested that the Strata Corporation seek legal advice.

15. At the May 8, 2003 AGM the Strata Corporation agreed to retain a lawyer to provide an opinion with regard to determining whether the Strata Corporation was using the correct schedule of unit entitlement.

16. Until just prior to the Annual General Meeting of May 8, 2003, the Claimants, Dan Ayers, Dan Stevens and Joan Chisholm, were not aware that the Strata Corporation was collecting strata fees by using an incorrect schedule of unit entitlement.

17. By letter from Jamie A. Bleay (legal counsel hired by the Strata Corporation) dated May 20, 2003, the Strata Corporation was advised that from April 1984 to and including May, 2003, all strata lot owners at Strata Plan VR 1395, including the Claimants, had been paying Strata Fess and Special Levies on a basis of a schedule of unit entitlement other than the schedule of unit entitlement filed in the Land Title Office.

18. The Strata Corporation did, in the next annual budget which was approved on or about June, 2004, ensure that Strata Fees were calculated in accordance with the schedule of unit entitlement filed in the Land Title Office.

19. Between April 1984 and May 2003, certain owners at Strata Plan VR 1395, including Dan Ayers, Dan Stevens, owners of unit 402, and Joan Chisholm, owner of unit 401, were assessed and paid more in Strata Fees and/or Special Levies than they would have if the Strata Fees and Special Levies had been assessed based on the correct schedule of unit entitlement.

20. Between April 1984 and May 2003, certain owners of Strata Plan VR 1395 were assessed and paid less in Strata Fees and/or Special Levies than they would have if the Strata Fees and Special Levies had been assessed based on the correct schedule of unit entitlement.

21. Between 1993 and 2003, Dan Ayers and Dan Stevens paid $2, 019.03 more to the Strata Corporation than they would have paid pursuant to the schedule of unit entitlement filed in the Land Title Office.

22. Between 1986 and 2003, Joan Chisholm paid approximately $3,913.29 more to the Strata Corporation than she would have paid pursuant to the schedule of unit entitlement filed in the Land Title Office.

23. As a result of retaining Baker to address the schedule of unit entitlement issue, Mr. Heliker and Ms. Brock paid the sum of $1323.38 in legal fees.

24. On or about March 18, 2004, the Claimants commenced proceedings against the Strata Corporation claiming for the amounts overpaid for common expenses in addition to legal fees expended to address the schedule of unit entitlement issue.”


[3] The Claimants argue that Section 99 of the Act sets out a mandatory formula for calculating strata fees based on the filed Schedule of Unit Entitlement and one must conclude that the formulas created by the legislature were perceived to be the fairest way in which to apportion expenses amongst owners in a strata corporation. They further argue that the Strata Corporation calculated strata fees by using an incorrect and unfiled schedule of unit entitlement and in doing so exceeded its authority and its collection of strata fees were ultra vires the Strata Corporation.

[18] I find that the position of the Claimants is built on a false premise in that it contemplates a "them" versus "us" structure in the composition of a strata corporation, while the Act contemplates only an "us" scenario. The owners of strata lots are the strata corporation and merely vote in a council, which comprises of their representatives to manage the affairs of the strata corporation. In other words, a resolution of the strata corporation is a resolution of the owners, and only in the event of unfairness or oppression could such a resolution be challenged in the Courts by individual owners, the Court of course always retaining the power to strike down any act which is ultra vires the strata corporation upon application by individual owners.

[19] What I find has happened in this case is that the strata corporation, including the owner Claimants, failed to exercise due diligence over several years in ascertaining what was the proper Unit Entitlement upon which strata fees should have been based; approved routinely the strata fees that were incorrectly calculated; made no attempt over several years to have the action of the majority in this regard declared ultra vires by the Court, or file an amended Schedule of Unit Entitlement with the Land Title Office; and now wants the Court to attribute blame to the strata corporation, of which they are and were a part, for the mistake they were all deemed to have condoned over the years, and participated in voting for its acceptance. In the meantime, of course, strata lots have been bought and sold, and as noted above; Section 101 specifically states that on the sale of a strata lot, the seller is not entitled to a return of contributions to the contingency reserve fund; it is impossible to calculate at this stage if those who were assessed less should have paid more and who should be responsible for such payment; and to what extent the purported "excess monies" were used to benefit the strata corporation as a whole, of which the Claimants are a part; and of course since every judgment against the strata corporation is a judgment against all the owners, including the Claimants, one has to wonder how the Claimants expect the Courts to apportion their share, and why should the Courts be expected to do this.


The entire case can be read here: Heliker et al v. Strata Plan VR1395

Case Studies, Pendrell Place: Monk comments on Kautzman


Hi James,

I have been reading up on myleakycondo.com's Blog and there are a couple of things that I would like to point out to you about my personal experience with Randy Kautzman.

Firstly, I finally located Randy Kautzman in June of 2004 by complete
luck, when we ran into each other at a social gathering. Turns out he lived
around the corner from me, which doesn't say much for my searching abilities because I had been looking for him for quite a while.

Mr. Kautzman was polite, helpful and answered all of my questions about 1819 Pendrell without hesitation. On July 1st 2004, Mr. Kautzman agreed to do a videotaped interview about his experience with the strata council of 1819 Pendrell Place. The purpose of the interview was to help Mr. Oldaker and I clarify many unanswered questions which the ex-council members were unwilling to answer (to this day) which has resulted in our litigation.

While working at 1819 Pendrell Place, Mr. Kautzman DID repeatedly advise the Strata council that the repairs which he had done to the roof were only temporary in nature and wholly inadequate. Mr. Kautzman also went as far as advising the Council that he did not recommend the temporary fix and refused to warranty those repairs on the premise that they needed to replace the whole roof.

While working at 1819 Pendrell Place Mr. Kautzman posted several notices and wrote letters to the Council members and also took them on tours of the building. He advised them that major problems existed with their roof and they chose to do nothing. The Council members had already illegally withdrawn the Strata Corporation's last $10,000 from the reserve fund in order to engage Mr. Kautzman to renovate their own decks. I believe that when Mr. Kautzman advised the Council members that more money was needed in order to to fix the roof, the Strata Council chose to ignore his advice because they would have had to explain to the owners where the reserve funds had disappeared to.

I personally can't think of anything else that Mr. Kautzman could have done in order to get his message across to the members of the Strata Council of 1819 Pendrell Place in 1998-99 about their faulty roof.

There is also no conceivable way that Mr. Kautzman could have known or be expected to know if the engagement of his services had been properly authorized. That was the Council's responsibilty.

Mr. Kautzman has been upfront, honest and very helpful in supporting our suspicions of fraud, misappropiation of funds and kickback schemes
associated with the past property management and Council members of 1819 Pendrell Place.

Based on the documents which I've had the unfortunate experience of having to research, it seems quite apparent that Mr. Kautzman did the right thing and warned the council that the roof repairs would likely fail and were not adequate for the climate in Vancouver.

Mr. Kautzman had NOTHING to do with the fact that his warnings were ignored in 1998-99 by the Council members of 1819 Pendrell Place.

Some members of the Council were preparing to sell me a condo in September of 2000, which was disclosed to me as having a roof which was under warranty - wrong! - and the roof was left "as is" for 4 more years.

On June 7th 2001, the ex-members of council, who dealt with Mr. Kautzman, circulated a document in which they represented that they "made sure" the building was repaired and made "watertight".

How could that be true? That statement was published over 6 months AFTER I bought my leaky rotten condo at Pendrell Place.

During our July 1st 2004 videotaped interview, Mr. Kautzman was shown the June 7th 2001 document and the signatures on it. He was asked to identify any of the people with their signatures on that document who knew about the deterioration of the roof at 1819 Pendrell Place in 1998-99. Mr. Kautzman's answer was "all of them".

All of the documents which I have reviewed completely support Mr. Kautzman's statement.

Mr. Kautzman could not have been more clear about the urgency of replacing the roof. He repeatedly adressed it, in every concievable form of communication, short of sending smoke signals, to the members of the Strata Council of 1819 Pendrell Place in 1998-99.

I have not personally reviewed all of the Maintenance Company invoices
myself and am in no position to comment on all of them. However, I do employ people for a living and based on the time which I have spent with Mr. Kautzman, I would and will not hesitate to engage his services, should I require them. I found him to be quite knowledgable and upfront.

I have forwarded you some pictures of the roof which were taken in 2003 more than 3 years after Mr. Kautzman advised the council of its deterioration. Mr. Kautzman was shown these photographs and confirmed that the photos represented the roof as he last remembered it and left it in 1999.

Photo by Chris Monk showing roof patch that voided roof warranty.

(Chris Monk's photo of roof patch done by Randy Kautzman.)


What is disturbing to me is the fact that nothing has changed at 1819
Pendrell Place. The building is still not fixed and to this day no one has ever "made sure" the building was or is "watertight", even after having milked me and the other owners of a million bucks.

Pendrell Place has been through many generations of "repairs". Mr.Kautzman was the first to identify the roof problem. He was then let go by Ascent Management, under suspicious circumstances, as per our July 1, 2004 interview with him.


Sincerely,


Chris Monk

KPMG alleges fraud in deal involving leaky condo repair company Prefco and Harrison Lake Marina

 

 This case will be of particular interest to leaky condo owners whose strata corporations contracted with one of the Preferred companies before and after the collapse of New Home Warranty.

 

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

KPMG et al v. Harrison Lake Marina Corporation,

 

2006 BCSC 143

Date: 20060127
Docket: S045361
Registry: Vancouver

Between:

KPMG Inc. in its capacity as Trustee of Prefco Enterprises Inc.
and Coast Flashing and Scaffolding Inc., P.C.G. Construction Group Inc.,
and Preferred Restoration & Emergency Services Inc.

Plaintiffs

And

Harrison Lake Marina Corporation

Defendant

- and -

Docket: H040947
Registry: Vancouver

Between:

Kozul Holdings Inc.

Petitioner

And

Harrison Lake Marina Corporation, KPMG Inc., in its capacity as trustee in
bankruptcy of Prefco Enterprises Inc., Prefco Consultants Inc., Wayne Hatala,
Mike Blake, B. Ford Pharmacy Ltd., Chizen Farms Ltd., Crestmount Holdings Ltd.,
Greentree Mortgage Corporation, Moonpool Capital Corporation, Richard Connors,
Joanne Gerl, Werner Gerl, Esther Hauck, James Masleck, Suzanne Seliga,
Jenifer Gray, Olympia Trust Company, Canadian Western Trust Company,
Richard Frank Simon d.b.a. Harrison Landscaping

Respondents


Before: The Honourable Madam Justice Martinson

Reasons for Judgment

Counsel for KPMG

J. Grieve
K. Robertson

Counsel for Harrison Lake Marina Corporation

F. Eadie

Counsel for the First Mortgagee

J. Goheen

Counsel for the Second Mortgagees

D. Nugent

Date and Place of Hearing:

January 9 and 19, 2006

 

Vancouver, B.C.

INTRODUCTION

[1]                There are two proceedings involving several applications before the Court. 

[2]                The first proceeding is a fraudulent conveyance action by KPMG, in its capacity as trustee in bankruptcy for a group of companies (the “Prefco Group”), against the Harrison Lake Marina Corporation (“HLMC”).  The action relates to the payment of over one million dollars by the Prefco Group to HLMC while the Prefco Group was insolvent.  KPMG, in its statement of claim, asks for repayment of the funds and relies on the Fraudulent Preference Act, R.S.B.C. 1996, c. 164, the Fraudulent Conveyance Act, R.S.B.C. 1996, c. 163, the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, and the Land Title Act, R.S.B.C. 1996, c. 250.  The action is scheduled for trial on May 15, 2006.  In relation to this action, KPMG registered a certificate of pending litigation (“CPL”) against the titles to HLMC’s lands and water lot leases (the “Property”). 

[3]                The second proceeding is a foreclosure petition by Kozul Holdings Inc., the first mortgagee of the Property (the “First Mortgagee”).  The First Mortgagee was granted an Order Nisi in May 2005 (the “Order Nisi”) and the redemption period has expired. 

[4]                In the applications before this Court: HLMC was seeking cancellation of the CPL so that it could complete a sale of its shares; KPMG was seeking conduct of sale of the Property (the First Mortgagee supported this application); and, a group of companies and individuals who are respondents to the foreclosure petition and second mortgagees of the Property (the “Second Mortgagees”) were seeking a six month extension of the redemption period of the Order Nisi and conduct of sale of the Property (HLMC supported this application).

[5]                At the initial hearing of the CPL application on January 9, 2006, this Court had to consider whether the proposed sale of HLMC’s shares was provident.  It was advised that the only available appraisal of the Property was prepared at the request of HLMC by Cunningham & Rivard Appraisals (Vancouver) Ltd. on January 12, 2004 (the “Initial Appraisal”).  The appraised value as at that date was $1,750,000 - significantly higher than the value of the proposed share sale.  HLMC argued that this appraisal was entitled to little weight.  This Court reserved its decision and intended to give oral reasons for judgment on the CPL application on January 19, 2006.  On that morning, counsel for KPMG asked permission to present evidence of an updated appraisal that had been prepared by Cunningham & Rivard Appraisals (Vancouver) Ltd. for HLMC before the initial hearing, but which had not been presented by it at the hearing.  This Court considered that new evidence and gave its decision dismissing the application to remove the CPL and granting KPMG conduct of sale.  These are the reasons for those decisions. 

 

 (More)

Case Studies, Pendrell Place: Kautzman threatens legal action

Thursday January 26, 2006 8:39 PM

Mr. Balderson:

I am just informing you of my intent to launch legal action against you, Mr. Oldaker and any other person associated with this website.

As you have defamed me, my former company, and have caused damage to my reputation and company.

I am going to have my lawyer read, and assess the misinformation and libelous remarks you have direct toward me on this site.

How dare you post stuff that is so far from the truth?

I have every intent of attending your upcoming court date on behalf of the condo owners.

I am going to give you until this upcoming Sunday to remove any reference to me and or my company before I legally rip you and your friends a new asshole.

I can assure you that posting this type of information was not only stupid but it has also left you open for a major lawsuit.

I suggest you immediately remove your remarks toward myself or suffer the consequences of legal action please govern yourself accordingly.

Randy Kautzman


Friday January 27, 2006 5:15 pm

Randy,

Thanks for your comments about our Blog.

Please particularize your allegations that we have defamed you with untruths about you and or your companies (The Maintenance Company and/or Level One) with respect to our Case Study of Pendrell Place, 1819 Pendrell Street, Vancouver.

We strive to present the truth, the whole truth and fact-based opinions about leaky rotten condos, including leaky rotten condos like Pendrell Place that continue to leak and rot after being “repaired” at great expense to the owners.

We would be pleased to receive any further comments you have regarding your work at Pendrell Place.

Dr. James Balderson, Ph.D., Q.S.
COLCO: The Coalition of Leaky Condo Owners
www.myleakycondo.com
E JamesBalderson@myleakycondo.com


Friday January 27 2006, 9:40pm

You people really are crazy.

Hmmm I can only imagine how much time and effort you people are putting into this crazy lawsuit.No problem, you kids have fun with your little blog while my lawyer crawls so far up your ass, he will be tasting your food before you do.

[Randy Kautzman]


January 27, 2006
(Fax from Mr. Kautzman to Richard Oldaker and Christopher Monk)

Mr. Oldaker:

I had the opportunity to see your website blog, myleakycondo.com

I find your statements about myself and my former company defaming, malicious and slanderous.

I am going to give you until this coming Monday to remove my name and any reference to myself or my former company. If they [sic] references and an apology is not posted by 5PM this Monday, I will be turning this matter over to my lawyer.

I will then pursue all legal action to have your site shut down. In addition, I will instruct my lawyer to pursue a libel lawsuit against yourself and any other party that has posted any blog information on your site.

I strongly urge you to remove the references toward me as it has hurt me personally and financially.

In addition, I have contacted Barbara Coleman and informed her and her lawyer of your intent to pay for my testimony. In addition, your transcripts of our taped conversation are grossly inaccurate and this will indeed come into play.

Please govern yourself accordingly.


Randy Kautzman





Additional information with respect to Kautzman's proposed legal action may be found below:

1. Chris Monk comments on Kautzman.


2. Kautzman is on the record as providing information to Mr. Oldaker and Chris Monk of his own free will. The following excerpt is taken from Part 5, page 99 of the Randy Kautzman Transcript:

10 MR. MONK: Why don't we wrap it up? It's July 1st, 2004. What

11 time is it?

12 MR. OLDAKER: It is 8:41 on Canada Day.

13 MR. MONK: We all agree it's Canada day?

14 MR. OLDAKER: So that's it?

15 MR. KAUTZMAN: Given on my own free will.

16 MR. MONK: Oh, yeah. Own free will, Randy Kautzman, no one has

17 influenced you in any way?

18 MR. OLDAKER: No, we agreed to pay Randy $200 for his time.

19 MR. KAUTZMAN: But it's not an influence. It's definitely not an

20 influence.

21 MR. OLDAKER: I wouldn't think so.

22

23

24

25

(Page 100)

1 MR. KAUTZMAN: Money doesn't sway.

2 MR. OLDAKER: Okay.

3 MR. MONK: So off we go.

4

5 [END OF TAPE].


Case Studies, Spinnaker West: Continuing leaks and rot

Dear Mary,

As you know, I patrol your leaky rotten condo at Spinnaker West several times per week.

This is to let you know that we have had a near-record prolonged period of rain during December 2005 and January 2006. Although we had a clear day yesterday, several more days of wet weather are beginning today.

I have drained approximately two inches of standing water from your North deck several times. The tiny drain spouts plug up with needles from the fir tree. Nothing has been done to enlarge the drains.

So much water has drained down and into the North wall that the doorframe for the door from your front room to the deck has swollen making the door very difficult to open and to close. You would not be able to open it in case of fire.

The usual wet areas in the kitchen, den and foyer are very wet and the drywall has deteriorated further. Your custom wood flooring in the den is twisted, lifted and stained even more than when you left.

Glen Harris and Clive Boulton met on Clive’s rooftop deck yesterday morning with, presumably, another contractor.

As of January 1, 2006, Strata Property Managers must be licensed. Realacorp Management Ltd. is currently licensed. Sarah Ann Hedley is licensed for Trading, Rental Property Management, and Strata Property Management.

Strata property managers are agents of the Strata Council. As agents they can only legally do that which the Strata Council authorizes them to do.

As you know, the owners of Spinnaker West, LMS 0497 have not instructed the Strata Council to repair the building which has been leaking and rotting since first occupied in the early 1990’s.

Please note that my email referring to 2005 BCSC 1760, Ranftl v. The Owners, Strata plan VR 672 should have referred to the leaky rotten condo complex at 1024 West 7th Avenue, not the one at 1040 West 7th Avenue. The latter leaky rotten condo has completed extensive repair work. The necessary work at 1024 remains stalled, although Garth Cambrey’s term as an expensive administrator was recently extended.

I trust the sun will shine again over Vancouver and that your leaky condo will dry out somewhat before next fall.


Dr. James Balderson, Ph.D., Q.S.
COLCO: The Coalition of Leaky Condo Owners
www.myleakycondo.com
E JamesBalderson@myleakycondo.com

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