Condo purchasers lose appeal; Carena developer keeps deposit, sells condo for higher price

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Liu v. Coal Harbour Properties Partnership,


2006 BCCA 385

Date: 20060830


Docket: CA033164

Between:

Wei Wei Liu and James Sheng Liu

Appellants

(Defendants)

And

Coal Harbour Properties Partnership

Respondent

(Plaintiff)


Before:

The Honourable Mr. Justice Hall

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

A.E. Farber

Counsel for the Appellants

J.C. McKechnie

Counsel for the Respondent

Place and Date of Hearing:

Vancouver, British Columbia

9 June 2006

Place and Date of Judgment:

Vancouver, British Columbia

30 August 2006

Written Reasons by:

The Honourable Mr. Justice Hall

Concurred in by:

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

Reasons for Judgment of the Honourable Mr. Justice Hall:

[1] The appellants, whom I will describe as the "purchasers", appeal from a judgment in favour of the respondent, whom I will term the "vendor". The relevant order in the case was pronounced on 14 June 2005 by Mr. Justice A.F. Wilson. The neutral citation for the case is 2005 BCSC 873. The action followed a real estate transaction that did not complete. The order made by Wilson J. provided that the deposit of $391,000 paid by the purchasers in that transaction could be retained by the vendor. There were previous proceedings which came to this Court and can be found at 2004 BCCA 283, but these earlier proceedings have limited relevance to what is at issue in this appeal.

[2] The facts are that the purchasers entered into an agreement with the vendor for the purchase and sale of two strata lots on 18 August 2001. The building that was to contain the strata lots had not yet been built. The agreed purchase price of the property was $1,955,000. The agreement provided that the purchasers would pay an initial sum as a deposit and then at intervals two subsequent sums totalling $391,000. These deposit or earnest money payments were made between 20 August 2001 and 12 December 2001. A controversy thereafter arose between the purchasers and the vendor involving parking stalls and ultimately this seems to have been the rock upon which the transaction of purchase and sale foundered. The purchasers refused to complete at the date when completion was required and the vendor accepted their repudiation of the agreement and claimed the sums paid earlier as a deposit on the purchase price.

[3] Wilson J. found that the appellants were not lawfully entitled to repudiate the agreement. The issue in the litigation then became one of whether or not relief from forfeiture of the sum of $391,000 ought to be available to the purchasers. The appellants argued that the sum of the deposit was in the nature of a penalty and argued that relief from forfeiture ought to be available to them. The respondent vendor countered that the sum stipulated had been agreed to be a genuine pre-estimate of damages and a deposit of earnest money and that accordingly relief from forfeiture should not be available to the purchasers.

[4] The relevant clause in the agreement between the parties reads as follows:

Time will be of the essence hereof and unless all payments on account of the Purchase Price, together with adjustments thereto as provided herein and all other amounts payable hereunder, are paid when due, then the Vendor may at its option:

(a) cancel this Agreement by written notice to the Purchaser and in such event the amount theretofore paid by the Purchaser and all accrued interest shall be absolutely forfeited to the Vendor as liquidated damages (the Vendor and Purchaser hereby agreeing that such amount constitutes a genuine pre-estimate of the damages which the Vendor will suffer as a consequence of the Purchaser's default) and the Vendor shall be entitled to be paid such amount upon written demand therefor[e] by the Vendor. The Purchaser agrees that the Vendor will be entitled absolutely to any deposit and all accrued interest and hereby irrevocably appoints the Vendor as its agent to advise the deposit-holder to pay the sum forfeited to the Vendor; ...

[Emphasis added.]

[5] Wilson J. noted that the agreement between the parties expressly provided that the amount of the deposit was stipulated clearly to be a pre‑estimate of damages. It was contemplated by the parties at the time the transaction was entered into that it might be in excess of two years between the time of payment of the deposit and the time when the balance of the sale proceeds would be receivable, the time of completion, during which period there was of course some risk that the real estate market in the area might decline. The judge found it to be irrelevant that the vendor had been able to subsequently sell the units for substantially more than the sum the purchasers had contracted to pay for them. The property was sold on 23 February 2004, for the sum of $2,750,000, a considerable increase from the original agreed contract price of $1,995,000.

 (More)

Vancouver, VR 1411: Mary Buchanan buys a leaky rotten condo; court appoints administrator; owners have 30 days

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Fraser v. Strata Plan VR1411 et al,


2006 BCSC 1316

Date: 20060829
Docket: S062820
Registry: Vancouver

Between:

R. Craig Fraser

Petitioner

And

The Owners, Strata Plan VR1411, Maurice Duteau and Mary Buchanan

Respondents


Before: The Honourable Mr. Justice Cullen

Reasons for Judgment

Counsel for the Petitioner

M.A. Worfolk

Counsel for the Respondent, Mary Buchanan

F. Eadie

Date and Place of Trial/Hearing:

June 29, 2006


Vancouver, B.C.

[1] This dispute concerns a three unit strata corporation owned by the petitioner, R. Craig Fraser, and the respondents, Mary Buchanan and Maurice Duteau.

[2] There are cross-applications brought by Mr. Fraser and Ms. Buchanan. By his petition, Mr. Fraser seeks a series of orders set out in the petition at paragraphs (a) to (l) inclusive, as follows:

(a) a declaration that an amount of at least $560,000.00, plus a contingency of 20%, is required to pay for the rehabilitation of the building envelope on Building B at 1029 West 7th Avenue, Vancouver, B.C., V6H 1B2 as recommended by Spratt Emanuel Engineering Ltd. in its report dated June 1, 2005 (the “Building B Repairs”);

(b) in the alternative, a declaration that an amount of at least $725,000, plus a contingency of 20%, is required to pay for the rehabilitation of the building envelope on Buildings A and B at 1025, 1027 and 1029 West 7th Avenue, as recommended by Spratt Emanuel Engineering Ltd. in its report dated June 1, 2005 and by Morrison Hershfield in its report dated March 27, 2006 (the “Entire Strata Corporation Repairs”);

(c) a declaration that the Strata Corporation’s buildings require repair and the Strata Corporation is required under Section 72 of the Strata Property Act to repair and maintain;

(d) a declaration that the Strata Corporation is in breach of its obligation to repair and maintain the buildings;

(e) a declaration that sections 1 through 6 of the bylaw resolution filed by the owners of Strata Plan VR 1411 on August 11, 2003 and registered in the Land Title Office under BV313905 are invalid;

(f) a declaration that sections 8 and 10 of the bylaw resolution filed by the owners of Strata Plan VR 1411 on August 11, 2003 and registered in the Land Title Office under BV313905 are not enforceable;

(g) an Order directing that common expenses be paid by the owners in accordance with the Strata Property Act, SBC 1998, c. 43, as amended;

(h) an Order that Mary Buchanan and Maurice Duteau reimburse the petitioner for common expenses paid by him personally to date in accordance with their unit entitlement and the Strata Property Act;

(i) an Order authorizing and empowering the Strata Corporation to issue a special assessment to the Owners, based on their respective unit entitlement, not exceeding $560,000 plus a contingency of 20%, such assessment to be payable 14 days after the date this Order is granted;

(j) in the alternative, an Order authorizing and empowering the Strata Corporation to issue a special assessment to the Owners, based on their respective unit entitlement, not exceeding $725,000 plus a contingency of 20%, such assessment to be payable 14 days after the date this Order is granted;

(k) alternatively, a mandatory injunction requiring the Strata Corporation to expend the sum of up to $725,000, plus a contingency of 20%, to finance the Building B Repairs or the Entire Strata Corporation Repairs, said assessment to be due and payable 14 days after the date this Order is granted;

(l) in the alternative:

(i) an Order that an Administrator be appointed to exercise the powers and perform the duties of the Strata Corporation and the Strata Council for The Owners, Strata Plan VR 1411 (the “Strata Corporation”) in relation to the repair and maintenance of the Strata Corporation’s building envelope, and related components;

(ii) an Order that if a ¾ vote resolution to raise a special levy for the Repair is put to a vote of the owners, and such resolution does not pass, the Administrator and/or any interested party shall have leave to apply to this Court for an Order approving the resolution without a ¾ vote;

(iii) an Order that the Strata Corporation provide access to all information, records and documents requested by the Administrator, and provide such authorizations as are requested by the Administrator to obtain information, records and documents held by third parties which relate to the Strata Corporation;

(iv) an Order that the Administrator may retain the necessary professionals, including independent legal counsel, for opinions, advice and services in respect of his or her duties pursuant to this appointment as Administrator;

(v) an Order that the Administrator’s fees of $150.00 per hour plus disbursements shall be rendered monthly, and shall be payable by the Strata Corporation;

(vi) an Order that six months after the Administrator’s appointment, the appointment shall be reviewed by the Court, at which time the Administrator shall report to the Court with respect to the steps taken, the costs incurred as a consequence of his or her appointment as Administrator and whether his or her appointment as Administrator should continue;

(vii) an Order that the Administrator shall be at liberty to apply to the Court for directions to assist and permit him or her to discharge his or her duties as Administrator hereunder;

(viii) an Order that, if any ¾ vote resolution(s) or majority vote resolution(s) of the owners are required to give effect to any of the Orders set out herein, and if such resolution(s) do not pass at a general meeting of the owners, that the administrator and/or any party have leave to apply to this Court for an Order approving the resolution(s);

(ix) an Order that no person shall issue any process against the Administrator or any employee related to the Administrator’s appointment without leave of the British Columbia Supreme Court;

(x) an Order that the Strata Corporation be ordered and directed to proceed with the Repairs in such manner as the Strata Council or, if an Administrator is appointed, in such manner as the Administrator may decide;

[3] By notice of motion dated June 21, 2006, Ms. Buchanan seeks the following relief:

1. the owners of strata lots 2 and 3 contribute to the cost of remedial work to Building “B”, pro rata in accordance with their respective unit entitlements;

2. a declaration that, in accordance with the resolution of the Strata Corporation attached hereto as Appendix “A” (the “Existing resolution”) that the Defendants Fraser and Duteau are solely responsible to contribute to the costs of repair and maintenance of Building “B”;

3. the Existing Resolution be revoked and that the Resolution attached hereto as Appendix “B” be deemed to be passed by all the members of the Strata Corporation and that the same be filed in the Land Title Office against the title of the common property of the Strata Corporation as a resolution passed pursuant to Section 100 of the Strata Property Act;

4. in the alternative, that the Respondent, Mary Buchanan be solely responsible to contribute to a special levy to pay for the repairs to Building ”A” in the amount of $241,000 and the Respondent, Maurice Duteau and the Petitioner be solely responsible to contribute to a special levy to pay for the repairs to Building “B” in the amount of $410,000 pro rata in accordance with the relative value of their unit entitlements.

5. the Respondent, Mary Buchanan have her costs of these proceedings.

[4] The strata corporation consists of two buildings which share a common foundation. Building “A” houses the strata lot owned by Mary Buchanan and a garage forming part of strata lot 2, owned by Maurice Duteau. Building “B” is comprised of the balance of Mr. Duteau’s strata lot 2, and Mr. Fraser’s strata lot 3. The roof of Building “B” is on top of Mr. Fraser’s unit, which is built above Mr. Duteau’s unit. Buildings “A” and “B” do not share a common roof.

[5] There is evidence that the strata property is in need of significant repair. On June 10, 2005 the City of Vancouver sent a legal notice to the owners identifying “multiple indications of faulty construction” on the top floor of Building “B” and ordering the owners to:

1. make application for a building permit to re-construct the roof structure and supporting members to meet the minimum requirements of the by-law by June 27, 2005; and

2. commence repairs immediately upon issuance of the building permit.

[6] The particulars of the faulty construction identified by the City is as follows:

1. the roof structure is over-spanned and sagging;

2. vertical supports for the roof are not tied in to provide a continuous load path for the roof structure;

3. beams and lintels and top wall plates are not supported to carry the superimposed loads;

4. the bedroom wall is buckling near the top from lack of support;

5. there is evidence of corrosion of wall members and fasteners of exterior gypsum sheathing board; [and]

6. the top wall plate is comprised of non-structural material (flashing and partition gauge metal).

[7] The previous owners of Ms. Buchanan’s strata lot 1, Manoj Gupta and Dinaya Kulkarni, undertook significant renovations to lot 1. The City of Vancouver legal notice does not apply to Building “A” which houses that strata lot. The renovation work to strata lot 1, was made without any contribution from the other lot owners through the operating fund contingency reserve fund or otherwise, although, according to Mr. Gupta, the renovations included approximately $63,000 of maintenance and repair to common property associated with Building “A”.

[8] Mr. Gupta deposed that he sought to have contribution from Mr. Fraser and Mr. Duteau towards the repairs. According to Mr. Gupta, Mr. Fraser was not willing to contribute to the cost of repairs and asserted to him that in the past, owners of the units had always paid for the repairs to their own buildings.

[9] Before strata lot 1 was sold to Ms. Buchanan, the strata corporation passed a by-law amendment on August 11, 2003. The amendment was unanimously approved by the then owners in the strata corporation, Mr. Gupta and Ms. Kulkarni, Mr. Duteau and Mr. Fraser. The amended by-laws read as follows:

Types

1. Strata lot 1 shall be one type of strata lot and shall be referred to in these bylaws as the “Strata Lot in Building A”.

2. Strata lots 2 and 3 shall be a different type of strata lot and shall be referred to in these bylaws together, as the “Strata Lots in Building B”.

3. A contribution to the operating fund which relates to and benefits only the Strata Lot in Building A shall be borne only by the owner of the Strata Lot in Building A.

4. A contribution to the operating fund which relates to and benefits only the Strata Lots in Building B shall be shares only by the owners of the Strata Lots in Building B. Each strata lot’s share of that operating fund contribution shall be in the proportion that each strata lot’s unit entitlement bears to the total unit entitlement of the Strata Lots in Building B.

5. A contribution to the operating fund which relates to and benefits all of the strata lots shall be shared by the owners of all strata lots. Each strata lot’s share of that operating fund contribution shall in the proportion that each strata lot’s unit entitlement bears to the total unit entitlement of all strata lots.

6. A contribution to the operating fund that relates to and benefits only limited common property shall be shared only by owners of the strata lots entitled to use the limited common property. Each strata lot’s share of that operating fund contribution shall be in the proportion that each strata lot’s unit entitlement bears to the total unit entitlement of all the strata lots entitled to use the limited common property.

7. Each strata lot’s share of a contribution to the contingency reserve fund or a special levy shall be shared by all strata lots in the strata corporation in proportion to their unit entitlement.

Sole Responsibilities of the Strata Lot in Building A

8. Notwithstanding any bylaw contained in the Schedule of Standard Bylaws to the Strata Property Act, S.B.C. 1998, c. 43 (the “Act”), the owner of the Strata Lot in Building A has the sole duty to repair and maintain the following:

c. chimneys, balconies, light fixtures, eavestroughs, downpipes and other things attached to the exterior of Building A, excluding the exterior stairs and the courtyard between Building A and Building B (as shown on the strata plan);

d. doors, windows and skylights on the exterior of Building A, except for the two doors to the garage of Strata Lot 2; and

e. fences, railings and similar structures that enclose patios, balconies and yards, except for the railings along the external stairs and the railings connecting Building A and Building B.

Sole Responsibilities of Strata Lot 2

9. Notwithstanding any bylaw contained in the Schedule of Standard Bylaws to the Act, the owner of Strata Lot 2 has the sole duty to repair and maintain the two doors to the garage of Strata Lot 2.

Shared Responsibilities of Strata Lot 2 and Strata Lot 3

10. Notwithstanding any bylaw contained in the Schedule of Standard Bylaws to the Act, the owners of Strata Lot 2 and Strata Lot 3 have the shared duty to repair and maintain the following:

a. the structure of Building B (as shown on the strata plan as building B),

b. the exterior of Building B,

c. chimneys, balconies, light fixtures, eavestroughs, downpipes and other things attached to the exterior of building B, excluding the exterior stairs and the courtyard between Building A and Building B,

d. doors, windows and skylights on the exterior of Building B, excluding the door to the Meter Room as shown on the strata plan (commonly referred to as the “utility room”); and

e. fences, railings and similar structures that enclose patios, balconies and yards, except for railings along the external stairs and between Building A and Building B.

Responsibilities of the Strata Corporation

11. The Strata Corporation must repair and maintain the following:

a. the railings along the external stairs and the railings connecting Building A and Building B;

b. the external stairs;

c. the utility room;

d. the courtyard between Building A and Building B;

e. the sump pump that is located in the garage of Building A; and

f. all utility lines services and drains.

[10] By-laws 1 to 6 and 8 to 10 reflect the past practice of the strata lot owners to apportion responsibility for expenses to owners according to whether the expenses relate to Building “A” or Building “B”. By-law 7 appears inconsistent with by-laws 1 to 6, and 8 to 10 as it provides that each strata lot’s share of contributions to the emergency reserve fund or a special levy, is to be shared by all strata lots within the corporation on the basis of unit entitlement.

[11] In addition to the remediation identified by the City of Vancouver legal notice, there is evidence that the strata property has other building envelope deficiencies effecting both Building “A” and Building “B”, leading to “water ingress problems”. In June of 2005, Mr. Fraser received a report from Spratt Emanuel Engineering Ltd. (phonetic) recommending extensive building envelope remediation to Building “B” “including new roofing, new roof structure, new wall cladding, new wall structure, new windows, new doors, additional insulation, and better measures to deal with the thermal bridging evident in the walls and ceilings of the living space.” In his reporting letter to Mr. Fraser dated June 1, 2005, Mark Emanuel of Spratt Emanuel Engineering Ltd. noted as follows:

BACKGROUND

The existing top storey of this 3-unit strata complex was altered at the time of construction to comply with the City of Vancouver height restrictions. We understand that the roof had originally been constructed at a higher elevation and was cut down to comply with the City of Vancouver zoning By-Laws which require a maximum elevation of 25 ft 0 inches. The original over-height structure was badly reconstructed at a new lower elevation to meet the City of Vancouver zoning and development By-Laws. The resulting existing structure does not comply with the Building By-Law at the time of construction Vancouver Building By-Law 6134, nor does it comply with the current Vancouver Building By-Law 8057, 1999. The following deficiencies were noted:

DEFICIENCIES:

1. A mix of combustible and non-combustible construction materials were used. The requirement was for non-combustible structure.

2. The reconstructed structure contains window and door headers which are not supported by load bearing members.

3. Loan bearing members, where present, do not allow adequate transfer of load to subsequent lower floors.

4. The roof structure appears to be under capacity due to the use of 2x4 wood roof rafters placed continually.

5. Lack of adequate Environmental Separation, Part 5 of Vancouver Building By-Law 8057, 1999 requires adequate thermal and moisture protection. The existing structure offers no dedicated roof insulation. Heat transfer from the exterior to the interior has resulted in condensation within the roof structure and subsequent mould, fungus and deterioration. The existing insulation value does not comply with Vancouver Building By-Law 8057, 1999 as well as the older By-Law in place at the time of construction.

6. Unsafe wiring is present with inadequate clearance between framing members, wiring and wall surfaces.

7. Deficiencies of the exterior building envelope, due to improper roofing, flashings, wall cladding assemblies, insulation and vapour barrier assemblies, window detailing, door detailing, and deck detailing have all contributed to premature building envelope failure, resulting in rainwater infiltration and condensation on building surfaces. The resultant damage consists of heavy rust to steel structural components, wood rot, fungus and mould on wood components, and subsequent damage to interior finishes.

RECOMMENDATIONS:

We recommend that extensive building envelope remediations are required at this building. The remediations should include new roofing, new roof structure, new wall cladding, new wall structure, new windows, new doors, additional insulation, and better measures to deal with the thermal bridging evident at the walls and ceilings of the living space. This can best be accomplished by placing insulation out-board of the walls and roof of the existing living space. In our opinion this additional exterior wall insulation will qualify for the City of Vancouver FSR exemption. The addition of insulation to the roof will cause encroachment beyond the current building height, which we understand is at the allowable limit.

Should you have any questions please do not hesitate to contact the undersigned.

[12] Mr. Fraser also received a report from Richard Balfour of Balfour and Company Architects, detailing the construction deficiencies in Building “B” and estimating the cost of repairs at approximately $560,000.

[13] For her part, Ms. Buchanan obtained a report from Morrison Hershfield dated March 27, 2006 expressing the opinion that Building “A” also requires significant “envelope repair work” and estimating the cost of that work at approximately $234,000.

[14] On May 4, 2006, Mr. Fraser received a quotation from Coast Pro Contracting Ltd. estimating the cost of remediating both buildings together at $723,000 plus a 10% to 15% contingency allowance. The cost of remediating each building separately is $224,000 for Building “A” and $534,000 for Building “B” for a total of $758,000 plus the 10% to 15% contingency allowance.

[15] The Coast Pro quotation assessed the remediation of the roof structure of Building “B” at $198,000 and the balance of the remedial envelope work at $210,000 for Building “A” and $315,000 for Building “B” if done together, and $224,000 and $336,000 respectively if done separately.

[16] Mr. Fraser obtained a further report from VVV Services Ltd. on May 17, 2006 which confirmed the identified problems reflected in the earlier reports and identified some additional problems relating to the foundation, providing an approximate budget of $410,000 for remediation. According to the VVV report, the breakdown of costs associated with the remediation of the envelope for Building “B” includes $220,000 for remediation of the stucco walls, and $81,000 for the roof, comprised of renewal of the roof structure and membrane ($45,000); window replacement and roof deck door replacement ($22,000); and, roof deck and pedestrian grade membranes ($16,000). The balance of the budget relates to the problems identified in the foundation and a contingency amount of $75,000 for unseen deficiencies.

[17] In support of his position, Mr. Duteau submits a report from Andrew Mill, a structural engineer with David Nairne & Associates respecting the roof on Building “B”. Mr. Mill concluded in his report as follows:

The 4 inch wood decking system spanning the full width of the building from the east wall to the west wall has sufficient capacity to safely support the design live loads. If the north sloped portion of the roof is framed in accordance with the building permit drawings, the joist framing is satisfactory, only localized reinforcing of the built up wood beams supporting the joice would be required.

[18] Mr. Mill estimated the cost of the work to reinforce the wood roof framing would not likely exceed $15,000. His analysis was confined to a structural analysis of the existing roof framing.

[19] When Mr. Fraser initially obtained his engineering and architecture reports in relation to Building “B”, it was on the assumption that the amended by-laws validly allocated the costs and responsibilities for remediating Building “B” to himself and Mr. Duteau alone. Mr. Duteau disagreed with Mr. Fraser’s view of what was needed to remediate the building and accordingly, Mr. Fraser sought legal advice from Michael Walker of Miller Thomson concerning the appropriate action to take under the Strata Property Act, R.S.B.C. 1998, c. 43 (the “SPA”) to deal with the building’s problems. After meeting with Mr. Fraser, Mr. Walker wrote a letter dated December 21, 2005 on behalf of Mr. Fraser to Mr. Duteau and Ms. Buchanan. Mr. Walker’s letter outlines Mr. Fraser’s position which is substantially the same as he takes on this application. The letter reads, in part, as follows:

We have been retained by Mr. Craig Fraser, registered owner of Strata Lot 3, Strata Plan VR1411, located at 1029 West 7th Avenue. We have been provided with a copy of the City of Vancouver’s letter to Mr. Fraser dated June 10, 2005 (“City Notice”), a copy of which is enclosed, ordering the reconstruction of the roof structure and supporting members of Building B (1027/1029 West 7th Avenue).

In addition to the conditions noted in the City Notice, consultants retained by our client have noted a number of other serious deficiencies in the building construction, including inadequate design and inappropriate materials for decks and floors, and extensive building envelope deficiencies. We enclose correspondence from Richard Balfour & Company, Architect and from Spratt Emanuel Engineering Ltd. (the “Consultants’ Reports”).

As you will see below, the responsibility for dealing with the City Notice rests with the strata corporation not with Mr. Fraser as the owner of the top floor strata lot in Building B. Therefore, Mr. Fraser has reluctantly instructed us to write to you proposing that the owners raise funds to comply with the City Notice by a special levy.

We have reviewed the bylaw resolution filed by the owners of Strata Plan VR1411 on August 11, 2003 and registered in the Land Title Office under BV313905. It is our legal opinion that sections 1 through 6 of these bylaws are invalid as the Strata Property Act did not permit such a bylaw to be adopted after January 1, 2002, and that sections 8 and 10 are not enforceable as they contravene section 72 of the Strata Property Act, which provides as follows:

Under section 68 of the Strata Property Act, the boundary of each strata lot is the mid-point of the wall, floor or ceiling. From the mid-point outward is common property which must be repaired and maintained by the strata corporation as a common expense of all owners.

We have advised Mr. Fraser that the strata corporation has a legal obligation to comply with the City Notice by:

1. retaining consultants and contractors to undertake the required work; and

2. raising funds to finance this work by special levy under section 108 of the Strata Property Act.

To this end, we enclose a resolution for adoption by written consent of the owners. The amount to be raised by special levy under this resolution is based on the budget estimate of Mr. Balfour, which we attach for your reference. Please note that Mr. Balfour’s estimate is subject to the qualifications noted on it. Following adoption of this resolution, the strata council (which in the case of a three-unit strata corporation is made up of all owners pursuant to section 9 of the standard bylaws set out in the Strata Property Act) will have authority to collect the special levy contributions and apply them towards correction of the deficiencies noted in the City Notice. Any excess funds remaining from the special levy after completion of the work will be refundable to the owners pursuant to section 108 of the Strata Property Act. The strata corporation, through the strata council, will also have a legal obligation pursuant to the strata corporation, through the strata council, will also have a legal obligation pursuant to the Strata Property Act to engage consultants and contractors to commence repairs in compliance with the City Notice.

It should be noted that the principles outlined above will also apply to any deficiencies in the structure of Building A.

This is a matter of great urgency to all owners within the strata corporation. If the strata corporation does not adopt the enclosed resolution and proceed promptly and diligently to comply with the City Notice, our client will be entitled to apply to BC Supreme Court for an order under section 165 of the Strata Property Act requiring the strata corporation to perform its legal duties and imposing a special levy on the owners to finance the required work. In addition, if the strata corporation does not proceed diligently, my client will be entitled to apply under section 174 of the Strata Property Act for the appointment of an administrator to exercise the powers and perform the duties of the strata corporation. In either event, our client will also seek an award of costs against the strata corporation, which award will be payable only by the owners of strata lots 1 and 2.

We request your prompt attention to this matter to protect the investments of all owners and to avoid costly litigation. If we have not received the enclosed resolutions signed by all owners by January 15, 2006, our client is prepared to initiate legal proceedings against the strata corporation.

[20] Mr. Walker’s letter did not lead to a resolution of the issue of the responsibility for the remediation of Building “A” and Building “B”. Mr. Duteau has taken and continues to take the position that substantial parts of the remediation work to the roof identified in Mr. Walker’s letter as necessary are actually not, and in fact constitute renovations designed only to benefit Mr. Fraser. Ms. Buchanan has resisted and continues to resist any responsibility for any remediation of Building “B” relying on the amended by-laws and on the unfairness to her, given her reliance on those by-laws and representations concerning them when she decided to purchase her unit.

[21] Ms. Buchanan’s alternative position is taken in an action she commenced on February 14, 2006 against the vendors of her unit, Mr. Gupta and Ms. Kulkarni, and against Mr. Fraser, Mr. Duteau, the strata corporation and Richard Neilson, the lawyer who handled the conveyance of the property. In that action, Ms. Buchanan seeks a declaration that she is not required to contribute to the remediation costs of Building “B”, or in the alternative, as against the strata corporation and the co-owners, she seeks relief pursuant to s. 164 of the SPA. As against Mr. Gupta and Ms. Kulkarni, Ms. Buchanan seeks damages for negligent and fraudulent misrepresentation in connection with the amended by-laws, and as against Mr. Neilson, damages for professional negligence for failing to advise her with respect to the validity of the amended by-laws.

[22] Ms. Buchanan deposed that she entered into a contract of purchase and sale dated July 10, 2003 with Mr. Gupta and Ms. Kulkarni in relation to strata lot 1 on the basis of representations that she would not be responsible for the care and maintenance of Building “B” and that a resolution to that effect would be passed by the strata corporation before the completion date of August 26, 2003 (the amendments as earlier noted, were passed and filed on August 11, 2003).

[23] Ms. Buchanan deposed that as a result of the representations and resolutions that were made, she did not concern herself with the condition or future repair issues with respect to Building “B” as she had with Building “A” (by obtaining a building inspection) before deciding to enter into the agreement. She also deposed that in her view, strata lot 1 would have a significantly higher value if the owner could deal with Building “A” independent of the other two strata lot owners and that it would decrease in value if the owner is required to contribute to the costs of repair and maintenance of all the common property of the strata corporation pro rata in accordance with the unit entitlement of strata lot 1. Ms. Buchanan submits evidence that the difference in value between strata lot 1 with independent responsibility and strata lot 1 with interdependent responsibilities is between $40,000 and $50,000.

[24] Although not parties to this petition, because it implicates the validity or invalidity of the amended by-laws which are at the heart of the lawsuit initiated by Ms. Buchanan, Mr. Gupta, Ms. Kulkarni and Mr. Neilson were represented at and made submissions in the hearing of the petition with respect to the validity of the by-laws at issue and the appropriate exercise of the court’s discretion in relation to Ms. Buchanan’s responsibility for contribution towards the remediation of Building “B”.

THE POSITION OF THE PETITIONER

[25] The petitioner relies on the basic proposition that under the present SPA, the strata corporation has a duty to repair and maintain common property which includes the building envelope encompassing the deficiencies identified in the present property. In particular, the petitioner relies on s. 3 of the SPA which reads as follows:

Except as otherwise provided in this Act, the strata corporation is responsible for managing and maintaining the common property and common assets of the strata corporation for the benefit of the owners.

[26] The petitioner also relies on s. 72 which provides as follows:

(1) Subject to subsection (2), the strata corporation must repair and maintain common property and common assets.

(2) The strata corporation may, by bylaw, make an owner responsible for the repair and maintenance of

(a) limited common property that the owner has a right to use, or

(b) common property other than limited common property only if identified in the regulations and subject to prescribed restrictions.

(3) The strata corporation may, by bylaw, take responsibility for the repair and maintenance of specified portions of a strata lot.

[27] The petitioner contends that pursuant to sections 3 and 72(1), the strata corporation has a duty to repair and maintain the roof and the building envelope which it has, to date, failed to do because the respective positions of Ms. Buchanan and Mr. Duteau prevent the necessary authorization to proceed.


 (More)

Leaky condo owners battle Fairchild Projects, Scott Construction, and James Cheng, et al

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners, Strata Plan LMS 1751 v. Fairchild Projects No. 12 Ltd. et al.,

2006 BCSC 1306

Date: 20060825
Docket: C996121
Registry: Vancouver

Between:

The Owners, Strata Plan LMS 1751

Plaintiffs

And

Fairchild Projects No. 12 Ltd., Scott Management Ltd.,
J.C. Scott Construction Ltd., James K.M. Cheng Architect Inc.

Defendants


Before: The Honourable Mr. Justice Williamson

Reasons for Judgment

Counsel for the Plaintiffs

Murray Wolf
Ross McLarty

Counsel for Innovatech Building Systems

Wendy Baker

Counsel for Sealed Air (Canada) Co./CIE

Thomas S. Woods

Counsel for Intertek Testing Services NA Ltd. and Steven Moskalyk

James C. MacInnis

Counsel for Alliance Roofing Systems Ltd.

James K. Fraser

Counsel for Delta Pacific Landscaping Ltd.

Neil R. MacLean

Date and Place of Hearing:

July 28, 2006

Vancouver, B.C.

[1] This is an application pursuant to Rule 15(5) to join 16 additional parties as defendants in the action. The lawsuit concerns a condominium project adjacent to the Oakridge Shopping Mall in Vancouver. There are two primary claims. One concerns water seepage through the building envelope causing damage to the buildings. The second relates to water seepage into the development’s underground parkade.

[2] The plaintiff’s property includes a building of six storeys, a building of four storeys, and two townhome-style buildings. There are 113 units involved. There is also a central courtyard with a large pond under which lies a portion of the parkade.

[3] The condominium development was constructed in 1993 and 1994. The City issued a certificate of occupancy in December of 1994.

[4] The occupants and the strata management company discovered problems with water seepage shortly after construction. They undertook repairs in 1996, but found further problems in 1997 and 1998.

[5] In June of 1999, the plaintiffs retained legal counsel. Negotiations with the developers commenced at that time. The writ was served in November of 2000; the statement of claim in October of 2002.

[6] The 17 proposed additional defendants appear to be sub-contractors or suppliers of material for the project. This application is limited to 16 of the 17 proposed defendants because the 17th, NAP Commercial, a supplier, is a company that was dissolved and the plaintiffs are awaiting confirmation of the company’s limited restoration.

[7] Six of the proposed defendants have responded to and oppose the joinder application: Steven Moskalyk, Intertek Testing Services NA Limited, Sealed Air (Canada) Co., Alliance Roofing Systems Ltd., Innovatech Building Systems Ltd., and Delta Pacific Landscaping.

[8] A seventh proposed defendant, Jeff Wilson Holdings, takes no position on the application. An eighth, Power Drywall, requested that other counsel inform the court that it required an adjournment. I did not consider that to be a formal application for adjournment and declined to adjourn the matter.

[9] Eight of the proposed defendants have not responded to the materials served on them. They are:

Gordon Spratt,

67219 B.C. Ltd. formerly Gordon Spratt & Associates Ltd.,

429641 B.C. Ltd. formerly CML Contracting Limited,

Micron Business Enterprises Ltd., formerly Micron Construction Ltd.,

Prestige Glass Ltd.,

168013 B.C. Ltd., formerly Rockingham Engineering Limited,

Spider Construction Ltd., and

Bob Ross.

[10] The present defendants took no position on these applications.

[11] Rule 15(5)(a) states that at any stage of a proceeding the court may order that a person be added as a party where there may exist a question or issue relating to or connected with the subject matter of the proceeding “which in the opinion of the court it would be just and convenient to determine”.

[12] The factors to be considered in the exercise of the discretion pursuant to this Rule are set out in Teal Cedar Products (1997) Ltd. v. Dale Intermediaries Ltd. (1996), 19 B.C.L.R. (3d) 282, 46 C.P.C. (3d) 183, at para. 67. They are:

(a) the length of the delay,

(b) the reason for the delay,

(c) whether the limitation period has expired, and

(d) the presence or absence of prejudice.

[13] In addition, one must consider the extent of the connection, if any, between the parties sought to be added and an existing party that relates to the relief sought or the subject matter of the existing action.

[14] I turn to those factors.

Delay

[15] The delay here has been lengthy. The project was completed in 1994, 12 years ago. The material shows that there were water seepage problems from the beginning. Nevertheless, the plaintiffs did not commence their action until November of 1999, a delay of five years. They did not file a statement of claim until October 16, 2002, a delay of three years. Now, four years later, they are seeking to add 17 defendants. Each of these delays is lengthy. Together, they total approximately 12 years. I consider this a lengthy delay.

Reasons for Delay

[16] I am not persuaded that the delay has been explained satisfactorily. As I understand the submission of the plaintiffs, it is their position that they knew there were water seepage problems from 1995 onward. Nevertheless, they say that at that time they were not aware of the extent of the problem. Further, they say settlement discussions with the developer were ongoing until 2002. They say that it wasn’t until they received reports from engineers in 2000 and 2002 that they realized the significant costs involved in repairing the water seepage problems. Finally they say they changed counsel three times.

[17] I am not persuaded that it is the degree of the potential damage that is the determinative factor in justifying delay. I find on the material that the plaintiff knew in the mid to late 1990s that they had water seepage problems. They were sufficiently concerned that they commenced an action in November of 1999. That action was commenced against the present defendants who were the project developer, architect and builder. It would have been a simple matter, through appropriate use of the discovery procedure, to obtain a list of relevant sub-contractors or suppliers.

[18] This factual situation is very similar to that in Strata Plan LMS 343 v. Coquitlam (City), 2005 BCSC 1150 in which Pitfield J. observed at para. 21:

The plaintiff says it did not have sufficient information to know whether it was reasonable to pursue litigation and was not aware of the identity of all parties who may have contributed to or caused the deficiencies. . . The evidence establishes that the plaintiff knew the identity of the developer and general contractor at June 30, 2000. In fact, the general contractor had carried out some of the repairs in the 1990s. The plaintiff knew the identity of the architect at June 30, 2000. It may not have been aware of Indalex and Starline but the identity of the sub-trades and suppliers could readily have been determined by request directed to the general contractor.

[19] That is the situation here.

[20] I also note that in 1999 an engineering company prepared a report indicating that a waterproofing membrane supplied by the predecessor company of one of the proposed defendants was potentially related to the leakage problem in the parkade. I reject the suggestion that the owners did not know of this report.

[21] Nor can “negotiations” or change of counsel by the plaintiffs justify such a delay.

[22] In short, I find the delay in this case to be very long. I conclude that there is no satisfactory explanation for that delay.

The Limitation Period

[23] There is a debate between the parties as to whether the limitation period is two years or six years. I am prepared to accept for the purposes of this decision that the limitation period, at least with respect to some of the proposed defendants, is six years. See: Strata Plan NW3341 v. Delta (Corp.) (2002), 5 B.C.L.R. (4th) 250, 2002 BCCA 526.

[24] The postponement provisions of s. 6 of the Limitation Act R.S.B.C. 1996, c. 266, apply to claims, such as those here, for damage to property. The question is, when did the plaintiffs have within their means knowledge of facts that a reasonable person, having taken appropriate advice, would regard as showing that an action would have a reasonable prospect of success and that they ought to bring an action against these proposed defendants. See 410727 BC Ltd. v. Dayhu Investments Ltd. (2004), 30 B.C.L.R. (4th) 157, 2004 BCCA 379.

[25] I am not persuaded, as the plaintiffs submit, that they did not know and could not have known of the extent of the problem or of the proposed defendants’ role in it until July of 2000. Rather, I am satisfied on the material before me that at least at the time the writ was filed, November 19, 1999, the plaintiffs had within their means knowledge of facts which a reasonable person would regard as demonstrating that they would have a reasonable prospect of success in an action against the proposed defendants. I conclude, therefore, that the limitation period has expired.

Prejudice

[26] I am satisfied that each of the proposed defendants who has appeared and made submissions on this application has demonstrated prejudice.

[27] Before dealing with the prejudice that has been raised by these proposed defendants, I observe that the plaintiffs have put the court in a difficult position by failing to tender a draft amended statement of claim setting out the specific causes of action alleged against the various proposed defendants. While this is not determinative, it makes it difficult for the proposed defendants and the court to determine questions such as prejudice.

[28] The proposed defendant Sealed Air (Canada) Co. is the successor company to the manufacturer and supplier of the waterproofing membrane installed on the project. There is an allegation in the materials that a contractor, who is also a proposed defendant, Delta Pacific Landscaping, ran a bobcat over this membrane and damaged it. If that were proven, absent some other evidence, it is doubtful that Sealed Air would be liable. Delta has submitted material to show that some critical witnesses have died, other employees are no longer with the company, and many documents no longer survive. These are typical of the types of prejudice that arise when there has been a lengthy delay in bringing an application to add a defendant.

[29] Innovatech, another proposed defendant, was involved in the installation of metal panels. An affidavit filed on behalf of the plaintiffs contains evidence that the plaintiffs knew as early as February of 1998 that some of the leaks “may be due to metal panels installed by Innovatech Building Systems”, a quotation from a letter filed as Exhibit O to that affidavit.

[30] Innovatech submits that had it known at that time that it was a potential defendant, it would not suffer the prejudice it now faces in circumstances where the company was dissolved some seven years ago. It submits, as a result, that it is prejudiced in its defence.

[31] Affidavit material filed by proposed defendants Intertek and Moskalyk discloses that Intertek destroyed its documents relating to the project, including inspection reports, in 2004, ten years after their work on the development was completed. Moskalyk further deposes that he has no independent memory of the inspection work he undertook on the project some 12 years ago. Similar to Innovatek, these proposed defendants say that had they known much earlier of their potential exposure, they would have preserved documents. Thus, these respondents submit, they are prejudiced in preparing an adequate defence.

[32] The proposed defendant Alliance Roofing has also filed affidavit evidence that it routinely destroyed documents a number of years after a particular project was completed and that its work on this project was completed in June of l994. A search has disclosed no remaining documents. I note the material also discloses that Alliance was asked to return to the project on a number of occasions after completion not to correct deficiencies in its work, but to repair problems with the work of others. This is consistent with the plaintiffs knowing who Alliance is and what it did.

[33] I am satisfied that given the extraordinarily lengthy delay here and the evidence of their actions long after the project was completed, these proposed defendants have demonstrated significant prejudice.

The Connection

[34] The final factor to be considered in such an application is the extent of the connection between the proposed defendants and the relief sought or the subject matter of the existing action.

[35] There is a paucity of evidence with respect to that connection. The proposed defendants appear to be sub-contractors or suppliers involved in the supply of materials or the installation of those materials which may be contributing to the leaks. But, as noted above, there is no proposed amended statement of claim before the court on this application. To say that a particular supplier or sub-contractor was involved in the project is not sufficient to demonstrate the type of connection to the subject matter or the relief sought necessary for a successful application pursuant to Rule 15(5). The plaintiff would have to identify something which it is alleged the proposed defendant did or failed to do, whether it was installation or supplying of material, which it claims was a cause of the damage. While that may be implied in the application here, no specifics have been alleged.

[36] The plaintiffs assert that materials they filed on this application “clearly establish a possible connection between the proposed defendants and the subject of the existing claim”. They refer specifically to paras. 92 to 104 of the affidavit of one Fred Warriner, a beneficial owner of one of the units and a member of the Strata Council. However, ten of those paragraphs do no more than refer to contracts with various suppliers or sub-contractors. To say a company was one of many contracted to do work on a large project is not to show a connection to the relief sought or the subject matter of the claims.

Result

[37] For all of the above reasons, I conclude that it would not be just and convenient to join as defendants the respondents listed in para. 7 above. The application with respect to these respondents is dismissed. These respondents will have the costs of this application at scale 3.

[38] This leaves those potential defendants who have not responded. This has caused me some difficulty as it would seem they are in the same position has those proposed defendants who have responded. I conclude, however, that it would be an error to so speculate. These proposed defendants were served and had notice of the application. They did not respond. I conclude that being so, I have no reason not to add them as defendants. I so order.

[39] Finally, the application to add the supplier NAP Commercial is adjourned generally.

[40] Order accordingly.

“L.P. Williamson, J.”
The Honourable Mr. Justice L.P. Williamson

Mr. Perera and Ms. Juteau purchase a rotten sail boat to live on

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Perera et al v. De Groot et al,

2006 BCSC 1281

Date: 20060822
Docket: 05/2006
Registry: Victoria

Between:

Dan Perera and Carrie Juteau

Plaintiffs

And:

Jan J. De Groot, Stephen T. Stratton and
Coast Capital Savings Credit Union

Defendants


Before: The Honourable Mr. Justice Johnston

Reasons for Judgment

Counsel for the Plaintiffs:

D. Williams

Jan J. De Groot:

In Person

Stephen T. Stratton:

In Person

Date and Place of Trial:

20060220-20060221; 20060421 and 20060714

Victoria, B.C.

[1] Mr. Perera and Ms. Juteau wanted a sail boat they could live on while they learned to sail. They had no experience living on the water or sailing. In March of 2003 they found a sail boat offered for sale at a price they could afford in Vancouver. To buy the boat they needed a loan from the Credit Union for the full price of $30,000, and before the Credit Union would lend them money it required that they obtain a pre-purchase survey of the vessel. The Credit Union supplied a list of marine surveyors and Mr. Perera selected the defendant Mr. De Groot from that list. Mr. De Groot instructed Mr. Stratton to perform the survey on his behalf.

[2] On March 17, 2003 the defendant Mr. Stratton surveyed the sail boat, and discussed some of his observations with Mr. Perera. Either Mr. Stratton or Mr. De Groot provided a written survey report to Mr. Perera within a matter of days.

[3] Mr. Perera and Ms. Juteau bought the sail boat, moved it to Sidney, and began to live aboard. Over the summer of 2003, they went sailing every couple of weeks, when they could arrange an experienced sailor to accompany them on the boat. In January 2004, they had a small accident with the boat, and that led Mr. Perera and Ms. Juteau to discover significant rot in the bow portion of the hull.

[4] Mr. Perera and Ms. Juteau attempted to do repairs over the summer of 2004. In November 2004, they hauled the boat out of the water to make further repairs, and discovered extensive rot in the hull. On advice received from another marine surveyor, they decided not to put the boat back in the water and have been living on the boat on dry land ever since.

[5] Mr. Perera and Ms. Juteau now claim against Mr. De Groot and Mr. Stratton for negligent misrepresentation in the advice given orally and in the written survey; for negligence in the way in which Mr. Stratton conducted the survey; and for breach of the contract formed when Mr. Perera retained Mr. De Groot to conduct the survey.

[6] Mr. Perera and Ms. Juteau claim damages in negligence and for breach of contract.

[7] I shall deal in turn with negligent misrepresentation, then negligence in the performance of the survey, then with the claims in contract, and finally, with the questions of damages as they arise.

NEGLIGENT MISREPRESENTATION

[8] To succeed the plaintiffs must show that:

1. The defendants owed them a duty of care based on a "special relationship";

2. The defendants made a representation which was untrue, inaccurate or misleading;

3. The defendants acted negligently in making the representation;

4. The plaintiffs relied in a reasonable manner on the representation; and

5. The plaintiffs' reliance on the representation was detrimental in that it caused them damages.

See: Queen v. Cognos Inc., [1993] 1 S.C.R. 87.

1. Special relationship

[9] Queen v. Cognos sets out considerations relevant to the existence of a special relationship at para. 46. Applying those considerations, I find that a special relationship existed in this case for these reasons:

a) First, I find that it was foreseeable to the defendants that Mr. Perera, who had the contact with Mr. De Groot and Mr. Stratton, would rely on any representations made orally or in writing by Mr. Stratton.

b) I find that it was reasonable in the circumstances of this case that Mr. Perera rely on any representations contained in the survey report or in the statements made by Mr. Stratton to Mr. Perera.

These two findings are relatively easily made as they flow from the relationship between the parties, the details of which were known sufficiently to each of the parties, and the expectations reasonably raised by that knowledge. They include that Mr. Perera wanted a pre-purchase survey because he was contemplating the purchase of the sail boat, and Mr. De Groot, as the owner and operator of the survey firm, and Mr. Stratton, as the surveyor selected by Mr. De Groot to do the survey, were knowledgeable in the field of marine surveys.

c) I find that it was foreseeable that Mr. Perera would suffer damage if the statements made in the survey were wrong, were made negligently, or were simply not true. That finding flows directly from the ordinary incident of the relationship between marine surveyor and client - that the client is relying on the marine surveyor to exercise reasonable diligence and skill so that the client can make an informed decision whether to buy a boat.

d) It is not unreasonable in this case to impose a duty of care upon the defendants, primarily because they were retained in order that their skill and ability assist Mr. Perera in his decision to purchase the sail boat.

[10] But for a notation above the signature on the survey that it is delivered "Without Prejudice", there is nothing to suggest that the defendants were not willing to accept responsibility for what was said in the survey. I find that the notation "Without Prejudice" has no effect in this case because it completely undercuts the purpose for which the defendants were hired. There was no suggestion in evidence or argument that the defendants were relying on this phrase to avoid responsibility, or that the surveyors did not expect that Mr. Perera could rely on what was contained in the survey. While it might be possible in some circumstances for someone with special skill to be retained to give an opinion based on that skill yet deny any responsibility if the opinion were delivered without any regard to diligence, the circumstances are not found here. I conclude that the insertion of “Without Prejudice” words above the signature on the survey report were not intended to have any legal effect and do not have any legal effect.

2 & 3. Were the representations untrue, inaccurate or misleading, and did the defendants act negligently in making them?

[11] These two questions can most conveniently be answered together, as they go to the heart of the issues in negligence.

[12] Mr. Perera and Ms. Juteau complain primarily of two statements in the survey, the first is that the hull of the sail boat:

... was found to be in good condition with all laminates well bonded.

And in the summary:

For her age, this vessel was found to be in good condition and has been well maintained. ...

And:

... Subject to compliance with the recommendations as stated above, the vessel is considered suitable for her intended service.

[13] Mr. Perera and Ms. Juteau rely mainly on two arguments. The first arises from the fact that the sail boat was found to have been so rotten that it was not fit to sail 20 months or so after the defendants' survey, along with the opinion of another marine surveyor, Mr. Down. They say each establishes that Mr. Stratton missed rot that he should have detected when he did his survey. The second argument is that Mr. Stratton breached his duty to inform or advise Mr. Perera and Ms. Juteau that the materials used in the construction of the sail boat, as well as indications from extensive previous repairs to the boat, made the risk of rot so high that purchase of the vessel was ill advised.

[14] The defendants agree that when they examined the sail boat in November 2004 it suffered severely from dry rot, so severely that it was no longer feasible or safe to sail.

[15] It should be noted that whether the representations were untrue, inaccurate or misleading, is not a question of honesty or integrity. It is not necessary for the plaintiffs to show that Mr. Stratton intended to mislead or said something that was not true in order to establish liability. An honest belief by Mr. Stratton in the truth of what he said in the survey report or directly to Mr. Perera is not a defence. This is a claim in negligence, both negligence simpliciter and negligent misstatement. What is in issue is whether the manner of conducting the survey, or what was said in the survey report, fell below the standard to be applied to a marine surveyor.

[16] The defendants, Mr. De Groot and Mr. Stratton, both say it is entirely possible, and in this case likely, that rot developed in this boat after the survey in March 2003, and progressed rapidly to November 2004, when its full extent was discovered. They argue that this was possible because Mr. Perera and Ms. Juteau lived on the boat, and the presence of two people and a pet dog in a confined space, engaging in activities of daily living, such as showering and cooking, would generate humidity and warmth, prime conditions for the rapid development and growth of rot.

[17] Mr. Perera and Ms. Juteau say that they kept the boat well ventilated all the time they lived on it, and they never noticed any undue condensation inside the boat while they lived on it. Mr. Perera testified that they kept the boat at a comfortable temperature, around 20 degrees Celsius, during the cool seasons.

[18] Mr. Down doubted that the extent of rot he observed in November 2004 could have developed after March 2003, or as a result of the plaintiffs living aboard the boat. He pointed out that written material relied upon by Mr. De Groot and Mr. Stratton to support that theory related to tropical conditions, which bore no relationship to boats in colder British Columbia waters. Mr. Down qualified his assertions by stating that he was not an expert in the progression of dry rot.

[19] Mr. Down referred to areas where repairs had been effected by stapling new wood over old, with staples showing through, and to other areas of repair that had been painted over on the inside of the hull. Mr. Down said this was evidence of earlier repairs that should have alerted Mr. Stratton to the possibility that the boat had needed extensive repairs because of rot, which in turn should have been brought to Mr. Perera’s attention.

[20] Mr. Stratton says that he "sounded" the entire hull while the sail boat was out of the water in March 2003. By sounding he means he tapped the hull with a hammer and listened for the quality of the sound. Sounding is well-known and approved among marine surveyors as a method of checking for rot or delamination below a fibreglass surface. During his evidence, Mr. Stratton demonstrated sounding by rapping his knuckles sharply on the wooden edge of the witness box and then, as I recall, on the Bible (it may have been another surface), to demonstrate that the two sounded significantly different. By this, Mr. Stratton meant to convey that it is not the sound one gets by rapping a hull with a hammer, but the difference in sound between solid hull and either a hull that is delaminated or rotting under the surface. He testified that it is the difference in sound that one is listening for, and he felt perfectly capable of distinguishing this on his examination.

[21] This evidence was intended to deflect criticism of Mr. Stratton based on the fact that he has some degree of hearing impairment, which he acknowledged in his evidence. He says he has difficulty hearing conversation in crowds but has not felt the difficulty to be sufficiently serious that he thought it worth spending money on hearing aids. Mr. Stratton maintained that his hearing deficit did not affect his ability to examine for rot by sounding.

[22] I am not convinced that Mr. Stratton missed existing rot or delamination on the basis of a defective sounding technique or because his hearing was inadequate to the task.

[23] Another issue that relates to whether the survey was inaccurate or misleading arises out of Mr. Down's opinion that it was important for Mr. Perera to know that the material used in building the sail boat was, at least in part, Philippine mahogany plywood. According to Mr. Down, plywood of any form but particularly Philippine mahogany plywood is completely unacceptable as boat building material because of its susceptibility to rot.

[24] According to Mr. Down, the fact that Philippine mahogany wood was used in building the boat could be seen by looking at portions of the inside of the hull. He said these were visible to someone who got down and looking through the hatch in the floor or sole of the boat with a flashlight. Whether the wood was solid Philippine mahogany or plywood veneer could only be detected by “picking” the wood, which means to dig into the surface of the wood with a sharp pointed tool. Mr. Down suggested that this could be done, without the consent of the owner of the boat, so long as it were done in an unobtrusive area that could not readily be seen.

[25] I have difficulty accepting that this is an accepted practice among marine surveyors, particularly when the general thrust of the evidence from Mr. Down and the two defendants, all three of whom are marine surveyors, was that it is important to keep moisture from penetrating wood, particularly wood that is more susceptible to rot. That is why paint, resin, or other sealing material are put on exposed wood surfaces, to seal them from moisture.

[26] I am also not prepared to accept that it is acceptable practice for a surveyor, on behalf of a prospective purchaser, to violate the integrity of the surface of wood, by digging into it sufficiently to determine whether it is a veneer on plywood as opposed to solid wood, without the consent of the owner of the boat and thereby expose that portion of the boat to an increased risk of rot.

[27] I do not fault Mr. Stratton for not picking into exposed wood in this particular boat during his survey to determine whether the material used was solid wood or veneer on plywood. I do not find that Mr. Stratton breached a duty owed to Mr. Perera by failing to detect or to report the type of wood used to build the boat, or the increased risk of rot caused by use of that material.

[28] Mr. Perera and Ms. Juteau also argue, based again primarily on the evidence of Mr. Down, that it should have been apparent to Mr. Stratton that portions of the interior structure of the sail boat showed signs of rot, perhaps poorly masked or repaired, and that he should have detected and reported that to Mr. Perera.

[29] Sections of the boat have been cut out and marked as exhibits. Counsel argued, based largely on the evidence of Mr. Down, that at least one such sample, taken from a longitudinal stringer accessible under a settee, showed significant pre-existing rot that someone had attempted to cover over with resin or epoxy. Counsel argued that Mr. Stratton should have seen this on his inspection, been alerted to the possibility of pre-existing rot, and warned Mr. Perera in his survey report. The portion in evidence shows signs of substantial rot that had had some clear epoxy or sealant poured over top of it, to the point that some of the sealant had penetrated voids in the rotten stringer.

[30] Mr. Down said that when he put his head into the bilge area and looked, he could see new stringers from previous repairs, and then an original stringer that he said was so black with rot that it looked like it had been burned in a fire. I am asked to infer that this was, or should have been, visible to Mr. Stratton if he had conducted a visual examination as carefully as Mr. Down.

[31] Mr. Stratton said that he did so and did not see evidence of rot present.

[32] Mr. Stratton said in the survey report:

... Some past repair of wood rot is evident in the starboard sole support stringer.

And:

There is also indication of past leakage and possible deterioration of the deck support beam at the starboard chain plate attachment.

In his report Mr. Stratton recommended, in relation to the repair of wood rot, that:

10. The extent of repairs below the starboard settee berth should be further investigated to assure that all exposed wood is adequately sealed.

With respect to the possible deterioration of the deck support beam he recommended:

11. The possibility of wood deterioration in the deck beam and sheer clamp near the starboard chain plate attachment should be further investigated and repairs undertaken as necessary.

[33] In his survey report Mr. Stratton said that recommendations 10 and 11 might be carried out as convenient to the owner.

[34] After reading the survey report, Mr. Perera said that he looked below the starboard settee berth and determined that the wood surfaces were sealed. He said that it does not take expertise to see whether or not wood is covered by paint or resin. He thought no more was necessary.

[35] Mr. Perera says that the second possible defect noted by Mr. Stratton was something he had pointed out to Mr. Stratton during Mr. Stratton's survey and that, in any event, he repaired the area after he bought the sail boat.

[36] I conclude that at the time of Mr. Stratton’s survey, there was rot in the boat, either as an active condition in at least one stringer, or which had been covered over in poorly effected repair. While the evidence as to the rate at which rot can progress in materials such as were used in the construction of this sail boat in waters off British Columbia is unsatisfactory, it is unlikely that the extent of the rot found in November 2004 could have occurred from a start some time after March 2003. I conclude that for the boat to have been in the disastrous condition it was found to be in November 2004, there must have been significant rot present when Mr. Stratton did his survey.

[37] The issue then becomes whether a reasonably competent surveyor would have detected that rot, and whether, in failing to detect the rot, Mr. Stratton fell below the standard of a reasonably competent surveyor.

[38] I note that Mr. Perera said that when he inspected the boat before he bought it, he got down on his knees and looked inside the bilge area. While he was not an experienced boater at that time, he testified that he had seen rotten wood before. I infer that in his inspection he saw nothing to indicate the presence of rot.

[39] Mr. Perera hired Mr. De Groot so he could have the boat inspected by someone with training and experience that Mr. Perera did not have. The rot in the stringer, as seen by Mr. Down in November 2004 was present to some degree in March of 2003 and should have been visible to reasonably careful inspection. That Mr. Stratton did not see it or report it is evidence that his inspection was less than reasonably careful.

[40] I find further that there was some rot in the hull in March of 2003. While it may not have caused delamination, or a weakening of the bond between the fibreglass skin and the underlying wood veneer, I do not accept that the extent of the rot found by Mr. Down and by both defendants in November 2004 could have occurred as a natural progression from a condition that could not have been detected by reasonably careful inspection by a marine surveyor in March 2003.

[41] Mr. Down described a softness of the structure underlying the fibreglass that gave a different sound when struck with a hammer. The sound made when a hammer taps the fibreglass skin over rotting or rotten wood is different than the sound made when the bond between the fibreglass skin and underlying wood has delaminated, and, as indicated earlier, both sound different than the result from tapping fibreglass properly bonded to sound underlying material.

[42] I find that the rot should have been detected by Mr. Stratton in March of 2003. I accept that it may have progressed and grown worse between March 2003 and November 2004, and that it is not possible to say how much it progressed in that interval. I am satisfied on the evidence that there was rot in the hull in March of 2003, that Mr. Stratton missed it, and that a reasonably careful inspection by sounding or hammer testing would have revealed it.

[43] Mr. Stratton therefore breached his duty to Mr. Perera to conduct a reasonably careful inspection of the boat and to report his findings.

4. Reliance

[44] The next question is whether Mr. Perera relied in a reasonable manner on the representations set out in the survey.

[45] It is reasonable that Mr. Perera relied on the survey. He says that he told Mr. De Groot that he needed the survey because he and his wife wanted to buy the boat and that when he received the survey, and noted that it was professionally prepared, it indicated to him that he and his wife should definitely purchase the boat. The fact that Mr. Perera examined the boat himself does not take away from the reason he wanted a professional to look at it on his behalf.

[46] That establishes reliance and in the circumstances I find that it was reasonable that Mr. Perera rely on the statements made in the survey. Indeed, there is no doubt in my mind that both defendants intended that statements be relied upon and they understood throughout that Mr. Perera would rely on what was said in the survey report.

5. Did reliance result in damages?

[47] The last requirement for negligent misrepresentation is that the reliance on the representation resulted in damages.

[48] I find that Mr. Perera and Ms. Juteau would not have purchased the vessel if the survey had not indicated to them that the vessel was in sound overall condition. I further find that, having purchased the vessel, they ended up, in less than two years, with something that was not capable of being sailed, but was capable of being used as a floating residence.

[49] Mr. Perera and Ms. Juteau suffered damage as a result of their reliance on the representations in the survey.

NEGLIGENCE GENERALLY

[50] I have already dealt with the plaintiffs’ claim that Mr. Stratton was negligent in failing to identify substandard materials used in construction of the boat and to report on them.

[51] I find that there was no breach of the duty owed by Mr. Stratton to Mr. Perera for the reasons given in my findings on negligent misrepresentation. It has not been proven that Mr. Stratton owed a duty to pick at the surface of the boat to determine whether the wood used was solid or veneer, or that he breached any such duty by failing to do so.

[52] As to the alleged duty to detect rot and to report on it, for the reasons given in my findings on negligent misrepresentation, I find that there was a duty to be reasonably diligent in looking for rot and reporting on it if it were found, and that duty has been breached in this case.

[53] The plaintiffs also argued that there was a duty on Mr. Stratton to detect the extent of old repairs and to report on them. They argue that having found some old repairs, Mr. Stratton did not go far enough and he should have been alerted to the possibility of more extensive repairs and have been more diligent in his investigations.

[54] The plaintiffs found fairly extensive portions of the hull where original plywood had been replaced with solid wood, evidence of repairs that had been done some time before they bought the boat. Some of these old repairs were discovered when the plaintiffs began to cut out sections of the hull in an effort to repair the relatively minor damage thought to have been suffered in January 2004, and more were found when they investigated further in preparation for trial. The plaintiffs say that had they known of these old repairs, they would have been alerted to inquire further, and to avoid the purchase entirely. They claim that it was Mr. Stratton's job, acting reasonably as a surveyor, to have found out the extent of these old repairs..

[55] I cannot conclude on the evidence before me that Mr. Stratton could have found the extent of old repairs without destructive testing or going beyond what was reasonable in a pre-purchase survey. I cannot conclude that a reasonably competent surveyor, exercising the skill that should reasonably be expected of him, would have done more than Mr. Stratton did in finding the evidence of old repairs he reported on, and I find that that ground of negligence is not made out.

BREACH OF CONTRACT

[56] The plaintiffs argue further that there was a breach of the contract that existed between Mr. Perera and Mr. De Groot, in that it was an express or implied term of the contract for a survey that reasonable diligence be used in the conduct of the survey, that it would be done in a workman like manner, and that the report of the results of the survey would be accurate.

[57] I agree that a contract was formed when Mr. De Groot agreed to provide a survey and a report, and that the terms argued above were implied in the contract. I also agree that for the reasons given in my findings on negligent misrepresentation and negligence that Mr. Stratton was negligent in failing to detect rot that must have been there, the contract was breached.

DAMAGES

[58] The damages in tort would be measured by asking what would it take to put the plaintiffs in the position they would have been in if there had not been a negligent misrepresentation. I am satisfied that, had they known the true state of affairs, they would not have bought this boat. What then are the damages they suffered as a result of buying something they would not have bought if they had known the true state of affairs?

[59] This is to be distinguished from their damages in contract which would be measured as to what it would take to put them in the position if the contract had been properly performed, that is, if the survey had been competently conducted and the results accurately reported.

[60] In this case there may not be any significant difference other than the availability, it is argued, of non-pecuniary damages in tort for aggravation, mental distress, inconvenience, etc.

[61] I find that the damages are $36,000 being the cost of the vessel, including the insurance coverages required by the Credit Union. From that amount I deduct $7,000, which I find to be the salvage value of the mast and rigging. I award $3,000 as damages for the inconvenience suffered by the plaintiffs up to November 2004, that is the loss of the sail boat for the sailing season of 2004.

[62] After November 2004 I find that the inconveniences suffered by the plaintiffs have been largely of their own doing as they have elected, perhaps through financial necessity, to live on this sail boat while it is propped up on jack stands on hard ground. That inconvenience and discomfort, and it must have been substantial, could easily have been avoided had they elected to stop tearing the boat apart when they found how bad it was. They could have avoided the cost of dry land storage and have used the money otherwise spent on dry land storage to rent more reasonable accommodation elsewhere.

[63] Ms. Juteau was not a party to the contract formed when Mr. Perera spoke to Mr. De Groot. She has no claim in contract. I find that Mr. Perera did tell Mr. De Groot that he and his wife were contemplating the purchase of the boat, as the reason for the survey, and the duties owed by Mr. De Groot and Mr. Stratton were owed to both plaintiffs. The judgment will be in favour of both plaintiffs.

[64] The plaintiffs shall have their costs at Scale 3 unless there is a reason to depart from the ordinary costs award.

“R.T.C. Johnston, J.”
The Honourable Mr. Justice R.T.C. Johnston

Case Studies, Prendrell Place: Court rules legal bill too high; Andrew J. Winstanley exceeded his retainer by Richard Oldaker and Christopher Monk

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Winstanley v. Oldaker and Monk,

 

2006 BCSC 1246

Date: 20060816
Docket: L051363
Registry: Vancouver

Between:

Andrew J. Winstanley,
A Personal Law Corporation

Solicitor

And

Richard Bedford Oldaker and Christopher R. Monk

Clients

- and -

Docket: L052314
Registry: Vancouver

Between:

Andrew J. Winstanley,
A Personal Law Corporation

Solicitor

And

Richard Bedford Oldaker and Christopher R. Monk

Clients


Before: Master Taylor

Reasons for Decision

Solicitor, Andrew J. Winstanley:

Appearing on his own behalf

Counsel for the Clients:

L. A. Gold

Date and Place of Hearing:

May 8 - 12, May 30 & 31, June 1 &2 & June 5, 2006
Vancouver, B.C.

Written Submissions:

June 12, 19 & 22, 2006

[1]                In early October, 2004 the clients consulted the solicitor with respect to having counsel in some of their many actions removed as being in conflict of interest.  The solicitor quoted a fee of $5,000 to remove G. Stephen Hamilton as opposing counsel from these other actions.

[2]                All of the actions have their genesis in a water egress problem to a six storey condominium building located in the West End of Vancouver known as Pendrell Place.  From 1997 to date there have been approximately 17 different actions commenced relating inter alia to claims for damages due to loss of income of rental property; misrepresentation in the sale and purchase of strata lots; and claims by certain owners against other owners as a executives of the strata council and allegations that the executive members of the strata council acted ultra vires their powers.

[3]                The solicitor has been a member of the Law Society of British Columbia since 1982.  He holds himself out as having a preference for complex civil litigation cases and has had some notable successes over the years.  He seeks to have all of his accounts rendered to the clients from October 14, 2004 up to and including August 4, 2005 assessed pursuant to s.71 of the Legal Profession Act.  The fee component of the accounts total $52,251.08.  With taxes and disbursements the total is $63,476.61.

[4]                The client, Richard Oldaker, celebrated his 79th birthday during the course of this hearing.  He is a retired geophysicist and successful entrepreneur.  Aside from the litigation referred to as the oppression action he has some personal litigation against the strata corporation for failure to repair his strata lot and the ensuing damages he has suffered as a result of not being able to rent his unit for over five years.  His personal litigation is being handled for him by Darrell Burns.

[5]                The other client, Christopher Monk, owns and operates a business that recruits and provides staff for the hospitality industry.  Aside from the oppression action, he has a personal law suit against the vendor, the vendor’s agent and others for misrepresentation in regards to the sale of a strata lot with Pendrell Place to Mr. Monk.  He purchased his strata lot on October 30, 2000 and sold it two to three years later.  He claims he sold it for less than he otherwise would have received because he had to make full and complete disclosure about the problems in the building and the dissent amongst owners within the building.

[6]                After discussion between the solicitor and the clients, it was determined that conflicting-out Mr. Hamilton could be dealt with relatively quickly, and accordingly Mr. Oldaker, on behalf of the clients, provided the solicitor with a $5,000 retainer as requested.

[7]                Thereafter the solicitor began creating a lengthy compendium of facts dating back to 1997 in relation to the various causes of action.

[8]                Also through discussion with the clients it became known to the solicitor that one of the actions had been dismissed pursuant to an application by the defendants in that action pursuant to Rule 19(24) as disclosing no cause of action, and was under appeal.  The solicitor became interested in this matter and after reading the notice of appeal and the factum prepared by another solicitor he encouraged the clients to consider amending the factum.  The clients agreed that this should be done and, accordingly, also agreed to retain the solicitor for the purposes of drafting an amended appeal factum.

[9]                Within days of receiving the initial retainer of $5,000, on October 8, 2004 the solicitor rendered an account dated October 14, 2004 for $6,651.31 including taxes.

[10]            When the solicitor agreed to take on Mr. Monk’s personal action, which was transferred from another lawyer, Mr. Monk paid a retainer of $5,000.  This was paid on or about October 16, 2004.

[11]            On October 28, 2004 the solicitor rendered another account to the clients in the amount of $3,348.69 of which $2,375.33 was fees.  Part of this account was for the drafting of common damages – causation for which the solicitor billed 7 hours.  He had previously billed two hours for drafting the damages chronology on the account of October 14, 2004.  Included in the October 28th account were disbursements for the purchase of 14 ring binders totalling $150 and photocopies of $365.

[12]            The solicitor gave evidence that this is a matter of complex litigation and that all matters of complex litigation needed to have the facts checked against the instructions of the clients.  Accordingly this required a substantial amount of upfront costs.  The solicitor says that it was necessary for him to engage in drafting the compendium of facts after taking lengthy notes during interviews with the clients on three consecutive days, and thereafter checking the facts with documents provided to him at his request.

[13]            The solicitor claims these matters are complex by dint of the passage of time and the number of actions involved.

[14]            After review of the materials of almost 4,000 pages in eight volumes, I take a different view than that of the solicitor.  Individually, I believe that each one of the issues is perhaps of ordinary difficulty with the odd issue being slightly more difficult than average but on the whole none of them individually, or for that matter, collectively could be determined to be complex.  The parties were mired in the quicksand of the litigation process, but the substantive issues themselves were not that complex.

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