Case Studies, Pendrell Place: Interior view of Richard B. Oldaker's leaky rotten condo, PH4, during the repair of the exterior east wall.

Photo by C. Monk.  Interior view of Oldaker's LRC, during repair of exterior east wall, January 2007.

Case Studies, Pendrell Place: East wall repairs; PH 4, Oldaker's leaky rotten condo

Repair of exterior east wall, PH4, Oldaker's suite,floors 5 & 6, started January 2007.  Photo by C. Monk.

Court rules too late to sue architect of Howe Sound Secondary School for leaks and rot

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Board of School Trustees et al. v. Killick Metz Bowen Rose Architects and Planners et al.,

 

2007 BCSC 28

Date: 20070110
Docket: L032558
Registry: Vancouver

Between:

The Board of School Trustees of
School District No. 48 (Howe Sound)

Plaintiff

And

Killick Metz Bowen Rose Architects and Planners Inc.,
Zagreb Construction Ltd., Bollman Roofing & Sheet Metal Ltd.,
D.H.S. Building Products Inc., Inland Glass & Aluminium Limited,
Winwood Construction Ltd. and Inter-Coast Consultants Ltd.

Defendants

And

Robert Tischer doing business as
Bob's Plastering & Stucco and the said Robert Tischer
and Killick Metz Bowen Rose Architects and Planners Inc.

Third Parties


Before: The Honourable Madam Justice Gray

Reasons for Judgment

Counsel for the Plaintiff:

Allyson L. Baker

Counsel for the Defendant and Third Party:
Killick Metz Bowen Rose Architects and Planners Inc.

 

Kerry A. Short

Douglas Morrison

No other appearances

 

 

Date and Place of Hearing:

October 20, 2006

 

Vancouver, B.C.

INTRODUCTION

[1]                The plaintiff ("School Board") is a school board which owns Howe Sound Secondary School ("School").  The plaintiff has sued a number of parties, alleging that the School’s building envelope leaks.  The School Board alleges that the defendant Killick Metz Bowen Rose Architects and Planners Inc., which I refer to as the “Architect”, acted negligently or in breach of contract in its design, inspection and supervision of the addition to and renovation of the School, which was completed on or about June 1996.

[2]                The Architect applied under Rule 18A for a summary trial of the issue of whether the School Board's claim is barred by the time limitation in the contract between the School Board and the Architect.  The School Board applied for an order dismissing the Architect's Rule 18A application.  The School Board’s position is that this question should not be determined under Rule 18A and, if the question is decided under Rule 18A, that the contractual limitation does not bar its claim.  

[3]                The two applications were heard at a one-day hearing on the basis of affidavit evidence.  The only parties represented at the hearing were the School Board and the Architect.  Two other defendants filed outlines in which they did not oppose the Architect's application.  The remaining defendants and third party presumably took no position on the applications.

FACTS

[4]                The School Board owns the School, which was originally constructed in the late 1960s.

[5]                The School Board entered into a written contract with the Architect dated July 6, 1988 (“Consulting Contract”), for the design and construction of renovations and additions to the School.  The renovations and additions consisted of a new gymnasium, new brick cladding on the south wing of the existing building, and new cladding and windows on the north and south walls of the existing building (the “Addition”).

[6]                The Consulting Contract was essentially in a standard form known as the “Canadian Standard Form of Agreement Between Client and Architect” ("CSFACA"), 1987 edition.  This document was developed by a partnership between the ten provincial associations of architecture and the Royal Architectural Institute of Canada.  The CSFACA was subsequently revised, and new editions were published in 1997 and 2002.

[7]                The parties filled in the blank portions of the standard form to create the Consulting Contract.  The only change to the standard form was an alteration regarding the liability of the Architect.  The standard form would have limited the liability to the extent of available insurance or indemnity, but that passage was deleted from the executed Consulting Contract.  The Consulting Contract provided for compensation for basic services at a rate being a percentage of the construction contract, with hourly rates for additional services.

[8]                The material clauses were the following, with "Client" referring to the School Board:

1.5       The Contract Documents consist of the executed agreement between the Client and the contractor, the general conditions of the Contract, the plans, sketches, drawings, graphic representations, specifications and such other documents as are identified in the agreement and the general conditions as constituting part of the Contract Documents.

1.6       The Contractor is the person, firm, or corporation contracting with the Client to provide labour, materials and equipment for the execution of the Work.

1.8       Substantial Performance of the Work is as defined in the lien legislation applicable to the place of the project. If such legislation is not in force or does not contain such definition, Substantial Performance shall have been reached when the Work is ready for use or is being used for the purpose intended and is so certified by the Architect.

1.9       The Work means the total construction and related services required by the Contract Documents.

1.10     The Place of the Work is the designated site or location of the project of which the Work may be the whole or a part.

2.1.24      The Architect shall determine the date of Substantial Performance...

2.1.26      Before the end of the period of one year following the date of Substantial Performance, the Architect shall review any defects or deficiencies which have been reported by the Client during that period, and the Architect shall notify the Contractor of those items requiring attention by the Contractor to complete the Work in accordance with the Contract.

2.4.1      The Architect is able to provide additional services to the Client as listed below.  Additional services are not included in the basic services, and shall only be provided if authorized by the Client and shall be paid for by the Client as provided in this agreement.

2.4.20      Providing services after expiry of the period of one year following the date of Substantial Performance.

3.5.1      Unless otherwise stated in this agreement, the Architect's services terminate one year after certification of Substantial Performance.  For services required following expiry of the period of one year after certification of Substantial Performance, the Client shall arrange with the Architect for services as provided under paragraph 2.4.20.

3.9.1      In consideration of the premises and of provision of the services by the Architect to the Client under this agreement, the Client agrees that any and all claims which he has or hereafter may have against the Architect in any way arising out of or related to the Architect’s duties and responsibilities pursuant to this agreement (hereinafter referred to in this Article 3.9 as “claims” or “claim”), whether such claims sound in contract or in tort, shall be limited to the amount of $250,000.00 each claim and $500,000.00 for all claims during each period of coverage as provided by the Architect’s professional liability insurance or indemnity against errors and omissions in effect at the date of execution of this agreement, including the deductible portion thereof.

3.9.3      It is agreed that:

(a)        the Client will not assert a claim against the Architect unless the Client has asserted such a claim within any required time limitation against all persons who might reasonably be liable therefore and

(b)        any waiver by the Client with respect to a claim in favour of any of such persons shall constitute a waiver by the Client in favour of the Architect with respect to any claim against the Architect.

In this paragraph, “waiver by the Client” includes any agreement by the Client to a limitation, exclusion or release whether in whole or in part of the liability of another to the Client but does not include a fair agreement of settlement.

3.9.6      The Architect’s liability for all claims of the Client arising out of this agreement shall absolutely cease to exist after a period of six (6) years from the date of:

(a)        Substantial Performance of the Work, … or

(d)        commencement of the limitation period for claims prescribed by any statute of the province or territory of the Place of the Work. (sic)

whichever shall first occur, and following the expiration of such period, the Client shall have no claim whatsoever against the Architect. The Architect’s liability with respect to any claims arising out of this agreement shall be absolutely limited to direct damages arising out of the Architect’s services rendered under this agreement, and the Architect shall bear no liability whatsoever for any consequential loss, injury or damage incurred by the Client, including but not limited to claims for loss of profits and loss of markets.

5.7         Re: Article 3.9.1. The amount of the Architect’s Professional Liability Insurance in effect at the date of the execution of the agreement $1,000,000.00.

[9]                The School Board pleaded in the amended statement of claim that the Addition was substantially completed on August 21, 1996, the date on which the Architect prepared a “Notice of Substantial Completion”. This notice describes the project, owner, contractor, and Architect, and then states “[t]he Contract of the above–mentioned project has been declared substantially performed as of August 21, 1996, in accordance with the Builders’ Lien Act of British Columbia”.

[10]            Counsel advised that there was no dispute that use of the Addition began in the Fall of 1996.

[11]            In or about the Fall of 1996, following substantial completion, groundwater was leaking into the crawlspace.  The Architect and the general contractor reviewed the problem and made recommendations for repair including the installation of a sump pump into the crawlspace.  Repairs to the crawlspace were carried out in 1996 and again in 2001.

[12]            In or about the fall of 1996, water ingress was reported in the drama room. The School Board was advised that there was flashing missing at the brick wall-to-roof interface.  The Architect and the general contractor repaired the flashing and no further water ingress was reported in the drama room.

[13]            In or about October 1997, the Architect and general contractor investigated skylight leaks in the multipurpose room.  They concluded that the leaks had been caused by a fire on the roof of the Addition during construction.  The Architect and the general contractor resolved this problem and it did not re-occur.

[14]            In October 2001, the crawlspace flooded again.  The School Board carried out repairs which included removing damaged drywall and installing an additional sump pump.  The addition of the second sump pump has resolved the problem of groundwater in the crawlspace.

[15]            During the late 1990s, an unusual number of schools throughout British Columbia were experiencing water ingress-related problems.  As a result, in 2003 the Province of British Columbia, as represented by the Ministry of Finance, established the Building Envelope Program (“BEP”).

[16]            The BEP was established to identify schools which were dealing with water ingress and building envelope failures, and to remediate the problems.  Due to the large number of schools which required assessment, B.C. Housing took over the coordination of the assessments.  The School Board’s position is that prior to the establishment of the BEP, it did not have the resources or expertise to determine the nature of the water ingress problems, and addressed such problems on a case-by-case basis.

[17]            The School Board submitted a "Notification of Potential Water Ingress" ("Notification") to BEP on August 5, 2003.  This document refers to water puddles on the floor at the base of a wall, and says that two exterior walls have signs of mold and mildew growth.  Shortly afterwards, a BEP representative expressed concern to the School Board about the condition of the School.  However, no assessments of the School were conducted until February 2005, about 18 months after the Notification.

[18]            By letter dated September 10, 2003 from the School Board’s counsel to the Architect, the School Board advised the Architect that the School Board intended to advance a claim against the Architect for negligent design and negligent field reviews with respect to the original construction of the School.  The letter referred to construction which was completed on or about June 1996.  The letter said that if the Architect failed to respond to the letter, the School Board would have no alternative but to commence legal proceedings against the Architect without further notice.

[19]            The School Board’s writ of summons was issued on the day of the demand letter, September 10, 2003.  At that time, the only defendants were the Architect and Zagreb Construction Ltd. ("Zagreb").  The writ alleges that there were “various dangerous construction deficiencies (including deficiencies in design, inspection, workmanship and materials) (the “Deficiencies”) at [the School], and resultant damage arising therefrom, in the building and other assets of the [School Board]”.

[20]            The School Board claimed

against the [Architect] as the architects of record responsible for the design, inspection and supervision of the addition to and renovation of [the School] completed on or about June 1996 for breach of their contract and breach of their duty of care to the [School Board] in the said design, inspection and supervision and breach of their duty to warn the [School Board] of the Deficiencies which said breach of contract and negligence caused or contributed to the Deficiencies and damages suffered by the [School Board].  

The School Board also claimed against Zagreb, as the general contractor, for breach of contract and breach of duty of care.

[21]            A legal assistant with counsel for the School Board deposed that at the time of filing the writ of summons, and still in August 2004, the School Board was not aware of the full extent of the damage to the School.

[22]            In August 2004, the School Board applied to extend the time for serving the writ of summons for a further 12 months.  The School Board wished to monitor the performance of the building envelope renovations at the School to determine the extent of the construction deficiencies before making a decision whether to pursue the claim.

[23]            On August 30, 2004, the court renewed the writ of summons for a further 12 months.

[24]            In January 2005, B.C. Housing retained Morrison Hershfield Limited (“MH”), an engineering firm, to conduct investigations at various school facilities throughout British Columbia including the School.

[25]            In February and March 2005, MH performed various moisture probe tests and investigations at the School.  In the opinion of Mr. Lawton, a professional engineer with MH, there are various design and construction-related deficiencies in the School, including but not limited to the following:

(a)        faulty design and installation of a face sealed wall assembly;

(b)        lack of overhangs at highly exposed elevations;

(c)        no end dams were provided at the window flashing assemblies;

(d)        failed sealant applied between the corners of the glazing and the frame;

(e)        failure of the joints in the stucco and at the window-to-stucco interface;

(f)         failure of the window jamb and sill interface;

(g)        failure of the glass block assembly jamb and sill interface;

(h)        failed sealant at the edge flashing of the sloped roof where it interfaces the brick cladding;

(i)         nails through the cap flashing and underlying membrane; and

(j)         penetrations through the flat roof which did not have appropriate sleeves nor sealant.

[26]            Assuming that the Architect fulfilled the typical role of an architect on a construction project, the Architect would have been involved in the design and review of some or all of the aspects of the building envelope noted above.

[27]            Mr. Lawton recommended repairs to the School including the following:

(a)        re-cladding of the stucco walls that are exposed to the elements, including the north and south elevations of the North wing;

(b)        replacement of decayed sheathing and framing components;

(c)        removal and reinstallation of windows in a properly waterproofed rough opening in the wall areas that are to be re-clad;

(d)        addressing the scupper and roof edge detail; and

(e)        cleaning and resealing the perimeter of the skylight glazing.

[28]            Mr. Lawton’s opinion in May 2005 was that it would cost about $676,600 to repair the deficiencies, based on construction costs at that time. In his opinion, the parties potentially responsible for the deficiencies included the architect, general contractor, the installers of stucco, roofing, flashing, windows, and sealant, and the window supplier.

[29]            By order dated August 18, 2005, five additional parties were added as defendants.  The School Board filed an amended writ of summons on August 22, 2005.  The defendants were served with the order and amended writ of summons by letter also dated August 22, 2005.  The School Board asked each defendant to hold the matter in abeyance until the School Board had made further plans with respect to the assessment and remediation of the Addition.

[30]            In September 2005, the Architect demanded that the School Board produce a statement of claim.  The statement of claim was filed on November 2, 2005.

[31]            By letter dated January 18, 2006, counsel for the Architect served the application material relating to the Architect’s application for a summary trial under Rule 18A.  

[32]            The School Board’s counsel responded by asking the Architect’s counsel to hold the application in abeyance until a decision had been reached on the Rule 18A application in another lawsuit involving another school.  The Architect’s counsel agreed, but then in June 2006 sought to schedule the hearing in September 2006.  The claim against the Architect involving the other school settled in July 2006.

[33]            In August 2006, counsel for the Architect scheduled the Rule 18A application for October 11, 2006.

[34]            On October 3, 2006, Zagreb filed a third party notice against the Architect.

[35]            The School Board filed an amended statement of claim on September 8, 2006.  The School Board refers to the Consulting Contract, and also alleges that the Architect owed the School Board an independent duty of care.  The School Board alleged that the Architect breached the Consulting Contract and was negligent and in breach of its independent duties to the School Board, including an alleged duty to warn the School Board about defects and deficiencies.  The School Board also alleged that the Architect fundamentally breached the Consulting Contract.  During the hearing of the application, counsel advised that the School Board was withdrawing the allegations of fundamental breach and breach of a duty to warn.  

[36]            The School Board does not allege in the amended statement of claim that the Architect was engaged to perform services not covered by the Consulting Contract.

[37]            Three of the named defendants have not filed appearances to the writ of summons.  Zagreb has filed an appearance but not a statement of defence.  Three defendants, being the Architect, Bollman Roofing & Sheet Metal Ltd., and Winwood Construction Ltd., have filed statements of defence.  Winwood filed a third party notice naming Robert Tischer, doing business as Bob’s Plastering & Stucco and Robert Tischer, as a third party.  That third party has filed an appearance but not a defence.

[38]            Neither the School Board nor the Architect has delivered a list of documents.  None of the parties have conducted examinations for discovery.  The parties have not scheduled a trial date.

[39]            B.C. Housing has budgeted the remediation of the School at approximately $900,000.  Mr. Lawton did not provide an update to his May 2005 estimate of $676,000, but deposed that construction costs have risen significantly since he made that estimate.  There is no specific date for commencement of the remediation process, but B.C. Housing anticipates that the project will commence in the spring of 2007.

[40]            The Rule 18A applications proceeded at a one-day hearing on October 20, 2006.  As I understand it, a judge was not available on October 11, 2006, and as a result, the hearing was rescheduled to October 20, 2006.

ISSUES

[41]            There are two issues:

1.         Would it be unjust to decide the issues on the Rule 18A application; and if not,

2.         Is the School Board’s claim barred by the terms of the Consulting Contract?

POSITION OF THE PARTIES

[42]            The position of the Architect is that the court should decide the issues on the Rule 18A application for the following reasons:

(a)        it will save time and money for the parties in this action and others, whatever the outcome on the merits;

(b)        the only question which the court must decide to resolve the Architect’s application involves interpretation of the Consulting Contract; and

(c)        the question does not depend on any factual determinations, and is a question of interpretation of a contract and applying it in the circumstances of the facts about which there cannot be any dispute.

[43]            The School Board argues that the question is not suitable for determination under Rule 18A because it would be unjust and it will not result in an efficient resolution of the lawsuit.

ANALYSIS

(a)        Suitability for Rule 18A

[44]            The jurisdiction of the court under Rule 18A and the issues relating to whether the court ought to grant judgment on an issue were well summarized by Groberman J. in Coast Foundation Society (1974) v. John Currie Architect Inc., 2003 BCSC 1781, at paras. 11-18, as follows:

[11]      Rule 18A allows a party to apply to the court for judgment, “either on an issue or generally”.  Rule 18A(8) and (11) set out the circumstances in which judgment may be given:

(8)        On an application heard before or at the same time as the hearing of an application under subrule (1), the court may

(b)        dismiss the application under subrule (1) on the ground that

(i)         the issues raised by the application under subrule (1) are not suitable for disposition under this rule, or

(ii)        the application under subrule (1) will not assist the efficient resolution of the proceeding.

(11)      On the hearing of an application …, the court may

(a)        grant judgment in favour of any party, either on an issue or generally, unless

(i)         the court is unable, on the whole of the evidence before the court on the application, to find the facts necessary to decide the issues of fact or law, or

(ii)        the court is of the opinion that it would be unjust to decide the issues on the application ….

[12]      A summary trial can serve as an efficient manner of disposing of issues or claims in appropriate circumstances.  Where the court has the entire claim before it on a summary trial application, it will generally endeavour to grant judgment unless credibility issues preclude the fair adjudication of matters on affidavit evidence.  There are, of course, exceptions.  Discoveries, for example, may not have progressed to the point where the court is satisfied that each side has had an opportunity to uncover all of the evidence that might be important to its case.  In such a case, it might be unjust to grant judgment: Bank of British Columbia v. Anglo-American Cedar Products Ltd. (1984), 57 B.C.L.R. 350 (S.C.).  The court will also decline to grant judgment where the complexity of the issues is such that the court is unable to absorb all of the evidence and legal argument in the compressed time available within the Rule 18A procedure: Chen v. Chen, 2002 BCSC 906, 22 C.P.C.(5th) 73.

[13]      The question of when the court ought to give judgment on an issue, as opposed to on the claim generally, is more complex.  The court is justifiably reluctant to decide cases in a piecemeal fashion.  In addition to all of the concerns that arise when the entire claim is before the court, there is a multitude of others.  The result is that the court must exercise considerable caution before coming to the conclusion that it should grant judgment on an issue in a summary trial.

[14]      Where a Rule 18A application requires determination of a difficult issue of law that might not need to be resolved in order to decide the claim at trial, for example, the court may conclude that the appropriate development of the common law demands restraint:  Bacchus Agents (1981) Ltd. v. Phillipe Dandurand Wines Ltd., 2002 BCCA 138, 164 B.C.A.C. 300.

[15]      The court must also be wary of making determinations on particular issues on a Rule 18A application when those issues are inexorably intertwined with other issues that are to be left for determination at trial: Prevost v. Vetter, 2002 BCCA 202, 210 D.L.R. (4th) 649; inter-relatedness of issues is not always obvious, and caution is necessary whenever a party seeks judgment on an issue as opposed to judgment generally under Rule 18A: B.M.P. Global et al v. Bank of Nova Scotia, 2003 BCCA 534, [2003] B.C.J. No. 2383.

[16]      It must be borne in mind that the primary purpose of Rule 18A is the efficient resolution of disputes.  Where the court does not consider that the determination of an issue under Rule 18A will assist in the efficient resolution of the dispute, it ought not to make the determination.

[17]      There are at least two aspects to be considered in gauging the efficiency of the summary trial process.  First, this court must be concerned about the allocation of its own resources: North Vancouver (District) v. Lunde (1998), 60 B.C.L.R. (3d) 201 at 212 (C.A.) (paragraph 33).  Summary trial applications that will not, even if successful, reduce the length of trial, should, in general, be discouraged.  The court must recognize the reality that judicial time is a scarce resource.

[18]      Second, the court must consider the efficiency of a partial determination from the standpoint of the litigation itself.  Piecemeal decision-making is rarely an efficient manner in which to resolve a dispute.  It raises the possibility of multiple appeals on individual issues, and this will generally impede rather than hasten the orderly determination of the action.

[45]            The School Board relies on two other cases in which the court declined

Place LeBleu (Coquitlam): Still not fixed; Judge refuses order to sell leaky condo; orders accounting

Place LeBleu, Coquitlam, BC

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Citizens Bank v. E.M.F. Holdings et al,

 

2007 BCSC 16

Date: 20070105
Docket: H980908
Registry: Vancouver

Between:

Citizens Bank of Canada
(Formerly Citizens Trust Company)

Petitioner

And:

E.M.F. Holdings Ltd., Elizabeth M. Foster, George Foster,
Manuel Martin Pereira, Agostinha Pereira,
Gordon Frederick William Gooch, Barbara Lynn Richardson,
The Owners' Strata Plan LMS2435, Roy Boddy, Iola Boddy,
Creative Door Services Ltd. (Formerly Known as
Richards-Wilcox Door Systems (Vancouver) Ltd.),
Diana Krimmer, Larry Blanchard, Adam Tutinka

Respondents


Before: The Honourable Mr. Justice Johnston

Reasons for Judgment

(In Chambers)

Counsel for the Petitioner:

R. Finlay

Counsel for the Respondents:
  Barbara Lynn Richardson and
  Gordon Frederick William Gooch

G.F. Gregory

Counsel for the Respondents:
  The Owners Strata Plan LMS 2435:

J.A. Bleay

In Person:

F.M. Pereira (for himself and Agostinha Pereira)

Date and Place of Trial/Hearing:

20061124

 

Vancouver, B.C.

[1]                By motion dated November 14, 2006 the petitioner seeks orders settling the form of order made by me September 8, 2006, setting aside the appearance of Mr. Gordon Gooch in this proceeding, and that Mr. Gooch provide an accounting of monies received and disbursed by him relating to a commercial strata unit. 

[2]                The petitioner also brings back its motion of July 17, 2006, which was before me on September 8.  On that motion the petitioner sought an order for sale of a commercial strata unit which is the subject of the dispute in the petition.  On September 8, I adjourned that application generally.  On September 8, 2006 and November 24, 2006, the Owners' Strata Plan LMS 2435 (the "Owners") appeared by counsel, and both times supported the petitioner's application for an order for sale of the strata unit in question.

[3]                In September, Mr. Gooch and Mr. Pereira, both acting in person, opposed the order for sale.  Both continued their opposition on November 24th.  Mr. Pereira continued to appear in person; Mr. Gooch's position was argued by Mr. Gregory who appeared for Mr. Gooch's wife, the respondent, Barbara Richardson, who is a mortgagee of the strata unit in dispute.

[4]                Mr. Pereira is an owner of a residential strata unit in a building which contains 28 residential strata units in all, as well as at least one commercial strata unit.  It is the commercial strata unit that is in issue in these proceedings and which has, in over the past eight years or more acted, in the words of Mr. Finlay, as a "litigation magnet". 

BACKGROUND

[5]                On the material before me it is possible to give a superficial outline of the history which brought these litigants before the court on September 8 and November 24, 2006.  The material does not permit more than a bare outline and I do not intend this history to be taken as a finding of historical fact. 

[6]                Sometime in 1995 or 1996, the mixed used building was built, with the 28 residential strata units and at least the one commercial strata unit.  The owner and developer was the respondent, E.M.F. Holdings Ltd. 

[7]                A first mortgage was granted to the Mutual Trust Company ("Mutual") and a second mortgage to Citizens Trust Company ("Citizens") or its successor, Citizens Bank of Canada.  As units sold, partial discharges of the Mutual and Citizens mortgages were granted.

[8]                According to Mr. Tesky, who is now employed by a successor to Mutual, Citizens delivered executed but unregistered partial discharges of mortgages over all of the strata units in the development to Mutual on the understanding that only those partial discharges of Citizens’ mortgages that were necessary to facilitate sales of strata units would be used, and then only up until the Mutual mortgage was repaid in full.  At that point, Citizens expected that any unused partial discharges would be returned to Citizens.

[9]                According to Mr. Tesky, Mr. Gooch and Ms. Richardson registered mortgages subsequent in priority to the Mutual and Citizens mortgages.

[10]            Mr. Tesky says that at some point the Mutual first mortgage was paid in full, but that Mutual did not deliver back to Citizens any unused partial discharges as was the understanding between those two financial institutions.  Instead, the partial discharges were delivered to the solicitor for the owner, E.M.F. Holdings Ltd. ("E.M.F."). 

[11]            Mr. Tesky says that there were four unused discharges delivered to E.M.F.’s lawyer, and, for the purposes of this litigation, it is enough to know that one of them relates to the commercial strata unit in issue here, and one relates to Mr. Pereira's unit.  Mr. Tesky alleges that E.M.F. registered the partial discharges without the knowledge or consent of either Mutual or Citizens and at a time when somewhat more than $400,000 remained owing on the Citizens' mortgage.

[12]            The project ran into difficulty, the owner, E.M.F., defaulted.  A number of actions were commenced by various parties, including one or more petitions for foreclosure brought by Mr. Gooch and Ms. Richardson early in 1998, an action by Citizens seeking a declaration that its mortgage had priority over the Gooch and Richardson mortgages, and a petition in August 1998 in which Citizens sought much the same relief as in its action, and in addition sought an order for foreclosure on its mortgage.

[13]            These motions are brought in the petition commenced by Citizens on August 17, 1998. 

[14]            E.M.F., as the owner of the strata unit in issue here, has had little or no interest in the unit and has taken no active part in its management since approximately 1998.

[15]            That has left a vacuum which several parties have sought to fill, or have quarrelled over.  These include:  Mr. Gooch for himself and his wife, Ms. Richardson, as mortgagees and de facto managers of the strata unit; Mr. Tesky, for a company called MCap Financial Corporation, and as the authorized representative of Clarica Trust Company, formerly Mutual, which in turn seeks to advance the interest of Citizens over the unit; and the Owners, who are claiming unpaid strata fees, interest and penalties.

[16]            On September 18, 2000, this court ordered that Mr. Tesky be appointed receiver of the commercial strata unit, with limited authority to borrow money to pay property taxes.  On March 2, 2001 Mr. Gooch obtained an order that he be repaid money spent by him in the repair and maintenance of the commercial unit, and that he be reasonably compensated for the work done by him on the commercial strata unit.

[17]            In the meantime, there was no owner to pay strata fees attributable to the commercial unit.  Mr. Gooch, from time to time, made payments toward the strata fees levied, but in spite of that, they fell into arrears.

[18]            Mr. Gooch has alleged that the building envelope, for which the Owners are responsible, is in need of repair, that there are leaks into the commercial strata unit that make it difficult to rent and which depress its sale value.  When Mr. Gooch demanded that the need for repairs be investigated and that repairs be undertaken, the Owners responded by pointing to the fact that the strata fees have not been paid for the unit.  This led to an application before Edwards J. in April 2005.  The Owners applied for an order for conduct of sale of the strata unit.  Mr. Gooch applied for an order that he be appointed administrator of the strata corporation in order that he might take the steps necessary to determine what repairs were necessary and to effect those repairs.

[19]            Edwards J. was not persuaded that the Owners had fulfilled their duty to do "... all that can reasonably be done in the way of carrying out their statutory duty"  (Richardson et al. v. The Owners, strata Plan LmS2435 and Gooch et al. v. E.M.F. Holdings Ltd. et al. 2005 BCSC 636, at para. 19), by way of repairs to, and maintenance of, the building.  He ordered Mr. Gooch and Ms. Richardson to pay outstanding strata fees and subsequent monthly assessments attributable to the commercial strata unit into the trust account of Mr. Bleay, counsel for the Owners.

[20]            Edwards J. adjourned the Owners' application for conduct of sale of the strata unit pending performance by Mr. Gooch of the direction that he pay the outstanding arrears into Mr. Bleay's trust account.  Edwards J. said that the cost of the investigation and report could be paid from the funds paid by Mr. Gooch into Mr. Bleay's trust account, from the contingency fund, or by way of special assessment.  Edwards J. further said that the Owners must take the appropriate steps to fulfill the statutory duty to repair and maintain common property and that failure to do so would entitle the mortgagees, Gooch and Richardson, to renew their application to have an administrator of the strata corporation appointed.  That application was adjourned generally.

[21]            Mr. Gooch paid $30,000 into Mr. Bleay's trust account.  There is a dispute whether that amount was sufficient to cover all arrears at that time or, whether, if it was, the arrears have continued to increase since then.  Mr. Gooch has sought an accounting from the Owners to show what strata fees are owing as opposed to any claims for interest or penalties for late charges.

[22]            I was informed that the report directed by Edwards J. in April 2005 was not delivered to the Owners until the fall of 2006, and my impression was that it was delivered shortly before the applications were argued on November 24, 2006. 

[23]            In his motion filed July 2006, Mr. Tesky sought an order for the sale of the commercial strata unit in order that he be relieved of his duties as receiver and in order that he might be reimbursed the money he had borrowed to pay property taxes since 2000, which then totalled somewhat in excess of $200,000.

[24]            Mr. Gooch opposed that application, appearing in person at the hearing September 8, 2006.  While the evidence of what occurred around that time is not clear, it appeared that, before the application was heard, Mr. Gooch had offered to indemnify Mr. Tesky by paying to him or his company the amount borrowed, and Mr. Tesky had accepted the offer.  At the hearing on September 8, Mr. Gooch sought to be appointed receiver in place of Mr. Tesky, and Mr. Tesky did not oppose that application.  The Owners did oppose Mr. Gooch’s application.

[25]            I made certain orders on September 8.  Mr. Gooch and counsel have been unable to agree on the wording of the order.

[26]            The order of Edwards J., based on reasons given by him on April 28, 2005, had not been entered at the time the matter returned before me on November 24, 2006, although I was given a copy of an order which had been approved and submitted for entry just prior to the hearing.

[27]            This history can perhaps best be described in words used by Mr. Tesky in his third affidavit at para. 20 where he says:

Unfortunately, the litigation process has proven excessively protracted and costly and has not led to a resolution.

[28]            Mr. Gooch alleges that Mr. Tesky has, for some time, either impaired or blocked outright any attempts to lease the strata unit.  In spite of this alleged lack of cooperation, and in spite of the fact that he had no apparent legal authority, Mr. Gooch has managed to arrange one or more leases.  From time to time Mr. Gooch has provided to Mr. Tesky a summary accounting of the revenues and expenditures relating to the commercial strata unit.  There is some suggestion that by agreement between Mr. Gooch and Mr. Tesky, reached between their respective lawyers, Mr. Gooch has paid, out of rental revenue, money to Ms. Richardson's mother, who is one of the parties to one of the Gooch/Richardson mortgages.

[29]            As to the motion to settle the order made by me on September 8, 2006, a draft of that order has been approved by counsel for the Owners and for Mr. Tesky.  When the draft was sent to Mr. Gooch, who was still unrepresented, he objected to certain provisions set out in the draft, and to certain other omissions.  These included:  no accounting was provided for in the draft; that the draft did not contain any of the orders made by Edwards J. on April 28, 2005; the draft mentioned insurance and he had not been ordered by me to pay insurance on the unit; and, the draft provided that surplus funds be paid into court, and I had not made that order.

[30]            Mr. Finlay replied to these objections on behalf of Mr. Tesky on October 24, 2006.

[31]            While these disputes over the form and content of my September 8 order were going on, Mr. Gooch and Mr. Tesky were diverging on another and perhaps more fundamental question, and that is the amount Mr. Gooch was to pay to Mr. Tesky to indemnify him for the borrowings made by Mr. Tesky to pay property taxes on the commercial strata unit.  According to Mr. Tesky's affidavit, before the September 8 hearing, he had reached an agreement with Mr. Gooch that Mr. Gooch would pay Mr. Tesky's tax accounts and purchase receivership certificates securing funds which Mr. Tesky had borrowed to pay property taxes.

[32]            Mr. Tesky says there was an agreement that payment was to be made by October 16, 2006, and that day came and went without either payment by Mr. Gooch or an extension, to which Mr. Gooch was entitled.

[33]            Mr. Gooch had sent $205,000 to Mr. Tesky's solicitor and that money was deposited into the lawyer’s trust account.  The total amount claimed by Mr. Tesky to repay the borrowings to that time was $202,450.97. 

[34]            Mr. Gooch questioned the propriety of Mr. Tesky having borrowed from his own financial institution to pay property taxes from time to time, and disagreed with the interest charges claimed by Mr. Tesky's employer for those borrowings.

[35]            Additionally, Mr. Gooch questioned certain penalties that had been paid and which Mr. Gooch felt should have been avoided by Mr. Tesky.

[36]            Mr. Gooch therefore required the accounting, to which Mr. Tesky had agreed, before he authorized the release from trust of all of the funds to Mr. Tesky pursuant to their agreement.  Mr. Gooch did, however, agree that $150,000 could be paid to Mr. Teskey immediately, with the balance withheld until Mr. Tesky's accounts had been approved or passed.

[37]            The accounting was set for October 3, 2006 but a registrar declined to proceed because the order appointing Mr. Tesky receiver did not provide for an accounting.  Mr. Gooch swears that he was at all times willing to consent to an order to provide for the accounting but that Mr. Tesky has failed or refused to seek such an order.  Therefore, the accounting has not been done.  When it appeared to Mr. Gooch that Mr. Tesky was not about to proceed expeditiously to pass his accounts, Mr. Gooch asked for and received his funds from Mr. Tesky's counsel.  The money had been borrowed by Mr. Gooch and he was understandably reluctant to carry the cost of financing indefinitely.

[38]            During the hearing on November 24, 2006, I approved a draft of my September 8 order, with some variations that were spoken to and, I believe, agreed to by counsel.  The draft of my order of September 8, 2006, as approved by counsel, as varied on November 24, 2006, is approved by me for entry.  If counsel cannot agree on the variations after reviewing the tape of the proceedings, I direct that a transcript be ordered by Mr. Teskey, with the costs of the transcript to be spoken to.

[39]            That will dispose of the applications to set aside Mr. Gooch’s appearance, and for an order that he account.

APPLICATION FOR ORDER FOR SALE

[40]            Whether or not Citizens or any of its successors has a claim to the priority it asserts in its action should have been litigated years ago.

[41]            Mr. Finlay, in arguing in support of the application for order for sale, argued that a sale now would fix the amount of equity, if any, in this property and that would permit Citizens to make a business judgment whether there is enough money available to warrant proceeding to litigate its priority.

[42]            I do not have any sense of whether any increase in the value of this unit has outstripped any accumulation of interest of the principal owing under the disputed Citizens mortgage.

[43]            I am not inclined to order a sale of this unit on the basis that a sale will assist a litigant in deciding whether litigation that has been ongoing some eight years is worth pursuing. 

[44]            Mr. Gooch and Ms. Richardson and others are mortgagees under two mortgages, the value of which I am told now exceeds $1,000,000.  Whatever this unit is worth, it does not appear to exceed $600,000 at this point. 

[45]            Mr. Finlay argues that, when one considers the $202,000 owing for property taxes, some $54,000 owing for unpaid strata fees, an unknown value of the judgments or other claims against title to the unit, the total known or potential liabilities so far exceed any realistic estimate of the value of the unit that sale now should be ordered. 

[46]            In addition to the economic argument in favour of sale at this time, Mr. Finlay points to the various petitions and actions that have been commenced over the years, up to and including an action commenced in October 2006 by Mr. Gooch against the Owners.  He says, and there is merit to this, that sale of the unit might end the litigation and discourage litigants from pursuing other litigation.  At least, Mr. Finlay argues, a sale now might prevent any future litigation over this unit.

[47]            This argument might have more force if it were made by counsel acting for someone other than a litigant which has done little to advance its litigation over some eight years.

[48]            Additionally, some of the litigation is collateral in the sense that it concerns claims that the Owners have failed to properly maintain and repair the building.  To the extent that those claims can be proved, and to the extent they can be shown to have caused damage to mortgagees such as Mr. Gooch and Ms. Richardson, sale of the unit is not likely to end the litigation. 

[49]            I am concerned on the evidence before me that a sale now would be for a price which would be adversely affected by known deficiencies in the building, which have remained unrepaired for years, and which would have to be disclosed to any potential purchasers.  The losers in such a scenario would be Mr. Gooch,  Ms. Richardson, and other members of their family and friends who are subscribers to the Gooch/Richardson mortgages, if the Citizens mortgage does not have the priority claimed, or the Citizens claim is not pursued.

[50]            The financial interests driving the application to sell at this time are apparently something which Mr. Gooch is prepared to address and which he has tried to address, by borrowing $205,000 and sending it to Mr. Tesky's lawyer, subject only to an understandable and quite proper request that Mr. Tesky account for the amounts he says he has borrowed to pay property taxes over the years.

[51]            The support of the strata council for an immediate order for sale is also, to my mind, less than persuasive given the findings of Edwards J. as to the Owners' lack of diligence in performing their statutory obligations over the years, and Mr. Gooch's expressed willingness to pay the outstanding strata fees.

[52]            Mr. Gooch has not been the owner of this unit at this point.  He has in many ways acted as if he owned the unit by arranging for tenancies, receiving rents and applying rental monies to various purposes.  For that, he will have to account as has been ordered.  He has shown a willingness and an ability to pay the unpaid strata fees and to indemnify Mr. Tesky for money borrowed for taxes.  All Mr. Gooch has sought, as I see it, is an accounting for the strata fees and the taxes, to ensure that he is not paying monies that are not properly payable for either.

[53]            The application for order for sale is denied.  I direct that the Owners prepare and deliver to Mr. Gooch and to counsel for Ms. Richardson their accounts claiming strata fees within 30 days of this order.  Mr. Gooch and Ms. Richardson have 15 days thereafter to signify their approval to the accounts delivered by the Owners.  If the approval of Mr. Gooch and Ms. Richardson is not forthcoming within that 15 days, the Owners are directed to set the matter down before the Registrar for a report on the amounts claimed, the amounts paid from time to time, and the balance owing for strata fees.  Any other claims of the Owners by way of interest, penalties, etc., should also be investigated by the Registrar and form part of the report.

[54]            On receipt of the Registrar's report, either party to that accounting, that is the Owners or Mr. Gooch or Ms. Richardson on the other hand, are at liberty to set the matter down for approval of the Registrar’s report and recommendations.

[55]            Mr. Tesky is ordered to prepare and deliver his accounts relating to the amounts borrowed for taxes, including the delivery of any documents evidencing the amount of taxes claimed, the amount of any interest or penalty claimed by the municipality on unpaid or late paid taxes.  Mr. Tesky is further directed to provide any documents evidencing interest charged on monies borrowed by him to pay property taxes.  All of those documents will be disclosed by Mr. Tesky to Mr. Gooch and Ms. Richardson within 30 days of the date of this order.  Mr. Gooch and Ms. Richardson will have 15 days from the date of delivery of those accounts to indicate whether they approve the accounts as presented.

[56]            If Mr. Gooch and Ms. Richardson do not approve the accounts, or do not within 15 days signify their approval of those accounts, either party is at liberty to set the passing of Mr. Tesky's accounts as receiver for hearing before the Registrar. 

[57]            The Registrar shall inquire into and report on the amount of property taxes claimed from year to year by the municipality, the amounts of any penalties or interest claimed by and paid to the municipality for late payment of property taxes and the amount of any interest paid on money borrowed by Mr. Tesky to pay taxes and to whom that interest is paid.  The Registrar shall also inquire into and report on any relationship between Mr. Tesky and any party to whom interest has been paid by Mr. Tesky as receiver.

[58]            On receipt of the Registrar's report, either party is at liberty to set the matter down for a hearing into the approval of the Registrar’s report and any orders ancillary thereto.

[59]            Unless otherwise ordered by me, I am seized of both matters to return after the accounting.

[60]            Costs can be spoken to.

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