Building BC one new home at a time: HPO licensed residential builder Tiwana creates a homeowner disaster in Surrey; uses drug addict for critical work; multiple building code violations; false records

 

Will the Homeowner

Protection Office

protect you?

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Tiwana v. Shergill ,

 

2007 BCSC 458

Date: 20070330
Docket: S78073
Registry: New Westminster

Between:

Raj Tiwana and Goodwill Holdings Ltd.

Plaintiffs

And

Satnam Shergill and Jaginder Kaur Shergill

Defendants

Before: The Honourable Mr. Justice Crawford

Reasons for Judgment

Raj Tiwana:

Appearing on her own behalf, with
assistance of T. Nijjer

Counsel for the Defendants:

R.J. Morton and S. Charles

Date and Place of Hearing:

February 13 – 17, 20 – 24, 27 and 28, 2006 – March 1 – 3 and 6, 2006

 

New Westminster, B.C.

[1]                The plaintiff builder sued the defendant home owner for damages for breach of a residential house building contract.  The homeowner defendant alleged the builder failed to complete the house and sued for damages under a number of different headings. 

[2]                Appendix A to this judgment sets out the evidence that was given over the four weeks of trial.

[3]                Appendix B to this judgment is the interim findings and conclusions issued December 11, 2006. 

[4]                The findings result in judgment for the builder whose contract was terminated without notice by the owner.  However, the builder had great difficulty in establishing it’s damages.  On further reflection I find it likely some profit was lost, and I set that claim for lost profit at $10,000.

[5]                The owner proved there were deficiencies in the house, notably the foundation and the plumbing and heating systems.  I allowed $26,000 in damages for the cost of completion, $10,000 interest on monies borrowed for completion, and $100,000 in lost market value.

[6]                Two lien claims were established, one for A Class Doors, at $8,650, and one for New Century Tile in the amount $3,500.

[7]                The claims made by the defendant against the plaintiff for conversion of lumber or monies were not made out.

[8]                As to costs, I allowed the plaintiff’s costs at scale 4, which were to be offset by the defendant’s costs at scale 3 for 4 days.

“R. Crawford, J.”
The Honourable Mr. Justice R. Crawford

READ THE ENTIRE CASE HERE: 

2007 BCSC 458 Tiwana v. Shergill

 

Judge belittles condo owner for insisting that strata corporation provide financial reports and otherwise comply with the Strata Property Act

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Maciaszek v. Gosselin,

 

2007 BCSC 437

Date: 20070329


Docket: S67020
Registry: Kelowna

Between:

Stan Maciaszek

Plaintiff

And

Frank Gosselin

Defendant


Before: The Honourable Mr. Justice Rogers

Reasons for Judgment

Counsel for the Plaintiff:

T.T. Brown

Appearing on his own behalf:

F. Gosselin

Date and Place of Trial:

March 15, 16, 20 and 21. 2007

 

Kelowna, B.C.

Introduction

[1]                The plaintiff is suing the defendant for damages arising out of the plaintiff’s allegations that the defendant harassed, discriminated against, and inflicted intentional emotional stress upon him, and that the defendant trespassed upon and damaged the plaintiff’s property.

The Facts

[2]                There is on Cameron Road, in Kelowna, B.C., a five-unit strata complex.  The plaintiff owned Unit No. 2710.  He was the first person to occupy the strata.  He moved in shortly after it was built.  That was in 1992 or 1993.  The other units at 2712, 2714, 2716, and 2718 eventually filled up with other owners.  One of those owners was the defendant, who occupied Unit No. 2718.

[3]                The owners of the units were members of a strata corporation.  The corporation governed the operation of the complex.  The members elected the corporation’s officers each year at an annual general meeting.  Such financial reports as could be produced were presented at these AGMs.  The AGMs were generally held near the end of February or beginning of March.  The strata corporation was charged with setting rules and regulations for the occupiers of the complex, and with collecting enough money from the unit owners to meet the strata’s common expenses.  Those common expenses included landscaping, irrigation, maintenance and replacement of infrastructure, and so on.  With only five units in it, it was possible for the strata to be both efficient and informal.

[4]                The plaintiff’s personality did not easily mesh with the other occupiers of the complex.  I accept the evidence of those witnesses who described the plaintiff as a rigid authoritarian.  After having observed the plaintiff during this three-day trial, I would adopt that description as well.  The plaintiff’s unwillingness to compromise on any issue on which he felt he was right and others were wrong, coupled with his disinterest in the expectations and desires of other members of the complex, made personality conflicts with the other members inevitable.  When those conflicts arose, they tended to fester.  That is because the plaintiff was not prepared to accept any resolution short of capitulation to his point of view.

[5]                Up until December 2000, it was not necessary for the plaintiff to be an officer of the strata corporation.  Unfortunately, in that month the strata’s chairman planned to move out.  Another owner who had previously taken a role in strata governance was also leaving.  That left three occupiers, the plaintiff, the defendant, and Rebecca Secord, to fill the corporation’s three offices of president (or chair), treasurer, and secretary.  The defendant had been elected treasurer at the previous AGM.  Ms. Secord was the secretary.  At a meeting on December 3, 2000, the plaintiff volunteered to act as chairman until the next AGM.  The others agreed.  When that next AGM was called in early March 2002, the plaintiff was elected to his position as chair (although the term “elected” gives the process rather more glamour than it deserves – the plaintiff, the defendant, and Ms. Secord were the only members present at that meeting; the plaintiff took office more by default than by a genuine democratic exercise).

[6]                It would be an understatement to say that the plaintiff took his role of chairman seriously.  He acquired a copy of the Strata Property Act, S.B.C. 1998, c. 43.  He read it carefully.  He studied the strata’s rules and regulations.  He maintained an alert lookout for infractions committed by his neighbors.  There was no evidence at trial that any felonies or misdemeanors were actually taking place at the time.  Nevertheless, in April 2002, the plaintiff took it into his head to circulate a survey to the four other households in the complex.  The survey was ostensibly an invitation to the other households to express their opinion on the adequacy of the strata’s rules and regulations and to comment on any changes they might like to see made to those rules.  The survey was written with rather imperious language.  For example, the introductory paragraph included this:

In order to bring our Strata situation to the compliance with the Strata’s RULES AND REGULATIONS we are asking every member of our Strata to respond to this survey...

[7]                The plaintiff used the royal first-person pronoun “we” in this paragraph.  There was no “we” behind the survey; the plaintiff acted on his own and without conferring with the corporation’s officers or its members.  There was no suggestion in any of the evidence that around this time affairs in the complex made this survey necessary or even a good idea.

[8]                In any event, the recipients of this missive naturally took from this language that the survey’s author thought that rampant rule breaking was going on.  This impression was reinforced by the survey’s closing:

12.       Strata Council will review all responses, will do own examination of the whole property, and will make final decision within approximately two month.  Final decision of the Strata Council will be implemented and enforced.

[9]                This language brooks no nonsense from unit occupiers.  I find that even though two households did complete and return it, the plaintiff’s survey was generally not welcomed by the strata’s occupants.

[10]            I have no doubt that in the plaintiff’s mind his survey was a good thing.  I accept that the plaintiff believes that rules are meant to be strictly obeyed and deviation should be sanctioned.  I also accept that the plaintiff genuinely wanted to know whether the strata members wished to alter the regulatory regime within which they lived.  I also have no doubt that, except for the plaintiff, the strata’s members were primarily interested in just getting along with one another, doing the strata’s business in a relaxed and sometimes informal manner, and not “getting in one another’s faces” over minor infractions.

[11]            Unfortunately, the plaintiff decided that not only was he the strata chairman, he was also something like a park superintendent or camp policeman.  He took it upon himself to tell other occupants that they were breaking the rules.  On one occasion in early summer 2002, he upbraided Mr. Secord for parking his commercial truck on the roadway some distance from the plaintiff’s unit and for using a power-tool to buff its aluminum wheels.  The plaintiff’s own evidence on this is telling of his attitude.  The plaintiff said words to the effect that he went to tell Mr. Secord that this was not a proper place to park and that he should work on his truck elsewhere.  When confronted by direction, Mr. Secord asked who the plaintiff thought he was to be issuing orders.  The plaintiff replied that he was the chairman of the complex and so he had the authority to tell Mr. Secord what to do.

[12]            Not surprisingly, this episode circulated among the rest of the strata’s members.  On July 10, 2001, the four other unit owners presented the plaintiff with a letter.  In the letter, the plaintiff’s neighbors told him that they wanted him to resign as chairman of the strata corporation.  On July 14, 2001, the members held a meeting and elected Mr. Kruger to be their new chairman.

[13]            The plaintiff did not take his ouster with good grace.  The plaintiff became convinced that the defendant was spearheading a conspiracy against him.  The plaintiff’s theory is that because the defendant was slow in producing the strata’s financial reports (the defendant was still the corporation’s treasurer), and because the plaintiff continually badgered the defendant for those reports but did not receive them, and because, as the plaintiff later learned, the defendant was in arrears on his own strata fees, the defendant encouraged the other strata members to dislike the plaintiff.

[14]            The plaintiff believes that ultimately the defendant orchestrated things so that the plaintiff became isolated from his neighbors, his unit was starved of water for its lawn, and the strata corporation refused to underwrite the cost of repairing a crack in an exterior wall of his unit.  In the end, the plaintiff believes that the defendant’s harassment left him with no choice but to sell his unit for less than fair market value and to quit the strata altogether.

[15]            As to those specific allegations, I accept that the other strata members did not like the plaintiff.  They did not like him because he was difficult to get along with.  I find that his uncompromising attitude alienated his neighbors.

[16]            I find that the plaintiff’s lawn did go brown for a period during the summer of 2002 and that this was because the lawn wanted more water than the irrigation system delivered.  I also find that the defendant was not the cause of the plaintiff’s problem.  The plaintiff’s problem with his lawn was caused by the fact that the strata development is on a slope, with the plaintiff’s unit at the top.  Irrigation water runs downhill and collects in the septic system at the bottom of the development.  The volume of irrigation had to be moderated so that the strata was not faced with repair bills for when the septic field backed up into the lowest unit (which the defendant happened to own) and so that the strata would not have to pay for the expensive removal of waste water from the septic tank.  The strata corporation balanced the cost of having too much irrigation against the cosmetic effect of cutting back on irrigation and chose to act rationally by reducing the volume of irrigation.  The plaintiff’s lawn suffered in the result.

[17]            The plaintiff asserts that the installation of a padlock on the irrigation control panel was an element of the harassment he suffered at the defendant’s hands.  The evidence concerning the padlock was that someone who had no authority to access that panel was, in fact, going into it and was increasing the irrigation settings.  This unauthorized increase exacerbated the septic overflow problem.  The strata members who were authorized to access the irrigation control panel decided that the only thing to do was to secure the panel against tampering.  They decided to install a padlock and to limit distribution of the keys to the chairman and the treasurer.

[18]            In the spring of 2002, Mr. Kruger sent a notice around the strata to say that he would like to have a walk-around meeting during which the strata members could have a look at their common facilities together and discuss their plans for the coming year.  Only the plaintiff objected to the chairman’s proposal.  The plaintiff called Mr. Kruger on the telephone, and in an abrupt, authoritative and uncompromising tone, the plaintiff instructed Mr. Kruger that his “walk-around” meeting was not a proper AGM, that a proper AGM had to be called by giving a certain number of weeks notice, and that the notice had to include a proposed agenda and the corporation’s financial reports.  Mr. Kruger was an ordained clergyman before he moved into the strata complex.  His profession required him to deal with a wide variety of personalities.  It also equipped him with skills in assessing how people will behave given their demeanor and communication styles.  I accept Mr. Kruger’s characterization of his conversation with the plaintiff.  He said that the plaintiff was impolite when the plaintiff did not start the conversation with a polite “hello” but instead launched directly into a lecture on how to properly convene an AGM.  I also accept Mr. Kruger’s evidence that the plaintiff’s tone indicated that he would tolerate no opinions contrary to his own.

[19]            I also accept Mr. Kruger’s evidence that from this conversation and from the plaintiff’s general demeanor, he could “see the writing on the wall”.  He predicted (accurately, as it turned out) that the plaintiff was going to be a significant irritant to whoever managed the strata’s affairs.  Mr. Kruger wanted nothing to do with the strife he saw approaching.

[20]            In late May 2002, Mr. Kruger resigned as the corporation’s chair.  Ms. Secord took his place.  The plaintiff then began a campaign to force the calling of an AGM.  He sent around letters telling the others that he planned to convene an AGM on one of several dates.  With the exception of Ms. Secord, who told the plaintiff she could not attend because she had to work, the other strata members simply ignored the plaintiff’s messages.

[21]            The defendant was treasurer from February 2000 through 2001 and 2002.  He did not, however, diligently produce financial records and reports for the strata corporation.  While there was no evidence that any of the strata’s money, whether documented with receipts or not, was misspent, the plaintiff became increasingly agitated by the fact that the defendant had not produced financial reports as required by the Strata Property Act.  Finally, in January 2002, the plaintiff stopped paying his monthly strata fees.  He did this because, in his words, not having financial reports, he was not satisfied that his fees were being properly spent by the corporation.

[22]            As 2002 wore on, the four other unit owners began to withdraw from one another.  I accept Mr. Kruger’s evidence that the general sentiment at the time was that no one wanted to talk to anyone else because the only topic of conversation was how rotten the strata had become.  The members stopped having meetings. 

[23]            In December 2002, the plaintiff launched a petition out of the B.C. Supreme Court Registry at Kelowna.  His petition named the strata corporation as respondent.  The proceeding sought a court order appointing a management company to take over governance of the strata corporation.  The plaintiff’s complaint was that the corporation had not received financial reports from its treasurer and had not held a regular AGM.  The petition dismayed the plaintiff’s neighbors.  In their view, the discord and tension in the complex which it led to was the product of the plaintiff’s difficult nature.  It seemed unnecessary and unfair that they should be embroiled in a lawsuit over a situation that the plaintiff himself had manufactured.

[24]            The plaintiff’s petition was set for hearing in December 2002, but just before the matter was called, the plaintiff and the other strata members agreed that a management company would take over operation of the strata.  They consented to an order to that effect.  Okanagan Strata Management Ltd. was appointed to manage the strata’s affairs.  OSM assigned Mr. Ardley to attend to the strata’s business.  I accept Mr. Ardley’s evidence that the plaintiff was combative throughout Mr. Ardley’s involvement in the strata.  I also accept his evidence that the strata was deeply divided – the plaintiff was in his corner with his ideas of how things should be done, and the other four strata owners were in their corner.

[25]            As to the crack in the plaintiff’s wall, the plaintiff acknowledged that this was a longstanding problem with his unit.  He attributed it to subsidence of the soil on which his unit’s foundation was built.  The plaintiff approached the strata council in 2003 to pay for the repair of the crack.  The council considered its financial position at the time and decided to assess the crack but to put off repairing the crack because it wanted to ensure that it had the financial resources to meet the various contingencies that it faced.  Those contingencies included having to pay lawyers to defend itself from further legal proceedings that they anticipated the plaintiff might launch.  This was not an unwarranted concern – even after OSM took over management, the plaintiff continued to involve his lawyer and threaten legal action if his grievances were not addressed.  The plaintiff interpreted the council’s decision to assess but put off repairing the crack as an outright refusal to fix his problem.  This solidified his feelings of having being “hard-done-by” and discriminated against.  The plaintiff put his unit up for sale, and in March 2004 he moved out.  This, he says, was a consequence of the defendant’s harassment.

[26]            The plaintiff says that he lost money on the sale of his unit because the outside wall of his unit was cracked and because the defendant pulled some stucco away from the crack, thus exposing more of its length to potential purchasers.  I accept Ms. Secord’s evidence that after the council decided to assess the crack, she and the defendant attended the outside of the plaintiff’s unit.  They located the crack.  The defendant touched the stucco around the crack and the stucco simply fell off the building.  There was no tugging or pulling involved.

[27]            The plaintiff did not adduce evidence from persons who looked at the unit and who might have said that their impression of the house’s value was negatively influenced by seeing, say, a 20 cm as opposed to a 10 cm crack in the building’s foundation.  The plaintiff testified that he thought that if the crack had been repaired he should have got between $165,000 and $170,000.  However, the plaintiff did not adduce reliable evidence that the $155,000 he, in fact, received for his unit was less than what it would have been worth had the visible portion of the crack been shorter or if the crack had been repaired.  Such reliable evidence would have come from a properly qualified real estate appraiser.  The plaintiff does not, obviously, have any such qualification.

Analysis

[28]            The plaintiff may have been technically right when he insisted that the strata corporation operate strictly within the requirements of the Strata Property Act.  However, the way that the plaintiff expressed his opinions and demands quickly and thoroughly alienated his neighbors.

[29]            The plaintiff may also be correct that the defendant may have had a motive to drive the plaintiff away, viz:  a desire to conceal the arrears on his strata fee account.

[30]            The difficulty with the plaintiff’s case is that he adduced no evidence whatsoever that the defendant actually defamed him, or that the defendant did or failed to do anything that might amount to harassment, or that the defendant influenced others against the plaintiff.  That evidence, if it existed, would necessarily have come from the persons to whom the defendant published the defamatory remarks, or whose minds the defendant poisoned against the plaintiff.  Those persons would have been the three other unit owners:  Mr. Kruger, Ms. Secord or the Martins.  Mr. Kruger and Ms. Secord testified, and neither of them gave any evidence that could be interpreted as supporting the plaintiff’s case against the defendant.  The Martins were not called.  The plaintiff’s own evidence as it related to his allegations against the defendant amounted to nothing more than suspicion and supposition.  That is to say, the plaintiff was not able to testify that anyone told him that the defendant had defamed him, or that the defendant had taken steps to oust him from the complex, or that the defendant had done or failed to do something that might amount to harassment.

[31]            The plaintiff’s request for repair amounted to an expressed or implied invitation to attend at his unit to deal with the cracked wall.  The strata council, therefore, had the plaintiff’s authority to inspect the crack the plaintiff wanted it to repair.  The defendant was a bona fide member of the strata council and was entitled to look at the crack himself.  I accept Ms. Secord’s evidence that the stucco around the crack was fragile and that it simply fell off when the defendant happened to touch it.  Nothing about that event suggests that the defendant acted deliberately or negligently so as to increase the crack’s exposure.  In the result, I cannot find that the defendant trespassed on or caused damage to the plaintiff’s property.

[32]            The plaintiff did not, therefore, adduce evidence to support his claims against the defendant.  Despite his having good quality legal advice, and despite his counsel’s competent presentation of his case, that case was lacking.  The burden was on the plaintiff to prove the allegations against the defendant on the balance of probabilities, and he failed to do so.

Conclusion

[33]            The plaintiff’s action must be and is dismissed.  The defendant shall have his costs on Scale B.

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

BC Housing pursues Progressive Homes for building leaky rotten social housing; Court upholds insurance company's refusal to defend

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Progressive Homes Ltd. v.  Lombard General Insurance Company of Canada,

 

2007 BCSC 439

Date: 20070329
Docket: S066185
Registry: Vancouver

Between:

Progressive Homes Ltd.

Petitioner

And

Lombard General Insurance Company of Canada

Respondent


Before: The Honourable Mr. Justice Cohen

Reasons for Judgment

Counsel for the plaintiff

G.G. Hilliker, Q.C.
A.N. Epstein

Counsel for the defendants, Lombard General Insurance Company of Canada

W.K. Branch
C.A. Rhone

Date and Place of Trial/Hearing:

February 21 – 23, 2007

 

Vancouver, B.C.

I.          The Application

[1]                The petitioner, Progressive Homes Ltd. (“Progressive”), is a general contractor.  The respondent, Lombard General Insurance Company of Canada (“Lombard”), is a liability insurance company.

[2]                Lombard issued successive liability insurance policies to Progressive during the years 1987 through 2005 (the “insurance contracts”). 

[3]                In late 2004 and early 2005 four separate actions (the “Underlying Actions”) were brought against Progressive by B.C. Housing Management Commission (“BC Housing”) concerning condominium developments identified as:

(i)         West Coast Community Homes;

(ii)        Burlington Heights;

(iii)       Hyland Park; and

(iv)       Terra Nova Housing. 

[4]                BC Housing financed the construction and development of the buildings.  Progressive was the general contractor.  The buildings were constructed pursuant to contracts between Progressive and BC Housing Co-Op, who was given the leasehold in the lands for the building projects.  BC Housing is responsible for the repairs and has an assignment of any causes of action against Progressive.

[5]                The buildings suffer from what are colloquially referred to as “leaky condo” defects.  BC Housing alleges, inter alia, that Progressive failed to supply buildings which conformed to Progressive’s contractual obligations.  

[6]                Lombard initially defended the underlying actions on behalf of Progressive without waiving its rights.  Lombard later withdrew from the defence of the actions, taking the position that it was under no duty to defend because the claims in the actions were not covered under the insurance contracts.

[7]                Progressive brings this application for an order declaring that Lombard is under a duty to defend Progressive in the underlying actions.

II.         The Issue

[8]                The sole issue for determination is whether Lombard, under the terms of the insurance contracts, is obligated to defend Progressive with respect to the underlying actions.

III.        The Test

[9]                If there is a possibility that the claims in the underlying actions may fall within the coverage afforded by the insurance contracts then Lombard is under a duty to defend: See Nichols v. American Home Assurance Co. (1990), 68 D.L.R. (4th) 321 (S.C.C.).  In making this determination the Court must give the widest latitude to the pleadings in the underlying actions.  Any doubt as to whether the pleadings bring the incident within the coverage of the insurance contracts ought to weigh in favour of Progressive: See Opron Maritimes Construction Ltd. v. Canadian Indemnity Co., [1986] N.B.J. No. 111 (C.A.).

IV.        The Pleadings

[10]            Each claim in the underlying actions is in relation to a different building.  However, as the pleadings are similar, I will set out, as an example, the material allegations against Progressive in the action relating to Burlington Heights, BCSC Action No. S045955:

GENERAL CONTRACTOR

16.       Progressive entered into a contract with the Co-Op on or about November 8, 1993 (the “Construction Contract”) to construct the Development (the “Work”) in accordance with the plans and specifications and in accordance with applicable building codes, bylaws, regulations and standards.

17.       Pursuant to the Construction Contract, Progressive undertook responsibilities including, among other things:

(a)        to protect the Work and the Co-Op’s property from damage and to be responsible for any damage which may arise as the result of or in connection with Progressive’s operations under the Construction Contract;

(b)        to have control of the Work and to effectively direct and supervise the Work so as to ensure conformity with the Construction Contract and all drawings, specification and directions issued thereunder;

(c)        to be responsible for the construction means, methods, techniques, sequences and procedures used in the Work and for coordinating the various parts of the Work under the Construction Contract; and

(d)        to be responsible for making good any damage to the Work, at its own expense, if Progressive, in the performance of the Construction Contract and the Work, damaged the Work, and to remedy any deficiencies in the Work.

18.       Progressive owed a duty of care to the Plaintiffs to ensure that the Development was constructed using all reasonable care, skill, diligence and competence, and without construction deficiencies and design defects.

19.       Progressive knew or ought to have known that the Plaintiffs were relying on it to exercise reasonable skill, care and diligence in performing the Work and to construct the Development in accordance with the Construction Contract, construction drawings and specifications and in accordance with applicable statutes, building codes, regulations, bylaws and building standards.

20.       The Plaintiffs relied on Progressive’s professional advice that the building envelope system used for the Development was appropriate.

21.       Progressive knew or ought to have known that the Plaintiffs relied on its judgment, and knew or ought to have known that the building envelope system would allow water ingress but no or insufficient egress which would cause damage to the Development.

22.       Progressive knew or ought to have known that the Co-Op had no or little experience with the building envelope system selected for the Development and that it intended to maintain the Development without the assistance of further professional advice.

23.       Progressive breached its contract with the Co-Op and/or breached the duty of care it owed to the Plaintiffs, and was negligent in the construction of the Development, particulars of which include:

(a)        failing to ensure that the Development was constructed in compliance with all applicable building codes, bylaws, regulations other statutory requirements and industry standards;

(b)        failing to ensure that the Development was built in compliance with all plans and specifications;

(c)        failing to ensure that the Development would be constructed in a good and workmanlike manner;

(d)        failing to ensure that the Development would be free from construction defects;

(e)        failing to ensure that the Development would be protected, by adequate waterproofing systems, against all water damage;

(f)         failing to ensure that the Development would be adequately inspected during and after construction;

(g)        failing to warn or adequately warn the Plaintiffs of the special maintenance and inspection requirements of the building envelope system, and specifically the danger of water ingress; and

(h)        failing in its duty to provide clear instructions, including precautions to be taken to reduce damage from water ingress.

DEFECTS

29.       As a result of the breaches of contract by Progressive and the negligence of the Defendants and others, and all of them, the Development has sustained since the date of construction and continues to sustain defects and ongoing damage including the following:

(a)       water leaking through the exterior walls;

(b)        improper and incomplete installation and construction of framing, stucco walls, vinyl siding, windows, sheathing paper, flashings, ventilation, walkway membranes, flashing membranes, eaves troughs, downspouts, gutters, drains, balcony decks, pedestrian walkways, railings, roofs, and patio doors;

(c)        insufficient venting and drainage of wall systems;

(d)        inadequate exhaust ventilation system;

(e)        water leaking through the windows;

(f)         improper use of caulking;

(g)        poorly assembled and installed windows;

(h)        deterioration of the building components resulting from water ingress and infiltration

all of which are collectively referred to as the “Defects” and were caused by the Defendants and all of which constitute further breaches of the terms of the agreements referenced above.

30.       As a reasonably foreseeable consequence of Defects and particulars outlined above, significant portions of the Development have suffered since the date of construction and continue to suffer considerable moisture penetration, resultant rot and infestation which has caused the Development to be unsafe and hazardous and to pose a substantial physical danger to the health and safety of the occupants.

DAMAGES

33.       As a result of the Defects and of the negligence and breaches of contract by the Defendants the Plaintiffs have suffered damages including but not limited to the following:

(a)        inspection and professional advice concerning the Defects,

(b)        cost to date of remedial work, both permanent and temporary;

(c)        cost of relocation and alternate housing of tenants during remediation work and other tenant expenses;

(d)        diminution in value of the Development; and

(e)        expense, inconvenience and hardship caused by the construction and design deficiencies and their repair.

 

READ THE ENTIRE CASE HERE:
 
2007 BCSC 439 Progressive Homes Ltd. v. Lombard General Insurance Company of Canada

 

Glacier Lodge Whistler 1/4 share condo deal goes sour

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Morell et al v. Nedoma,

 

2007 BCSC 431

Date: 20070329
Docket: S055451
Registry: Vancouver

Between:

Renate Morell and Lorne Yeudall

Plaintiffs

And

Bohumir Nedoma aka Robert Nedoma aka Bob Nedoma

Defendant


Before: The Honourable Mr. Justice Cullen

Reasons for Judgment

Counsel for the plaintiffs

M.J. Braidwood

Counsel for the defendant

M.K. Woodall

Date and Place of Trial/Hearing:

December 11 – 14, 2006
January 4, 2007

 

Vancouver, B.C.

INTRODUCTION AND BACKGROUND

[1]                This action concerns the nature and effect of an agreement between the plaintiffs, Lorne Yeudall and Renate Morell and the defendant Bohumir Nedoma in relation to the purchase of a condominium at Whistler, in October of 1995.  The condominium, Units 108/109, Chateau Boulevard, Whistler [“the Property”] is registered solely in the name of Mr. Nedoma.  The present value of the Property is not the subject of precise evidence, but is in the range of $500,000.

[2]                At issue is whether the agreement entered into by the parties at the time of the purchase of the Property entitle the plaintiffs to a present interest or damages relating to the interest they would be entitled to hold, had the agreement been fulfilled. 

[3]                At the time of the purchase of the Property, Ms. Morell and Mr. Nedoma’s common-law spouse, Franziska Kaltenegger, were friends and in past were colleagues.  Dr. Yeudall had met Ms. Morell earlier in 1995 and began living with her in a common-law relationship as of August 1995.  Both couples remain in their respective common-law relationships, but Ms. Morell’s and Ms. Kaltenegger’s friendship has ended. 

[4]                The genesis of the decision and the agreement to purchase a condominium involved all four parties, and on October 7, 1995, Ms. Kaltenegger, while in the presence of Ms. Morell and Dr. Yeudall, viewed a number of prospective properties, ultimately making an offer to purchase the Property for $182,000.  Ms. Kaltenegger’s offer included a deposit of $1,000 which, although there was some controversy on the issue, I am satisfied was made by Ms. Morell, who wrote a cheque in that amount. 

[5]                The offer was subject to purchaser’s conditions which were removed on or before October 14, 1995, at which point Ms. Kaltenegger increased the deposit to $10,000, by sending an additional $9,000 to the realtor.  The completion date was set for October 23, 1995.

[6]                It was contemplated by the four parties that each would pay one-quarter of the purchase price and each would be entitled to a one-quarter interest.  As of the completion date, the plaintiffs had each advanced $10,000 towards purchase of the Property, Dr. Yeudall by cheque to Mr. Nedoma, dated October 19, 1995 and Ms. Morell by an additional $9,000 to Mr. Nedoma by cheque dated October 20, 1995.  The balance of the adjusted purchase price of $185,560.01 was paid by Mr. Nedoma when the transaction was completed on October 23, 1995.  The Property was registered in his sole name.

[7]                To date, neither Dr. Yeudall nor Ms. Morell have advanced any further funds to Mr. Nedoma on account of their share of the purchase price, although in 1996 and 1997 they made $3,183.92 in payments for expenses related to the Property and they paid in total, $8,830 in interest on the amount representing the unadvanced portion of their shares to Mr. Nedoma. 

[8]                When the Property was purchased, Ms. Morell was a financial consultant who sold insurance and mutual funds.  In 1995 she was approached by Eron Mortgage Corporation (“Eron”) to sell second mortgages and she also invested in them herself.

[9]                Dr. Yeudall was a psychologist who had been forced to retire in 1991 due to the development of neurological symptoms.  He testified that in 1995 he was receiving “a minor pension” but was waiting for a medical pension to be provided.  He testified that it was not settled until May 1996 when he received approximately $100,000 in a lump sum disability payment.  He too invested in Eron Mortgage Corporation, using his disability payment and proceeds from a line of credit. 

[10]            When Eron Mortgage Corporation collapsed in October 1997, both Dr. Yeudall and Ms. Morell lost substantial sums of money.  Ms. Kaltenegger had invested in Eron Mortgage through Ms. Morell and she too lost what she invested.  The friendship of the parties ended with the Eron collapse as did Dr. Yeudall’s and Ms. Morell’s ability to make any payments for expenses, interest or principal in relation to the Property. 

[11]            In the meantime, however, after the completion date on October 23, 1995, the parties met on November 3, 1995 to celebrate the purchase of the Property.  At that meeting, Mr. Nedoma produced and executed three documents.  The first two documents were entitled “Conditional Promisory Note” (“the CPN”).  One was made out to Ms. Morell and one to Dr. Yeudall.  The contents of the notes were the same, except for the promissee.  They read as follows:

CONDITIONAL PROMISORY NOTE

I, Bohumir Nedoma hereby declare the following:

For value received, the undersigned promises to pay Renate Morell/Lorne T. Yeudall on or after Jan 1/96 the sum of CDN $10,000 without interest conditionally, if and only if this sum of money is applied towards the option of purchasing ONE only 25% share in the property described as:

GLACIER LODGE unit 108 and 109

108/109 Chateau boulevard

VR 2266, DL 3866, Lot 21

Whistler, B.C.

In case of death or mental illness, the Last Will and testament presented at the time of signing this note takes precedence.

[12]            The third document which Mr. Nedoma produced was his Last Will and Testament which was referred to in the two conditional promissory notes.  The relevant portion of the Will reads as follows:

Named beneficiaries:

Renate Morrel 25% of cash equity in Whistler condo unconditionally

Lorne 25% of equity unc.

Franzi 50% of equity, provided

That she remains an active skier.  In case Franziska no longer skis, a further breakdown the 50% share assigned to her shall take place as follows:

25% of the equity unconditionally to F.K., the remaining

25% is to be transferred in full

towards paying off any remaining debts on the Roberts Creek property and any further funds applied to increase the value of the scholarship fund tabled below.

[13]            The evidence established that the parties shared the use of the condominium until October of 1997, when Dr. Yeudall and Ms. Morell’s fortunes sagged with the collapse of Eron Mortgage Corporation and the relationship between Ms. Morell and Ms. Kaltenegger ended. 

[14]            The evidence established that during the intervening period, the payments made by the plaintiffs were confined to some expense payments and interest on the unpaid portion of their principle payment towards their ownership in the Property.  In particular, on September 21, 1996 both Ms. Morell and Dr. Yeudall paid $1,800 in interest, on December 2, 1996 they each paid $470 in interest, on June 25, 1997 they each paid $1,645 in interest and on December 10, 1997 they each paid $500 in interest for the total of $8,830 between them.

[15]            In terms of expenses, they made payments between February 14, 1996 and September 2, 1997, totalling $3,183.92.

[16]            There is controversy as to why the interest payments were paid and what they represented.  It is the contention of the plaintiffs that the interest payments were part of an agreement reached between the plaintiffs and Mr. Nedoma under which Mr. Nedoma agreed to loan to each of the plaintiffs an amount representing the balance of their share of the purchase price and the plaintiffs agreed to pay the defendant 8% interest on the outstanding amount of the loan.  They contend that by entering into the loan agreement with Mr. Nedoma they have paid their share of the purchase price and are accordingly entitled to an equitable interest in the Property subject to a set-off for the outstanding principal, interest, and expenses ensuing from their cessation of payments since December 1997.

[17]            The defendant contends that his payment of the plaintiff’s share of the purchase price was dictated by the plaintiff’s failure to provide the necessary funds for completion on or before October 23, 1995, not by any loan agreement entered into.  He further contends that the payment of interest was volunteered by the plaintiffs after, and in response to the fact that he had presented the purchase of the Property by advancing the balance of the purchase price and thus was similarly not the product of a loan agreement.

[18]            The counter vailing positions of the parties emerges from their recollection of their past dealings and the contemporaneous documents used to identify the financial state of affairs surrounding and following the purchase of the Property.

II.         THE PLAINTIFFS’ EVIDENCE

1.         Dr. Yeudall

[19]            Dr. Yeudall is 69.  He retired in 1995 because of the neurological symptoms he developed, and he then moved to Vancouver.  He began cohabiting with Ms. Morell in August 1995, having met her some months earlier.  He was at the time waiting for a disability pension and a lump sum payment.  He confirmed that he invested the funds he received for his lump sum disability payment in Eron and also invested some funds he received by establishing a line of credit. 

[20]            Dr. Yeudall testified that Ms. Kaltenegger was a long time friend of Ms. Morell and had invited her up to Whistler on the weekend of October 7, 1995.  Dr. Yeudall testified he went along and they looked at various properties with a view to buying one as an investment and eventually at the end of the day looked at the Property on Chateau Boulevard.  They went back to the realtor’s office and Ms. Kaltenegger asked them if they would like to get involved in the purchase.  Dr. Yeudall said they agreed to become involved and at that point Ms. Kaltenegger called Mr. Nedoma as a result of which she relayed to them that Mr. Nedoma “would be interested provided the purchase was in his name.”  Dr. Yeudall said he understood the terms would be that each party would pay one quarter of the purchase price and it would operate as a partnership.  He testified that Ms. Kaltenegger signed an offer for the Property and Ms. Morell put down the $1,000 deposit.

[21]            Dr. Yeudall didn’t recall being involved in any negotiations concerning the Property.  He identified the October 7th, 1995 contract of purchase and sale as being signed by Ms. Kaltenegger and the October 23, 1995 purchaser’s statement of adjustments as being handled by Mr. Nedoma.  He was asked what happened between October 7 and October 23 and he said the only clear thing in his recollection was that he was requested to make a deposit of $10,000 and he wrote a cheque to Mr. Nedoma in that amount.  He identified his cheque dated October 19, 1995 and indicated it was cashed.  He was asked what else was discussed and he said there was discussion about he and Ms. Morell going to the bank for a loan to pay off the remaining balance.  He recalled that Ms. Morell also wrote another cheque in the amount of $9,000 to bring her deposit to $10,000.  Dr. Yeudall said the plan was that he and Ms. Morell would request a loan from the bank to pay the balance of their share of the purchase price and that they were confident they would be able to obtain the money.  He testified, however, that that did not happen, explaining that Mr. Nedoma agreed to carry the balance of the purchase price at 8% interest per year.  He was asked when that agreement was struck; he said he couldn’t really remember.  He recalled saying at discovery that it was either before or after the closing and he recalled saying several times it was before the closing, but he couldn’t really remember.  He testified it was around the closing date, but he was uncertain whether it was before or after.  He testified that as of the closing date he still had not received a disability cheque, it was still “caught up in the bureaucracy.” 

[22]            He said his understanding of the amount of the loan which Mr. Nedoma agreed to make to him was the balance of his one-quarter of the purchase price after deduction of the $10,000 paid as a deposit plus 8% interest.  He testified that he made his first interest payment in September of 1996 along with Ms. Morell when they paid $1,800 each to Mr. Nedoma.  He said the cheque for the interest was made when Mr. Nedoma presented him and Ms. Morell with documents regarding the expenses owing and the interest owing.  He acknowledged the interest payments on September 20, 1996, November 26, 1996, June 25, 1997 and September of 1997.

[23]            Dr. Yeudall was shown Tab 22 of Exhibit 1 which was a document titled “Lorne’s Mortgage Statement 1/1/96 – 12/31/97”.  The document also bore the date 8/30/97 over the words “Whistler – Yeudall”.  It showed an outstanding balance of -$36,390 as of December 31, 1995 and itemized the interest payments of $1,800 (September 21, 1996), $470 (December 2, 1996), and $1,645 (July 3, 1997).  It did not show the interest payment of $500 in December 1997.

[24]            Dr. Yeudall agreed the sum of $36,390 represented the outstanding balance of his share for a one-quarter interest in the Property and that the document accurately recorded the payments of interest which he made.  He confirmed that the statement identified $2,911 as the interest owing for the first year “retroactive and in the future” from October 15/95 to October 15/96.  He testified the sum of $470 paid on December 2, 1996 was in response to a request for payment at that time and he described the $1,645 payment as a payment against interest on July 3, 1997.  He confirmed that the document identified $3,000 as interest owing for year two (October 15, 1996 to October 15, 1997) and the sums of $255.91, $257.61 and $130 represented interest owed from October 15, 1997 to November 15, 1997, November 15, 1997 to December 15, 1997, and December 15 to December 31, 1997 respectively, which he said were not paid.  He agreed the statement showed interest owing as of the end of 1997 of $2,639.72, but testified he paid $500 on December 10, 1997 to lessen the total interest owing to $2,139.72.

[25]            Dr. Yeudall testified that after the collapse of Eron he lost about $200,000 which he had invested and as well, Ms. Morell lost a substantial sum of money.  He testified he was present when the defendant signed the CPN on November 3, 1995 but said the only thing he recalled about that was that the $10,000 referred to in CPN was what he and Ms. Morell were applying towards their one-quarter share of the Property and the CPN was a protection for them in case of the defendant’s death or mental illness, it was to confirm they were one-quarter owners and each had contributed $10,000 towards that ownership.

[26]            Dr. Yeudall said he recalled no discussion about an option referred to in the CPN’s.  He said there was no debatable issue about whether they “were going in on a one-quarter interest”.  He recalled no discussion about whether or under what conditions they would get their money back.  Dr. Yeudall testified the Last Will and Testament was to the same effect “to protect us in our one-quarter ownership”. 

[27]            As far as the expenses were concerned, Dr. Yeudall said they would be paid when the defendants supplied them with a statement showing how much was expended and that he and Ms. Morell would each pay their one-quarter share.  He said the expenses were handled by an account opened by the defendant and Ms. Morell on February 14, 1996.  They rented the Property under Powder Resorts Corporation, but they found it was not getting sufficient revenue, so the defendant organized a website and hired a manager to manage the rentals instead.

[28]            Dr. Yeudall identified a document titled “Cost Sharing Report 1/1/96 through 12/31/97” as being prepared by the defendant, showing a reconciliation of the expenses for the Property, accounting records showing the profits/loss for the Property and a transaction report reflecting the expenses paid by each party.

[29]            Dr. Yeudall testified that neither he nor Ms. Morell paid any interest, expenses or principal after the end of 1997 nor did they use the Property.  He testified they decided to pay their indebtedness to the bank and had no money to put towards the Property.  He said that the interest payments which they had made were treated as an investment in the Property for tax purposes. 

[30]            Dr. Yeudall testified that he did not directly discuss what he did with his lump sum payment which he received in May 1996 with Mr. Nedoma, although he testified that during a walk with Renate Morell, Franzisca Kaltenegger and the defendant, he “probably brought up that he invested in Eron”.

[31]            In cross-examination Dr. Yeudall agreed that if he did not pay his quarter share, he was not entitled to be an owner of the Property and he also agreed that before the completion of the sale, he told the defendant that he could get the money at the bank before the completion date.  He also agreed he told the defendant he was expecting a disability settlement in a manner of months and he agreed he couldn’t remember if the agreement for the defendant to fund the purchase price was made before or after the closing.  What he recalled was saying to the defendant that he would go to the bank to get the money and that the defendant intervened and said he would carry their portion.  He agreed that he planned to use his disability lump-sum payment to put into a high yield investment and anticipated paying off the condo purchase price in a year.  He agreed he concluded that Eron would yield more money than the Whistler investment.

[32]            He said he didn’t tell the defendant directly of his plan, but he recalled while on walks with the defendant and the others, discussing investing in Eron and he knew that Ms. Kaltenegger had done the same thing.  He agreed that he didn’t tell Mr. Nedoma when he received the disability settlement funds in May of 1996.  He agreed that he could have gone to the bank in October of 1995 to get the balance of his share of the payment and that in fact he did borrow $45,000 for investment in Eron. 

[33]            He said the arrangement with regard to interest was simply that they would pay interest when they were presented with a statement by Mr. Nedoma.  He agreed that the $1,800 interest payment paid in September of 1996 did not represent the full interest amount owing as of that date.  It was his recollection that he was presented with the mortgage statement at Tab 22 of Exhibit 1 in August of 1997, not in December. 

[34]            Dr. Yeudall said although he could not recall any specific meeting with the defendant prior to the completion date, he did recall giving him a cheque for $10,000.  He agreed that he invested over $200,000 in Eron after October 1995 and that Ms. Morell had invested a similar amount and they both believed they could get very generous returns on those investments.

[35]            He said he had no recollection about when the loan would be repaid and did not recall if that was discussed.  He said the sequence as he remembered it was that the defendant said he was going to take the Property in his name, then he and Ms. Morell gave $10,000 each to the defendant and then they were going to the bank to get the balance, but because the defendant offered to carry them they had no need to get the money to the lawyer.  He didn’t recall any discussion with the defendant between October 19th when he paid the $10,000 and the 23rd.  He indicated that it may still have been their intention to go to the bank when they put up the $10,000, he simply didn’t recall that meeting.

[36]            He testified that the defendant wanted the Property in his name from the beginning, which meant he would be paying the purchase price.  He said it was the defendant’s condition for being in the partnership that the Property would be in his name.  He was asked whether at the meeting of November 3rd, 1995 he told the defendant that he still intended to borrow money from the bank and he said he did not recall that.  However, in his examination for discovery when he was asked whether he was still expecting that he would pay his share via a bank loan at that time, he said yes.  He was asked whether in light of that evidence he agreed with the suggestion that as of November 3rd, there was no agreement that the defendant would loan the money for the plaintiffs’ share of the purchase price.  He said his memory was that the loan agreement was arrived at just before or just after the completion date.  He agreed however that in November of 1995 he still expected to pay the balance of the purchase price within a short period of time based on when he believed his disability payment would be coming.

[37]            He did not recall the reason why he was asked to pay the deposit and whether it was to match what Ms. Kaltenegger had put down.  He said he didn’t recall having thoughts about the deposit being non-refundable. 

[38]            He said the clear arrangement with the defendant was that they would start paying him when he presented the requisite documentation.  He denied agreeing in his examination for discovery that the $10,000 would be credited to the purchase price only if the balance were paid.  He answered yes, in his examination for discovery, mistaking the intention of the question.  He did not agree that the date of January 1st, 1996 on the CPN was selected because it was a date by which he expected to receive his pension and pay off the balance of his share of the purchase price.  He said he didn’t ask the defendant why he made January 1, 1996 the operative date in the CPN and he did not know why that date was chosen.  He denied that the $10,000 would be paid to him or on his credit, only if he paid the balance of the purchase price.  He said his understanding was that the defendant was going to grant a mortgage to the plaintiffs and they would get a mortgage statement from him.

[39]            He denied that the reason there was no time line for repayment was because he kept telling the defendant that he would pay when he got his disability payment, although he said “I told him that once or twice”.

[40]            With respect to the mortgage statement, he had no real recollection of the date he received it, but assumed it was in August of 1997.  When it was put to him that the document was originally created in August 1997, but was updated as time went on, he answered “it may be, I cannot say, well no, it was on the 30th as dated”.  He testified they didn’t go to Whistler in December of 1997.  He agreed that it was his understanding from the beginning that the defendant would pay a purchase price and get his name on the title and they would not get their name on the title until they paid their share.  He didn’t recall telling the defendant that they would clear up their indebtedness by the end of 1995.  He agreed that his and Ms. Morell’s strategy with the disability payment was to invest it in Eron, make some money fairly quickly and then pay off the defendant and still have some capital left over.  He said they anticipated the Eron investment lasting a year and a half.  He agreed he didn’t recall what he told the defendant at that point other than he said he was sure that the defendant was aware they had invested money in Eron.  He said he had no recollection of any meeting with Ms. Kaltenegger or the defendant in December of 1997.  He said he recalled one conversation with the defendant in December in which the defendant asked for an interest deposit.  He said he deposited a cheque for $1,000 reflecting $500 from each plaintiff, but there was no meeting.  He was asked whether there was any discussion of conditions to allow the defendant to find a way for the plaintiffs to finance their share, he said he could not recall any such discussion.  It was put to him that the defendant suggested that they each pay $500, that they make up the shortfall in interest, that they make regular payments into the future and that they commit to a specific date to pay off their share of the purchase price.  Dr. Yeudall said he didn’t recall that discussion. 

2.         Renate Morell

[41]            Ms. Morell is 64.  She originally came to know Ms. Kaltenegger in 1976 when they worked together for about 6 years.  She eventually began working in the financial services industry.  She was a chartered life underwriter and a chartered financial consultant.  She was approached by Eron to sell their “products” in 1995.  Initially she invested about $30,000 of her own money in Eron and Ms. Kaltenegger invested through her as well in the summer of 1995.  She considered her relationship with Ms. Kaltenegger to be a long term good friendship.  She began her relationship with Lorne Yeudall in March 1995 and they began cohabiting in August of that year.

[42]            They received a call from Franzisca Kaltenegger before the October 7th weekend, from Whistler, and they went up there to join her, to look at potential properties to purchase.  They were eventually shown the Property by a realtor and they made an offer, which included a $1,000 deposit which Ms. Morell paid with a cheque.  She said that on October 7, 1995 she and Ms. Kaltenegger and Dr. Yeudall discussed the Property after Ms. Kaltenegger asked them if they would be interested in “coming in on it”.  She said that Ms. Kaltenegger then talked to the defendant by telephone and at the conclusion of the conversation told them that he was willing to become involved in the partnership but would like to be the person on title.  Ms. Morell testified that the defendant said he would handle the financial transaction and somewhat later told her and Dr. Yeudall when they said they would go to the bank, to obtain their share of the purchase price, that he would carry them.  She testified the understanding was that each of them would be a one-quarter owner; they would jointly look after the upkeep of the Property, would use it and rent it out and would be free to use it when it was not being rented.  They would pay all expenses, one-quarter each.  Ms. Morell provided a cheque for $9,000 on October 20, 1995.  She testified she provided those funds because the defendant requested it to indicate they were serious about coming into the Property purchase.  She said there was no doubt that it was for the condominium purchase and she said she did not subsequently go to the bank to get funds because the defendant offered to carry them, to simplify the transaction.  Ms. Morell said she could not recall when the defendant made that offer, that it was either just before or just after the closing.  She said that there was an agreement that they would pay 8% annual interest, but she recalled no specific time span being discussed.  She testified that she paid 8% interest on the remaining one-quarter share after deduction of the $10,000 which she had already paid towards the Property.  She said the interest was calculated from October 15, 1995 and she testified that interest was paid “on receipt of a statement that the defendant prepared”.  She agreed that she and Dr. Yeudall paid $1,800 interest on September 20, 1996.  She identified Exhibit 1, Tab 21 as a document entitled “Renate’s Mortgage Statement prepared by the defendant.  She could not recall when she got it, but noted it was dated August 30, 1997.  She agreed that the interest for “year 1”, was October 15, 1995 to October 15, 1996 - $2,900.  She was asked why she didn’t pay regular interest, and testified that it was because of the defendant’s suggestion that he would prepare a statement and provide the statement to the plaintiffs and then they would pay.  She said that Dr. Yeudall developed a plan to invest in Eron, but “not as of October 15, 1995”.  It was the end of spring or early summer in 1996 and that is when he did his investing.  Ms. Morell testified she recalled going on walks with Dr. Yeudall and the defendant and Ms. Kaltenegger but couldn’t be specific about remembering the discussion Dr. Yeudall testified to about his investing in Eron. 

[43]            Ms. Morell testified she believed she could have obtained a loan in late 1995 and throughout 1996 and in the first half of 1997 to pay out her share of the purchase price.  She denied being involved in any discussion around December of 1997 about modifying the agreement by which the Property was to be purchased.  Her financial position at that time was “disastrous” and she could not have obtained funds to invest in the Property.

[44]            Ms. Morell confirmed that the Eron collapse resulted in the demise of her relationship with Ms. Kaltenegger and the end of the plaintiffs’ use of the Property.  She testified that there was no loan or mortgage agreement with the defendant “per se”, and she could not recall having discussions about finalizing such an agreement although she assumed there were some such discussions.  She took no steps to prepare anything further because of the “long and trusting relationship” that she had with Ms. Kaltenegger. 

[45]            So far as the conditional promissory notes are concerned, she described her understanding of them as a receipt from the defendant for the $10,000 they each gave him towards their 25% share in the Property.  She was never told the money was non-refundable.  She recalled the Will as providing for the plaintiff’s 25% share of the Property in the event something happened to the defendant.  She recalled no discussion of the term “unconditionally” used in the Will or the phrase “towards the option” used in the CPN.  She could recall no discussion about what would happen if the balance of the purchase price was not paid or the defendant ever saying that the plaintiffs would not get the $10,000 back in that eventuality.  She could recall no discussion about there being any conditions to getting the $10,000 back. 

[46]            Ms. Morell recalled no discussion about what would happen if she did not pay the balance of the purchase price.  She testified that she paid 8% interest until 1997, plus expenses and that she had a key and use of the Property.  After the fall of Eron, she and Dr. Yeudall could not go up to use the Property and made no further payments towards it.

[47]            In cross-examination, Ms. Morell agreed she had experience in lending money for mortgages and in selling mortgages for Eron.  She agreed after she began selling the mortgages in the summer of 1995 she received significant commission cheques from $15,000 up to $29,000 on a regular basis.  She agreed that when the Property was purchased in the fall of 1995 the money for her share was “only a phone call away” and she told Ms. Kaltenegger that.  She testified she had about $200,000 invested in Eron at the time of its collapse and that as of October of 1995 she had about $50,000 invested.  She agreed therefore in the ensuing period she invested a further $150,000.  She also agreed that she and Dr. Yeudall had a plan to invest in Eron to take advantage of its high yields, and at some later point they anticipated paying off the Property.  She couldn’t say exactly when it was they agreed on the plan, but she testified they had talked about it before the November 3, 1995 meeting.

[48]            Ms. Morell said that it was her understanding that if she did not pay her one-quarter share, she would nevertheless be entitled to whatever percentage of the Property she contributed towards its purchase.  She agreed that was never discussed, that “it was a casual financial understanding between friends” and there was no formal discussion or documentation.

[49]            Ms. Morell’s explanation of the CPN was not that there was a condition under which the defendant would pay the $10,000 back; it was that there was a condition that he would pay it without interest “if the monies applied towards the option of financing one 25% share in the Property.”  She relied on the Will as evidence there was agreement that they already owned their 25% share “unconditionally”. 

[50]            She testified Mr. Nedoma’s payment of the balance of the purchase price and the registration of the Property in his name simplified the transaction.  However, she agreed it would have been even simpler if everyone simply paid their share of the purchase price by the closing date and she also agreed that she could have had the money.  She ventured that it may have been more complicated and hence more expensive to put four names on title instead of one, but said that it was the defendant’s suggestion that it would be simpler to do it with him paying the purchase price and taking the Property in his name.

[51]            Ms. Morell remembered nothing of the conversation in which the defendant offered to finance their share of the Property.

[52]       &

Le Soleil (Vancouver): Court of Appeal confirms strata council members must act legally: must disclose conflicts of interest; cannot use strata corporation money for own purposes; cannot hide behind lawyer's advice

 


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Dockside Brewing Co. Ltd. v. Strata Plan LMS 3837,

 

2007 BCCA 183

Date: 20070327


Docket: CA033275

Between:

Dockside Brewing Company Ltd. and
Klaus Jurgen Scholz

Respondents

(Petitioners)

And

The Owners, Strata Plan LMS 3837,
Patrick A. Williams, Clark, Wilson,
Khoon Wah Alfred Tan, Lam Siat Khevn,
Peck Kiat Chee, Lye Eam Tan,
Tuck Fai Tham, Tan Hui Chuan,
Ah Kow Foo, Toong Jin Lam

Appellants

(Respondents)


Before:

The Honourable Madam Justice Prowse

The Honourable Mr. Justice Low

The Honourable Madam Justice Levine

 

G. S. Hamilton

Counsel for the Appellants

R.J. Sewell, Q.C. and
S.A. Griffin

Counsel for the Respondents

Place and Date of Hearing:

Vancouver, British Columbia

November 21 and December 8, 2006

Place and Date of Judgment:

Vancouver, British Columbia

March 27, 2007

 

Written Reasons by:

The Honourable Madam Justice Levine

Concurred in by:

The Honourable Mr. Justice Low

Dissenting Reasons in Part by:

The Honourable Madam Justice Prowse (Page 34, Paragraph 98)

Reasons for Judgment of the Honourable Madam Justice Levine:

Introduction

[1]                This appeal concerns a dispute between two groups of owners of lots in a strata corporation. One group, represented by the appellants, took control of the strata council, and approved expenditures for legal expenses to support litigation in circumstances where the statutorily required approvals for the litigation could not be obtained. The other group, which included the respondents, continuously objected to the strata council's actions on the basis that the strata council was acting in conflict of interest and contrary to the best interests of the strata corporation. 

[2]                In their petition brought under s. 33 of the Strata Property Act, S.B.C. 1998, c. 43, the respondents sought an order requiring the appellants to indemnify the strata corporation for the legal expenses. The chambers judge found that the expenditures were "unreasonable and unfair" to the strata corporation; that the appellants failed to disclose their conflicts of interest; and that they did not act honestly and in good faith. He ordered the appellants to pay $190,398.99 to the strata corporation, and special costs.

[3]                The appellants claim that the chambers judge erred in finding that they had a conflict of interest in a "contract or transaction with the strata corporation", and in any event, they acted in good faith, on the advice of legal counsel.

[4]                The underlying dispute in this case has been the subject of multiple legal proceedings.  The relevant events occurred from 2002 through 2005, involving numerous court proceedings, three meetings of the strata corporation, many meetings of the strata council, and extensive correspondence among lawyers and the various parties. The chambers judge set out the facts in detail in his reasons for judgment ((2005), 46 B.C.L.R. (4th) 153, 2005 BCSC 1209), and made findings of fact that support his conclusions that the appellants had conflicts of interest they failed to disclose, did not act in good faith, and could not rely on the advice of their legal counsel as a defence to the allegation of lack of good faith.

[5]                The appellants do not dispute the chambers judge's findings of fact; they argue that the facts do not show they had any conflict of interest, and if they did, they were reasonable in relying on the advice of their lawyers.  Despite their position that they do not dispute the facts as found by the trial judge, the arguments on appeal focused on the evidence and the facts, rather than the law.

[6]                From my review of the voluminous documentary evidence, and the affidavit and cross-examination of one of the appellants, Khoon Wah Alfred Tan, I conclude there is no basis to interfere with the chambers judge's decision, on either the facts or the law.  I agree that the appellants were in a conflict of interest with the strata corporation, did not act in good faith, and cannot rely on their lawyer's advice as a defence to the claim that they were not acting in good faith.

[7]                It follows that I would dismiss the appeal.

READ THE ENTIRE REASONS FOR JUDGMENT HERE:

2007 BCCA 183 Dockside Brewing Co. v. Strata Plan LMS 3837 

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