Vancouver, Shon Yee Place, VR 2275: Architects claim CMHC responsible for leaks and rot; Court declares CMHC did not owe a duty of care to architects but did owe a duty of care to BC Housing Management Commission

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Strata Plan VR 2275 v. Davidson,

 

2008 BCSC 77

Date: 20080118
Docket: S77473
Registry: New Westminster

Between:

The Owners, Strata Plan VR 2275, Shon Yee Housing Society
and British Columbia Housing Management Commission

Plaintiffs

And:

John B. Davidson, David H. Simpson, Ronald Yuen,
Davidson/Yuen Partners, Northmark Projects Inc.,
Northmark Construction Ltd., 334888 B.C. Ltd. formerly
known as Northmark Construction Ltd., Concost Properties
Inc., DNG Services Inc., Robertson, Kolbeins, Teevan &
Gallaher Ltd. doing business as Robertson Kolbeins Teevan
Gallaher Associates and Robertson, Kolbeins, Teevan & Gallaher
Ltd., NDC Construction Ltd. and David Nairne & Associates Ltd.

Defendants

And:

Canada Mortgage and Housing Corporation

Third Party


Before: The Honourable Mr. Justice Butler

Reasons for Judgment

Counsel for the Plaintiffs

Scott MacKenzie

Counsel for the Defendants, John B. Davidson, David H. Simpson, Ronald Yuen and Davidson/Yuen Partners

Craig A. Wallace

Counsel for the Third Party

D. Ross Clark, Q.C.
Ryan Garrett

Date and Place of Hearing:

December 19 and 20, 2007

 

Vancouver, B.C.

[1]                In this action the plaintiffs make allegations of water ingress defects and deficiencies in a social housing project called Shon Yee Place (the “Development”).  The plaintiffs are the Shon Yee Housing Society (the “Society”), which administers and has a leasehold interest in the Development; the numbered strata corporation (“VR 2275”), which is owner of the real property the Development is built on; and the British Columbia Housing Management Commission (“B.C. Housing”).  The plaintiffs have claimed against, among others, the defendants John B. Davidson, David H. Simpson, Ronald Yuen and Davidson/Yuen Partners (collectively, the “Architects”) for damages caused by deficiencies in the Development.

[2]                The Architects have brought a third party claim against the Canada Mortgage and Housing Corporation (“CMHC”).  This claim is founded on the Architects’ assertion that CMHC owed a duty to the plaintiffs and to the Architects to disclose to them knowledge it allegedly possessed, or should have obtained, about the inadequacy of the design principles, construction methods and inspection procedures employed at the Development.

[3]                CMHC has brought this Rule 18A application seeking to dismiss the third party claims.  While the Statement of Claim was first filed in December 2002, the Third Party Notice against CMHC was not filed until August 2007.  Examinations for discovery of CMHC have been substantially completed by the Architects and document discovery has been substantially completed by these parties.  This application was heard on December 19 and 20, 2007.  The trial of the action is scheduled to commence on February 4, 2008.  Accordingly, the 18A application was heard one or two days more than 45 days before the date set for trial as required by Rule 18A (1.1).

Facts

[4]                The Development is a social housing project run by the Society to provide low cost accommodation to seniors.  The Development is a seven-storey building located at 628 East Hastings Street in Vancouver, B.C.  The building exterior uses a number of building envelope design types to protect the interior spaces from water ingress including an exterior insulation finish system (“EIFS”), a face-seal water penetration control strategy.  The building was designed in late 1987 and was substantially completed in October of 1988.  The Architects were retained by the developer, NDC Construction Ltd., to be the architects for the Development.

[5]                CMHC’s involvement in social housing arises as a result of an agreement entered into on April 23, 1986 between the Government of Canada (“Canada”) and the Government of British Columbia (the “Province”) for the administration and cost sharing of social housing programs (the “Global Agreement”).  On July 7, 1986, CMHC and the Province, as represented by the Minister of Lands, Parks and Housing, entered into an agreement to carry into effect the principles set out in the Global Agreement (the “Operating Agreement”).

[6]                Social housing programs funded under the Global and Operating Agreements were designed to assist needy households to obtain affordable accommodation.  The intent of the Global and Operating Agreements was to direct social housing funds to households in need, to implement an arrangement for cost sharing and to transfer responsibility for housing program delivery and administration to the Province.

[7]                Under the Global Agreement, Canada and the Province agreed, among other things:

(a)        that the Province would be responsible for the delivery and administration of social housing programs;

(b)        to undertake a joint planning process, which included the assessment of needs, income and priority groups in different geographic areas in the province and the creation of three-year plans based on the needs assessment;

(c)        to establish a Planning and Monitoring Committee (the “PMC”); and

(d)        to share the costs associated with certain social housing programs.

[8]                Under the Operating Agreement, CMHC and the Province agreed:

(a)        that the Province, through its agent B.C. Housing, would be the Active Party.  The Active Party was responsible for the delivery and administration of social housing programs.  Delivery and administration were defined to include all activity associated with any program including direct dealings with clients or sponsors as well as loan, project and agreement administration.

(b)        that two social housing programs would be sponsored:  the Non-Profit Housing Program, under which the Development was constructed, and the Rent Supplement Program.

(c)        that, as the Active Party, the Province would undertake the assessment of project feasibility, project selection, project development, inspection, client selection, development of occupancy guidelines, approval of project annual operating budgets, calculation of eligible project costs, and loan, subsidy and project administration.

[9]                Under the Operating Agreement, Canada’s responsibilities through CMHC were more limited.  CMHC was responsible for insuring loans made by approved lenders for capital financing for housing projects under Part I of the National Housing Act, R.S.C. 1985, c. N-11, for making loans under s. 37.1 of the National Housing Act for proposal development funding, and for making contributions pursuant to s. 56.1 of the National Housing Act to eligible contribution recipients to enable them to meet the costs of rental accommodation.

[10]            CMHC and the Province also agreed that they would jointly chair the PMC, which would meet to:

(a)        conduct a joint planning process to develop and monitor the implementation of the current three-year plan which identified the most cost-effective and appropriate social housing strategy to meet the objectives of the Global and Operating Agreements;

(b)        propose modifications to the social housing programs and program guidelines, including adjustments to market rents and Maximum Unit Prices (“MUP”);

(c)        provide a forum for the sharing of information resulting from research, studies, surveys and other activities; and

(d)        monitor compliance with the Global and Operating Agreements.

[11]            While Canada agreed to provide mortgage loan insurance through CMHC, under the Operating Agreement the Province was responsible for the underwriting process including site and plans examination, determination of loan amount and approval of financing terms and conditions.  The Province was also responsible for authorizing all loan advances and undertaking inspections to ensure compliance with the plans and specifications and to determine the value of the work in place.

[12]            The Province developed three-year plans under the auspices of the PMC.  The PMC also discussed and approved adjustments to MUPs.  MUP was an estimate of construction costs of modest housing, including land purchase, and was used to forecast the number of units which could be subsidized under the housing programs.

[13]            The quarterly PMC meetings were used so that the Province could keep CMHC informed of the progress of the current three-year plan.  The Province, as the Active Party, carried out the activities required to take a given housing project from concept through to completion including distribution of housing units by area within the province, allocation of funding, formal commitment of subsidies to housing sponsor groups, advancement of funds, inspection and project administration.

[14]            In British Columbia, CMHC did not take a direct role in the delivery or administration of any housing project during the relevant time period under the Non-Profit Housing Program.  The only information CMHC typically received about any particular project was when funding was committed by the Province on that project and when CMHC received undertakings to insure mortgage loans.

[15]            The Shon Yee Housing Association, which is a non-profit organization related to the Society, applied to the Province under the Non-Profit Housing Program for funding to build the Development.  As the Active Party, the Province had direct contact with those organizations throughout the planning and construction of the Development.  B.C. Housing approved the Development under the 1987 Non-Profit Housing Program.  The Province informed the Society of this in December 1987, and also informed the Society at that time that B.C. Housing would arrange for mortgage loan insurance and would act as overall administrator for the project.

[16]            The Development was constructed and occupied.  In March 1998, approximately ten years after occupancy, a consultant retained by the Society reported water damage, fungal growth, cracks in stucco finishing and concrete, roofing membrane failure and sealant failure in certain areas in the building.  Subsequent studies have been done and rehabilitation work with a cost of approximately $1.5 million has been recommended or performed.

[17]            The gist of the plaintiffs’ claims is that the Architects’ designs, plans and specifications were not adequate to prevent water ingress, that they failed to test or inspect the materials to ascertain if they were reasonably fit for the purpose intended, that they failed to ensure that the design conformed with applicable bylaws and other enactments, and that they failed to warn the plaintiffs of maintenance and inspection requirements of the building envelope system.  A significant part of the allegation rests on the assertion that there were significant shortcomings to the face-seal design that were known or should have been known by the Architects.

[18]            The Architects deny the plaintiffs’ claims but say that if they are at fault, CMHC, as a result of its extensive involvement in building envelope studies in British Columbia, also knew or should have known of the problems associated with a face-seal strategy and that it failed in its duty to let B.C. Housing and others know of these problems.

Position of the Parties

[19]            CMHC says that it does not owe a duty of care either to the plaintiffs or to the Architects. (More)

Developer deleted windows; ordered to return condo deposits

Date of Judgment: July 4, 1995                     No. C934913

                                            Vancouver Registry

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:                        )

                               )

CHRIS LAU, MEI CHIH CHEN TSENG, )

CECILIA LEE, KIM WANG CHAN,     )

LAI KAM CHAN, PETER ENG,        )

JASON SHEN, and MICHAEL LEE     )

                               )        REASONS FOR JUDGMENT

                   PLAINTIFFS )

                               )

AND:                            )

                               )

1755 HOLDINGS LTD.              )

                               )

                   DEFENDANT    )

                              AND

No. C935586

Vancouver Registry

BETWEEN:                        )

                               )

RALPH HARRIS                    )

                               )        OF THE HONOURABLE

                   PLAINTIFF    )

                               )

AND:                            )

                               )        MR. JUSTICE WARREN

1755 HOLDINGS LTD.              )

                               )

                   DEFENDANT    )

Date and place of hearing:       October 26, December 15, 1994,

                                 February 16 and March 3, 1995

                                   Vancouver, British Columbia

Counsel for the plaintiffs:                      J.R. Singleton

                                              and C.R. Thomson

Counsel for the defendant:                           R.J. Olson

                                               and W.S. McLean


ISSUES

1              The plaintiffs in these two actions apply pursuant to Rule 18A for an order for judgment against the defendant. The critical issue to be decided on the application is whether the defendant breached a fundamental term of the purchase agreements executed by the plaintiffs and the defendant at various dates, all concerning the sale and purchase of condominium units in a project developed by the defendant in Vancouver, British Columbia. The plaintiffs say the defendant is in breach and they are not prepared to complete the purchase of the individual units and seek recovery of the deposits made by them and costs.

BACKGROUND

2              The defendant is a developer and constructed a twelve storey, twenty-four unit condominium at 2121 West 38th Avenue in Vancouver. The development was known as Ashleigh Court.

3              Prior to the commencement of construction, the defendant and its agent held a sales presentation at the Ramada Renaissance Hotel which had been advertised in the local newspapers. At the presentation there was a model of the condominium building prepared by a Vancouver model maker, based upon the plans of the designers of the project at that time. Also in the presentation room there were enlarged photographs showing the possible views from different locations in the project as well as floor plans of the various levels of the building and a list of features which would be included in each suite. Also on view were samples of carpet, ceramic tiles and granite which would be included in the finishing of the lobby of the building and the suites. Also available was a sales brochure which contained among other things, floor plans of the first and second floor suites, typical floor suites, the penthouse suite and a list of features as well as a price list of the suites. The drawings in the brochure were prepared by a commercial artist, again based upon drawings prepared by the designers of the project. The brochure is a sophisticated and seductive invitation to purchase complete with descriptions of the advantages to be enjoyed by purchasers. The first page is a colour photograph of the model of the project superimposed on a photograph of the North Shore Mountains with the following words printed underneath:

          Enjoy unobstructed and panoramic views of the city, ocean and North Shore Mountains while dining or sipping a hot cup of tea with a friend in the living room, admiring the tree lined exclusive residences in prestigious Kerrisdale on the west side of the beautiful city of Vancouver.

4              The next two pages include photographs of the neighbourhood and very brief descriptions of the lifestyle Kerrisdale offers. The two pages following are colour photographs of various interior scenes with the following words:

          Great care is demanded in the design of each floor plan for Ashleigh Court to offer you a handsome home. Interior features and finishes are carefully appointed for your comfort and enjoyment.

5              The next five pages are of the landscaping plan, and floor plans of the first and second floors, a typical floor and the penthouse. The penultimate page provides a list of features of the building; of suites; of kitchens; of bathrooms; and of the penthouse. The building features include:

          Grand Glass Lobby with Granit Floor Tiles

          Exquisitely Designed Fountain and Reflecting Pool

          Luxurious and Private Landscaped Gardens and Walkways

6              The suite features include:

          Unobstructed City, Ocean and Mountain views in most suites

          Second Southern Exposure Open Balcony in Most Suites

          Large and Double Glazed Windows for views and comfort

          Tiled entrance foyer

          Built-in Book Shelves in Living Room

          Hot Water Heating System

          Recessed and Track Lighting

          Quality plush Carpet, and so on.

7              The kitchen features include:

          European Style Cabinets

          Breakfast counter

          Double Sink with Garborator

          High Performance Hood Fan

          Ceramic Tiled Floor

8              At the bottom of the page, and in somewhat smaller print, are the words "Illustrations and descriptions are approximate representations of features described. In a continuing effort to improve stardards [sic] of development, the developer reserves the right to make modifications and changes to building design, specifications, features and floor plans, without notice".

9              The model showed the south facing balconies with glass walls. The drawings showed each kitchen with a window. There were windows facing east or west (depending on the suite) as well as to the south in each master bedroom. Further, the drawings show a window in the master bedroom ensuite bathroom for the units on the east side of the building.

10             Each of the plaintiffs depose that they relied on the brochure, the plans and the other materials presented at the presentation and each entered into a contract to purchase, the Purchase Agreement.

11             The purchase agreement, in addition to setting out the purchase price and the times for payment, also contained the following clause:

          4.0 Construction

          4.1 Construction. The vendor will construct and complete the development and the Strata Lot in a good and workmanlike manner substantially in accordance with the plans subject to any changes required by the City of Vancouver or any other approving authorities.    Notwithstanding the foregoing, the vendor may:

              (a) make minor modifications and as, in the sole opinion of the vendor and/or the architect retained by the vendor or the project manager (the "architect"), are desirable and reasonable; and

              (b) use materials other than as prescribed in the plans provided that alternative materials are, in the sole opinion of the architect, of a quality comparable to those prescribed in the plans.

          [emphasis added]

THE PLAINTIFFS' POSITION

12             The plaintiffs say that the defendant is in fundamental breach of its contracts with each of the plaintiffs in part because the building did not feature a grand glass lobby with granite floor, a tiled entrance foyer, built-in book shelves in the living rooms, a hot water heating system, a window in the kitchen, a window in the east wall of the master bedroom on the east side of the building or the west wall of the master bedroom on the west side of the building, windows in the ensuite bathroom on the east side of the building, recessed lighting or quality plush carpeting. Further, although not pleaded, the evidence would indicate that the fountain and reflecting pool were not as described in the brochure nor were the luxurious and private landscaped gardens and walkways provided. As well, the south facing balconies, shown in the plans with glass guardrails, are in fact, constructed of concrete.

13             In summary, the plaintiffs say that they agreed to purchase their respective units on the basis that the building would be constructed in accordance with the plans and as reflected and described in the brochures provided to the plaintiffs through the defendant or its agent. The plaintiffs say that the building was not constructed in accordance with the plans and some portions were not constructed or were constructed with significant modifications such that the changes substantially altered the quality and value of the property and entitles the plaintiffs to rescind the agreement and a corresponding repayment of the deposits paid with costs.

THE DEFENDANT'S POSITION

14             On this application the defendant submits that the plaintiffs' action should be dismissed with costs or alternatively, the application under Rule 18A be dismissed. The defendant says that the plaintiffs received essentially what was bargained for under the terms of the contract and the disclosure statement, contracts contemplating changes could be made to the design of the building and the plaintiffs were aware that such changes were a possibility. In any event, the defendant says that the plaintiffs have not demonstrated that the changes in design of which they complain are breaches of contract and the plaintiffs have failed to demonstrate that the changes were fundamental.

15             The parties agree that the test whether there has been a fundamental breach of contract (as the plaintiffs term it) or that the breaches were material (as the defendant terms it) is objective and that the subjective considerations of an individual plaintiff is not relevant.

16             The defendant, in its argument, refers to the affidavits filed on its behalf and offers an explanation for each one of the changes complained of by the plaintiffs. The defendants were extremely concerned about keeping construction costs down while maintaining the competitive quality of the design but no design adjustment was made solely on the basis of its effect on costs. "In many cases, minor revisions were made to the preliminary scheme to improve appearance, function or durability. In other cases, substitutions of materials or systems were made where the defendant and its consultants judged that cost saving was possible without a detrimental affect on appearance, function or durability". The defendant through the affidavit of Tom Ip then deals with each change complained of by the plaintiffs. With respect to the south facing balconies, the defendant says that their primary purpose was to give access to the second exit stairwell, they do not extend in front of the large master bedroom window so as to block or diminish the view, for privacy reasons the defendant considered glass guardrails inappropriate and safety militated in a concrete material to avoid occupant's confusion in the event of a forced evacuation.

17             With respect to the reflecting pool, the defendant says that it was changed in part for costs but also to discourage littering.

18             With respect to the changes in the landscape design, the defendant says that a number of landscape elements were proposed by the architects early in the design development stage "but not all received the defendant's approval and were incorporated into the final design".

19             With respect to the material substitutions, the floor of the lobby was changed to slate, providing a much safer surface when wet; the entrance foyer described in the brochure as "tile entrance foyer" was changed to carpet for consistency with the general floor finish of the elevator cars; and lighting, described in the marketing brochure as recessed, in fact were only surface mounted because "the construction technique used in the project (concrete frame and slab, and no suspended ceilings) did not readily permit fixtures to be recessed".

20             As for the bookshelves, no built-in bookshelves were provided in part because a layout change was made necessary by building code considerations. Further, the built-in bookshelves "may have unduly restricted opportunities for furnishing the living room, which are modest in size, and may also have restricted available locations for electrical outlets".

21             With reference to the plaintiffs' complaints about the missing window in the kitchen, the defendant replies that it felt it would interfere with the most efficient layout of the kitchen as the refrigerator and cupboard doors open against the only length of exterior wall where a window would have been possible. With reference to the bathroom in the master bedroom on the east side of the building, the defendant felt the window's location directly above the bathtub "was considered to be inappropriate and undesirable". Apparently the defendant was concerned about privacy, the draft factor and the maintenance problems of a window frame wetted during the use of showers. With respect to the additional window in the master bedroom on the sidewall, both east and west, the defendant decided not to include the window as it's placement "may have unduly limited possibilities for efficient furniture layout as the southern wall has a door to the balcony and a large window and the interior walls closets or doorways opening into the bedroom". There was also an additional reason for omitting these windows and that was "for the improvement of appearance of the east and west facades of the building".

22             With respect to the change in the heating system from hot water to electric baseboard type, this change was not cost driven apparently but rather to increase individual temperature controls, reduce the pro-rata cost to the owners, some of whom would be frequently absent from Vancouver, reduce the ongoing maintenance and servicing costs and, reduce the size of the baseboard providing less interference with usable floor area.

THE SUBMISSIONS

23             In its argument, the defendant says that each of the contracts provide for the same; the construction would be in a good and workmanlike manner substantially in accordance with the plan but that the vendor may make "minor modifications . . . as are desirable and reasonable" and the plans were subject to such modifications as may be determined by the architect or required by the city. The defendant says that the units built by the defendant were substantially the same as those proposed at the time of the original offering and the plaintiffs have focused on a number of changes as being fundamental and inconsistent with the sales brochure but the sales brochure does not form part of the contract between the parties (See Abramowich v. Azima Developments Ltd. (1993), 86 B.C.L.R. (2d) 129, Court of Appeal). In Abramowich the plaintiff purchaser failed to complete on it's transaction and sued for damages alleging the unit was not completed in accordance with the representations contained in a brochure which had described the unit as "luxurious" or, "exceptional quality" or, "architect designed interiors" or, "first class finishings" while the written contract made no reference to the standards to which the condominium would be built. The trial judge in Abramowich rejected the argument that the brochure terms should be implied as terms of the contract.

24             Ryan, J. in Abramowich considered the role promotional brochures played in the action between Abramowich and Azima Developments. At p. 176-77 of her reasons reported at 19 R.P.R. (2d) 172, but more conveniently found in the reasons for judgment of Toy, J.A. in the Court of Appeal (1993), 86 B.C.L.R. (2d) 129 at 131:

          The written contract made no reference to the standards to which the condominium would be built. It is the plaintiff's position that he relied upon the promotional brochure to the knowledge of the vendor. He submits that the court ought to imply as a term of the contract that the unit was to be built to the standards set out in the brochure. Aside from the problem in determining an exact standard from the promotional material, the plaintiff's next difficulty is the limited circumstances in which a court will impose a contractual term.

          Lord Pearson said in Trollope and Colls Ltd. v. Northwest Metropolitan Regional Hospital Board (1973), 2 All E.R. 260:

              An unexpressed term can be implied if, and only if, the court finds that the parties must have intended that term to form part of their contract; it is not enough for the court to find that such a term would have been adopted by the parties as reasonable men if it had been suggested to them; it must have been a term that went without saying, a term necessary to give business efficacy to the contract, a term which, although tacit, formed part of the contract which the parties made for themselves.

          On any view of the evidence, the plaintiff has failed to meet this test. I am not convinced that the promotional literature was intended by the parties to form a part of the contract.

          [Emphasis original]

25             Toy, J.A., for the court, examined the underlying agreement in Abramowich as well as the correspondence which passed between the parties and the plaintiff's attempt to obtain the vendor's consent to amend the agreement. The proposed amendment acknowledging the purchaser's claim concerning defects, deficiencies or repairs, was never assented to by the vendor and, under those circumstances, Toy, J.A. agreed with the trial judge in these words:

          I agree with the trial judge that in interpreting an assigned agreement between the parties it is not necessary to give business efficacy to the agreement by implying the terms of the printed brochure into the agreement for the reasons she has stated. In my opinion, all that was required to give business efficacy to the parties' agreement was for the vendor to complete the condominium unit in accordance with the plans and specifications which, apparently, met with the architects approval on February 14, 1990 shortly before the City of Vancouver occupancy certificate was issued on that date.

26             In reply to this submission the plaintiffs say that an officer of the defendant conceded that the brochure reflected what was in the plans at the time the purchase and sale contracts were entered into. This is borne out by extracts from the examination-for-discovery of Mr. Ip to the effect that the drawings in the brochure were prepared by a commercial artist from the drawings prepared by the architect and that whatever was in the brochure at the time the sales contracts were entered into reflected what was in the plans at that time. Accordingly, the plaintiffs submit that the brochure is explanatory and reflective of what was in the plans at the time the various plaintiff's purchased their units. The brochure is informative evidence of what the plaintiffs saw at the time they entered into the purchase and sale agreement and in determining what the defendant's intended to represent to the plaintiffs and what they intended to build.

27             Accordingly, the Abramowich case is irrelevant as the plaintiff is not asking that the brochure be read as part of the purchase and sale agreement but rather to demonstrate by excellent description what the plans and specifications reflect and the plans and specifications were made part of the purchase and sale agreement.

28             In the plaintiff's affidavit material was the affidavit of one John Davidson, an architect with the firm of Davidson, Ewan, Simpson. He was retained by the plaintiff's solicitors to review the changes made between the time of the sales representations and the final construction. He prepared a report which, in summary, expressed the opinion that the changes made between the date of purchase and the completion of the construction "are more extensive and significant than would typically be expected in a project of this calibre". The report expresses many opinions of artistic or aesthetic and personal views and the defendant objected most strongly to the court considering the report of Mr. Davidson as being outside the scope of expertise of an architect and going to the ultimate question (Hay and Hay Construction Co. Ltd. v. Sloan(1957), 132 C.P.R. 132 (Ont. H.C.); Emil Anderson Construction Co. Ltd. v. B.C. Rail Company (1987), 17 B.C.L.R. (2d) 357 and Emil Anderson Construction Co. Ltd. v. B.C. Rail Company (1987), 15 B.C.L.R. (2d) 28 (S.C.B.C.).)

    

29             In response to this the plaintiff argues that the defendant has not introduced any evidence from any source, let alone from the architects who designed the project, that the modifications were minor. Evidence in other words, disagreeing with the conclusion or opinion of John Davidson. This argument, while it does not deal directly with the defendant's objections, does leave unanswered the opinion expressed by John Davidson, which, after I strip away the opinions of artistic merit or aesthetic values, goes to the extent of changes. The affidavit of G. Gerald Kennedy, architect, filed by the defendant, deals with his opinion of the general areas of expertise or qualification of architects which do not include, in his opinion, any general ability to predict how "appealing their client's projects will be, from a marketing prospective, to the target buyer". He had familiarity with terms such as "luxurious", "exclusive", "generous", "spacious" and "grand" to mention some of the terms he used, but it was his opinion that such terms, while frequently used in marketing are all equally meaningless. In response to the affidavit of Mr. Kennedy the plaintiff argued compellingly that there was no indication that Mr. Kennedy saw any of the materials which are the subject of controversy before me and he makes no comment upon whether the modifications were minor or substantial or, in the words of Mr. Davidson "more extensive and significant". That opinion, in my view, stripped of those areas which offend the ultimate issue rule (Emil Anderson) and are clearly within the area of expertise of an architect.

30             The defendants further submit that the changes made to the building and to each of the units reflect only the natural evolution of the design and each change was made by the developer on a reasonable basis. As the contract expressly permits change the defendant says that the changes were merely evolutionary and were not material amounting to a breach of a fundamental term of an obligation under the contracts. In this regard the defendant relies on Milgram v. York Humber Ltd (l992), 22 R.P.R. (2d) 102 (Ont. C. of J. Div) and Abdool v. Sommerset Place Developments of Georgetown Ltd. (l992) 10 O.R. (3d) 120 (Ont. C.A.). Both cases deal with situations which arose under and were bound by the provisions of the Ontario Condominium Act. But the defendant says that both cases provide assistance on the issue of materiality. The test in Abdool of materiality is whether a change would provide a purchaser reasonable cause to reconsider or if a change is likely to influence a decision of a purchaser to purchase. The description of the test in Milgram is more helpful. At p. 105 McRae, J. of the Ontario Court of Justice (General Division) said the test is that adopted by Borins, J. in Budinsky v. Breakers East Inc. (1992), 6 O.R. (3d) 255:

          Therefore . . . where the amendment is of such significance as to be likely to influence the decision of a reasonable purchaser to purchase the condominium unit or to alter the character of the disclosure statement.

31             McRae, J. adopted that definition and noted that the test is an objective test. He in turn looked at the changes in the building which was the subject of the litigation before him and concluded that the changes were not material, that "a reasonable person would quickly conclude that this change was minor and was clearly beneficial to the purchaser". The two changes considered by McRae, J. were the deletion of a public activity centre in the condominium complex which he concluded was a benefit to the plaintiff as the public would no longer have access to the complex; the second was an increase in the number of units from 408 to 413 thereby decreasing the plaintiff's percentage interest in the building. McRae, J. found that there was an express disclosure in the disclosure statement allowing the owner to increase the number of units to as many as 416 and that the actual decrease of percentage interest amounted to three parts per one hundred thousand and was so trivial as to not constitute a material change.

32             In the Abdool case the issue was the application again of s. 52 of the Condominium Act of Ontario which provides that an agreement to purchase a new condominium would not be binding on a purchaser until the developer delivered a current disclosure statement with all material amendments thereto. The disclosure statement advised the purchasers that the condominium would have as amenities a recreational unit which included an indoor swimming pool, an exercise room and an outdoor play area which included children's play facilities. The statement further provided that construction would begin in October 1988 and would be completed by December 1990. In fact the occupancy permits for the swimming pool and the children's play area were substantially delayed.

33             The defendants before me rely upon the following passage from Abdool found at p. 138:

          To invoke a common dictionary meaning of "material", when is a defect so pertinent, germane or essential as to render a disclosure statement in contravention of the Act and entitle a purchaser to cancel the transaction?

          I approach this question first by reference to the applicable burden of proof. In my opinion, when a purchaser who has had the opportunity afforded by the cooling off period to consider the disclosure statement and the accompanying documentation, and has decided to go through with the transaction, subsequently seeks to resign from his or her otherwise binding agreement of purchase and sale on the basis of the deficiency of the disclosure statement, the onus is on the purchaser to show that the disclosure statement fails to satisfy the requirements of the Act to the degree that the agreement must be declared non-binding.

          To discharge this onus and prove the materiality of the complaint, in my opinion, the purchaser is obliged to establish objectively that had the information that was not disclosed, or that was inaccurately or insufficiently disclosed, been properly disclosed in the disclosure statement at the time it was delivered to the purchaser, a reasonable purchaser would have regarded the information as sufficiently important to the decision to purchase that he or she would not likely have gone ahead with the transaction but would instead have rescinded the agreement before the expiration of the ten day cooling off period.

34             The Ontario Court of Appeal concluded that the purchaser's decision in Abdool to seek recision was prompted by declining real estate values, dissatisfaction with their purchases or a change in personal circumstances, and that the disclosure statements were in no way material to this decision.

35             While both Abdool and Milgram may be useful for providing a definition for the term materiality, their particular fact situations are materially different from the facts in the case at bar.

36             The plaintiffs rely upon the summary by G.H.L. Fridman, Q.C. in The Law of Contract in Canada, Second Ed., Carswell 1986, where, at p. 531, Fridman considers the nature of fundamental breach:

          Perhaps the idea which most satisfactorily enshrines the idea of fundamental breach is that which appealed to Lord Diplock in the Photo Production case, as differentiating such a breach from breach of condition. This is the notion of some act which substantially deprives the innocent party of the intended benefit such party was to obtain under the contract. However defined, a fundamental breach is one which is more significant in factual terms, and more effective in respect of the rights and liabilities of the parties than the continued existence of the contract and their "primary obligations", in Lord Diplock's phrase, than any other kind of breach.

          In every instance, it is a question of fact whether the breach complained of by the innocent party amounts to a fundamental breach or some other kind. That question, in turn, depends upon: the terms of the contract; intended benefit to the innocent party; the purpose of the contract; the material consequences of the breach; and, perhaps, though this has never been discussed in the cases, the extent to which the loss incurred by the innocent party can be remedied adequately by an award of damages. One point is clear. Whether a breach is fundamental does not appear to depend upon any express terms of the contract.

37             As Lord Upjohn observed in Suisse Atlantique Societe D'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale,[1967] 1 A.C. 361:

          Whether such breach or breaches do constitute a fundamental breach depends on the construction of the contract and on all the facts and circumstances of the case.

DECISION

38             Viewing all of the facts and circumstances of this case, including clause 4.0 of the contract, I conclude that the multitude of changes and omissions were not so trivial or inconsequential as the defendant argues are within the ambit of the contractual terms permitting modification. The units were not "substantially in accordance with the plans" and none of the modifications were "minor". Rather, they were and are "so pertinent, germane or essential" as to amount to a fundamental breach entitling the plaintiffs and each of them to recision.

39             The plaintiffs are entitled to the return of their deposits and costs.

"Warren, J."

June 30, 1995

Vancouver, British Columbia