Victoria, 1001 Terrace Avenue: Strata Corporation must pay legal bill incurred fighting condo owner over conversion of common attic space without permission and without Building Permit

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Crease Harman & Company v. The Owners, Strata Plan VIS770,

 

2007 BCSC 1073

Date: 20070720
Docket: 07/1608
Registry: Victoria

Between:

Crease Harman & Company

Solicitor

And:

The Owners, Strata Plan VIS770

Client


Before: District Registrar Bouck

Reasons for Decision

Counsel for the Solicitor
(also referred to as the Law Firm)

D. Houston

Appearing on behalf of the Client
(also referred to as the “Council”)

Dr. L. Chorney

Date and Place of Trial/Hearing:

June 13, 2007

 

Victoria, B.C.

Introduction

[1]                This is a client initiated review of the Law Firm’s bill pursuant to s. 70 of the Legal Profession Act, S.B.C. 1998, c. 9 (the “Act ”).

[2]                The bill in question was issued on February 1, 2007 (the “Bill”).  It relates to services provided in a dispute between the Council and one of the owners within Strata Plan VIS770.

[3]                The Bill charges fees of $18,300 and disbursements of $995.  Together with taxes, the total amount charged is $21,718.29.  The bill remains unpaid.

[4]                The Client seeks a substantial reduction in the fees allowed to the Law Firm, primarily on the basis that the Law Firm failed to follow instructions and obtained a poor result in the retainer.  The Client also suggests that the Law Firm lacked skill in the retainer.

[5]                The Law Firm says that the Client was warned of the possible result and cost of the litigation.  All of the services charged were necessary and proper to conduct the proceeding.  In short, it did nothing wrong and the fees charged are reasonable.

Background to the Retainer

[6]                The subject matter of the Bill concerns a residential building located at 1001 Terrace Avenue in Victoria.  This is an older building converted some years ago into eight strata units.

[7]                The circumstances causing the Client to retain Crease Harman are as follows:

·         Since July 2002, unit #8 has been owned by a mother and son whom I will refer to as the Kaufmanns.  The Kaufmanns are ordinarily resident in Switzerland, so the unit is vacant much of the year.

·         In February 2005, upon the inspection by a professional engineer, it was determined that unit #8 had encroached on common property as a result of renovations carried out at various times over the previous 25 years.  None of these renovations were carried out by the Kaufmanns.

·         The renovations included attic space converted to habitable areas, with resulting use as a bathroom, small bedroom and closet.  The total amount of space encroached was 354 square feet.

·         The engineer reported that as a result of these renovations:

o        the walls breached to create the habitable areas were firewalls;

o        the renovations were done without permits; and

o        the alterations do not meet current building code requirements.

·         The Council had no record of granting permission for these renovations and there had never been an alteration of the strata plan to reflect them.

·         Council communicated this discovery to the City of Victoria.  An inspector from the City recommended that the encroached areas be returned to attic space.  No further action was taken by the City regarding the renovations, including the apparent firewall breach.

·         In September 2005, the Kaufmanns undertook repairs to an enclosed balcony.  The repairs were done over the objection of Council which in turn levied a fine against the Kaufmanns.  The Kaufmanns had also installed hardwood floors without Council’s permission.

·         On November 30, 2005, a meeting of the Strata Council was held to address the encroachment/renovations issue.  The Owners rejected a resolution which would designate the encroached common property as for the exclusive use of the owners of unit #8.  Instead, a resolution was passed requiring the Kaufmanns to pay an additional $400 per month as a user fee for the occupation of the common space.

[8]                In December 2005, the Council retained the Law Firm for the purposes of rectifying the strata plan to show the actual habitable space in unit #8.  The Kaufmanns had earlier declined to consent to a resolution that would permit this change.  Mr. Tryon prepared the material and eventually spoke to a consent order.  The change in unit entitlement was confirmed by the court on March 16, 2006.  The Council was pleased with the work done by the Law Firm and paid its bill for that work promptly.

[9]                However, the dispute between the Council and the Kaufmanns was not resolved with this change of unit entitlement.

[10]            Having now retained counsel, a petition was brought by the Kaufmanns on January 28, 2006 (the “Kauffmann Petition”), seeking various relief, including an order vesting the encroached space with the owners of unit #8, return of $1,292.05 in user fees (although it appears those fees were never paid), and the cancellation of the fine relating to the balcony enclosure.

[11]            The Kaufmann Petition also sought redress for an age restriction by-law which was perceived to be solely directed at Mathias Kaufmann.

[12]            The by-law imposing the user fee of $400 per month was rescinded by Council in February 2006 on the advice of Crease Harman & Company.

The Retainer

[13]            The Council approached the Law Firm in May 2006 seeking advice on how to obtain a final remedy of the situation with unit #8.  Although the Law Firm was familiar with the dispute, the Client prepared a comprehensive letter outlining a chronology of events.

[14]            In its letter of instruction authored by Dr. Chorney, the Council states that it is seeking access to the encroached areas so that the common property “can be repossessed and restored”.  The Council had already received tacit approval from the City of Victoria for a building permit to carry out this work.

[15]            The letter also suggests that the Kaufmanns (or more accurately, Ingrid Kaufmann and her husband) “have a long history of being unreasonable”.

[16]            Nonetheless, the Council was open to settling the dispute, so long as health and safety issues are not compromised, financial ramifications are “thought through” and any agreement is “legally biding on all future owners of unit # 8”.

[17]            Finally, the letter notes that the Kaufmanns had applied for a building permit “for the trespass areas” in August 2005 but that permit was denied on the basis that the space did not conform to the building code.

[18]            A meeting was arranged between Dr. Chorney, Mr. Norm Simmons and Ms. Connie Tisdall, representing the Council, and Mr. Guy Whitman, a senior solicitor at the Law Firm, to discuss possible remedies available to the Client.

[19]            Mr. Whitman recalls reviewing the Strata Property Act and the Council’s letter of instruction in preparation for this meeting.  He also contacted the Kaufmanns’ lawyer.

[20]            Both Dr. Chorney and Mr. Simmons recall that Mr. Whitman was late for the meeting which lasted about two hours.

[21]            According to Mr. Whitman, the Council wished the Kaufmanns to contribute additional strata fees to reflect the now rectified unit entitlement.  The Kaufmanns had not paid any of the user fees imposed of $1,292.50.

[22]            Mr. Whitman recalls that the amount involved in the dispute was $3,500.  It is not clear where this figure comes from as the letter from the Council makes no reference to that amount.

[23]            After discussing the matter, Mr. Whitman advised the Council members that it would be unwise to further litigate the dispute with the Kaufmanns.  While he did not offer an opinion on the success of any lawsuit, Mr. Whitman suggested that legal fees would be at least $5,000.

[24]            Mr. Whitman perceived a different attitude among the Council members as to their willingness to incur fees in litigation.  Dr. Chorney was prepared to pursue any remedy; Mr. Tisdall and Mr. Simmons were not so committed.

[25]            It appeared to Mr. Whitman that the cost of litigation was greater than the amount involved.

[26]            In addition, Mr. Whitman opined that because the Kaufmanns were innocent purchasers and the additional space was occupied without complaint for a number of years, it was unlikely a court would order deconstruction.  Mr. Whitman also pointed out that the City of Victoria was aware of the firewall issue and had not expressed any concern.

[27]            Based on discussions with the Kaufmanns’ counsel, Mr. Whitman believed that the issue could be remedied by simply increasing the Kaufmanns’ strata fees.

[28]            The Client was not satisfied with the advice.  The removal of the firewall was perceived as a safety issue.  There was also concern that the renovations prevented adequate roof ventilation for the rest of the building.  The Client wished to pursue litigation.

[29]            The matter was referred again to Mr. Tryon, a senior litigator at the Law Firm.

[30]            On Council’s instructions, Mr. Tryon issued a petition on July 5, 2006 seeking:

1.         a declaration that all of the encroached attic space was common property;

2.         a declaration that the Kaufmanns had converted the space for their use without permission;

3.         an injunction requiring the Kaufmanns to allow access to unit #8 in order for the Council to determine the work and material required to restore the encroached space to its original condition; and

4.         an order allowing Council to restore the developed space to its original condition.

[31]            Dr. Chorney provided most of the instructions to the Law Firm.  However, because of the perceived antagonism between Dr. Chorney and the Kaufmanns, it was decided that Mr. Simmons would swear the primary affidavit in support of the petition.

[32]            The Council offered some specific instructions on facts to include in the affidavit material.  Those facts included an explanation of the calculation of the user fee issued to the Kaufmanns.

[33]            Mr. Tryon chose not to include in the affidavit material the report of the engineer which raises the firewall concern.  In Mr. Tryon’s view, this issue was not contentious.

[34]            There was some delay in the Kaufmanns responding to the petition.

[35]            There was also a dispute over whether the petitions should be consolidated for hearing.  Affidavit material was prepared, but a consent order eventually entered.

[36]            Outlines were exchanged in advance of the hearing of the petitions and forwarded to the Client for review.

[37]            The Client’s written argument was provided to Dr. Chorney on the day of the hearing.

[38]            Dr. Chorney believed that the Outline did not effectively identify the safety concerns of the Council.  She asked Mr. Tryon to postpone the hearing so that additional affidavit material could be filed.  Mr. Tryon disagreed that there were any omissions in the material and did not accept the instructions to adjourn.

[39]            Dr. Chorney says that she reminded Mr. Tryon on at least two occasions in the week before the hearing that the Kaufmanns had applied for a building permit in 2005 and that it was refused.  Mr. Tryon denies receiving this information at that time.

[40]            Both petitions were heard by Masuhara J. on December 5, 2006.

[41]            The transcript of the proceedings before Masuhara, J. shows that there was considerable dialogue between the bench and counsel, particularly when it came to formulating an order.

[42]            Mr. Tryon submitted that the Kaufmanns Petition ought to be dismissed.  However, in both oral and written argument, Mr. Tryon made the alternative suggestion that the Kaufmanns be permitted to apply for building and occupancy permits.  The time frame suggested for obtaining these permits is no more than three months.

[43]            The court asked Mr. Tryon whether such permits could be issued retroactively.  Mr. Tryon’s response was that it was uncertain but possible.

[44]            Neither Mr. Tryon, nor the Kaufmanns’ counsel, alerted the court to the fact that the Kaufmanns had unsuccessfully applied for such permits in August of 2005.

[45]            Mr. Tryon concedes that the building and occupancy permit remedy was suggested by the Law Firm, not the Client.  The Law Firm was of the opinion that the court was unlikely to order the rectification of the attic space given that the renovations have been in existence for as long as twenty-five years and the Kaufmanns are not full-time residents.  Thus, an alternative remedy should be offered to the court.

[46]            The Law Firm believed it possible that the City could issue permits based on “equivalencies” under the building code.  It appreciated that the issuance of such permits was only possible and not probable.

[47]            There are no written reasons for judgment.  The terms of the court’s order include:

1.         a declaration that the improved attic spaces are common property;

2.         the granting of a lease to the Kaufmanns over the common property for two decades with lease payments to be calculated according to unit entitlement formula;

3.         the lease being conditional upon the Kaufmanns obtaining building and occupancy permits based on the respective codes in operation at the time of construction; and

4.         if the permits are not in place within 18 months, and the court does not grant additional time on application by the Kaufmanns, the lease is terminated and the Strata Corporation may take steps necessary to recover the common property.

[48]            The Council was unhappy with this result.  It was no further ahead and, in fact, allowed the Kaufmanns an additional 18 months of occupancy while safety and ventilation issues remained.

[49]            In a lengthy email issued December 6, 2006 to the Law Firm, Dr. Chorney expressed her disappointment with both the result and Mr. Tryon’s conduct at the hearing.  She believed that despite spending thousands of dollars in legal fees, the Owners will be no further ahead at the expiry of the 18 months.

[50]            The following day, Dr. Chorney instructed Mr. Tryon not to “work on the order”.  The Client instructed Mr. Tryon to communicate with the Kaufmanns’ lawyer by telephone rather than letter.  Mr. Tryon declined to accept these instructions but did not communicate that fact to the Client.

[51]            On December 16, 2006, Dr. Chorney reiterated the Client’s instructions to cease any work related to the court’s order.

[52]            The Client also instructed the Law Firm to bring to the court’s attention the fact that the suggested building and occupancy permits were rejected by the City in August 2005.

[53]            Mr. Tryon was unsure what the Council wished to accomplish by appearing back before Masuhara J. with this information.  Nonetheless, he and the Kaufmanns’ counsel were prepared to make submissions to the court that the order as granted was not enforceable.

[54]            Mr. Tryon filed a Request to Appear Before A Specific Judge, as per the link found on the Supreme Court web-site.  Some research into this process was conducted as Mr. Tryon had never before made such a request.

[55]            The Client was advised of this step in a letter dated February 9, 2006 (sic).  That letter also enclosed the Bill.  The Client was invited to contact Mr. Tryon if it had any concerns or questions regarding the Bill.

[56]            The Client declined to pay the Bill and terminated the retainer shortly thereafter.  The Client subsequently retained another law firm to make submissions before Masuhara J.  Re-attendance before the court had not occurred by the time of this appointment.

[57]            As well, parts of the Kaufmann Petition have yet to be heard.

The Client’s Complaints

[58]            The Client’s complaints are articulated in the Outline prepared by Dr. Chorney for this proceeding.

[59]            The complaints are summarized as follows:

A.         Lack of Reasonable Care and Skill

[60]            It is suggested that Mr. Whitman’s services offered nothing of value to the Client and that he misplaced a document prior to forwarding the file to Mr. Tryon.

[61]            With respect to Mr. Tryon, it is submitted that he failed to bring various important information before the court; misrepresented some of the relevant evidence; and failed to answer the court’s questions adequately or at all.

[62]            It is further submitted that Mr. Tryon advised the Client to accept an order that was incapable of performance and thereby prolongs the resolution of the safety and health issues which precipitated the litigation.

B.        Failed to Carry Out Instructions

[63]            Not only did Mr. Tryon refuse to follow the Client’s instructions regarding work on the order, but he also chose to communicate with the Kaufmanns’ lawyer in writing with a resulting unnecessary fee.

C.        Poor Result

[64]            The Client submits that the order of the court is the result of the overall poor performance of the Law Firm and its failure to follow instructions.  The Client is no further ahead and left with an order incapable of performance.

[65]            The only thing accomplished, a declaration that the encroached areas are common property, was never in doubt.


 (More)

Victoria, Swan Lake Estates: Court finds it just and convenient to add Almetco as a defendant in Meadowlark leaky condo development

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Strata Plan No. VIS 3540 v. Oak Meadows Estates Ltd.,

 

2007 BCSC 750

Date: 20070530
Docket: 00-3554
Registry: Victoria

Between:

The Owners, Strata Plan No. VIS 3540

Plaintiff

And:

Oak Meadows Estates Ltd., Meadowlark Developments Ltd., Kellyoak Enterprises Ltd. (formerly known as Seawest Properties Ltd.), Kelvin D. Armstrong (also known as Kelly Armstrong), David Franklin Vidalin, The Corporation of the District of Saanich, Vic Davies Architect Ltd., Yoneda & Associates Consultants Ltd., Ron Leier Construction Ltd., Ken Poskitt Roofing Ltd., Great West Stucco Ltd., Victoria Deck Limited, Irwin Industries (1988) Ltd., A.C.T. Concrete Placing and Finishing Ltd., National Labour Pool Ltd., Bluewater Fireplace Corp., John Doe and John Doe Limited

Defendants

And:

Almetco Building Products Ltd., Great West Stucco Ltd., Yoneda & Associates Consultants Ltd., Ken E. Smith, Vic Davies Architect Ltd., Hayward Wells & Associates Ltd., Ron Leier Construction Ltd., The Corporation of the District of Saanich, Victoria Deck Limited, Bluewater Fireplace Corp., Rod Noble (doing business as Noble Sheet Metal), Ken Poskitt Roofing Ltd., A.C.T. Concrete Placing and Finishing Ltd., Irwin Industries Ltd. and 461734 B.C. Ltd. (formerly Diversified Construction Services Ltd.)

Third Parties


Before: The Honourable Mr. Justice Frankel

Reasons for Judgment

Counsel for the Plaintiff

Vince G. Critchley

Counsel for Almetco Building Products Ltd.

Brian D. Rhodes

Date and Place of Hearing:

March 30, 2007

 

Vancouver, B.C.


Introduction

[1]                The plaintiff, The Owners, Strata Plan No. VIS 3540, (the “Owners”), are the owners of 18 strata lots which make up The Swan Lake Estates, (“Swan Lake”), a building located at 971 McKenzie Avenue, Victoria. B.C.  It has commenced what colloquially can be called a “leaky condo” action against the developer of the property, and numerous other parties.  On this application it seeks to add Almetco Building Products Ltd. (“Almetco”) as a defendant, pursuant to Rule 15(5)(a)(iii) of the Rules of Court.  Almetco supplied the windows and sliding glass doors for the project.

[2]                For the reasons that follow this application is allowed.

Background

[3]                This matter has a long history.  I will not rehearse every step taken along the path leading to this motion.  Rather, I will recite only those events necessary to provide a context for this decision.

History of Construction, Remediation, and Litigation

[4]                A development permit for the building was issued to Meadowlark Developments Ltd. (“Meadowlark”) on April 18, 1994.  The building permit was issued on August 23, 1994, and the occupancy permit on December 23, 1994.  Almetco supplied the windows and glass doors sometime in 1994.

[5]                There were some isolated reports of water leaks in one or two units in May of 1996, July of 1997, and December of 1998.  The Strata Council attempted to have the developers and contractors effect the necessary repairs.

[6]                At the request of the Strata Council, building inspectors for the District of Saanich (“Saanich”) inspected the building on January 18, 1999.  They advised a member of the Council that damage had been caused by structural defects, and that it was Meadowlark’s responsibility to effect repairs.  The Strata Council wrote to Meadowlark the following day, advising it of the results of the inspection.

[7]                Meadowlark attempted to effect repairs to the building.  Despite these efforts the problems persisted.  On April 12, 1999 the Strata Council filed a report with the New Home Warranty Program, seeking coverage for water penetration.

[8]                The New Home Warranty Program advised the Strata Council that they should consider hiring a building envelope engineer.  This led to Chatwin Engineering Ltd. (“Chatwin”), being retained in early June of 1999.

[9]                Chatwin delivered its preliminary report on August 5, 1999.  It confirmed water penetration was occurring at several locations, including at “Window to stucco/cedar siding intersections”.  It recommended further investigation be undertaken “in order to identify all building envelope deficiencies as well as to produce a detailed scope of repairs . . . ”

[10]            On August 17, 1999 the Strata Council authorized Chatwin to proceed with a building envelope assessment, and to determine the cost of emergency repairs.

[11]            That same day the Strata Council sent a letter to the Owners which included the following:

The “Preliminary Site Investigation Report” indicates that there are deficiencies in the construction of the building, which involve primarily the roof flashing, ventilation of the ‘attic’ space, and probable water intrusion where structures penetrate the building envelope (vents, windows, etc.). . . .

[12]            Prior to September 8, 1999, a representative of the Strata Council discussed the possibility of commencing an action against those responsible for the defects in Swan Lake with a lawyer.

[13]            On October 13, 1999, Chatwin delivered a report entitled, “Phase 1 Building Envelope Condition Survey & Investigation Emergency Repairs”.  On the first page it describes one of the deficiencies as “Water ingress into the cladding system related to inadequate waterproofed flashing located on the roof and deck parapets”.  Under the heading “Building Envelope Inspection Results” the report states:  “Water travelling along the pitched roof to wall intersection is entering the cladding system at the stucco termination molding [sic] to roof interface”.

[14]            The cost estimate for emergency remedial work in the report included a quote for “the removal and replacement of existing skylights and the installation of new gaskets”.

[15]            The minutes of the Owners Annual General Meeting of November 29, 1999 indicate that the Phase 1 Report was discussed, and that a further inspection dealing with cladding and hydrology was pending.  It also states that:

The Corporation was notified that it is the intention of the Council to seek legal advice regarding any possible recourse to recover the cost of the repairs, and what legal action it may take should any of the owners be delinquent in repaying the strata.

[16]            Chatwin’s second report, “Phase 2 Hydrology and Building Envelope Condition Survey and Investigation”, was delivered on February 1, 2000.  It contains the following statement:

5.3       Windows / Sliding Doors

Aluminum [sic] framed windows and sliding doors are used in this project.  These types of windows and doors are known to leak at the mitred frame corners as the frame corners are mechanically fastened and sealed with caulking which, over time, breaks down and allows water to enter the wall assembly directly.  During our review it was noted that the lower frame corner of unit #302s [sic] sliding door had come apart allowing water to penetrate into the wood components in the above noted fashion.  See photo #29 in Appendix 3.

[17]            In the spring of 2000, the Strata Council had some discussions with a lawyer in regard to commencing legal action against the parties responsible for the deficiencies in the construction of Swan Lake.

[18]            In late June of 2000, the Strata Council retained Glen A. Crawford, “to provide legal services relating to the remediation of the Building and to commence action against the parties responsible for the faulty construction of Swan Lake”.  On June 23, 2000, Mr. Crawford wrote to the District of Saanich to provide notice of his clients’ potential claim in negligence against it, i.e., “for failure to ensure the proper inspection of the building, and to ensure that it was properly constructed”.

[19]            Shortly after being retained, Mr. Crawford received a Trades List from Saanich listing Almetco as the supplier of windows for Swan Lake.

[20]            On June 29, 2000, Mr. Crawford wrote to the two architects, and the structural engineer involved in the building of Swan Lake, putting them on notice that the Owners would be taking legal action against them for negligence in the design and construction of the building, and for the costs of remediation to the building envelope.

[21]            On July 10, 2000, Mr. Crawford filed a Writ of Summons in the Victoria Registry, naming Oak Meadows Estates Ltd., Meadowlark, Saanich, and “John Doe Limited” as defendants.  A Notice of Discontinuance was filed on August 2, 2000, and a new writ filed the same day.  The second writ was necessary because the Owners did not pass a special resolution authorizing litigation until July 27, 2000.

[22]            Mr. Crawford deposes that he did not name any other defendants as he was unsure as to which trades had been negligent.  He did not want to miss any limitation period relating to the action against Saanich.

[23]            Between August, 2000 and March, 2001, Mr. Crawford took no steps to locate or add additional defendants.  He deposes that he did not think there was a limitation problem, as his understanding was that the six year period started to run when the Owners received Chatwin’s Phase 2 Report (on February 1, 2000).

[24]            During March or April of 2001, a para-legal employed by Mr. Crawford prepared a praecipe to obtain a desk order adding defendants to the action.  It was not filed as Mr. Crawford wished to conduct additional research to discover all potential defendants.  However, due to illness, Mr. Crawford did not do this research.

[25]            The writ was served in July of 2001.  Mr. Crawford states that he did not take steps to have it served earlier, as he was expecting that additional parties would be identified by Chatwin, and added.  He says Chatwin did not provide him with the requested information.

[26]            The remediation work on Swan Lake commenced on August 31, 2001.

[27]            On September 27, 2001, Mr. Crawford filed a Notice of Motion seeking to add a number of defendants, including Almetco, to the action.  This application was never brought on for hearing.

[28]            Mr. Crawford’s medical condition worsened in the winter of 2001, and he hired M. Bruce Wardhaugh, a lawyer, to assist him with his leaky condominium files.  On January 11, 2002, Mr. Wardhaugh became an associate of Mr. Crawford’s firm, and assumed conduct of the Swan Lake file.

[29]            The remediation work on Swan Lake was substantially completed by January 22, 2002.

[30]            On June 30, 2003, Mr. Wardhaugh received a letter from counsel for Saanich stating that unless a Statement of Claim was filed within two weeks, he would seek to have the action dismissed.  As a result, Mr. Wardhaugh filed a Statement of Claim on July 9, 2003.  Although Almetco was one of a number of new defendants named in the style of cause, no order had been granted adding them.  This Statement of Claim was served on Saanich, but not on any of the other named defendants.

[31]            On October 14, 2003, Mr. Crawford hired another associate, Justin Hodkinson, to assume conduct of his firm’s leaky condominium files.  Mr. Wardhaugh’s employment with Mr. Crawford’s office ended in mid-December, 2003.

[32]            In December, 2003, Mr. Hodkinson noticed that no order had been obtained adding Almetco, and a number of other parties, to the Statement of Claim filed on July 9, 2003.  This led to his asking Chatwin for its opinion on whether certain parties should be added.  Almetco was not mentioned in this letter.

[33]            In early January, 2004, Mr. Hodkinson advised the Strata Council that he would need a report from Chatwin before moving forward with the litigation, and that it might be necessary to add other parties.

[34]            In July of 2004, Mr. Hodkinson was aware of the proper procedure to be followed in seeking to have parties added as defendants.  However, it was his practice to attempt to identify all potential defendants before filing such an application.

[35]            In early August, 2004, Mr. Hodkinson provided the Strata Council with an update.  He advised he had identified a number of parties that he intended to add as defendants by the end of September, once he received confirmation from Chatwin.  Almetco was one of the parties mentioned.

[36]            Both Mr. Crawford and Mr. Hodkinson attended the Owners Annual General Meeting of September 23, 2004.  They acknowledged responsibility for the delay in advancing the action (i.e., procrastination), and said that they would move quickly to add parties, including Almetco.

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Victoria, Cooperage Place: Sellers lose leaky condo repair refund to buyers

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Hutka v. Aitchison et al,

 

2006 BCSC 1169

Date: 20060731
Docket: 06-1258
Registry: Victoria

IN THE MATTER OF 405-11 COOPERAGE PLACE

Between:

Victoria, Cooperage Place: Sellers lose leaky condo repair refund to buyers

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Hutka v. Aitchison et al,

 

2006 BCSC 1169

Date: 20060731
Docket: 06-1258
Registry: Victoria

IN THE MATTER OF 405-11 COOPERAGE PLACE

Between:

Glen Hutka and Olga Hutka

Petitioners

And:

Kenneth Wayne Aitchison, Carole Joan Aitchison,
Strata Corporation 1889 and Proline Management Ltd.

Respondents


Before: The Honourable Mr. Justice R. D. Wilson

Reasons for Judgment

Counsel for the Petitioners:

R. P. Warburton

Counsel for the Respondents Kenneth Wayne Aitchison and Carole Joan Aitchison:

H. J. Rusk

Date and Place of Trial/Hearing:

July 18, 2006

 

Victoria, B.C.

I.

[1]                The interesting question on this application is one of entitlement to a partial refund of a special assessment.  That special assessment was paid by the previous owner of a strata lot, into a fund, to repair a defective condominium building.  The previous owner sold the strata lot to the current owner.  After the sale completed, the refund issued.  Both parties claim entitlement.  The petitioners' claim sounds in contract.  The respondents' claim sounds in the equitable remedy of unjust enrichment.

II.

[2]                Prior to 31 August 2004, the respondents owned strata lot 32 in a condominium building.  The envelope in that building suffered premature failure.  The strata corporation imposed a special levy on the owners of the strata lots in the building to fund rectification and litigation.  Individual assessments were calculated by unit entitlement.  The respondents, as owners of strata lot 32, paid $60,135.01 into that fund on a date not identified in the evidence.

[3]                By a contract of purchase and sale dated 16 June 2004, the respondents agreed to sell, and the petitioners agreed to buy, strata lot 32, with completion and possession dates of 1 September 2004.  On that latter date, the respondents' transfer of their fee simple interest in strata lot 32, to the petitioners, was registered in the Land Title Office at Victoria.

[4]                By mid-July 2005, the rectification and litigation, for which the fund had been established, had been concluded.  The strata corporation was left with an excess of money.  It resolved to refund the excess to the owners.  The amount attributable to strata lot 32 is $17,758.03.

III.

[5]                It appears to be common ground that there is nothing express in the contract between the parties addressing the contingencies inherent in the special fund.[1]  As current owners of the strata lot, the petitioners have a prima facie entitlement to the refund.

[6]                The Form B, Information Certificate, dated 23 August 2004, records, among other information, the following:

(d)        Any amount that the owner of the strata lot described above is obligated to pay in the future for a special levy that has already been approved .................................................................$0.00

...

(f)         Amount in the contingency reserve fund minus any expenditures which have already been approved but not yet taken from the fund .............................................$81,937.03 as of July 31, 2004

...

(j)         Is the strata corporation party to any court proceedings or arbitration, and/or are there any judgments or orders against the strata corporation?

                          No            X       Yes - Litigation is currently proceeding against a number of defendants for certain water penetration issues.

[7]                I find that by omitting any reference to a future special levy, or the contingency reserve fund, the parties, by their contract, implicitly allocated the risk of contingencies of the litigation.  Thus, any adjustment to the contingency reserve fund, either by increase through a future special levy, or decrease, by a refund, was a risk allocated to the purchaser.

IV.

[8]                The remedy of unjust enrichment, the remedy sought by the respondents, is dependent upon proof of three elements:

1.         an enrichment;

2.         a corresponding deprivation; and,

3.         an absence of juristic reason for the enrichment.[2]

[9]                The respondents say that if the refund is paid to the petitioners, then the petitioners will be enriched at the respondents' corresponding deprivation, for no juristic reason.

[10]            The first element mentioned above is probably satisfied.  Receipt of money is conventionally taken as an enrichment.

[11]            On the second element mentioned above, I find it instructive to refer to the comments of Southin, J.A. in Scott v. Noble:[3]

The learned judge in his reasons found that there was an enrichment of the defendants from the plaintiff's labour but no corresponding deprivation because the plaintiff was an employee who received the salary bargained for.  If the learned judge was using the word "enrichment" in its dictionary sense, I agree with him that there was an enrichment.  The interesting question of whether the term "enrichment" in the formula "unjust enrichment" is a term of art with some ingredient added to the dictionary meaning may wait for another day.  However, even if using the word "deprivation" in its ordinary dictionary sense means that there can be said to have been a deprivation, here it was justified by the simple juristic reason of a contract of employment which was observed by the employers.  [my underlining]

[12]            That interesting point was not argued before me.  Accordingly, I assume, without deciding, that the second element is satisfied:  there would be a corresponding deprivation.

[13]            The third element, the absence of juristic reason, has received further explanation by the Supreme Court of Canada in Garland v. Consumers' Gas Co..[4]

[14]            "... The proper approach to the juristic reason analysis", said Mr. Justice Iacobucci, "is in two parts":

... First, the plaintiff must show that no juristic reason from an established category exists to deny recovery.  ... The established categories that can constitute juristic reasons include a contract ..., a disposition of law ..., a donative intent ..., and other valid common law, equitable or statutory obligations ...  If there is no juristic reason from an established category, then the plaintiff has made out a prima facie case under the juristic reason component of the analysis.  [Authorities omitted; the underlining is mine]

[15]            In the case at hand, there is a contract.  That contract has been performed by the petitioners.  There is no "element of injustice or want of commercial good conscience".[5]  Accordingly, this case falls within an established category and I do not consider the second part of the analysis.

[16]            The parties were free to contract as they would.  In Dewar v. Brooks,[6] the parties to a real estate transaction, in circumstances similar to those in this case, addressed specifically, the allocation of risk.  The task of the Court in Dewar was to interpret the parties' contract.  I see my task in this case to be similar, even though in the absence of an express term.

[17]            There is a comment in Restitution,[7] which commends itself to me:

The law of contract is designed to recognize and protect rights created by agreement.  By agreement, as long as such agreement does not offend the law by being obtained fraudulently or under duress, for example, or is in some other way susceptible to attack, one party may enrich the other, even, it may be added, unjustly.

V.

[18]            The petitioners will have the relief prayed for in their petition.  I declare that they are entitled to the common property and common assets of Strata Corporation No. 1889, including the proceeds of litigation as a tenant in common in a share equal to the unit entitlement of Strata Lot 32, District Lot 119, Esquimalt District, Strata Plan 1889 divided by the total unit entitlement of all the strata lots.

[19]            I further order that Strata Corporation No. 1889 and/or its property manager, Proline Management Ltd., pay all money held by it to the credit of Strata Lot 32 to the petitioners.

[20]            The petitioners will have their costs against the respondents Aitchison only.

“R.D. Wilson, J.”
The Honourable Mr. Justice R.D. Wilson



[1]           I am constantly perplexed by counsel's senseless practice of encumbering their material with illogical documentation.  To a vexing degree, the exhibits attached to Mr. Johnston's affidavit are unreadable.  Fortunately, by not putting in issue the content of that documentation, counsel have spared me the inconvenience of adjourning this matter until proper material is placed before the court.

[2]           Pettkus v. Becker, [1980] 2 S.C.R. 834, at page 848.

[3]           (1995), 99 B.C.L.R. (2d) 137 (B.C.C.A.), at page 143, paragraph 17.

[4]           [2004] 1 S.C.R. 629, at pages 648 to 652, paragraphs 38 to 47.

[5]           See:  Cherrington v. Mayhew's Perma-Plants Ltd. (1990), 45 B.C.L.R. (2d) 374 (B.C.C.A.); Atlas Cabinets and Furniture Ltd. v. Nat. Trust Co. (1990), 45 B.C.L.R. (2d) 99 (B.C.C.A.).

[6]           2004 BCPC 84 (B.C. Prov. Ct.)

[7]           Restitution, Fridman and McLeod, Carswell 1982, at page 247.

Victoria: Mr. Morton sells his leaky rotten condo to Mr. Cope without full disclosure; court awards Mr. Cope $54,200 because he bought a wet condo instead of a dry condo

 

 

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Cope v. Morton,

 

2004 BCSC 1412

Date: 20041101
Docket: 02/4766
Registry: Victoria

Between:

Richard Sydney Cope

Plaintiff

And:

Barry Allan Morton

Defendant


Before: The Honourable Mr. Justice R. D. Wilson

Reasons for Judgment

Counsel for the Plaintiff:

D. L. Armstrong

Counsel for the Defendant:

M. M. Johnson

Dates and Place of Trial/Hearing:

14 and 15 September 2004

 

Victoria, B.C.

I.

[1]                On 31 October 2001, Mr. Morton sold a condominium unit to Mr. Cope.

[2]                On 9 June 2004, a special assessment, of $52,200, was levied against Mr. Cope.  The special assessment had been authorized by the strata corporation, to pay for remediation of a moisture problem in the condominium building.  Mr. Cope sues Mr. Morton for recovery of that amount, because, he claims, Mr. Morton did not disclose the magnitude of the moisture problem, prior to the sale.

[3]                Both of these gentlemen say they relied on the same information, to come to the conclusion that whatever moisture problem the building had, was adequately addressed by an ongoing maintenance program, instituted by the strata corporation.

[4]                If either of them had looked further, they would have learned that the maintenance program was not commensurate with the magnitude of the moisture problem in the building.

[5]                The question raised on this trial is, upon which of these two gentlemen does the law impose the duty of looking further?

II.

[6]                The unit is one of 140 units contained in two, eight‑storey buildings.  The complex was constructed in 1977, and available for occupancy in 1978.

[7]                In a report dated 16 August 1991, a consulting engineer wrote, "... that the buildings have leaked since they were constructed".

[8]                Throughout the 1980's, the strata corporation obtained a number of consultants' reports on remediation of the leaking phenomenon.  There is no evidence of any measures taken by the strata corporation, until the early 1990's, to address this problem, in response to the reports received from those consultants.

[9]                In the summer of 1991, the strata corporation retained the services of Hardy BBT Limited ("Hardy"), a consulting engineering and professional services provider.  Hardy conducted an investigation, and reported to the corporation, by letter dated 16 August 1991, with its findings and recommendations.  Hardy's findings and recommendations were entirely consistent with those of all of the consultants who had preceded Hardy, namely, "the installation of a new cladding over the existing building walls, such that a rainscreen wall system is produced".  The corporation was concerned about the cost of such an enterprise, and requested of Hardy that it provide optional, less expensive, remedial measures.  Hardy complied.  In a report dated 15 November 1991, three options were presented:


OPTION


COMMENTS


APPROXIMATE COST
($)

1.  Overcladding - Installation of new rain-screen wall cladding and replacement of all windows

- best short and long term technical solution

       2,000,000

2.  Surface

Treatments - application of a penetrating sealer to the masonry, a coating to the stucco and caulking

- will reduce the potential for water penetration but will not eliminate it.

- most economical short term solution (but not permanent)

         270,000

3.  Surface Treatments - as for 2. above except that the work will be performed in phases over approximately four years.

- as for 2. above.

year 1----57,000

year 2----50,000

year 3----50,000

year 4----70,000

year 5----70,000

 

[10]            Mr. Morton purchased, and took possession of the unit, in July 1991.

[11]            On a date not defined in the evidence, there was a special meeting of the owners of the corporation, precipitated by the Hardy report.

[12]            In his testimony at the trial, Mr. Morton said he did not recall being at the meeting.  He said he never read the Hardy reports, although, he had "heard them referred to".  At his examination for discovery, the following questions and answers appear:

135  Q      I'm suggesting to you that if you were an owner at the time this report became public or became available to the council, that you certainly would have been aware of it?  You would certainly remember it -- finding out you had a $2 million assessment right after you bought the property?

     A      Actually, my first involvement with council as a spectator -- whatever you want to call it -- was when this report was totally rejected actually --

136  Q      Yes.

     A      -- by council.

137  Q      When was that?

     A      I honestly couldn't tell you.

138  Q      In '91, '92, that time period?

     A      I would say -- I'm guessing '92, but I don't know -- '91, '92.

139  Q      Tell me about the -- about rejecting it.  This report recommended as a best short- and long-term technical solution spending $2 million to repair and re and re the over cladding.  What happened then?  Did you go to a meeting where this report was discussed?

     A      I think I was at one meeting.  That's 12 years ago.  I honestly can't remember.

140  Q      Tell me everything you do remember about these Hardy BBT reports.

     A      The reports themselves, nothing.

141  Q      And the $2 million?

     A      It was actually -- the number that was mentioned was $3 million.

142  Q      You know that that was rejected?

     A      That was rejected because council decided to go to a totally different plan, which, as far as I know, was working.

143  Q      Tell me about that.

     A      The plan was to basically budget for waterproofing repairs each year.  It was included in the budget, and the waterproofing report was done.  Council accepted that as the approach to be taken, and they were showing results.

[13]            The meeting was contentious.  The owners were divided over the course to be pursued.  In result, however, the corporation rejected Hardy's "best" solution and decided to proceed on Option 3 above, that is to say, the application of a seal, in phases.  A committee to oversee the program was created, with a budget of $50,000 per year.  It was called the "Water-Proofing Committee".  It referred to itself as such in the regular reports it made to the corporation following its inception.  The waterproofing committee budget was renewed annually at the annual general meetings.

[14]            Mr. Morton was never a member of the waterproofing committee.  He was the chairman of the strata council, for nine months, in 1993, and again, he served part of a two-year term in 2000-2001.  He saw the reports of the waterproofing committee at every meeting to which it reported, and annually at the annual general meeting.  Those reports contain an ongoing history of the waterproofing program, its successes and failures.  Mr. Morton said that he concluded from the committee's activities, as evidenced in the reports, that the moisture problem was in hand and being addressed appropriately.

[15]            In July 2001, Mr. Morton decided to sell the unit, in anticipation of his retirement, and relocation out of the area.  He listed the unit for sale with Mr. Chilton, of Pemberton Homes Realty.  In the course of the listing arrangement, Mr. Morton completed a "Property Disclosure Statement".  This is a standard form document, copyrighted by the British Columbia Real Estate Association.  Mr. Morton dated his form 11 July 2001.

[16]            Among other things, Mr. Morton provided the following responses:

10.   Strata Council Chair's Name - Barry Morton

B.    STRUCTURAL: (Respecting the unit and common property including limited common property)

24.   Are you aware of any damage due to wind, fire or water?   Answer "No"

26.   Are you aware of any leakage or unrepaired damage?   * See below

C.    ADDITIONAL COMMENTS AND/OR EXPLANATIONS: (Use additional pages if necessary).  Describe any repairs to the common property or the unit in the last 2 years.

*     Isolated, please see strata minutes.

[17]            Mr. Cope was also anticipating retirement.  Accordingly, he was seeking a condominium residence in Victoria county.  Mr. Cope had heard of the "leaky condominium" phenomenon in the county.  He wished to avoid acquiring a unit in such a structure.

[18]            In the course of Mr. Cope's surveying the market, Mr. Morton's unit came to his attention.  Mr. Cope contacted Mr. Chilton at Pemberton Homes.  He told Mr. Chilton he was concerned about the leaky condominium phenomenon.

[19]            Mr. Cope viewed Mr. Morton's property with Mr. Chilton on 1 August 2001.  He made an offer to Mr. Morton to purchase the unit on 9 August 2001.  Among other things, Mr. Cope's offer contained the following:

1.    The Seller agrees to provide, through the Seller's Agent, at the Seller's expense, on or before Aug. 17, 2001 copies of the following documentation:

(d)    A copy of the minutes of the last two Annual General Meetings, any Special General Meetings, and all meetings of the Strata Council of the last 24 months.

...

(h)    A copy of the Building Envelope Inspection Report, or any Remediation Reports, and all related documents.

3.    PROPERTY INSPECTION:

Subject to the Buyer obtaining and approving an inspection report of the Property on or before Aug. 24, 2001.

[20]            Mr. Morton accepted Mr. Cope's officer on 10 August 2001.  The representations in the property disclosure statement were incorporated as terms of the concluded contract.

[21]            Mr. Chilton had received copies of some of the minutes of the meetings of council from Mr. Morton.  He inquired of the property manager, Cornerstone Properties Ltd., for documentation in its possession.  The documentation Mr. Chilton did receive he forwarded on to Mr. Cope.  Mr. Chilton did not receive from Cornerstone, a copy of the minutes of the special general meeting, held in 1991, to consider the recommendations of Hardy.  Mr. Chilton did not obtain, or forward to Mr. Cope, a copy of the building envelope inspection report, or the remediation reports prepared by Hardy.

[22]            Mr. Chilton testified that when he did not receive documentation from Cornerstone, he assumed that it did not exist.  He was wrong.

[23]            Mr. Cope commissioned a building inspection by Homeguard Building Inspections Inc.

[24]            On the topic of moisture, Homeguard reported, in part:

The exterior wall surface is stucco and brick.  The building has a number of flashing details where various building features intersect adjacent wall surfaces.  A representative sampling of exterior building details such as flashings, wall intersections, door and window penetrations and the various materials in place to prevent moisture penetration were examined.  Special care should be taken with respect to these details.  It is important that flashing intersections and details are kept well sealed with a good polyurethane caulking to protect against damp and weather penetration.  No indications of deterioration to these details were observed at the time of inspection.  It is impossible to detect the degree of damp deterioration or if structural deterioration has occurred in a framing assembly without removing the interior or exterior finishes.  Further examination for damp penetration is referred to a building envelope specialist.

[25]            Mr. Chilton sent to Mr. Cope copies of the minutes of the corporation's meetings from August 1999 to June 2001.

[26]            Mr. Cope read those minutes, which included reports from the waterproofing committee, and concluded that the moisture problems in the structure were not significant.  He calculated that the $50,000 annual budget, for the waterproofing committee was nominal, considering that it was divided among 141 owners.  He calculated that his contribution would be $354 per annum, and concluded that this was a nominal amount to pay for the maintenance of a 24-year-old building.

[27]            In result, Mr. Cope removed the conditions from the purchase and sale agreement, completed the transaction, and took occupancy on 1 November 2001.

[28]            The owners of the corporation elected a new council in October 2001.  Rectification of the moisture problem was revisited by that new council.  Among other things, the new council commissioned reports from consulting engineers, Read Jones Christoffersen Ltd. and Levelton Engineering Ltd.  Those reports essentially repeated the preferred recommendation by Hardy in 1991.  However, the probable cost to correct had now risen to $4,500,000.

[29]            On 7 June 2004, the owners of the corporation, at a special general meeting, adopted the following resolution:

RESOLVED, as a THREE QUARTER (3/4) VOTE, of The Owners, Strata Plan No. 609, that the Strata Corporation raise a Special Levy in the amount of FOUR MILLION FIVE HUNDRED THOUSAND ($4,500,000) DOLLARS.  The purpose of the special levy is to repair the building envelope of the strata corporation buildings and to make any other necessary ancillary repairs as may be required to prevent further water leakage into the buildings.

[30]            On 9 June 2004, the property manager billed Mr. Cope for his proportionate share of the special assessment, namely $52,200.

III.

[31]            Mr. Cope claims against Mr. Morton on three grounds:

1.    fraudulent misrepresentation;

2.    negligent misrepresentation; and

3.    breach of contract.

[32]            To succeed in his claim based on fraudulent misrepresentation, Mr. Cope must prove four elements.

[33]            First, Mr. Cope must prove that Mr. Morton made a representation to Mr. Cope.  This element is not contentious.  Mr. Morton represented to Mr. Cope that he, Mr. Morton, was aware that the unit and common property had isolated leakage or unrepaired damage, as seen in undefined strata minutes.

[34]            Second, Mr. Cope must prove that the representation was false in fact.

[35]            This element has been proved.  "Isolated" means, "untypical"; "exceptional".[1]

[36]            At 11 July 2001, there was leakage, and there was unrepaired damage, the magnitude of which was not defined in the minutes provided, or any of them.  The minutes provided did not present a complete history of the leakage or unrepaired damage.  Significantly missing were the minutes of the special meeting on the Hardy report.  Accordingly, it was a false statement to say that the leakage and unrepaired damage was "isolated" as seen in "strata minutes".

[37]            Third, Mr. Cope must prove that Mr. Morton knew that the representation was false when it was made.  Or, that Mr. Morton made the representation recklessly, not knowing if it was true or false.

[38]            There is a subjective element in the tort of fraud or deceit.  Professor Fridman makes the following observation:[2]

... Liability for deceit or fraud is based upon the idea that to lie or deceive are morally wrong acts which merit legal sanction, when they result in harm suffered by the victim.  Actual fraud and not just misrepresentation must be proved.

Falsehood therefore entails a deliberate, wilful, conscious distortion of the truth.  It will not suffice that the maker of the deceptive statement is inaccurate unless he is also aware of the inaccuracy (or is so reckless that he does not care whether or not he is speaking the truth).  He must lack honest belief in the truth of what he is stating.

[39]            Mr. Cope has not met that test.  He has not proved that Mr. Morton knew the magnitude of the problem as defined in the Hardy reports.  Or, that Mr Morton was recklessly blind to the systemic nature of the problem at the time he completed the disclosure statement in July 2001.

[40]            In result, Mr. Cope's claim in fraudulent misrepresentation fails.

[41]            To succeed on the second ground, of negligent misrepresentation, Mr. Cope must prove five elements.

 

 

[42]            First, that there was a duty of care owed by Mr. Morton to Mr. Cope, based on a special relationship.  This element is proved.  There was a special relationship between these two gentlemen of prospective vendor and prospective purchaser.

[43]            The second element Mr. Cope must prove is that the representation in question was untrue, inaccurate or misleading.  This element is proved for the reasons given above.  There was leakage at July 2001.  There was unrepaired damage to the structure in July 2001.  Neither of those phenomena were isolated; they were systemic.

[44]            The third element Mr. Cope must prove is that Mr. Morton must have acted negligently in making the misrepresentation to Mr. Cope.  This element is proved.

[45]            On 11 July 2001, there existed a systemic structural problem with the condominium building in which Mr. Morton's unit was located.  That problem was defined in the Hardy reports of 1991.

[46]            The temporary solution of surface treatment, did not repair the damage.  Mr. Morton was aware of a report which had precipitated the special meeting of 1991, which resulted in the adoption of the waterproofing committee solution.  Mr. Morton knew the history of the building from the time he took occupancy.  He was in a position to get his facts right before he made the representation.  He was negligent in not doing so.

[47]            However, Mr. Morton argued that referencing the minutes was sufficient compliance with his duty to Mr. Cope.  He says the onus was on Mr. Cope to make the further inquiries indicated by the minutes provided.  Sask v. Brooke[3] is the authority cited in support of this proposition.

[48]            Sask was a case with remarkably similar facts to this case.  There, a disclosure statement and minutes of meetings of the strata council were held to be sufficient to alert the purchaser to the need for further inquiries.  This information provided the prospective purchaser with the history of the leakage problems in the complex in question.  In result, the purchaser's claim, based on negligent misrepresentation, was dismissed.

[49]            Put another way, Mr. Morton is arguing that the systemic problem was a patent defect.  It is up to the purchaser, Mr. Cope, goes the argument, to ascertain the extent of that defect, either by inspection or inquiry.  It is an example of the application of the doctrine of caveat emptor.

[50]            The doctrine does not apply in this case.  And Sask is distinguishable on the facts.  Mr. Cope and Mr. Morton, by their agreement, allocated the burden of inquiry to Mr. Morton.  There was an obligation assumed by Mr. Morton to "provide ... at [his] expense ...", among other things, "A copy of the Building Envelope Inspection Report, or any Remediation Reports, and all related documents".  At 10 August 2001, that documentation was available.

 

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