2475813 Nova Scotia Ltd. v. Rodgers et al.,

• Jurisdiction: Nova Scotia
• Judge: Bateman, Hallett and Cromwell, JJ.A.
• Neutral Citation: 2001 NSCA 12
• Date: 20 November 2000
• Court: Court of Appeal of Nova Scotia (Canada)

2475813 N.S. Ltd. v. Rodgers (2001), 189 N.S.R.(2d) 363 (CA);

 590 A.P.R. 363

MLB headnote and full text

Temp. Cite: [2001] N.S.R.(2d) TBEd. JA.035

Rita M. Rodgers, et al. (appellants/respondents by cross-appeal) and 2475813 Nova Scotia Limited (respondent/appellant by cross-appeal)

Intab Ali et al. (appellants/respondents by cross-appeal) and Bruce Brett, 2475813 Nova Scotia Limited, Charles Henman, Pamela Robertson, Betty Sinnis and Robert Thomson (respondents/appellants by cross-appeal) and Halifax County Condominium Corporation No. 151 (respondent)

(163846; 163847; 2001 NSCA 12)

Indexed As: 2475813 Nova Scotia Ltd. v. Rodgers et al.

Nova Scotia Court of Appeal

Bateman, Hallett and Cromwell, JJ.A.

January 24, 2001.

Summary:

Brett effectively controlled over 80% of the votes of all unit holders in a condo­minium corporation. He was also a director of the corporation. At a general meeting, the Brett interests authorized the sale of the corporation's property to a Brett company. Some individual unit owners refused to sign the conveyancing documents. The Brett interests and the individual unit owners applied for declaratory relief.

The Nova Scotia Supreme Court, in a decision reported at 184 N.S.R.(2d) 281; 573 A.P.R. 281, determined the applications. The individual unit owners appealed and the Brett interests cross-appealed.

The Nova Scotia Court of Appeal allowed the appeals in part and dismissed the cross-appeals.

Equity - Topic 3681

Fiduciary or confidential relationships - Use of fiduciary position for profit or gain - General - Brett effectively controlled over 80% of the votes of all unit owners in a condominium corporation - He was also a director of the corporation - Section 40 of the Condominium Act permitted the sale of the corporation's property by a vote of unit owners who owned at least 80% of the common elements and the consent of all required encumbrancers - At a general meeting, the Brett interests authorized the sale of the corporation's property to a Brett company - Some individual unit owners refused to sign the conveyancing docu­ments and applied for declaratory relief - The Nova Scotia Court of Appeal held that, in these circumstances, Brett owed a fiduciary duty to both the individual unit owners and the corporation - However, he did not stand in the same position as a true trustee - The obligation was not to act selflessly, but to act in the best interests of all the unit holders and of the corporation -The duty did not preclude personal profit from the decision, but did preclude profit at the expense of others - See paragraph 87.

Real Property - Topic 8806

Condominiums - General - Interpretation of statutes - [See first Real Property - Topic 8880 ].

Real Property - Topic 8880

Condominiums - Corporation - General - Termination of - Sale - Brett effectively controlled over 80% of the votes of all unit owners in a condominium corporation - At a general meeting, the Brett interests au­thorized the sale of the corporation's prop­erty to a Brett company - Some individual unit owners refused to sign the con­veyancing documents and applied for declaratory relief, alleging, inter alia, that the proposed sale was a colourable attempt by the Brett interests to terminate the governance of the Condominium Cor­poration without the consent of 100% of the unit owners, as required by s. 41 of the Condominium Act - The chambers judge disagreed - She held that: s. 40 of the Act contained all the requirements to authorize a sale of the corporation's property; s. 40 authorized the sale of the corporation's property by a vote of unit owners who owned at least 80% of the common elements and the consent of all required encumbrancers; once such a vote had taken place, all unit owners were required to execute the conveyance of the property; and any owner who voted against the sale was entitled to the protection of the arbi­tration procedures in ss. 40(5) and 40(6) to determine fair market value of the property - The Nova Scotia Court of Appeal upheld the chambers judge's decision on this issue - See paragraphs 24 to 29.

Real Property - Topic 8880

Condominiums - Corporation - General - Termination of - Sale - Brett effectively controlled over 80% of the votes of all unit owners in a condominium corporation - At a general meeting, the Brett interests au­thorized the sale of the corporation's prop­erty to a Brett company - Some individual unit owners refused to sign the con­veyancing documents - The opposing par­ties applied for declaratory relief - The individual unit owners argued that the word "sale" in s. 40 of the Condominium Act was limited to sales necessitated by heavy capital expenditures or to offers to purchase by a person at arm's length to the corporation - The chambers judge rejected the argument - The Nova Scotia Court of Appeal upheld the chambers judge's de­cision that the proposed transaction was a "sale" within the meaning of s. 40 - See para­graphs 31 to 35.

Real Property - Topic 8880

Condominiums - Corporation - General - Termination of - Sale - Brett effectively controlled over 80% of the votes of all unit owners in a condominium corporation - At a general meeting, the Brett interests au­thorized the sale of the corporation's prop­erty to a Brett company - Some individual unit owners refused to sign the con­veyancing documents - The opposing par­ties applied for declaratory relief - The chambers judge held, inter alia, that s. 40 of the Condominium Act authorized the sale of the corporation's property by, inter alia, a vote of unit owners who owned at least 80% of the common elements and the consent of all required encumbrancers - The chambers judge refused the Brett interests' request for a declaration that individual unit owners could not direct a registered encumbrancer to unreasonably withhold its consent to the sale - The Nova Scotia Court of Appeal upheld the refusal -See paragraphs 47 to 49.

Real Property - Topic 8963

Condominiums - Duties and rights of unit holders - Fiduciary duties - Brett effective­ly controlled over 80% of the votes of all unit owners in a condominium corporation - Section 40 of the Condominium Act permitted the sale of the corporation's property by a vote of unit owners who owned at least 80% of the common elements and the consent of all required encumbrancers - At a general meeting, the Brett interests authorized the sale of the corporation's property to a Brett company - Some individual unit owners refused to sign the conveyancing documents and applied for declaratory relief - The Nova Scotia Court of Appeal held that Brett, by virtue of being the owner and controlling mind of the developer and having effective voting control of the corporation, owed a fiduciary duty to all the unit owners not to use that voting control to authorize a sale of the property where, as here, their in­terests and his could conflict - Secondly, by virtue of Brett's position as a director of the corporation, he owed a similar fiduciary duty to the corporation - The court declared that a sale of the corpora­tion's property to a corporation under Brett's control could be authorized pur­suant to s. 40 of the Condominium Act by unanimous approval of the other unit owners or by order of the Supreme Court of Nova Scotia - See paragraphs 63 to 89.

Real Property - Topic 8963

Condominiums - Duties and rights of unit holders - Fiduciary duties - [See Equity - Topic 3681 ].

Real Property - Topic 9025

Condominiums - Voting rights - Unit owners - Brett effectively controlled over 80% of the votes of all unit owners in a condominium corporation - At a general meeting, the Brett interests authorized the sale of the corporation's property to a Brett company - Some individual unit owners refused to sign the conveyancing docu­ments - The opposing parties applied for declaratory relief - The chambers judge held that any individual or corporation owning two or more units could exercise voting rights for each of the units owned - The Nova Scotia Court of Appeal agreed with this conclusion - See paragraph 30.

Real Property - Topic 9082

Condominiums - Officers and directors - Conflict of interest - Directors of a condo­minium corporation (including Thomson, Henman and Sinnis) voted to convene a general meeting to consider, inter alia, a resolution for the sale of the corporation's property to a company owned by Brett (the purchaser) - Brett effectively controlled over 80% of the unit owners' votes - At the general meeting, the Brett interests authorized the sale - Thomson, the condo­minium's general manager, had been told by Brett that his position would continue - Henman had acted as a paid litigation agent for the purchaser and as a paid com­mission agent for sales he arranged by unit owners to the purchaser - Sinnis had entered into a purchase and sale agreement for her unit with the purchaser that had an "open" closing date - Some individual unit owners refused to sign the conveyancing documents and applied for declaratory relief, alleging that these directors were in a conflict of interest as set out in s. 15F(7) of the Condominium Act - The chambers judge disagreed - There were no contracts or proposed contracts to which the cor­poration was or would be a party that were being voted upon at the directors' meeting - The Nova Scotia Court of Appeal upheld this finding - See paragraphs 36 to 39.

Real Property - Topic 9087

Condominiums - Officers and directors - Obligations and duties - Fiduciary duties - Brett effectively controlled over 80% of the votes of all unit owners in a condo­minium corporation - He was also a direc­tor of the corporation - At a general meet­ing of the corporation, the Brett interests authorized the sale of the corporation's property to a Brett company - Some indi­vidual unit owners refused to sign the conveyancing documents and applied for declaratory relief, alleging, inter alia, that the directors provided insufficient infor­mation at the general meeting for an informed decision regarding the offer - The chambers judge agreed and held that the authorization to sell the property was therefore null and void - On appeal, the individual unit owners submitted that the chambers judge should have gone further and found that the directors also breached their duty to them by: failing to obtain an independent legal opinion respecting the validity and effect and potential liabilities to the corporation of Brett's actions; failing to present an analysis and a recommen­dation; failing to insure that an impartial person chaired the meeting; and permitting improper use of a proxy - The Nova Scotia Court of Appeal upheld the chambers judge's decision on this issue - See para­graphs 40 to 46.

Real Property - Topic 9087

Condominiums - Officers and directors - Obligations and duties - Fiduciary duties - [See Equity - Topic 3681 and first Real Property - Topic 8963 ].

Words and Phrases

Sale - The Nova Scotia Court of Appeal considered the meaning of the word "sale" as found in s. 40 of the Condominium Act, R.S.N.S. 1989, c. 85 - See paragraphs 31 to 35.

Cases Noticed:

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1; [1994] 9 W.W.R. 609; 22 C.C.L.T.(2d) 1; 117 D.L.R.(4th) 161, refd to. [para. 56].

Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534; 131 N.R. 321; 6 B.C.A.C. 1; 13 W.A.C. 1; 85 D.L.R.(4th) 129, refd to. [para. 56].

Canadian Aero Services v. O'Malley, [1974] S.C.R. 592, refd to. [para. 56].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161, refd to. [para. 57].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84; 42 D.L.R.(4th) 81, refd to. [para. 60].

Eberts v. Carleton Condominium Corp. No. 396 et al. (2000), 136 O.A.C. 317 (C.A.), refd to. [para. 63].

National Trust v. Grey Condominium Corp. No. 36, [1995] O.J. No. 2079 (Gen. Div.), refd to. [para. 63].

Ceolaro v. York Humber Ltd. (1994), 37 R.P.R.(2d) 1 (Ont. Gen. Div.), refd to. [para. 63].

Carleton Condominium Corp. No. 347 v. Trendsetter Developments Ltd. et al. (1992), 57 O.A.C. 258; 94 D.L.R.(4th) 577 (C.A.), refd to. [para. 63].

Owners - Condominium Plan No. 86-S-36901 v. Remai Construction (1981) Inc. et al. (1991), 93 Sask.R. 211; 4 W.A.C. 211; 84 D.L.R.(4th) 6 (C.A.), refd to. [para. 71].

York Condominium Corp. No. 167 et al. v. Newrey Holdings Ltd. et al. (1981), 32 O.R.(2d) 458; 122 D.L.R.(3d) 280 (C.A.), refd to. [para. 71].

Frontenac Condominium Corp. No. 1 v. Macciocchi (Joe) & Sons Ltd. (1975), 67 D.L.R.(3d) 199 (Ont. C.A.), refd to. [para. 74].

Coomber, Re, [1911] 1 Ch. 723, refd to. [para. 82].

Statutes Noticed:

Condominium Act, R.S.N.S. 1989, c. 85, sect. 40, sect. 41(1) [para. 26].

Authors and Works Noticed:

Anger and Honsberger, Law of Real Prop­erty (1985), vol. 2, ss. 3801 [para. 3]; 3802 [paras. 3, 4]; 3902 [para. 64]; 4008.1 [para. 71].

Cooter and Freedman, The Fiduciary Re­lationship: Its Economic Character and Legal Consequence (1991), 66 N.Y.U.L. Rev. 1045, generally [para. 60].

Corpus Juris Secundum (1996), vol. 31, p. 260 [paras. 3, 5].

Finn, P.D., Contract and the Fiduciary Principle (1989), 12 U.N.S.W.L.J. 76, p. 88 [para. 61].

Rosenberg, Alvin B., Condominium in Canada (1969), generally [para. 3].

Rotman, Leonard I., Fiduciary Obligations in The Law of Trusts: A Contextual Approach (2000), p. 742 [para. 58].

Counsel:

David A. Copp and Janet H. Morris, for the appellants/respondents by cross-appeal, Intab Ali et al.;

Dennis James and Paul Morris, for the respondents/appellants by cross-appeal.

This appeal was heard on November 20, 2000, by Bateman, Hallett and Cromwell, JJ.A., of the Nova Scotia Court of Appeal. Cromwell, J.A., delivered the following decision for the Court of Appeal on January 24, 2001.