Atlanta Ind. Sales v. Emerald Mgt., (2006) 399 A.R. 1 (QB)

• Court: Court of Queen's Bench of Alberta (Canada)
• Judge: Phillips, J.
• Neutral Citation: 2006 ABQB 255
• Citation: (2006), 399 A.R. 1 (QB),2006 ABQB 255,[2006] 10 WWR 515,399 AR 1,62 Alta LR (4th) 232,19 BLR (4th) 256,[2006] CarswellAlta 679,[2006] AJ No 624 (QL),(2006), 399 AR 1 (QB),[2006] A.J. No 624 (QL),399 A.R. 1
• Date: 03 February 2006

Atlanta Ind. Sales v. Emerald Mgt. (2006), 399 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2006] A.R. TBEd. JN.007

Atlanta Industrial Sales Limited and Westcoast Developments (1977) Ltd. (plaintiffs) v. Emerald Management & Realty Ltd. (defendant)

(0201 05469)

Westcoast Developments (1977) Ltd. (plaintiff) v. Emerald Management & Realty Ltd. (defendant)

(0201 05468)

Atlanta Industrial Sales Limited (plaintiff) v. Emerald Management & Realty Ltd. (defendant)

(0201 05467; 2006 ABQB 255)

Indexed As: Atlanta Industrial Sales Ltd. et al. v. Emerald Management & Realty Ltd.

Alberta Court of Queen's Bench

Judicial District of Calgary

Phillips, J.

April 7, 2006.

Summary:

Emerald managed the plaintiffs' rental properties for a management fee of 4% of all monies collected by Emerald. Emerald collected and retained certain fees charged to tenants and levied charges against the plaintiffs for certain administrative tasks. The plaintiffs sued Emerald regarding the fees and charges, alleging breaches of contract and fiduciary duty. Compensatory damages were agreed on but the plaintiffs also sought punitive damages. Emerald asserted that (i) the fees and charges were within the management agreement or that there was an oral agreement or implied term based on custom that the fees and charges would go to Emerald, (ii) it had authority to collect and retain the fees and charges and had provided full disclosure and (iii) the action was statute-barred.

The Alberta Court of Queen's Bench held that Emerald was liable for the disputed fees and charges but declined to order punitive damages. The court held that the action was not statute-barred in any respect.

Agency - Topic 3084

Relations between principal and agent - Agent's duty - General - Fiduciary duty - Emerald managed the plaintiffs' rental properties for a management fee of 4% of all monies collected by Emerald - Emerald collected and retained certain fees charged to tenants and levied charges against the plaintiffs for certain administrative tasks - Emerald's monthly statements reported only net revenues - General ledger pages, which indicated where fees and charges came from, were provided to the plaintiffs only after repeated requests - The plaintiffs sued Emerald regarding the fees and charges, alleging, inter alia, breach of fiduciary duty - Emerald asserted that it had authority to collect and retain the fees and charges and that it provided full disclosure - The Alberta Court of Queen's Bench held that Emerald was liable for the disputed fees and charges - The relationship between the plaintiffs and Emerald was an inherently fiduciary one - Nothing express or implied in their agreement authorized Emerald's actions - Emerald breached the duty it owed to the plaintiffs to make full disclosure, not to use the plaintiffs' properties to acquire an undisclosed benefit and to remit all interest earned on monies belonging to the plaintiffs - See paragraphs 156 to 181.

Agency - Topic 3260

Relations between principal and agent - Agent's remuneration - Bars - Breach of fiduciary duty - [See Agency - Topic 3084 ].

Agency - Topic 3434

Relations between principal and agent - Agent's duty to disclose - Breach - Effect of - [See Agency - Topic 3084 ].

Contracts - Topic 2059

Terms - Implied terms - Custom - [See Contracts - Topic 3523 ].

Contracts - Topic 2086

Terms - Implied terms - Trade custom - Circumstances when trade custom will not be implied - [See Contracts - Topic 3523 ].

Contracts - Topic 3523

Performance or breach - Breach - What constitutes a breach - Emerald managed rental properties owned by the plaintiffs - Section 8 of the management agreement provided for a management fee of 4% of all monies collected by Emerald in carrying out its duties - Section 9 specified that Emerald would be indemnified for certain third party costs - Emerald collected and retained fees charged to tenants for lease breaking, late and NSF cheques and charges levied against the plaintiffs for collecting laundry monies, negotiating and placing property insurance, collecting and remitting interest on security deposits, hosting an annual party for resident managers and charges related to telephone answering - The plaintiffs sued Emerald regarding the fees and charges, alleging, inter alia, breach of contract - Emerald asserted that the fees and charges, while not third party costs, were within s. 9 or that there was an oral agreement or implied term based on custom that the fees and charges would go to Emerald - The Alberta Court of Queen's Bench held that Emerald was liable for the disputed fees and charges - There was no oral agreement or implied term - The annual party was an Emerald business expense for which it was not entitled to compensation - The other fees and charges were in respect of duties for which Emerald was already compensated under s. 8 - See paragraphs 114 to 155.

Damages - Topic 1297

Exemplary or punitive damages - Conditions precedent (or when awarded) - Emerald managed the plaintiffs' rental properties for a management fee of 4% of all monies collected by Emerald - Emerald collected and retained certain fees charged to tenants and levied charges against the plaintiffs for certain administrative tasks - The plaintiffs sued Emerald regarding the fees and charges, alleging breaches of contract and fiduciary duty - Compensatory damages were agreed on but the plaintiffs also sought punitive damages - The Alberta Court of Queen's Bench held that Emerald was liable for the disputed fees and charges but declined to order punitive damages - While punitive damages were largely restricted to intentional torts and breaches of fiduciary duty and the court had found breaches of fiduciary duty here, they were to be awarded only in exceptional cases and with restraint - The substantial compensatory damages adequately achieved the objectives of retribution, deterrence and denunciation - Further, Emerald's conduct had been sufficiently denounced by the court's findings of breaches of contract and fiduciary duties - See paragraphs 234 to 243.

Damages - Topic 1305

Exemplary or punitive damages - Breach of contract - [See Damages - Topic 1297 ].

Damages - Topic 1309.1

Exemplary or punitive damages - Breach of confidence or fiduciary duty - [See Damages - Topic 1297 ].

Damages - Topic 1322.1

Exemplary or punitive damages - Bars - Award unnecessary - [See Damages - Topic 1297 ].

Equity - Topic 3643

Fiduciary or confidential relationships - Breach of fiduciary relationship - Elements of - [See Agency - Topic 3084 ].

Equity - Topic 3644

Fiduciary or confidential relationships - Breach of fiduciary relationship - Nondisclosure - Effect of - [See Agency - Topic 3084 ].

Equity - Topic 3651

Fiduciary or confidential relationships - Breach of fiduciary relationship - Effect of breach - [See Agency - Topic 3084 ].

Limitation of Actions - Topic 1905

Actions - General - Breach of fiduciary duty - Beginning in 1985, Emerald managed the plaintiffs' rental properties for a management fee - Emerald collected and retained certain fees charged to tenants and levied charges against the plaintiffs for certain administrative tasks - Emerald's monthly statements reported only net revenues - In March or April 2000, Emerald's accountant advised the plaintiffs to request general ledger pages, which indicated where fees and charges came from, for review - The pages were supplied in April 2001 after repeated requests - The plaintiffs challenged Emerald's retention of the fees and charges and, on March 15, 2002, sued Emerald, alleging breaches of contract and fiduciary duty - Emerald asserted that the action was statute-barred - The Alberta Court of Queen's Bench held that the action was not statute-barred in any respect - The plaintiffs first had knowledge that an injury had occurred that was attributable to Emerald's conduct as early as January 2000 (by reference in a variance report to charges for a banquet), but it was not until April 2001 that they knew, or ought to have known, that the injury warranted bringing a proceeding - Further, Emerald's failure to report certain of the fees and charges at all or with sufficient specificity to be meaningful and transparent constituted fraudulent concealment until January 2000 which overcame the ten year ultimate limitation period - See paragraphs 182 to 233.

Limitation of Actions - Topic 2023

Actions in contract - Actions for breach of contract - When time commences to run - [See Limitation of Actions - Topic 1905 ].

Limitation of Actions - Topic 2025

Actions in contract - Actions for breach of contract - Fraudulent concealment - Effect of - [See Limitation of Actions - Topic 1905 ].

Words and Phrases

Rent - The Alberta Court of Queen's Bench determined whether certain fees charged to tenants and charges levied against the property owners for certain administrative tasks by a rental property management company were included in "rent" as defined in the management agreement between the parties - See paragraphs 114 to 155.

Cases Noticed:

Faryna v. Chorny, [1952] 2 D.L.R. 354 (B.C.C.A.), refd to. [para. 92].

Gainers Inc. v. Pocklington Holdings Inc. (2000), 255 A.R. 373; 220 W.A.C. 373; 2000 ABCA 151, refd to. [para. 102].

Eli Lilly & Co. et al. v. Novopharm Ltd. et al., [1998] 2 S.C.R. 129; 227 N.R. 201, refd to. [para. 104].

Hawrish v. Bank of Montreal, [1969] S.C.R. 515, refd to. [para. 105].

Guaranty Properties Ltd. et al. v. Edmonton (City) (2000), 261 A.R. 376; 225 W.A.C. 376; 2000 ABCA 215, refd to. [para. 105].

M.J.B. Enterprises Ltd. v. Defence Construction (1951) Co. et al., [1999] 1 S.C.R. 619; 237 N.R. 334; 232 A.R. 360; 195 W.A.C. 360, refd to. [para. 106].

Northern Alberta Institute of Technology Academic Staff Association v. Northern Alberta Institute of Technology (2002), 328 A.R. 13; 2002 ABQB 750, varied on other grounds (2004), 346 A.R. 316; 2004 ABCA 42, refd to. [para. 156].

Brown v. Inland Revenue Commissioners, [1965] A.C. 244 (H.L.), refd to. [para. 156].

Gray v. New Augarita Porcupine Mines Ltd., [1952] 3 D.L.R. 1 (P.C.), refd to. [para. 156].

Terra Energy Ltd. v. Kilborn Engineering Alberta Ltd. et al. (1999), 232 A.R. 101; 195 W.A.C. 101; 170 D.L.R.(4th) 405; 1999 ABCA 72, leave to appeal refused [2000] 1 S.C.R. xxi; 253 N.R. 193; 255 A.R. 399; 220 W.A.C. 399, refd to. [para. 158].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161, refd to. [para. 159].

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, refd to. [para. 160].

Advanced Realty Funding Corp. v. Bannink (1979), 27 O.R.(2d) 193 (C.A.), refd to. [para. 164].

Baker (Charles) Ltd. v. Baker and Baker, [1954] O.R. 418 (C.A.), refd to. [para. 165].

Parker v. McKenna (1874), L.R. 10 Ch. 96 (C.A.), refd to. [para. 165].

Regal (Hastings) Ltd. v. Gulliver, [1942] 1 All E.R. 378 (H.L.), refd to. [para. 165].

De Shazo v. Nations Energy Co. et al. (2005), 367 A.R. 267; 346 W.A.C. 267; 256 D.L.R.(4th) 502; 2005 ABCA 241, refd to. [para. 182].

James H. Meek Trust et al. v. San Juan Resources Inc. et al. (2005), 376 A.R. 202; 360 W.A.C. 202; 2005 ABCA 448, refd to. [para. 182].

Seidel v. Kerr et al. (2003), 330 A.R. 284; 299 W.A.C. 284; 2003 ABCA 267, refd to. [para. 183].

K.M. v. H.M., [1992] 3 S.C.R. 6; 142 N.R. 321; 57 O.A.C. 321, refd to. [para. 184].

Evans v. Crooks et al. (1995), 173 A.R. 107 (Q.B.), refd to. [para. 184].

Photinopoulos v. Photinopoulos et al. (1988), 92 A.R. 122; 63 Alta. L.R.(2d) 193 (C.A.), refd to. [para. 187].

Hill v. Registrar of South Alberta Land Registration District (1993), 135 A.R. 266; 33 W.A.C. 266 (C.A.), leave to appeal refused [1994] 1 S.C.R. viii; 170 N.R. 79; 162 A.R. 159; 83 W.A.C. 159, refd to. [para. 187].

Peixeiro v. Haberman, [1997] 3 S.C.R. 549; 217 N.R. 371; 103 O.A.C. 161, refd to. [para. 187].

Ward v. Taubner (2004), 368 A.R. 95; 9 E.T.R.(3d) 275; 2004 ABQB 565, refd to. [para. 187].

Owners-Condominium Plan No. 9421549 v. Main Street Developments Ltd. et al. (2004), 365 A.R. 162; 2004 ABQB 962, refd to. [para. 187].

J.N. v. G.J.K. et al. (2004), 361 A.R. 177; 339 W.A.C. 177; 2004 ABCA 394, refd to. [para. 188].

Fenrich v. Wawanesa Mutual Insurance Co. (2005), 371 A.R. 53; 354 W.A.C. 53; 2005 ABCA 199, refd to. [para. 191].

Daniels v. Mitchell (2005), 371 A.R. 298; 354 W.A.C. 298; 2005 ABCA 271, refd to. [para. 191].

Novak et al. v. Bond, [1999] 1 S.C.R. 808; 239 N.R. 134; 122 B.C.A.C. 161; 200 W.A.C. 161; 172 D.L.R.(4th) 185, refd to. [para. 193].

Bowes v. Edmonton (City) et al. (2005), 386 A.R. 1; 49 Alta. L.R.(4th) 50; 2005 ABQB 502, refd to. [para. 196].

Kitchen v. Royal Airforces Association, [1958] 2 All E.R. 241 (C.A.), refd to. [para. 200].

V.A.H. v. Lynch et al. (2000), 255 A.R. 359; 220 W.A.C. 359; 2000 ABCA 97, refd to. [para. 202].

Wilson v. McDonnell Douglas Canada Ltd. (1985), 52 O.R.(2d) 74 (H.C.), affd. (1986), 55 O.R.(2d) 415 (C.A.), refd to. [para. 204].

King v. Victor Parsons & Co., [1973] 1 All E.R. 206 (C.A.), refd to. [para. 204].

Michaels et al. v. Red Deer College, [1976] 2 S.C.R. 324; 5 N.R. 99; [1975] 5 W.W.R. 575; 57 D.L.R.(3d) 386, refd to. [para. 237].

Noble v. Principal Consultants Ltd. (Bankrupt) (2000), 261 A.R. 82; 225 W.A.C. 82; 187 D.L.R.(4th) 80; 2000 ABCA 133, refd to. [para. 237].

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, refd to. [para. 238].

Whiten v. Pilot Insurance Co. et al., [2002] 1 S.C.R. 595; 283 N.R. 1; 156 O.A.C. 201; 2002 SCC 18, refd to. [para. 240].

Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. and O'Connor, [2002] 1 S.C.R. 678; 283 N.R. 233; 299 A.R. 201; 266 W.A.C. 201; 2002 SCC 19, refd to. [para. 241].

Authors and Works Noticed:

Alberta, Law Reform Institute, Limitations, Report No. 55 (1989), generally [para. 191]; pp. 33, 64 [para. 192]; 69, 70 [para. 198].

Bowstead and Reynolds on Agency (17th Ed. 2001), paras. 6-002 to 6-110 [para. 161]; 6-055 to 6-058, 6-063 [paras. 156, 162]; 6-065 [para. 156]; 6-074, 6-075, 6-100 [paras. 156, 162]; 6-107 [para. 156].

Chitty on Contracts (29th Ed. 2004), para. 28-035 [para. 199].

Fridman, Gerald Henry Louis, The Law of Agency (7th Ed. 1996), pp. 155 to 188, 174, 175 [para. 161].

Fridman, Gerald Henry Louis, The Law of Contract in Canada (4th Ed. 1999), pp. 477 to 479 [para. 104]; 480 to 491 [para. 105]; 491 to 498 [para. 104]; 500 to 516 [para. 106].

Counsel:

J.E. Sharpe, for the plaintiffs;

D.A. Downe, for the defendant.

This action was heard on September 26-28, 2005, with supplementary written submissions filed on February 3, 2006, by Phillips, J., of the Alberta Court of Queen's Bench, Judicial District of Calgary, who delivered the following reasons for judgment on April 7, 2006.