Condominium Corp. No. 0321365 et al. v. 970365 Alberta Ltd. et al., (2012) 519 A.R. 322

• Judge: Fraser, C.J.A., Watson and McDonald, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: September 13, 2011
• Citations: (2012), 519 A.R. 322;2012 ABCA 26

Condo. Corp. No. 0321365 v. 970365 Alta. Ltd. (2012), 519 A.R. 322; 539 W.A.C. 322 (CA)

MLB headnote and full text

Temp. Cite: [2012] A.R. TBEd. JA.128

Condominium Corporation No. 0321365 and an Unspecified Unit Holder, as Representative Plaintiff (appellant/plaintiff) v. MCAP Financial Corporation (respondent/defendant) and 970365 Alberta Ltd., Dome Britannia Properties Inc., D. Marshall Project Management Ltd., Prairie Communities Corp., Joanne Wright, Michael Nowlan, Travis Henkel, Earth Tech Canada Inc., Hans Kneppers, John Cuthbert, Cuthbert Smith Consulting Inc., Residential Warranty Company of Canada Inc., Alberta Permit Pro Inc., Regional Municipality of Wood Buffalo, Gary Nissen, Archiasmo Architectural Works Limited, Macleod Dixon LLP, Burstall Winger LLP, David Marshall and Evan Welbourn (not parties to the appeal/defendants) and 970365 Alberta Ltd., Dome Britannia Properties Inc., Prairie Communities Corp., Joanne Wright, Michael Nowlan, Travis Henkel, Earth Tech Canada Inc., Hans Kneppers, Kneppers Consultants Inc., Alberta Permit Pro Inc., Gary Nissen, Archiasmo Architectural Works Limited, David Marshall, Evan Welbourn, Real Estate Strategies Group Inc., David Bamber and Allan Penner (not parties to the appeal/third parties)

(1001-0308-AC; 2012 ABCA 26)

Indexed As: Condominium Corp. No. 0321365 et al. v. 970365 Alberta Ltd. et al.

Alberta Court of Appeal

Fraser, C.J.A., Watson and McDonald, JJ.A.

January 27, 2012.

Summary:

The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property. The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project. MCAP applied for summary judgment dismissing the plaintiffs' claims against it.

The Alberta Court of Queen's Bench, in a decision reported at 501 A.R. 323, allowed the application. The plaintiffs appealed.

The Alberta Court of Appeal, McDonald, J.A., dissenting in part, allowed the appeal in part.

Equity - Topic 3652

Fiduciary or confidential relationships - Breach of fiduciary relationship - Liability of third parties or accessories (incl. doctrines of knowing receipt or assistance) - The Alberta Court of Appeal stated that "[u]nder the first category, knowing assistance, a finding of liability requires that the stranger to the trust have either actual knowledge of the trustee's fraudulent and dishonest design or be reckless or willfully blind to that intention. And where the trust is, as here, imposed by statute, the stranger will be deemed to have known of it: ... The dishonest and fraudulent intent of the trustee does not refer to fraud in the criminal sense; conduct that is morally reprehensible will do. Nor is it necessary that the stranger have acted in bad faith or dishonestly. The test is whether the stranger can be said to be 'taking a risk to the prejudice of another's rights, which risk is known to be one which there is no right to take ...'" - See paragraph 94.

Equity - Topic 3652

Fiduciary or confidential relationships - Breach of fiduciary relationship - Liability of third parties or accessories (incl. doctrines of knowing receipt or assistance) - The Alberta Court of Appeal stated that "[t]he second category, knowing receipt, occurs where a stranger receives trust property for its own use or benefit and with knowledge that the property was transferred to it in breach of trust. It is irrelevant whether the breach was fraudulent. For knowing receipt, the level of knowledge required is lower since the stranger is being enriched at the expense of the plaintiff. Thus, relief will be granted where a stranger, having received trust property for its own benefit and having knowledge of facts which would put a reasonable person on inquiry, fails to inquire as to the possible misapplication of trust property. Because the recipient is held to this higher standard, constructive knowledge, that is knowledge of facts sufficient to put a reasonable person on notice or inquiry, will be adequate as the basis for liability ..." - See paragraph 95.

Equity - Topic 3652

Fiduciary or confidential relationships - Breach of fiduciary relationship - Liability of third parties or accessories (incl. doctrines of knowing receipt or assistance) - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims of knowing assistance, knowing receipt and unjust enrichment against it - The plaintiffs submitted that MCAP participated in a breach of trust by knowingly assisting in a fraudulent and dishonest design on the part of a trustee or by receiving monies it knew were subject to trust conditions - The Alberta Court of Appeal declined to grant summary judgment - There were genuine issues for trial with respect to all three claims - See paragraphs 92 to 114.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP obtained summary judgment dismissing the plaintiffs' claim of negligent misrepresentation against it - On appeal, the Alberta Court of Appeal noted the required elements for a successful negligent misrepresentation claim: "[f]irst, there must be a duty of care based on a 'special relationship' between the representor and the representee. Second, the representation in question must be untrue, inaccurate or misleading. Third, the representor must have acted negligently in making the representation. Fourth, the representee must have relied, in a reasonable manner, on the negligent misrepresentation. And fifth, the reliance must have been detrimental to the representee in the sense that damages resulted." - See paragraph 65.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims against it - At issue was, inter alia, whether MCAP breached a duty of care to the plaintiffs by its alleged representation that the terms of the commitment letter would be strictly enforced - The chambers judge allowed the application - The plaintiffs appealed - The Alberta Court of Appeal allowed the appeal - The chambers judge erred in summarily dismissing the negligent misrepresentation claim - The chambers judge erred in purporting to try the case given the patent conflict in the evidence on the issue of the alleged representations - It was not for the chambers judge to determine that it would be "highly unlikely" that the plaintiffs' claim would succeed at trial - Whether MCAP made any implied representation and, if so, the content of any such representation, were both issues for a trial judge following a trial on the merits - Further, the chambers judge failed to recognize that there was a dispute on a material fact, namely whether MCAP made an implied representation - The chambers judge also failed to recognize that the scope of the alleged representations was broader that he assumed - Finally, it was not open to the chambers judge, on this record, to determine that it was not reasonably foreseeable by MCAP that any prospective purchasers could reasonably rely on the alleged representations - There was ample evidence demonstrating the existence of a material dispute on this point too - Again, all of this was for a trial judge with the benefit of a full hearing - The plaintiffs had shown that the claim for negligent misrepresentation was a genuine issue for trial - See paragraphs 66 to 90.

Practice - Topic 5703

Judgments and orders - Summary judgments - Conditions precedent - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP obtained summary judgment dismissing the plaintiffs' claims against it - On appeal, the Alberta Court of Appeal reviewed the test for summary judgment and affirmed that "a summary judgment application involves two steps. First, the moving party must adduce evidence to show there is no genuine issue for trial. This is a high threshold. If there is no genuine issue for trial, then there will be no merit to a claim. Accordingly, if the evidentiary record establishes either that there are missing links in the essential elements of a cause of action or that there is no cause of action in law, then there will be no genuine issue for trial. The fact there is no genuine issue for trial must be proven; relying on mere allegations or the pleadings will not suffice: ... Second, once the burden on the moving party has been met, the party resisting summary judgment may adduce evidence to persuade the court that a genuine issue remains to be tried: ... That effectively means showing that the claim has what is often referred to as 'a real chance of success'. This may be accomplished by establishing the existence of disputes on material questions of fact, including inferences to be drawn therefrom, or on points of law that cannot be readily resolved given the factual disputes." - See paragraphs 41 to 44.

Practice - Topic 5702

Judgments and orders - Summary judgments - Jurisdiction or when available or when appropriate - [See all Torts - Topic 77 ].

Practice - Topic 5708

Judgments and orders - Summary judgments - Bar to application - Existence of issue to be tried - [See third Equity - Topic 3652 , second Fraud and Misrepresentation - Topic 2508 and Real Property - Topic 8821 ].

Real Property - Topic 8806

Condominiums - General - Interpretation of statutes - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP obtained summary judgment dismissing the plaintiffs' claims against it - On appeal, the Alberta Court of Appeal discussed and summarized the trust and hold back provisions of s. 14 of the Condominium Property Act - See paragraphs 7 to 13.

Real Property - Topic 8821

Condominiums - Developers - General (incl. what constitutes) - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims against it - At issue was, inter alia, whether MCAP was a "developer" within the meaning of s. 14 of the Condominium Property Act - The chambers judge allowed the application - The plaintiffs appealed - The Alberta Court of Appeal allowed the appeal - There was a genuine issue for trial as to whether MCAP should, in the particular circumstances of this case, be properly characterized as a "developer" for purposes of s. 14 - The court accepted, without deciding, that ordinarily, while an interim financier would not be found to have received funds "on behalf of a developer" when it received proceeds of sale of condominium units in repayment of the debt a developer owed to it, it did not follow that this would invariably be the case - Depending on the facts, there might well be instances in which an interim financier was properly included within the definition of "developer" under s. 14 - A trial judge considering the issue would need to address and resolve a number of matters - See paragraphs 115 to 132.

Restitution - Topic 62

Unjust enrichment - General - What constitutes - [See third Equity - Topic 3652 ].

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims against it - At issue was, inter alia, whether MCAP owed a duty of care to the plaintiffs - The chambers judge allowed the application - The Alberta Court of Appeal affirmed the decision - The chambers judge was correct in determining that a construction lender did not owe a duty of care to the purchasers of units in a condominium project which it was financing or to the condominium corporation - Difficulties arose at both stages of the Anns analysis (Anns v. Merton London Borough Council (1978 A.C.)), making the recognition of a duty of care in these circumstances legally unmanageable and commercially unreasonable - See paragraphs 45 to 64.

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims against it - At issue was, inter alia, whether MCAP owed a duty of care to the plaintiffs - The chambers judge allowed the application - The Alberta Court of Appeal affirmed the decision - The first stage of the Anns test (Anns v. Merton London Borough Council (1978 A.C.)) focussed on the relationship between the plaintiff and defendant - It contained two requirements: "reasonable foreseeability of harm plus a close and direct relationship of proximity sufficient to justify the imposition of a prima facie duty of care" - In this case, in the context of the lender-purchaser relationship, problems arose in defining the composition of the class to whom a lender would owe a duty of care - With respect to the proximity requirement, what a court was looking for was whether the circumstances of the relationship between the parties were such "that the defendant may be said to be under an obligation to be mindful of the plaintiff's legitimate interests in conducting his or her affairs" - On the broad issue of fairness, an interim financier's legitimate business interests might well conflict with those of the purchasers and condominium corporation - Collectively, the concerns revealed the practical and policy difficulties inherent in finding the required foreseeability of harm and proximity between an interim financier, on the one hand, and purchasers and a condominium corporation, on the other, sufficient to ground a prima facie duty of care - Many of the features of the subject relationship would necessarily be undefined, not only in scope and time but also content - See paragraphs 49 to 57.

Torts - Topic 77

Negligence - Duty of care - Relationship required to raise duty of care - The plaintiffs sued a large number of defendants, seeking damages arising from the faulty construction of a condominium property - The defendants included MCAP Financial Corp., which provided interim mortgage financing to the developer of the project - MCAP applied for summary judgment dismissing the plaintiffs' claims against it - At issue was, inter alia, whether MCAP owed a duty of care to the plaintiffs - The chambers judge allowed the application - The Alberta Court of Appeal affirmed the decision - The second stage of the Anns test (Anns v. Merton London Borough Council (1978 A.C.)) focused on whether there were any policy considerations which ought to negative or limit the scope of the duty, the class of persons to whom it was owed, or the damages to which a breach might give rise - A consideration of the second stage of the Anns test also justified rejection of the plaintiffs' claimed duty of care - Policy considerations in commercial cases might more readily weigh in favour of limiting tort liability - Compelling policy reasons existed for not recognizing a duty of care by an interim lender to the purchasers of condominium units or the related condominium corporation to enforce the terms of a lending agreement - Further, "were this duty of care found to exist, this would fundamentally alter the economic and commercial realities of construction financing and significantly undermine the continued viability of the commercial lending industry" - The deleterious effects that recognizing this novel duty of care would have on commerce and the financial industry and in turn economic development were obvious, i.e., additional costs jeopardizing the availability of capital - See paragraphs 58 to 64.

Cases Noticed:

Elbow River Marketing Limited Partnership v. Canada Clean Fuels Inc. et al. (2011), 513 A.R. 315; 530 W.A.C. 315; 2011 ABCA 258, refd to. [para. 3].

Tottrup et al. v. Clearwater No. 99 (Municipal District) (2006), 401 A.R. 88; 391 W.A.C. 88; 2006 ABCA 380, refd to. [para. 5].

Owners-Bare Land Condominium Plan No. 8820814 v. Birchwood Village Greens Ltd. et al. (1998), 235 A.R. 217; 1998 ABQB 1023, refd to. [para. 9].

Murphy Oil Co. et al. v. Predator Corp. et al. (2006), 384 A.R. 251; 367 W.A.C. 251; 2006 ABCA 69, refd to. [para. 39].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 40].

Mitten v. College of Alberta Psychologists et al. (2010), 487 A.R. 198; 495 W.A.C. 198; 2010 ABCA 159, refd to. [para. 40].

Papaschase Indian Band No. 136 v. Canada (Attorney General) - see Lameman et al. v. Canada (Attorney General) et al.

Lameman et al. v. Canada (Attorney General) et al., [2008] 1 S.C.R. 372; 372 N.R. 239; 429 A.R. 26; 421 W.A.C. 26; 2008 SCC 14, refd to. [para. 43].

Anns v. Merton London Borough Council, [1978] A.C. 728 (H.L.), refd to. [para. 48].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1, refd to. [para. 48].

Cooper v. Registrar of Mortgage Brokers (B.C.) et al., [2001] 3 S.C.R. 537; 277 N.R. 113; 160 B.C.A.C. 268; 261 W.A.C. 268; 2001 SCC 79, refd to. [para. 48].

Cooper v. Hobart - see Cooper v. Registrar of Mortgage Brokers (B.C.) et al.

Hill et al. v. Hamilton-Wentworth Regional Police Services Board et al., [2007] 3 S.C.R. 129; 368 N.R. 1; 230 O.A.C. 260; 2007 SCC 41, refd to. [para. 48].

Broome et al. v. Prince Edward Island, [2010] 1 S.C.R. 360; 400 N.R. 148; 297 Nfld. & P.E.I.R. 24; 918 A.P.R. 24; 2010 SCC 11, refd to. [para. 48].

Stewart v. Pettie et al., [1995] 1 S.C.R. 131; 177 N.R. 297; 162 A.R. 241; 83 W.A.C. 241, refd to. [para. 51].

Hercules Management Ltd. et al. v. Ernst & Young et al., [1997] 2 S.C.R. 165; 211 N.R. 352; 115 Man.R.(2d) 241; 139 W.A.C. 241, refd to. [paras. 54, 151].

Fullowka et al. v. Pinkerton's of Canada et al., [2010] 1 S.C.R. 132; 398 N.R. 20; 474 A.R. 1; 479 W.A.C. 1; 2010 SCC 5, refd to. [para. 60].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 65].

Ault et al. v. Canada (Attorney General) et al. (2011), 274 O.A.C. 200; 2011 ONCA 147, leave to appeal dismissed (2011), 428 N.R. 397, refd to. [para. 73].

Keith Plumbing & Heating Co. et al. v. Newport City Club Ltd. (2000), 135 B.C.A.C. 59; 221 W.A.C. 59; 2000 BCCA 141, refd to. [para. 87].

Motkoski Holdings Ltd. v. Yellowhead (County) (2010), 474 A.R. 367; 479 W.A.C. 367; 2010 ABCA 72, refd to. [para. 90].

Citadel General Life Assurance Co. et al. v. Lloyd's Bank of Canada et al., [1997] 3 S.C.R. 805; 219 N.R. 323; 206 A.R. 321; 156 W.A.C. 321, refd to. [para. 93].

Air Canada v. M & L Travel Ltd., Martin and Vaillant, [1993] 3 S.C.R. 787; 159 N.R. 1; 67 O.A.C. 1, refd to. [para. 94].

Elder Advocates of Alberta Society et al. v. Alberta et al., [2011] 2 S.C.R. 261; 416 N.R. 198; 499 A.R. 345; 514 W.A.C. 345; 331 D.L.R.(4th) 257; 2011 SCC 24, refd to. [para. 96].

Garland v. Consumers' Gas Co., [2004] 1 S.C.R. 629; 319 N.R. 38; 186 O.A.C. 128; 2004 SCC 25, refd to. [para. 96].

Tanouye v. KJM Developments Ltd. (1980), 25 A.R. 200 (T.D.), refd to. [para. 148].

Canadawide Investments Ltd. v. Muirhead (1958), 15 D.L.R.(2d) 526; 26 W.W.R. 460 (Alta. C.A.), refd to. [para. 148].

Merchants Bank of Canada v. Stevens (1919), 30 Man.R. 46; 49 D.L.R. 528 (C.A.), refd to. [para. 148].

Royal Securities Corp. v. Montreal Trust Co., [1967] 1 O.R. 137; 59 D.L.R.(2d) 666 (H.C.J.), refd to. [para. 149].

Johnson v. Forbes, [1932] 1 D.L.R. 219; 26 Alta. L.R. 268 (C.A.), refd to. [para. 149].

Statutes Noticed:

Condominium Property Act, R.S.A. 2000, c. C-22, sect. 14 [para. 7].

Authors and Works Noticed:

Alberta, Hansard, Legislative Assembly Debates (April 3, 2000), p. 662 [para. 172].

Feldthusen, Bruce, Economic Negligence (3rd Ed. 1994), pp. 62, 63 [para. 88].

Fleming, John G., The Law of Torts (10th Ed. 2011), pp. 202, 203 [para. 59].

Hansard (Alta.) - see Alberta, Hansard, Legislative Assembly Debates.

Counsel:

G. Vogeli and T. McDonald, for the appellant;

R.H. Haggett, for the respondent.

This appeal was heard was heard on September 13, 2011, by Fraser, C.J.A., Watson and McDonald, JJ.A., of the Alberta Court of Appeal. The judgment of the Court of Appeal was delivered at Calgary, Alberta, on January 27, 2012, and included the following opinions:

Fraser, C.J.A. (Watson, J.A., concurring) - see paragraphs 1 to 133;

McDonald, J.A., dissenting in part - see paragraphs 134 to 176.