Owners-Condominium Plan No. 822 2630 v. Danray Alberta Ltd. et al., (2007) 401 A.R. 202 (CA)

• Judge: Côté, Conrad and Paperny, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: October 03, 2006
• Citations: (2007), 401 A.R. 202 (CA);2007 ABCA 11

Condo Plan 822 2630 v. Danray Alta. (2007), 401 A.R. 202 (CA);

      391 W.A.C. 202

MLB headnote and full text

Temp. Cite: [2007] A.R. TBEd. FE.002

The Owners: Condominium Plan No. 822 2630 (respondent/plaintiff) v. Danray Alberta Ltd., Danny Taran (appellants/defendants) and Linda Milton, Donna Daly, Ken Charters, Darcy Milnthorp, Jeanne Cummins, Al Milton, Jim Allan, Sylvia Hortie, Corrine Urch and Debbie Ellis (respondents/third parties) and Lisa Johnson and James Butler (respondents/third parties) and Michael Lee (respondent/third party) and John Doe No. 1 and John Doe No. 2 (defendants/not parties to the appeal) and 584090 Alberta Ltd., Re/Max Real Estate (Edmonton) Ltd., Sheldon Wolanski and Mark Kornell (third parties/not parties to the appeal)

(0503-0341-AC; 2007 ABCA 11)

Indexed As: Owners-Condominium Plan No. 822 2630 v. Danray Alberta Ltd. et al.

Alberta Court of Appeal

Côté, Conrad and Paperny, JJ.A.

January 22, 2007.

Summary:

Danray Alberta Ltd. owned a condominium project. Two realtors proposed that Danray sell the land to a numbered company and, in turn, they would commence marketing the condominium units to individual purchasers. In January 1994, the proposal was accepted and a sale agreement was entered into. The sale to the realtors closed on August 1, 1998. Pursuant to the agreement, Danray executed the transfers directly to the purchasers of the condominium units. The purchasers of the units (the owners) sued Danray and its principal (Taran) on the basis that they did not properly maintain the project and failed to establish an adequate contingency reserve fund.

The Alberta Court of Queen's Bench, in a decision reported at 388 A.R. 1, held that Danray and Taran owed the owners a fiduciary duty and the owners suffered damages as a result of a conflict of interest occasioned wherein Taran and Danray accepted an inadequate budget, knowing of pressing needs for capital expenditures. The court assessed damages. Danray and Taran appealed.

The Alberta Court of Appeal allowed the appeal and set aside the judgment.

Real Property - Topic 8821

Condominiums - Developers - General - What constitutes - Danray Alberta Ltd. owned a condominium project - Two realtors proposed that Danray sell the land to a numbered company and, in turn, they would commence marketing the condominium units to individual purchasers - The proposal was accepted and the sale closed - The individual purchasers (the owners) sued Danray and its principal (Taran), asserting that they breached their fiduciary duties by failing to properly maintain the project and establish an adequate contingency reserve fund - The Alberta Court of Appeal held that once Danray signed the sale agreement with the numbered company it was no longer the beneficial owner of the property - Danray was simply an unpaid vendor under an agreement for sale with no greater rights unless the sale failed - Additionally, because it was not involved in selling units to the public, it was not a developer with respect to the owners - Accordingly, it did not owe a fiduciary obligation to the owners on the basis of it being an owner-developer - Further, fiduciary obligations did not arise out of the parties' reasonable expectations - There was nothing to support a finding of a mutual understanding that either Danray or Taran would abandon self-interest to act on the owners' behalf - The owners purchased from the numbered company on an "as it stands" basis - They were advised of the correct amount in the reserve fund and had no basis to assume that Danray and Taran would be acting on their behalf - See paragraphs 33 to 44.

Real Property - Topic 9082

Condominiums - Officers and directors - Conflict of interest - Danray Alberta Ltd. owned a condominium project - Two realtors proposed that Danray sell the land to a numbered company and, in turn, they would commence marketing the units to individual purchasers - In January 1994, the proposal was accepted - The sale to the realtors closed in August 1998 - In furtherance of its commitment to the numbered company to perform all tasks necessary to facilitate the sale of the individual units, Danray passed a special resolution replacing the statutory bylaws with new ones - Danray also appointed Taran to the board of directors - Taran's only acts as a director were to sign the new management agreement with the numbered company's management company and to authorize the signing of the estoppel certificates as required by the sales agreement - The individual purchasers sued Danray and its principal (Taran), asserting that they breached their fiduciary duties by failing to properly maintain the project and establish an adequate contingency reserve fund - The Alberta Court of Appeal held that Taran did not owe a personal fiduciary obligation to the condominium to establish a reserve fund arising from his 26 day tenure as a director - Directors of condominium corporations might owe fiduciary duties to the corporation to act honestly and in good faith, and not to put their interests in conflict with those of the corporation - Even if such was the case, Taran was not required by the then statute or bylaw to establish and maintain an adequate reserve fund - Additionally, if any obligation existed prior to Taran's appointment as a director, it was assumed by the numbered company under the sale agreement - In any event, there was no evidence to indicate that Taran misled anyone about the state of the reserve fund - See paragraphs 45 to 51.

Real Property - Topic 9087

Condominiums - Officers and directors - Obligations and duties - Fiduciary duties - [See Real Property - Topic 9082 ].

Cases Noticed:

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. 14].

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. 30].

York Condominium Corp. No. 167 et al. v. Newrey Holdings Ltd. et al. (1981), 32 O.R.(2d) 458, dist. [para. 34].

Condominium Plan No. 752 1207 Owners et al. v. Terrace Corp. (Construction) Ltd. et al. (1983), 43 A.R. 386, dist. [para. 34].

Authors and Works Noticed:

Rotman, Leonard Ian, Fiduciary Law (2005), pp. 100, 101 [para. 33, footnote 3].

Counsel:

L.M.H. Belzil and F.N. Moore, for the appellants;

G.J. Thorlakson, for the respondents.

This appeal was heard on October 3, 2006, by Côté, Conrad and Paperny, JJ.A., of the Alberta Court of Appeal. The following memorandum of the judgment of the court was delivered on January 22, 2007.