Owners-Condominium Plan No. 822 2630 v. Danray Alberta Ltd. et al., 2005 ABQB 455

• Judge: Sulyma, J.
• Court: Court of Queen's Bench of Alberta (Canada)
• Case Date: December 14, 2004
• Citations: 2005 ABQB 455;(2005), 388 A.R. 1 (QB)

Condo Plan 822 2630 v. Danray Alta. (2005), 388 A.R. 1 (QB)

MLB headnote and full text

Temp. Cite: [2005] A.R. TBEd. JN.127

The Owners Condominium Plan No. 822 2630 (plaintiff) v. Danray Alberta Ltd., Danny Taran, John Doe No. 1 and John Doe 2 (defendants) and 584090 Alberta Ltd., Re/Max Real Estate (Edmonton) Ltd., Sheldon Wolanski and Mark Kornel (third parties) and Linda Milton, Donna Daly, Ken Charters, Darcy Milnthorp, Jeanne Cummins, Al Milton, Jim Allan, Sylvia Hortie, Corinne Urch and Debbie Ellis (third parties) and Lisa Johnson and James Butler (third parties) and Michael Lee (third party)

(9703 06875; 2005 ABQB 455)

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

Alberta Court of Queen's Bench

Judicial District of Edmonton

Sulyma, J.

June 21, 2005.

Summary:

The units of a registered condominium project were initially rented. In 1988, Danray Alberta Ltd. purchased the land and residential structures and continued the rental operation. In 1994, 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. The purchasers of the condominium 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 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.

Real Property - Topic 8821

Condominiums - Developers - General - What constitutes - The units of a registered condominium project were initially rented - In 1988, Danray Alberta Ltd. purchased the project and continued the rental operation - 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 - The Alberta Court of Queen's Bench held that Danray and its principal could be considered developers under the Condominium Property Act, since they, in conjunction with the realtors, sold or offered for sale to the public residential units that had not previous been sold to the public - The sale to the realtors was directly tied to the sale of individual units - The entire arrangement was for the purpose of selling individual units and the Act's public protection intention should not be circumvented merely by inserting an intermediary in the process - If the individual units had not been sold, the entire sale would have failed - Further, the Act's public protection provisions were intended to protect a new condominium corporation and Board from a developer who took advantage of its position before the first Board was established - That protection was just as relevant to this situation, where although the units were not new, the Board was - See paragraph 134.

Real Property - Topic 9082

Condominiums - Officers and directors - Conflict of interest - Danray Alberta Ltd. owned a registered 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 - The transaction's structure resulted in Danray approving a management agreement; being the assignor on estoppel certificates respecting the purchasers' initial contribution toward a capital reserve replacement fund; and by way of conduit, approving the budget that was part of the eventual sales package provided to individual purchasers - 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 Queen's Bench allowed the action - A fiduciary obligation was clearly in place when Taran signed the management agreement and while he was director of the condominium corporation (July 15 to August 1994) - Since the 1994 sale agreement contemplated Danray being the de facto board until the closing date, its fiduciary obligation commenced in January 1994 - It was in the defendants' interest to have a low operating budget to avoid jeopardizing sales or Taran having to cover a deficit - The condominium corporation suffered damages when the defendants accepted an inadequate budget, knowing of pressing need for capital expenditures - See paragraphs 133 to 154.

Real Property - Topic 9087

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

Cases Noticed:

2475813 Nova Scotia Ltd. v. Rodgers et al. (2001), 189 N.S.R.(2d) 363; 590 A.P.R. 363; 2001 NSCA 12, refd to. [para. 108].

Owners - Condominium Plan No. 86-S-36901 v. Remai Construction (1981) Inc. et al., [1992] 1 W.W.R. 66; 93 Sask.R. 211; 4 W.A.C. 211; 84 D.L.R.(4th) 6 (C.A.), refd to. [para. 108].

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. 108].

Matthias v. Strata Plan VR 2135, Owners, [2000] B.C.T.C. 243; 2000 BCSC 519, refd to. [para. 108].

Hill v. Strata Plan NW 2477, Owners (1991), 2 B.C.A.C. 289; 5 W.A.C. 289; 57 B.C.L.R.(2d) 263; 81 D.L.R.(4th) 720 (C.A.), refd to. [para. 108].

Owners, Strata Plan 1229 v. Trivantor Investments International Ltd., [1995] B.C.T.C. Uned. 411; 4 B.C.L.R.(3d) 259; 1995 CarswellBC 188 (S.C.), refd to. [para. 108].

Strata Plan 1261, Owners v. 360204 B.C. Ltd. et al., [1995] B.C.T.C. Uned. H05 (S.C.), additional reasons [1996] B.C.T.C. Uned. 695 (S.C.), refd to. [para. 108].

Condominium Plan No. 752 1207 Owners et al. v. Terrace Corp. (Construction) Ltd. et al. (1983), 43 A.R. 386; 26 Alta. L.R.(2d) 147; 146 D.L.R.(3d) 324 (C.A.), refd to. [para. 109].

Water's Edge Village Estates (Phase II) Ltd. v. Minister of National Revenue (2002), 292 N.R. 98; 2002 D.T.C. 7174; 2002 FCA 291, leave to appeal dismissed (2003), 311 N.R. 198; 2003 CarswellNat 707 (S.C.C.), refd to. [para. 126].

Duncan v. R. - see Water's Edge Village Estates (Phase II) Ltd. v. Minister of National Revenue.

Miller v. Howard (1914), 30 W.L.R. 112; 1914 CarswellBC 143 (P.C.), refd to. [para. 128].

Canadian Northern Railway v. Peterson (1914), 29 W.L.R. 286 (Sask. S.C. en banc), refd to. [para. 128].

Neuzen v. Korn, [1995] 3 S.C.R. 674; 188 N.R. 161; 64 B.C.A.C. 241; 105 W.A.C. 241, refd to. [para. 131].

De Yong v. Weeks (1983), 43 A.R. 342; 25 Alta. L.R.(2d) 117; 1983 CarswellAlta 43 (Q.B.), revd. (1984), 55 A.R. 305 (C.A.), leave to appeal dismissed (1985), 56 N.R. 240; 58 A.R. 38 (S.C.C.), refd to. [para. 131].

Counsel:

G. James Thorlakson (Miller Thomson LLP), for the plaintiff;

Louis M.H. Belzil (Shores Belzil), for the defendants.

Sulyma, J., of the Alberta Court of Queen's Bench, Judicial District of Edmonton, heard this action on December 14, 2004, and delivered the following judgment on June 21, 2005.