The Owners, Strata Plan VIS 3815 v. Polo Pacific et al

2003BCSC1811

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: The Owners, Strata Plan VIS 3815 v. Polo Pacific et al, 2003 BCSC 1811 Date: 20031203 Docket: 98/2867 Registry: Victoria Between: The Owners, Strata Plan VIS 3815 Plaintiff And: Polo Pacific Development Ltd., The Campbell Moore Group Architects Limited, Ron Leier Construction Ltd., McLay‑Vidalin Development Corp., Meadowlark Developments Ltd., Swiftsure Developments Ltd., Dominion Stucco 1988 Ltd. and The City of Victoria Defendants And: The Attorney General of Canada and Her Majesty the Queen in Right of the Province of British Columbia Third Parties Before: The Honourable Mr. Justice Macaulay Reasons for Judgment (In Chambers) Counsel for the Plaintiff: A.R. Tryon Counsel for the Defendant: Swiftsure Developments Ltd. G. Harney and M. Frey Counsel for the Defendant: The Campbell Moore Group Architects Limited F.L. Mandarino Date and Place of Hearing: 20030902 - 20030904 Victoria, B.C. [1] Swiftsure Developments Ltd. ("Swiftsure") is one of several defendants in what is colloquially referred to as "leaky condo" litigation. Most of the claims are framed in either negligence or misrepresentation. Pursuant to Rule 18A governing summary trials, Swiftsure seeks an order dismissing all claims against it. The plaintiff, The Owners, Strata Plan VIS 3815 ("Owners"), and one co-defendant, The Campbell Moore Group Architects Limited

("Architects"), oppose the application principally on the basis that the issues are not suitable for disposition under the summary trial rule. [2] The remaining defendants and third parties did not join in, or take any position, on the application. In spite of that, I find it necessary to consider the effect on their position at trial if I were to finally decide the issues raised by Swiftsure. [3] I have concluded that Swiftsure's application must be dismissed, pursuant to either Rule 18A(8)(a) or (b), because, having regard to Rule 18A(11)(a)(ii), it would be unjust for me to decide whether Swiftsure is entitled to judgment dismissing the claims against it without the benefit of a full trial. Accordingly, I will endeavour to avoid references to the extensive evidence filed on behalf of Swiftsure other than to say that, if it were not for my concerns under sub-rule (11)(a)(ii), there was un-contradicted evidence capable of supporting the findings of fact sought by Swiftsure. Notwithstanding the lack of contradictory evidence, I am not persuaded that the Swiftsure affidavit evidence provides a sufficiently complete evidentiary picture. [4] I will later address my skepticism about whether I should make the findings of fact necessary for Swiftsure to succeed on the summary trial application without having the context that can only be provided by the whole of the evidence at a

conventional trial. To that extent, sub-rule (11)(a)(i), which precludes granting summary judgment where the court is unable, on the whole of the evidence, to find the facts necessary to decide the issues, is also a factor in my decision. [5] The facts alleged on behalf of Owners as well as the various causes of action arising are intertwined and complex so I will commence with an overview taken from the pleadings. The strata complex and associated building was built in about 1995 through 1996 and is known as Polo Pacific. Owners is a strata corporation and is now responsible for Polo Pacific. Owners commenced the action in August 1998. [6] Several of the defendants are of classes against whom the claims are typical of those found in "leaky condo" litigation. The defendant Polo Pacific Development Ltd. ("Polo Pacific Development") was the alleged owner and developer. Architects performed architectural, design and consulting services in connection with the project. Another defendant Meadowlark Developments Ltd. ("Meadowlark Developments"), was the general contractor or construction manager. The defendants Ron Leier Construction Ltd. and Dominion Stucco 1988 Ltd. were sub-trades on the project. [7] In addition, the defendant, the City of Victoria ("the City"), performed inspections and issued permits. Third party proceedings have been issued against the Attorney General of Canada

and Her Majesty the Queen in Right of the Province of British Columbia respecting the alleged unsuitability of the applicable building code requirements. [8] Owners alleged various design and construction deficits resulting from the negligence of the defendants. More significantly for present purposes, Owners also alleged that Polo Pacific Development made: (a) representations that the condominium would be of good quality; (b) implied representations that the Polo Pacific would be free of construction or design defects; and, (c) guarantees and assurances that remedial action would be carried out by Polo Pacific Development to repair any defects which did arise. [9] Owners further alleged that Polo Pacific Development represented to it and the individual owners that the project would be "constructed by or under the direction and control of Polo Pacific Developments and that the construction would be of good quality as a result". Finally, Owners alleged that Polo Pacific Development breached fiduciary duties owed to Owners and the individual strata lot owners relating to the development and construction of the project. [10] The claims against the two remaining defendants, Swiftsure and McLay-Vidalin Development Corp. ("McLay-Vidalin"), are somewhat unusual. Notwithstanding the description of Swiftsure and McLay-Vidalin as promoters, Owners advances claims against them in negligence relating to the development and construction of the project and for negligent misrepresentation relating to the marketing phase that are very similar to the claims against the developer. The claims are set out in the amended statement of claim as follows:

THE PROMOTERS 29. At all times material to this action and at all times during the development of Polo Pacific and construction of the Condominium, McLay-Vidalin and Swiftsure were the promoters and the supervising participants for the construction of the Condominium.

30. At all times material to this action and at all times during the development of Polo Pacific and construction of the Condominium, Swiftsure and McLay-Vidalin were the persons having control over the construction and quality of Polo Pacific or permitted themselves to be presented to the public as having such control.

31. As the promoters and supervising participants for the construction of the Condominium, Swiftsure and McLay-Vidalin exercised control over the following: a) the suitability of the design; b) the type and quality of the materials selected for the construction of the Condominium; c) the contractor, subcontractors and material men chosen to provide labour, materials or professional services for the design or construction of the Condominium; d) the manner in which the strata lots comprising Polo Pacific were offered for sale to the public, including representations about the quality of Polo Pacific and the extent to which the public could rely on the involvement of McLay-Vidalin & Swiftsure as demonstrating the Condominium was properly designed and constructed.

32. McLay-Vidalin and Swiftsure permitted Polo Pacific to be presented to potential buyers, some of which included the present strata lot owners, as being a quality or properly completed condominium by virtue of the role which McLay-Vidalin or Swiftsure had in the design, construction or completion of Polo Pacific.

33. By virtue of the control which McLay-Vidalin and Swiftsure had over the construction of Polo Pacific, McLay-Vidalin and Swiftsure owed a duty of care to the Plaintiff and to the Owners to ensure Polo Pacific was completed in a good and workmanlike manner, free of significant construction deficiencies and the Defects and in a way which would not pose a significant risk or danger to the Owners, other persons or their property.

34. Alternatively, Swiftsure is liable to the plaintiff and the Owners for representing or permitting or failing to take steps to stop the continued publication of the following express or implied representations: (a) Polo Pacific was built with quality design and construction, (b) The quality of the design and the construction was assured by Swiftsure and McLay-Vidalin, (c) Swiftsure and McLay-Vidalin were the developers of Polo Pacific; (d) Swiftsure and McLay-Vidalin were the builders of Polo Pacific; (e) The quality of the design and the construction was under the control of Swiftsure and McLay-Vidalin; (f) By implication, Polo Pacific was constructed in a way which would not impose a significant risk or danger to the Owners, other persons or their property; (g) The express or implied representation that the established status of Swiftsure and McLay-Vidalin could be relied on as assuring that responsible persons would be answerable for any design or construction defects; and, (h) The express or implied representation that design and construction defects which might occur at Polo Pacific would be repaired by Swiftsure and McLay-Vidalin. Whereas because of the manner of the design and construction, Polo Pacific is affected by the Defects and because the actual owner/developer of Polo Pacific was Polo Pacific Developments Ltd., Swiftsure and McLay-Vidalin have refused to

accept responsibility for the design or construction of Polo Pacific and the Defects. 34A. If Swiftsure and McLay-Vidalin were the developers or builders of Polo Pacific, as Swiftsure represented, then Swiftsure and McLay-Vidalin, by virtue of their control over the construction of Polo Pacific, owed to the Owners and, derivatively, to the plaintiff, the duty of care described in paragraph 33. 34B. Alternatively, if the representations about Swiftsure and McLay-Vidalin being the developers and builders of Polo Pacific were false, then the representations were made negligently or without regard to whether the representations were true. 34C. Swiftsure knew and intended that potential buyers, including the Owners, would believe that the developers and builders of Polo Pacific were companies with established histories and reputations in the southern Vancouver Island community. The plaintiff says Swiftsure intended to refute or dispel the impression or belief Polo Pacific was developed and built by a company with no history and formed for the limited purpose of developing Polo Pacific and insulating the persons who would profit from the development of Polo Pacific from any liability or responsibility for the design or construction of Polo Pacific. 34D. When the Representations were made, the Owners and the plaintiff stood in a special relationship to Swiftsure constituted by: (a)

The reasonable expectation or likelihood that the Owners would rely on or be persuaded by the Representations when deciding whether to buy a strata lot in Polo Pacific; (b) The position of Swiftsure as an established builder and developer, relying on that reputation to promote the marketing of strata lots in Polo Pacific; or, (c) The position of Swiftsure as associated with or sharing common directors with Polo Pacific Developments and, therefore, having the means to control or influence the design, construction and marketing of Polo Pacific. 34E. By making any or all of the Representations, Swiftsure acted negligently. The making of the Representations was negligent because: (a) Swiftsure did not investigate or adequately investigate and confirm the truth of the representations about the quality of Polo Pacific, before those representations were made; (b) By making the Representations without adequate investigation, Swiftsure did not act reasonably and failed to conduct itself in conformity with the standard of care of the ordinary and reasonable developer or builder in the circumstances; (c) Swiftsure knew the representations about Swiftsure and McLay-Vidalin being developers and builders of Polo Pacific were untrue and intended those representations to be communicated to the Owners, with the intention the Owners would rely on those representations. The plaintiff says this

course of conduct was contrary to the standard of care of the ordinary reasonable developer and builder in the circumstances. 34F. The Owners relied on the Representations. In particular, the Representations persuaded, induced or contributed to the decision of the Owners to enter into contracts for the purchase of strata lots in Polo Pacific. In the circumstances, the reliance by the Owners on the Representations was reasonable.

35. The Owners and their predecessors in title relied on the said representations and have thereby suffered damages as hereinafter described. ... FAILURE TO WARN BY POLO PACIFIC DEVELOPMENTS, MEADOWLARK, SWIFTSURE AND MCLAY-VIDALIN 40. Polo Pacific Developments, Meadowlark, Swiftsure and McLay-Vidalin each owed a duty of care to the Plaintiff or the Owners to: a) warn the Plaintiff or the Owners of any potential or actual defects in the Construction; b) warn or inform the Plaintiff or the Owners of the design or construction deficiencies, as discovered, or when Polo Pacific Developments, Meadowlark, Swiftsure or McLay-Vidalin should have reasonably concluded the Condominium might be subject to water ingress or premature failure, so that continuing deterioration could be prevented or arrested.

41. Polo Pacific Developments, Meadowlark, Swiftsure and McLay-Vidalin each breached this duty, in that Polo Pacific Developments, Meadowlark, Swiftsure and McLay-Vidalin: a) knew or ought to have known of potential or actual defects in the construction and failed to warn or inform the Plaintiff or the Owners; and b) became aware of circumstances which reasonably should have caused Polo Pacific Developments, Meadowlark, Swiftsure and McLay-Vidalin to realize that the Condominium could be subject to water ingress or premature failure and Polo Pacific Developments, Meadowlark, Swiftsure and McLay-Vidalin failed to warn or inform the Plaintiff and the Owners of such circumstances. [11] Polo Pacific Development did not defend the action against it. The remaining defendants raised similar, and in some cases, identical defences. [12] Architects denied the allegations of negligence against them, pleaded that the plaintiff failed to mitigate and also raised a limitation defence. McLay-Vidalin denied liability and expressly denied that it was ever the developer or a party to any representations made. It further pleaded that any representations made were done so without its authority. Meadowlark Developments pleaded in almost identical terms to McLay-Vidalin and, additionally, that it constructed the building to the standard of care required. [13] The City pleaded that if Owners suffered

any loss or damage, such loss or damage was caused or contributed to by the acts or omissions of Owners and other named defendants. The City expressly pleaded and relied upon the provisions of the Negligence Act, R.S.B.C. 1996, c. 333, and amendments thereto, and the Local Government Act, R.S.B.C. 1996, c. 323, as amended. [14] Dominion Stucco 1988 Ltd. denied that it owed a duty of care to Owners, or that it had been negligent. It pleaded similarly that if Owners had suffered loss or damage, such loss or damage was caused or contributed by the acts or omissions of the Owners or others. It too expressly pleaded and relied on the Negligence Act. [15] Ron Leier Construction Ltd. denied both duty of care and negligence. It pleaded that the duty owed by Ron Leier Construction Ltd. was to Meadowlark Developments and, further, that such duty was a duty to build in accordance with the design provided and that it did so. [16] In its statement of defence, Swiftsure also generally denied the allegations against it. In specific answer to paragraphs 29 to 31 of the statement of claim, set out earlier in my reasons, Swiftsure, in paragraph 4, denied: ... that it was a "promoter" of Polo Pacific or that it had control over the construction and quality of the Polo Pacific, the suitability of the design of the Polo Pacific, the type and quality of the material selected for the construction of

the Polo Pacific and the manner in which the strata lots comprising the Polo Pacific were offered for sale as alleged or at all, or that it permitted itself to be presented to the public as having such control. Swiftsure also pleaded, in paragraph 5: In answer to paragraph 32 of the Statement of Claim, Swiftsure denies that it permitted the Polo Pacific to be presented to potential buyers as being a quality or properly completed condominium by virtue of the role, if any, Swiftsure had in the design, construction or completion of the Polo Pacific, as alleged or at all. Finally, Swiftsure pleaded, in the alternative, reliance upon the provisions of the Negligence Act in similar fashion to the other defendants described above. [17] It is apparent that Owners advances some of the claims in a representative capacity on behalf of individual strata lot owners. Paragraph 67 of the amended statement of claim alleged as follows: 67. By special resolution passed July 15, 1998 the Owners [individual strata lot owners] authorized the plaintiff to sue as representative of all Owners about any matters affecting the strata corporation, including the common property of the strata corporation. The statement of claim was not amended until the commencement of the Rule 18A hearing. Perhaps because the amendment flagged the issue, to this point, only Swiftsure has raised difficult and important

questions relating to whether Owners is entitled to bring the representative actions pleaded. [18] The legal issues raised by Swiftsure respecting the entitlement of Owners to sue in a representative capacity are significant. The outcome affects other parties who did not participate in the Rule 18A hearing. While it might fairly be assumed that those parties did not attend and participate in the hearing because they did not object to Swiftsure succeeding on arguments that may equally benefit them, the more important question is whether they would object to Swiftsure failing if it would effectively deprive them of the opportunity to raise the same issues at trial. On the other hand, assuming that it would be open to the parties to revisit the same arguments at the eventual trial, there is a risk of an inconsistent judicial conclusion having had the benefit of further argument. These concerns go to the question of whether it would be unjust to decide such issues on a piecemeal basis. [19] In any event, I am not persuaded that the other parties had any reason to expect that such important legal issues would be argued at the Rule 18A hearing as it was not necessary for the applicant to provide notice of the anticipated legal arguments. The legal issues identified before me that give rise to these concerns are as follows: (1) Whether s. 15 of the Condominium Act, R.S.B.C. 1996, c.

64 (repealed effective July 1, 2000) entitled Owners, as the strata corporation, to sue only for damages "caused by any person"; (2) Whether the section extends to claims for pure economic loss flowing from physical damage; (3) Whether the section precluded any suit by Owners for negligent misrepresentation; (4) Whether Owners was lawfully authorized pursuant to s. 15(7) to sue on behalf of any individual strata lot owners; and, (5) Whether the consents obtained by Owners from individual strata lot owners in August 2003 were valid having regard to the provisions of the Strata Property Act, S.B.C. 1998, c. 43 (proclaimed effective July 1, 2000) or otherwise. It would be wrong to decide any of these issues without hearing from all parties. [20] Counsel did not raise this question during the hearing before me. In retrospect, I regret that I did not come to this conclusion immediately when the arguments were advanced. Much time might have been saved. [21] The issues canvassed on the Rule 18A hearing were not limited to the foregoing. The hearing extended over three days. Swiftsure relied on evidence intended to demonstrate that it was not involved in the design or construction of the project or the marketing. According to counsel for Swiftsure, that evidence was unchallenged. [22] There was a beguiling simplicity to the defendants' position but, in my view, it would be dangerous,

and accordingly unjust, to draw final conclusions from the affidavit evidence alone. [23] I will not review the evidence in detail in light of my conclusion, nor should my description be interpreted as indicating any final view. I refer to the evidence solely to illustrate why I have reached the conclusion that it would be unjust to determine the facts without the complete factual matrix that only a full trial, at which all parties participate, can provide. [24] The affidavit evidence disclosed that a number of individuals and companies had relationships and some form of involvement in the Polo Pacific project. One of those individuals was Anthony Young. [25] Anthony Young was the sole shareholder in Sandspit Holdings Ltd. which, in turn, owned 50 percent of the issued share capital of Swiftsure. J. Duncan Holdings (1993) Ltd. owned the remainder of the issued share capital of Swiftsure. Anthony Young and James Duncan were directors and officers of Swiftsure. [26] During the construction and marketing of Polo Pacific, Polo Pacific Development was owned by McLay-Vidalin as to 50 percent of the issued share capital; J. Duncan Holdings (1993) Ltd. as to 25 percent; and, 474188 B.C. Ltd. as to the remaining 25 percent. The principals of McLay-Vidalin were Bruce McLay and Dave Vidalin. Bruce McLay and Dave Vidalin have since resigned as officers and directors of Polo Pacific. James

Duncan and Anthony Young have taken over as directors and officers. [27] Dave Vidalin is also the principal of Meadowlark. James Duncan is also a director and officer of J. Duncan Holdings (1993) Ltd. [28] 474188 B.C. Ltd. is owned by Anthony Young and Mark Langdon, as joint tenants and trustees for the Young Family Trust. Anthony Young is also a director and officer of 474188 B.C. Ltd. [29] The evidence also disclosed that Anthony Young was personally involved in the design, construction and marketing phase of the project. He worked out of the offices of Swiftsure. Swiftsure had been involved as a builder or developer of earlier projects similar to Polo Pacific in the Greater Victoria area and enjoyed a good reputation. [30] Mr. Young specifically deposed that Swiftsure was not involved in any aspect of the design or construction of the Polo Pacific, or in the marketing of the project. According to Mr. Young, his own involvement in the project was solely in his capacity as a director or officer of 474188 B.C. Ltd. and related primarily to the marketing and sales phase of the project. [31] In spite of that, it is clear that references to the names "Swiftsure" or "Swiftsure Developments", as a co-developer or builder of the Polo Pacific project, figured prominently in the advertising, including on a site sign. Swiftsure's touted role in the project may well have been significant

to potential purchasers because of its local reputation as an established builder. These references remain unexplained on the evidence. [32] There is also evidence that Mr. Young frequently attended at the construction site and was personally involved in some aspects of the decision making. It would not be a stretch to conclude that he must have known, and even authorized, that the Swiftsure name be used for marketing purposes. [33] It would be dangerous, in my opinion, to form final conclusions about the specific nature of the alleged involvement of Swiftsure in the project without hearing viva voce evidence from as many of the significant players as possible. To this point, there is no evidence from James Duncan, Dave Vidalin or Bruce McLay. [34] The full factual matrix will assist in determining what role, if any, each defendant played in relation to the design, construction and marketing of the project. To decide the role of one defendant relative to the others as a slice of the litigation would be to walk uncharted territory without a map. The danger is heightened in the present case because Mr. Young would probably be required to testify at the trial involving the remaining defendants even if he succeeded on the Rule 18A application. [35] Ultimately, it is a matter of judicial discretion whether a just result can be achieved under Rule 18A. The cases are replete with

warnings about the dangers associated with litigating questions of fact or law in slices or releasing one defendant from an action only to later discover that others seek to place blame on the same defendant at trial. I have considered the law on these issues as set out in the following cases. [36] The Court of Appeal has repeatedly criticized the use of Rule 18A to litigate cases involving an extensive overlapping of issues where to do so will raise the possibility of inconsistent findings of fact or law. For example, where causation was a live issue in a social-host liability case, a summary trial judge should not have determined the questions of whether the host owed the plaintiff a duty of care and breached that duty because that could not be done without also determining the facts that the plaintiff had to establish to succeed on the issue of causation. The summary trial judge was not asked to determine the causation issue. See Prevost (Committee of) v. Vetter (2002), 100 B.C.L.R. (3d) 44; 2002 BCCA 202. [37] The Court of Appeal has also discouraged the use of Rule 18A to litigate serious questions of law "in slices". For example, see Bacchus Agents (1981) Ltd. v. Philippe Dandurand Wines Ltd., 2002 BCCA 138; [2002] B.C.J. No. 377 (C.A.). Southin J.A. expressly pointed out in Bacchus Agents that sub-rule (8) permits the court to dismiss a summary judgment application when

it will not assist the efficient resolution of the proceeding, or when the issues are not suitable for disposition under the rule. [38] To similar effect, both the Court of Appeal and other summary trial judges have warned against the danger of separating out defendants in multiple party litigations or issues from their factual matrix. Even if findings of fact can be made based on affidavits that would entitle one of several defendants to judgment dismissing the claim, it may be unjust to decide the issue of liability under Rule 18A. In part, this is a reflection of the long-standing practice of not granting non-suits at trial where there are co-actors who are both defendants. See Thomson v. Kootenay Lake District Hospital and Health Services Society, [1985] B.C.J. No. 2697 (S.C.). [39] To grant an application by a single defendant for dismissal in complex multi-party negligence cases requires the summary trial judge to attempt to "cross a legal minefield, not knowing where to step to avoid making decisions with unforeseen consequences or unintended results". The court should avoid making findings that may impact on other parties in ways that cannot, because of the complexity of the case, be fully anticipated. See Privest Properties Ltd. v. Foundation Co. of Canada, [1990] B.C.J. No. 1349 (S.C.). [40] Even where the summary judgment application involves an apparently discrete

issue such as the interpretation of a written agreement, there may be a need to consider the factual matrix which formed the background to the agreement that can only be explored at a full trial. This is another indication that factually complex cases are often not well suited to the summary trial procedure. In my view, this is particularly so where the applicant is one of several defendants. The Court of Appeal affirmed these principles some time ago in Cannaday v. Sun Peaks Resort Corp., [1998] B.C.J. No. 85 (C.A.). [41] Taking into account all the principles recited, I conclude that it would be unjust to decide the issues raised by Swiftsure under Rule 18A. I decline to do so and the application is dismissed with costs in the cause. "M.D. Macaulay, J." The Honourable Mr. Justice M.D. Macaulay