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March 2013

ALBERTA EDITION

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ONPOINT L EGAL RESEARCH Prepare to Win.

Inside this Issue: Tweet yourself well. Don’t have the time to tweet, blog, comment or get linked in?

With brief legal updates written specifically for your target audience, OnPoint can help you stay in touch with your clients and acquire new ones. See p.3 Featured Cases: P4

Real Estate; Vendors and Purchasers; Condominiums; Condition Precedents

P6

Development Permits; Zoning Law; Issue Estoppel

P8

Labour Relations; Grievances; Arbitration; Disability-based Discrimination

P10 Negligent Misrepresentation; Liability; Directors and Officers P12 Municipal Law; Development Permits; Procedural Fairness; Scope of Appeal


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Swan Group Inc. v. Bishop, 2013 ABCA 29 Areas of Law: Real Estate; Vendors and Purchasers; Condominiums; Condition Precedents

~Clause in condominium agreement not true condition precedent; developer entitled to keep deposit~ CLICK HERE TO ACCESS THE JUDGEMENT

BACKGROUND

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he appellant Swan Group (“Swan”) developed single family and multi-family projects. One such project was a condominium development at Stewart Creek in the Three Sisters Village at Canmore. Respondent Mark Bishop entered into an agreement to purchase a unit for a total of$922,094. The agreement was dated April 19, 2007. Bishop paid a deposit of $130,485. The agreement did not have a fixed completion date and at the time of the agreement, the project had not been started. The offer was made subject to the following Developer’s

Condition: “The Developer shall register the Phased Condominium Plan creating the units shown on Schedule 1 on or before September 20, 2008.” The condominium plan was registered on May 6, 2009. On August 18, 2009, Swan provided Bishop with notice of possession which stated that the possession date would be October 22, 2009. On November 23, 2009, Swan’s lawyer received a letter from Bishop’s lawyer advising that Bishop no longer intended on completing the purchase. Bishop’s lawyer sent a letter advising that Bishop would not complete because of a material change in his financial circumstances. Swan’s lawyer advised Bishop’s lawyer that since Bishop did not complete the purchase, Swan was terminating the agreement, retaining the deposit money and reserving its rights to claim any expenses caused by Bishop’s failure to complete. In a hearing before a master, Swan and Bishop each sought summary judgment. Bishop contended that the clause requiring registration of the condominium plan was a true condition precedent, and that the failure of Swan to register the plan on or before September 22, 2009, voided the agreement ab initio. The master granted judgment in favour of Swan on the basis that the clause in question was not a true condition precedent. Bishop’s appeal to the Court of Queen’s Bench was allowed. Swan further appealed.

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Swan Group Inc. v. Bishop, (cont.) APPELLATE DECISION

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he appeal was allowed. The difference between a “condition precedent” and a “true condition precedent” was defined in Turney v Zhilka, [1959] SCR 578 at 583-84, 18 DLR (2d) 447 as follows: “The obligations under the contract, on both sides, depend upon a future uncertain event, the happening of which depends entirely on the will of a third party – the Village council. This is a true condition precedent - an external condition upon which the existence of the obligation depends. Until the event occurs there is no right to performance on either side. The parties have not promised that it will occur. In the

absence of such a promise there can be no breach of contract until the event does occur.” In the present case, the Developer’s Condition was worded as an obligation of the vendor under the agreement. It did not by its terms suggest that the involvement of an uncontrolled third party could frustrate the ability of either the vendor or the purchaser to complete the agreement. Late compliance with the Developer’s Condition was, on its face, an easily reparable default if timely objection had been made by Bishop. There was not in the law of real estate sales agreements a broad hospitality to the idea that default of a condition which relates to a step in an ongoing construction project should automatically void the agreement ab initio. Doing so would deprive the parties of the certainty in their relationship, perhaps the single most important purpose of a contract. The court should not make the Developer’s Condition a true condition precedent per se when it was not so designated by the parties in the agreement. It was not the role of the court to invent terms and construct an agreement that the parties did not make, particularly where what the parties purported to have agreed to was so nebulous that it could not be understood, let alone enforced. OnPoint is proud to announce that we have joined the impressive crew of contributors for SLAW, a far-reaching and highly respected Canadian Law blog. On one Sunday a month we will be featuring a case summary, commentary, and counsel comments in a column called Summaries Sunday: OnPoint Legal Research.

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Sihota v Edmonton (City), 2013 ABCA 43 Areas of Law: Development Permits; Zoning Law; Issue Estoppel ~Zoning board estopped from denying proposed use to existing approved use of building~ CLICK HERE TO ACCESS THE JUDGEMENT

BACKGROUND

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he appellant Jarnail Sihota was the owner of premises in a strip mall that are zoned CNC Neighborhood Convenience Commercial Zone. That zoning permits use of the premises for Professional, Financial and Office Support Services, but does not allow General Industrial Use. In 2000 Sihota applied for and obtained a development permit from the respondent The City of Edmonton and the Subdivision and Development Appeal Board (“SDAB�) of the City of Edmonton to operate a post office facility (including a sorting and distribution facility). That permit was not appealed, and the post office facility

was operated for 12 years. Neither the zoning of the premises, nor the provisions of the applicable zoning bylaw changed during that time. In 2011, Sihota applied to construct a mezzanine addition within the existing premises, which would permit the construction of washrooms and a lunchroom to improve the amenities for the employees, and also to make more space available on the main floor for the postal operation. The application was denied on several bases, including that the postal facility did not qualify as a Professional, Financial and Office Support Service, but rather was correctly characterized as a General Industrial Use. Sihota appealed to the SDAB, and was successful on all of the issues except the one relating to the proper characterization of the use. The SDAB agreed that the postal facility was a General Industrial Use, and concluded that the doctrine of issue estoppel had no application. Sihota was granted leave to appeal to the Court of Appeal on two issues: (a) Was the Development Officer estopped or precluded from holding that the existing use of the building was not a permitted or discretionary use under the zoning? (b) Did the Development Officer err in not approving the proposed use as an Accessory Use to the existing approved use of the building?

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Sihota v Edmonton (City), (cont.) APPELLATE DECISION

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he appeal was allowed. In the circumstances, there was no point in referring this matter back to the SDAB, and a declaration issued that Sihota was entitled to his development permit. The issue on appeal was whether the doctrine of issue estoppel precluded the City of Edmonton from denying Sihota a development permit. The Supreme Court of Canada in Danyluk v Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 SCR 460, confirmed that issue

March 2013

estoppel can arise as a result of administrative proceedings in some circumstances. In order for the doctrine to be engaged: (a) the same issue must be involved, (b) the decision said to create the estoppel must be final, (c) the same parties or their privies must be involved, and (d) as a discretionary matter, it must be fair and just to apply the doctrine of issue estoppel in the particular circumstances. The role of the development officer in the system was analogous to the role of the employment standards officer in Danyluk. Issue estoppel meant the prior decision was “binding on the parties�; issue estoppel prevented them from re-litigating what has already been decided. The salient issue was whether the municipality and the developer were bound by previous decisions relating to the use of the subject land. In the planning context, certainty was essential because of the large sums of money that can be invested in reliance on development permits.

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Lethbridge Regional Police Service v Lethbridge Police Association, 2013 ABCA 47 Areas of Law: Labour Relations; Grievances; Arbitration; Disability-based Discrimination ~Dismissal of probationary police constable due to illness-related restrictive duties not constituting disability-based discrimination~

CLICK HERE TO ACCESS THE JUDGEMENT

BACKGROUND

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rievor Lester was hired as a recruit constable in April of 2005, and he commenced an18-month probationary period of employment as mandated by s. 4(1)(a) of the Police Service Regulation, AR 356/90. In October 2005, when the grievor suffered a hernia that required surgery. He was offered modified desk duties, but he refused as he “was not interested in being behind a desk”. Instead, he stayed home and worked on his rehabilitation. In January of 2006, Lester returned to work. In March of 2006 he injured his back while lifting an intoxicated person into the back seat of a police car. He attempted to continue with his work, despite increasing pain and discomfort. By April of 2006, he had filed a Workers’ Compensation claim, although he continued

to work. He was placed on modified duties, and while it was anticipated he would return to work in a few weeks, he remained on that status longer as a result of his doctor’s advice. It was anticipated that Lester could return to work by August of 2006, but he was told to provide an updated medical report from his family doctor clearing him for work before reporting for regular duties. He was also told to report to a different shift upon his return from holidays. Lester disregarded these instructions, and reported to his original squad without providing the necessary doctor’s letter. The Employee Resource Centre directed that Lester undergo a full psychological assessment, and retained Dr. Schmalz, a psychologist with impressive credentials in assessing police officers. Dr. Schmalz reported: “It would appear that while Mr. Lester has been employed as a police officer for over one year, his actual time on the job, in good physical shape, has been very limited. Given this, then, he has likely not trained adequately, physically or mentally. This reality paired with the personality style in relation to managing stress, deems him psychologically unable to manage the challenges of police work, from a risk management perspective, at the present time and for the foreseeable future.” The Police Commission terminated Lester’s employment on April 26, 2007. The appellant Lethbridge Police Association filed a grievance under the collective agreement. The essence of the grievance was that Lester’s employment had been terminated, in part, because of a disability. The arbitrator concluded that the whole situation amounted to discriminatory treatment. On judicial review, the chambers judge found no evidence to support the decision of the arbitrator, and set it aside. The Lethbridge Police Association appealed.

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Lethbridge Regional Police Service, (cont.) APPELLATE DECISION

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he appeal was dismissed. The arbitrator’s ultimate decision was not transparent and intelligible, and therefore not one of the outcomes that was defensible in respect of the facts and law. The arbitrator’s overall approach caused him to lose sight of the narrow issue he had to decide. Having concluded that there was a general unfairness surrounding Lester’s situation, he drew the inference that this was attributable to “stereotypical thinking”, and was therefore discriminatory. He lost sight

March 2013

of his earlier observations that: (a) even if there was some element of “discriminatory” decisionmaking, that should not prevail if overall there was ample reason for not continuing Lester’s employment, and (b) human rights legislation was not designed to insulate those actually unable to perform a job. The record did not support a finding of stereotypical thinking. It was a legitimate decision for an employer to terminate a probationary employee who was prone to refusing work that he did not care for, or that he perceived was “not what he was hired for”. An employer was entitled to prefer the willing employee who will take on all tasks that need completing. It was also legitimate for an employer to terminate a probationary employee who had a general attitude of distrust of management. An employer was entitled to cultivate a cooperative and collegial workplace environment.

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Hogarth v Rocky Mountain Slate Inc., 2013 ABCA 57 Areas of Law: Negligent Misrepresentation; Liability; Directors and Officers ~Corporate officer not personally liable for firm’s negligent misrepresentation~ CLICK HERE TO ACCESS THE JUDGEMENT

BACKGROUND

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n 1988 a slate deposit was discovered in British Columbia. By the late 1990s several of the defendants had become aware of the slate deposit, and decided to develop a quarry to exploit it. The defendant Eli Suhan was the first to investigate the deposit, and he later involved the appellant Roger Simonson, and the defendant chartered accountant John Powell. The three of them, with some others, incorporated Rocky Mountain Slate Inc., retained a mining engineer named Charles Kucera, and began to prepare a business plan. Suhan, Simonson, and Powell became shareholders and officers of Rocky Mountain Slate Inc. By 2001 they had outlined a business plan to raise funds to develop the quarry. It anticipated the creation of a limited partnership,

and the sale of units to investors. Over time they developed three documents to help in the raising of funds: The Rocky Mountain Slate Inc. Investment Opportunity, the Rocky Mountain Slate Inc. Business Plan, and the Rocky Mountain Slate Future-Oriented Financial Information document. A “future-oriented financial information” document is a recognized accounting report which includes forecasts or projections of a business opportunity. In mid to late 2001, the individual Defendants introduced the Plan as an investment opportunity to the Plaintiffs. The appellant Simonson became one of six directors of the general partner, he chaired the directors’ meetings, and he was the president of the limited partnership. Operation of the quarry started in 2002, and by August of 2002 the officers concluded that a further cash injection was required to sustain operations. After further reports and representations about the operations were made, a number of the plaintiffs purchased additional Class D units in the limited partnership. The quarry was not, however, successful, and it ceased operation by the end of 2002. The plaintiffs commenced an action to recover their losses from a number of defendants. The trial judge found that Rocky Mountain Slate Inc., Suhan, Simonson, and Powell were liable to the plaintiffs for the value of their investments in the Class A units, and collectively awarded them judgment for $1.395 million, plus interest of over $469,000. She concluded that the individual defendants were liable personally, because the evidence established stand-alone tortious conduct on their part. The appellant Simonson appealed.

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Hogarth v Rocky Mountain Slate Inc., (cont.) APPELLATE DECISION

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he appeal was allowed, O’Brien and Rowbotham JJ.A. for the majority, Slatter J.A. concurring. The conduct of Simonson was not tortious in itself, or exhibited a separate identity or interest from that of Rocky Mountain Slate Inc., the corporation. The impugned statements were made for the purposes of raising funds for the corporation and for its benefit. It was not sufficient to create a separate

identity that Simonson himself was an officer and investor in the corporation. Having a shareholding or other financial interest in the corporation did not translate into a separate interest for the purpose of establishing personal liability in trust. The trial judge did not identify any aspect of Simonson’s conduct in making the impugned representations independent from his activity as a corporate officer. The claim against Simonson for personal liability in carrying out the business of the corporation must fail.

Blair Mackay Mynett Valuations Inc. is the leading independent business valuation and litigation support practice in British Columbia. Our practice focus is on busines s va l u ati o n s, m e rg e rs and acquisitions, economic loss claims, forensic accounting and other litigation accounting matters. We can provide your clients with the knowledge and experience they require. Suite 1100 1177 West Hastings Street Vancouver, BC, V6E 4T5 Telephone: 604.687.4544 Facsimile: 604.687.4577 www.bmmvaluations.com

March 2013

Left to Right: Vern Blai r, Cheryl Shearer, Robert D. Mackay, Kiu Ghanavizchian, Chad Rutquist, Gary M. W. Mynett, Chris Halsey-Brandt, Andy Shaw, Jeff P. Matthews, Farida Sukhia

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Grand Central Properties Inc v Cochrane (Town), 2013 ABCA 69 Areas of Law: Municipal Law; Development Permits; Procedural Fairness; Scope of Appeal ~Subdivision and Development Appeal Board may have misdirected itself on scope of its appellate powers~ CLICK HERE TO ACCESS THE JUDGEMENT

BACKGROUND

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ochrane Properties Ltd. owned a large piece of property in the respondent Town of Cochrane (“Town”), which it wanted to develop by constructing a large retail store. It applied to the Town for a development permit. On September 7, 2012, the Town’s Development Authority (“Authority”) approved a Development Permit for a 96,983 square-foot retail department store with an associated 344-stall parking lot. The Authority found the proposed development was a permitted use under the Town’s Land Use Bylaw (“Bylaw”), but it attached 51 conditions of approval to the Development Permit pursuant to its power under section 4 of the Bylaw. The Authority also varied a requirement, found in the Bylaw, dealing with the number of trees required to be planted on the site. The applicants Grand Central

Properties Inc., Grand Central Developments Inc. and Grand Central Health Inc. (“Grand Central”) appealed the granting of the Development Permit to the Subdivision and Development Appeal Board (“Board”), challenging a number of the conditions attached to the permit, alleging a failure to impose other conditions, and appealing the variation with regard to the number of trees. Grand Central had asked for production of, or access to, all relevant documents relating to the granting of the Development Permit, including a Traffic Impact Assessment. The documents were not produced until a week before the hearing, although access to some of this material appeared to have been granted somewhat sooner. The Board upheld the Development Permit, with the exception of the variance for the trees, and dismissed the Grand Central’s appeal. Grand Central applied to the Court of Appeal for leave to appeal the decision of the Board, contending that (i) the Board made a jurisdictional error and breached the rules of natural justice and procedural fairness, by failing to grant an adjournment, giving them more time to review and consider the materials, and to provide expert evidence; and (ii) the Board misdirected itself regarding the scope of an appeal to the Board under s. 685(3) of the Municipal Government Act, RSA 2000, c M-26 (“MGA”). Grand Central submitted they were entitled to a full de novo hearing on all their grounds of appeal before the Board, because it was common ground that the Authority had varied a provision of the Bylaw.

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Grand Central Properties Inc v Cochrane (Town), (cont.) APPELLATE DECISION

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he application was granted in part. The application on the ground of procedural fairness failed. If Grand Central were seeking an adjournment, as they claimed, they needed to make that clear to the Board. The Board would then have been forced to make a ruling, which, if it was unfavourable to Grand Central, could ultimately have served as a basis for arguing unfairness. Furthermore, the effect of a possible adjournment on the

result was speculative. With respect to the application on the ground of misdirection, Grand Central contended that the MGA did not contemplate different tiers of appeal. Once an appeal right was given, then a Board had the full range of powers set out in section 687(3). As this was a leave application, it was not the function of the Court of Appeal to attempt any detailed discussion relating to the merits of the issue. However, the issue merited appeal and Grand Central had a reasonable prospect of success.

JOSEPHSON ASSOCIATES We are a boutique business litigation law firm in Vancouver, BC. We welcome referrals in the following areas: • Corporate & Shareholder disputes • Contract Disputes • Employment Law Issues • Franchising & Distribution issues • Commercial tenancy & real estate disputes • Injunctions and Anton Pillar Orders

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Alberta Take Five March 2013  

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