Pontin v. Rainville, 2010 ABQB 790

Court of Queen ’ s Bench of Alberta Citation: Pontin v. Rainville, 2010 ABQB 790 Date: 20101210 Docket: 0803 14738 Registry: Edmonton Between: Thomas Pontin and Johanna Pontin Applicants - and - Robert Rainville and Laura Rainville Respondents _______________________________________________________ Memorandum of Decision of L.A. Smart, Master in Chambers _______________________________________________________ I. Nature of the Application [ 1 ] The Applicants Thomas and Johanna Pontin (the Pontins) are seeking an order under the Law of Property Act , R.S.A. 2000, c.

L-7 ( LPA ) terminating their co-ownership with the Respondents Robert and Laura Rainville (the Rainvilles) in certain real property (the Fanta Property), an order directing the sale of the Rainvilles’ interest in the Fanta Property to them, and an order directing that an accounting, contribution and adjustment be made in respect of the property. [ 2 ] The Rainvilles have filed a cross-application pursuant to the LPA and the Partnership Act , R.S.A. 2000, c. P-3 seeking an

order directing the Pontins to provide them and James and Margaret Henning (the Hennings) with an accounting in relation to the Fanta Property and another property jointly owned by the Pontins and Rainvilles (the White House Property), together with an accounting of the elk farm operations on the Fanta Property in which the parties were involved. They also ask that the Fanta Property and elk farm operations be transferred to them and the Hennings with an equalization payment being made to the Pontins after the Pontins have provided an accounting of the properties and business operations.

In the alternative, they ask that the Fanta Property be subdivided. They seek a right of way and easement over the Fanta Property in order to provide them with access to adjacent property owned by them. [ 3 ] I refer in this decision to the Pontins and the Rainvilles as the parties. Section 25(2) of the LPA states that every person served with an application for termination of co-ownership is a party to the action. In this case, that would include all encumbrancees of the Fanta Property being ICG Utilities Ltd (Utility Right Away) and Alberta Treasury Branches ( 1 st Mortgagee).

Neither of them appeared at the hearing of this matter or filed written submissions although I see no evidence of service upon them. In the case of ICG their interest would not be affected or discharged as part of these proceedings. In the event the ATB mortgage is to remain on title its consent and agreement to assumption and/or release of covenants may be required. II. Facts A. Easement Discussions and Purchase of Fanta Property [ 4 ] Laura Rainville and Johanna Pontin were friends.

In March 2006, Laura Rainville was employed by Thomas Pontin at his law office in Millet, Alberta. [ 5 ] In July 2006, the Pontins and Rainvilles became registered owners, all as joint tenants, of the White House Property, a residential property located at 5[...]-48 Avenue, Millet and legally described as Plan 8322091, Block 11, Lot 17. [ 6 ] The parties agree that they purchased the White House Property for investment purposes. In an affidavit sworn on November 14, 2008, Laura Rainville deposed that the Pontins held a 50 percent interest in the White House.

She further deposed that she and her husband held a 25 percent interest in the property, and held the remaining 25 percent interest in trust for her parents, the Hennings. [ 7 ] Laura Rainville was appointed by the co-owners to take care of all of the books and to manage the monies in relation to the White House. [ 8 ] The Rainvilles owned a 5.27 acre parcel in SW30-47-24-W4M, Lot 1, Block 2, Plan 9123606, in the County of Wetaskiwin (the Rainville Property), purchased by them in December 2002.

The Pontins also had property in the area. [ 9 ] Access to the Rainville Property was by way of a road and bridge on an easement granted to the Rainvilles on the adjacent portion of SW30-47-24-W4M (Coggan Property). After the Coggans purchased the Coggan Property in May 2003, the Rainvilles had disputes with them over the easement. The bridge on the easement fell into disrepair due to a wash out that occurred in May 2007. This prevented the Rainvilles from accessing their property. Eventually, the Rainvilles repaired the bridge and continued to use the bridge as access to their property.

As evidenced by Laura Rainville’s affidavit sworn August 24, 2010, the Rainvilles do not consider this access ideal as the bank continues to wash out and service, utility and emergency vehicles cannot use the access due to the sharp turn in the roadway after crossing the bridge. [ 10 ] After the parties’ investment in the White House Property, they became interested in acquiring other investment property and discussed acquiring the Fanta Property, which is legally described as: The north west quarter of

section nineteen

(19) Township forty-seven

(47) Range twenty-four

(24) West of the Fourth Meridian Containing 64.7 hectares (160 acres) more or less Excepting thereout: all that portion described as follows: commencing at a point on the west boundary of the said quarter

section 285 metres northerly from the south west corner thereof; thence easterly and at right angles to the west boundary 122 metres; thence northerly and parallel to the west boundary 122 metres; thence westerly and at right angles to the west boundary to a point thereon; thence southerly along the west boundary to the point of commencement containing 1.49 hectares (3.68 acres) more or less Excepting thereout all mines and minerals. [ 11 ] The Fanta Property was of particular interest to the Rainvilles and the Hennings as it borders the south boundary of the Rainville Property and could provide good access to the Rainville Property, thereby eliminating the need for the Rainvilles to access their property by way of the easement over the Coggan Property. [ 12 ] In August 2007, an offer from the Pontins and Rainvilles to purchase the Fanta Property from Bridget Fanta at a purchase price of $850,000.00 was accepted.

The transfer was registered October 4, 2007. The Pontins are joint tenants as to an undivided one- half interest in the Fanta Property. They hold 50 percent of their interest in trust for Thomas Pontin’s brother Timothy Pontin, and Timothy’s wife Jackie Pontin. The Rainvilles are joint tenants as to the remaining undivided one-half interest in the property. They hold 50 percent of their interest in trust for Laura Rainville’s parents Jim Henning and Margaret Henning (the “Hennings”). [ 13 ] The four couples paid $75,000.00 each towards the purchase price of the Fanta property.

The remainder of the purchase price was paid by way of a first mortgage of $400,000.00 on the Fanta Property granted to ATB Financial, and a second mortgage of $200,000.00 granted to the Hennings. The Hennings raised the $200,000.00 by mortgaging their personal residence with PC Financial. The extra $50,000.00 raised by the parties was used as an “operational kitty” by them. [ 14 ] According to Laura Rainville, Thomas Pontin acted as legal counsel for the parties on purchase of the Fanta property, the Alberta Treasury Branches Financial (ATB) mortgage on the property and the Hennings’ mortgage on the property.

He also represented the Rainvilles on the White House Property purchase and mortgage and in relation to easement issues between the Rainvilles and Coggans. In addition he acted for the Hennings in relation to the mortgage on the Fanta Property, and for the Hennings and PC Financial on the mortgage on the Hennings’ personal residence. B. Fanta Property Tenancies and Crop Agreements [ 15 ] In her November 14, 2008 affidavit, Laura Rainville deposed that after the Fanta Property purchase closed, the parties commenced the business of renting the house, the shop, barn, crop land and pasture.

She stated that she and Johanna Pontin opened two joint bank accounts for the Fanta Property funds (one for savings and operating expenses and the other for damage deposits), with each having signing authority on the accounts.

She deposed that she continued to manage all of the records for what she termed “the joint venture.” [ 16 ] A Residential Tenancy Agreement, dated November 27, 2007, was executed by Thomas Pontin, purportedly as representative of the parties as landowners, by which they leased the residence located on the Fanta Property to Shawna Rae, Travis Oosthoek and Conor Hayes on a month to month basis, at a rent of $1,950.00 per month. (The Agreement erroneously identifies the property as the SE 1/4 of s.19 but it is not disputed that it relates to the residence on the Fanta lands.) [ 17 ] By December 2007, the friendship between the parties had deteriorated. [ 18 ] On December 15, 2007, Thomas Pontin and Laura Rainville, on behalf of Country Creek Elk Farm (CCEF), identified in the agreement as “an association of owners [of the Fanta Property],” entered into what was said to be a joint venture agreement with Lykele Miedema to maintain an elk herd on the Fanta Property for the purpose of producing calves for sale.

CCEF agreed to purchase a 50 percent interest in Mr. Miedema’s herd of 15 elk cows for $7,500.00 and to purchase an elk handling facility and two bale feeders from

him for $4,500.00. These were to be installed in the barn and paddock. It was agreed that on termination of the agreement, Mr. Miedema would buy back the bale feeders for $750.00. It was also agreed he would be responsible for upgrading the fencing around the paddock, a 20-acre area of the Fanta Property that had been set aside as an elk pasture and would arrange to have the paddock and elk handling facility inspected. The parties agreed that all of the income and expenses, after initial set up, would be shared equally. [ 19 ] The agreement further provided: 10.

In the event the Landowners wish to sell the Lands prior to the third anniversary date of this agreement, they shall reimburse Lykele for reasonable costs incurred by him, including his own time and effort. 11. Upon termination of this agreement at any time, and subject to the provisions of paragraph 10, the herd shall be sold for the best available price and all income therefrom shared equally after payment of all outstanding and agreed to expenses.

Lykele shall have a first right to buy the herd back at fair market value or at a value to be agreed upon by the parties hereto. [ 20 ] According to Laura Rainville in her November 14, 2008 affidavit, the parties’ purchase was financed through the operating capital of their “partnership.” In their written submissions, the Pontins’ say that $7,500.00 from the kitty was used to purchase the 50 percent share in the elk and that the co-owners paid $5,187.50 to Mr. Miedema for services and supplies for the elk farm.

An invoice attached as part of an exhibit to Laura Rainville’s affidavit shows that an additional $687.50 was paid for hay and minerals. [ 21 ] Laura Rainville stated in her affidavit of November 14, 2008 that on January 19, 2008 the parties had a meeting at which it was decided that the barn on the Fanta Property was to be rented as one large unit and Robert Rainville could use part of the barn until there was a tenant. What purport to be minutes of the meeting attached as an exhibit to her affidavit reflect that there was a crop tenant who was to pay $1,470.00 in each of May 2008 and September 2008.

The Pontins agree that after the sale of the Fanta Property closed, a crop tenant was found who would pay those sums. [ 22 ] Thomas Pontin deposed that on April 1, 2008, the parties entered into a verbal contract with Grant Thompson to farm approximately 90 acres located on the Fanta Property at a price of $35.00 per acre, the full amount of the rent to be paid by Thompson in September each year. [ 23 ] Laura Rainville deposed that at a meeting of the parties on March 8, 2008, it was agreed to begin advertising for a tenant for the barn and that she was to manage the tenancies, collect the rents and keep the records and books for the Fanta Property. [ 24 ] The relationship between the parties continued to deteriorate through the spring of 2008. [ 25 ] On April 6, 2008, what was identified as the CCEF, a Joint Venture, as lessor, and Tri West Oilfield Ltd., as lessee, entered into an agreement relating to an “as is” lease of a 2,400 square foot machine shop located on the Fanta Property, for a term of two years from May 1, 2008 to April 30, 2010, at an annual rent of $36,000.00 plus GST.

The agreement provides that the lessee was to be responsible for all occupancy costs. The lessee covenanted to use the premises only to operate an automotive repair shop and welding shop. It was agreed that if the lessee continued to occupy the shop after expiry of the term of the lease, any renewal granted or sooner determination, the lessee would be a monthly tenant at a rent of 100 percent of the minimum rent and additional rent payable under the agreement on the same terms as contained in the agreement.

Thomas Pontin and Laura Rainville signed the agreement for CCEF. [ 26 ] Laura Rainville deposed in her affidavit that between April 27-30, the wall of the Fanta Property shop was damaged and that the Pontins did nothing about it. She stated that the parties lost income from a tenant for a bunkhouse and rent for the barn as the Pontins waited for Tri West to decide if it wanted to rent those improvements.

She deposed that a meeting of the parties on May 17, 2008, the Rainvilles and Hennings asked that a business manager be appointed because of the group’s lack of process for decision making and that a mediator be considered. [ 27 ] In cross-examination on her affidavit, Laura deposed that despite ongoing payment problems with the Tri-West tenant,

Thomas Pontin advised he did not want to take steps to terminate the lease and the Rainvilles had no mandate to do so as far as he was concerned. [ 28 ] The residential tenants vacated the Fanta Property at the end of July 2009. C. Litigation [ 29 ] Laura Rainville deposed as to the breakdown in the relationship between the parties over the summer of 2008 and stated that in July 2008 Johanna Pontin unilaterally closed the joint accounts that had been set up to operate the White House property, the Fanta Property and the CCEF operations and removed the funds.

She claimed Johanna Pontin mismanaged the accounts, regularly paid the Henning mortgage late, failed to collect utility bills and paid tax accounts twice.

She deposed that despite requests, Johanna Pontin refused to provide an accounting of the funds taken, received and spent and refused to provide access to financial and other records relating to the parties’ various ventures. [ 30 ] Problems arose between the parties in terms of dealing with tenants on the Fanta Property, making decisions about repairs, maintenance and improvements, dealing with financial issues, making plans for future development, and agreeing to an easement across the property to accommodate the desire of the Rainvilles to have an alternative access to the Rainville Property. [ 31 ] According to Laura Rainville, these problems lead to the Rainvilles and Hennings seeking on July 11, 2008 to end their joint venture in the CCEF.

They proposed to sell their 50 percent interest to the Pontins at $150,000.00 and then to purchase a subdivided parcel on the Fanta Property back from them for $90,000.00. The Pontins did not agree with the proposal. [ 32 ] On October 21, 2008, the Pontins filed an originating notice for an order terminating their co-ownership with the Rainvilles in the Fanta Property and directing the sale of the Rainvilles’ interest in the property to them. Their application was brought under

Part 3 of the LPA . [ 33 ] On November 14, 2008, the Rainvilles filed a cross-application for an order directing that the equitable owners of the Fanta Property and encumbrancees be provided with notice of the Pontins’ application and be added as parties and for an order directing that the Pontins, Timothy Pontin, and Jackie Pontin provide them with a full accounting in relation to the White House Property, the Fanta Property, and “ [t]he business operations known as Country Creek Elk Farm, including residential tenancies, crop sharing agreements and an elk farming venture.” [ 34 ] They further applied for an order directing the Pontins, Timothy Pontin and Jackie Pontin to indemnify them and the Hennings in relation to those properties and business operations; an order directing that the Fanta Property, the White House Property and the CCEF operations be managed by representatives of the Pontins and Rainvilles in a transparent and accountable fashion; in the alternative, an order that the Fanta Property and CCEF operations be valued and transferred into the names of the Rainvilles and Hennings with an equalization payment being made to the Pontins after the accounting; in the further alternative, an order that the Fanta Property be subdivided so the Pontins would have 120 acres and all income generating improvements and the Rainvilles would have about 34 acres, with an equalization payment to the Rainvilles; and in any event an order granting a right-of-way and easement to them over the Fanta Property to provide access to their adjacent lands.

The Rainvilles brought their cross-application under s. 15 of the LPA and the Partnership Act . [ 35 ] The Rainvilles filed a further notice of motion on November 28, 2008 seeking some of the same relief; namely, an order directing that the equitable owners and encumbrancees of the Fanta Property be served with notice and be added as parties; an order directing that the White House property, Fanta Property and CCEF operations be managed by a representative of the Pontins and a representative of the Rainvilles in a fashion transparent and accountable to the equitable owners; an order directing that the Rainvilles have access to the Fanta Property to maintain, preserve and secure it pending disposition of the various applications and an order requiring the Pontins to pay solicitor and own client costs. [ 36 ] On December 9, 2008, I ordered that commencing February 19, 2009, Laura Rainville was to collect rents and pay bills from the rents collected in relation to the White House Property and the Fanta Property and advised that the parties were to apply to the Court if they could not agree on property management decisions.

I also ordered that the Pontins deliver to Laura Rainville all cash, in bank accounts or otherwise, relating to those two properties and the CCEF operations less any amounts required to be retained to ensure all

cheques issued to February 19, 2009 would be paid, together with a monthly accounting to that date. I ordered that Laura Rainville hold the funds in trust for the benefit of the owners of the properties and maintain separate accounts for the two properties and that she provide a monthly accounting with bank statements and supporting documents to the Pontins.

Further, I ordered that the Pontins serve the encumbrance holders with notice of their application and that service on the Hennings could be by way of service on the Rainvilles’ counsel. [ 37 ] On January 29, 2009, Thomas Pontin swore an affidavit referring to the differences between counsel as to what I had ordered on December 9 th and disputes between the Pontins and Rainvilles regarding management of the Fanta Property. Thomas Pontin deposed as to the reason why the Pontins decided to collect rent from the tenant. Paragraphs 13-15 of the affidavit read: 13.

The Applicants wish to purchase the interest of the Respondent in the Fanta property by paying to them the sum of $185,000.00 and that the Applicants would assume the Alberta Treasury Branches and Henning mortgages in their entirety. The Alberta Treasury Branches mortgage has approximately $390,000.00 outstanding principal balance. The Henning mortgage has approximately $190,000.00. Based on payment out of the Respondents 50% interest at $185,000.00, the offer effectively represents a value of the property in the sum of $950,000.00.

Therefore, in reality the Respondents will be receiving more than what their 50% is worth. 14. As for access concerns the Applicants are prepared to abide by requirements of the County of Wetaskiwin regarding access for the Respondents through the Fanta property as a result of future subdivision... The closing date for the purchase of the Respondents interest would be March 15, 2009. 15. ...

If the Applicants can buy out the Respondents for the price proposed then it would be unnecessary to deal with other issues that are raised by the Respondents. [ 38 ] On February 2, 2009, the Pontins filed a notice of motion applying for an order directing the sale of the Rainvilles’ interest in the Fanta Property to them or, in the alternative, directions for termination of the co-ownership and sale of the interests of the co-owners in the Fanta Property or, in the further alternative, dismissal of Laura Rainville as manager of the Fanta Property and appointment of Johanna Rainville as manager to collect rents and pay expenses. [ 39 ] In an affidavit sworn on April 7, 2009, Thomas Pontin deposed that he and his wife had not received any accounting from Laura Rainville from February 19 to March 31, 2009; had not received any particulars of the bank account established to deposit the rents and pay the mortgages and other expenses; and had not received bank statements and supporting documents.

He deposed he was concerned Laura Rainville was interfering with the quiet enjoyment of the White House Property and Fanta Property house tenants. He claimed that one of the Rainvilles had changed the locks on the barn on the Fanta Property on or about December 6, 2009 and had removed all of the tools and equipment belonging to the tenant without a seizure, court order or approval of the other landlords. He deposed the Pontins had provided a proper accounting for receipt and disbursement of funds. He suggested a third party should collect the rents, pay expenses and manage the tenants.

He indicated that he and his wife were no longer prepared to pay the Rainvilles $185,000.00 for their interest in the Fanta Property without further compromises and adjustments. [ 40 ] On May 14, 2009, the Rainvilles filed a notice of motion, returnable May 21st, seeking an order directing that a claim for damages arising from the Pontins’ repudiation of the agreement regarding the Fanta property, alleged to have been made on February 26, 2009, be heard concurrently with the other applications for relief and directing that Thomas Pontin be compelled to answer questions that he refused to answer at examinations for discovery and answer the undertakings he gave. [ 41 ] On May 14, 2009, Jennifer Dohei, a legal assistant for counsel for the Rainvilles, swore an affidavit attaching certain correspondence between counsel for the parties as exhibits, including: (

a) A letter of February 26, 2009 from counsel for the Rainvilles accepting the Pontins’ offer to purchase the interest of the Rainvilles in the Fanta Property for $185,000.00, assume the ATB and Henning mortgages and abide by the Count requirements for access through the Fanta Property as a result of future subdivision, with a closing date of March 15, 2009.

(

b) A letter of February 27, 2009 from counsel for the Pontins to counsel for the Rainvilles enclosing a form of order reflecting a purchase price for their interest in the Fanta Property of $185,000.00 without adjustments as full and final settlement of any claims each of the parties had in relation to the Fanta Property, with the Pontins to be responsible for the mortgages and to abide by County requirements for access by the Rainvilles through the Fanta Property, and with an accounting for the collection of rents and payment out of expenses from February 1, 2009 to the date of closing. (

c) A letter of March 3, 2009 from counsel for the Rainvilles to counsel for the Pontins seeking adjustment for the Tri-West property, arrears of the Henning mortgage and outstanding utilities and other charges owing by the Fanta residential tenants. He also sought clarification whether the Pontins proposed to assume or pay out the Henning mortgage. He said the Pontins would be responsible for outstanding utility charges for the Fanta shop and barn. He advised the Rainvilles would agree to a April 1, 2009 closing date. (

d) A letter dated March 4, 2009 from counsel for the Pontins to counsel for the Rainvilles respecting accounting for rent. (

e) A letter in response dated March 6, 2009 from counsel for the Rainvilles to counsel for the Pontins. (

f) A letter dated March 10, 2009 from counsel for the Rainvilles to counsel for the Pontins indicating it was his understanding that the Pontins had repudiated the parties’ agreement and providing clarification of the points raised in his previous letter of March 3 rd . (

g) Correspondence from counsel for the Pontins to counsel for the Rainvilles dated March 10, 2009 asking for the “agreement” to be identified. (

h) A letter dated March 16, 2009 from counsel for the Rainvilles to counsel for the Pontins stating that the Pontins had made an offer that was accepted. [ 42 ] On May 29, 2009, the Rainvilles proposed to the Pontins that the Rainvilles and the Hennings transfer their interest in the Fanta Property to the Pontins, with the existing encumbrances, other than the Henning mortgage, to remain on title and be the responsibility of the Pontins. The Pontins would pay out the Henning mortgage.

The Rainvilles would transfer their interest in the adjoining Rainville Property to the Pontins, clear of financial encumbrances and the Pontins would pay the Rainvilles and Hennings $625,000.00.

The offer was open until June 4, 2009, but not accepted. [ 43 ] The Pontins applied by notice of motion dated June 1, 2009, returnable June 5th, for an order providing directions on the procedure to be followed regarding termination of the co-ownership and sale of the Fanta Property or, in the alternative, an order for sale of the property on the open market by way of sealed bids with leave granted to the parties to submit their own bid. [ 44 ] On June 5, 2009, I ordered that the Rainville’s allegation that the Pontins entered into an agreement with them on February 26, 2009 regarding the land which is the subject of the action and repudiated that agreement be heard with a claim by the Pontins’ also for damages for repudiation of the agreement and the other applications for relief.

I ordered that the issues before the Court be set down for a Special Chambers Hearing and that the relief sought in the Pontin’s notice returnable June 5, 2009 and the Rainville’s notice returnable May 21, 2009 be adjourned sine die . [ 45 ] On September 3, 2009, Laura Rainville swore an affidavit in response to the April 7, 2009 affidavit of Thomas Pontin detailing aspects of her accounting and management in relation to the Fanta Property, White House Property and CCEF operations. [ 46 ] On October 7, 2009, the Hennings commenced a foreclosure action in respect of the Fanta Property ( Henning v.

Pontin - 0903 15794). [ 47 ] On December 2, 2009, the present matter was heard in special chambers.

[ 48 ] On April 26, 2010, Timothy Pontin swore an affidavit deposing that the Pontins had taken steps to deal with barn doors and roof damage through insurance and the insurer had recently settled the claim for $5,106.00. He stated the Pontins were directly paying their on-going share of the mortgages to ATB and the Hennings as Laura Rainville had refused to deal with their payments in a proper fashion. He deposed that the Pontins had prospective tenants for the Fanta property but Laura Rainville’s management was problematic.

He swore the affidavit in support of an application for an order preventing all parties from using or leasing out the Fanta Property until resolution of the present applications. [ 49 ] On April 28, 2010, Marceau J., the case management judge, ordered that a property manager be selected by the parties and, failing their agreement, they could submit names to him and he would make the final selection.

He also prohibited the Pontins and beneficial owners Timothy Pontin and Jackie Pontin and the Rainvilles and the beneficial owners the Hennings from entering on the Fanta Property until further order of the Court, except for inspection by Laura Rainville every 72 hours to comply with insurance documents. The Rainvilles were allowed to enter on the property to remove the chattels from the residence within 10 days of the order.

He also stated that the Rainvilles could apply to him for a temporary route within the Fanta Property to enable service and emergency vehicles to enter onto their adjacent property (if necessary). Marceau J. ordered that as of the date of appointment of a property manager, my previous order directing that Laura Rainville should collect rents and pay bills from the rents collected in relation to the Fanta Property be terminated. He ordered that the insurance proceeds held by counsel for the Pontins be used for repairs of the barn roof and doors.

He ordered that the Pontins pay $5,000.00 and the Rainvilles pay $5,000.00 as a retainer for use of the property manager and each side pay 50 percent of the future expenses of the property manager in relation to the Fanta Property.

Marceau J. declared that the Tri- West lease had been abandoned effective December 1, 2008. [ 50 ] On July 15, 2010, the Rainvilles filed a notice of motion for advice and directions on interim dealings with the Fanta Property pending a decision regarding the previous applications; and for an order directing that the Pontins pay them 50 percent of the ongoing expenses and specified previous expenses for the Fanta Property. [ 51 ] On July 15, 2010, Laura Rainville deposed that the Fanta Property had been empty and not generating any income since July 31, 2009.

She deposed that the Pontins had not paid their share of certain specified expenses on the Fanta Property and that her counsel had received an e-mail from counsel for the Pontins (attached as an exhibit to the affidavit) saying he had been instructed not to respond to the Rainville’s counsel until Marceau J.’s order was filed and I had issued my reasons.

She deposed she was not aware of any property managers prepared to manage the Fanta Property. [ 52 ] On July 30, 2010, the Pontins filed an originating notice against the Rainvilles and the Hennings for an order for partition and sale of the White House and payment of adjustments as necessary ( Pontin v.

Rainville - 1003 13001). [ 53 ] On August 3, 2010, the Pontins filed a notice of change of solicitors to Weir Bowen LLP. [ 54 ] On August 24, 2010, Laura Rainville swore an affidavit in support of an application brought by notice filed the same date for an order allowing the Rainvilles and service and emergency vehicles access to the Rainville Property through the Fanta Property, which was required as the bridge on the Coggan Property was washing out. III. Analysis A. Termination of Co-Ownership [ 55 ]

Section 15 of the LPA reads: 15(1) A co-owner may apply to the Court for an order terminating the co-ownership of the interest in land in which the co-owner is a co-owner.

[ 56 ] Section 15(2) of the LPA provides that on hearing the application of a party for termination of co-ownership, the Court must make one of the three types of orders listed in that subsection. Any of those orders have the effect of terminating the co-ownership.

Subsection 15(2) is mandatory (Sheffield Welding and Fabricating Ltd. v. 958760 Alberta Ltd. , 2003 ABQB 181 at para. 11 ). [ 57 ] In any event, s. 27 of the LPA states that “[n]otwithstanding any agreement between co-owners of land, the Court may make an order terminating the co-ownership, if the continuance of the co-ownership will cause undue hardship to one or more of the co-owners.” [ 58 ] There is sufficient evidence to establish that the parties are unable or unwill to co-operate in their ownership of the Fanta Property, and that this lack of co-operation is having undue hardship on the parties and the Hennings.

Termination of co-ownership is clearly appropriate in this case. B. Direction for Disposition and other Considerations 1. Legislation [ 59 ] Section 15(2) specifies that on hearing an application for termination of co-ownership, the Court shall make an order directing: (

a) a physical division of all or part of the land between the co-owners, (

b) the sale of all or part of the interest of land and the distribution of the proceeds of the sale between the co-owners, or (

c) the sale of all or part of the interest of one or more of the co-owners' interests in land to one or more of the other co-owners who are willing to purchase the interest. [ 60 ] A sale under subsection 15(2)(

b) or (

c) and the distribution of the proceeds of the sale are to be under the direction of the Court (s. 15(3)). [ 61 ] Sections 23 and 26 - 27 of the LPA read: 23(1) An order does not affect an encumbrance registered against the entire interest in land in respect of which the order is made.

(2) If an encumbrance is registered against the entire interest in land in respect of which an order is made and under the order the interest of a co-owner is to be sold to another co-owner, the Court may direct that compensation for the vendor’s liability under the encumbrance in an amount determined by the Court be paid to the purchaser of the interest from the proceeds of the sale. 26. Notwithstanding section 15(2), if an order has or may have the effect of subdividing a parcel to which

Part 17 of the Municipal Government Act applies, the Court shall (

a) stay the proceedings under this Part until the requirements of

Part 17 of the Municipal Government Act have been complied with, or

(

b) make the order subject to the requirements of

Part 17 of the Municipal Government Act being complied with. 2. Physical division [ 62 ] In their originating notice, the Pontins asked that the Court direct sale of the Rainville’s interest in the Fanta Property to them. [ 63 ] In their cross-application, the Rainvilles asked that the Fanta Property be valued and transferred into the names of the Rainvilles and Hennings with an equalization payment being made to the Pontins after accounting for the Fanta property, the White House Property and the CCEF operations.

In the alternative, they asked that the property be subdivided in such a way that the Pontins would be the owners of 120 acres, including all income generating improvements such as the house, barn and shop, all services to the facilities, the elk farm fencing and all agricultural crop land, less approximately 2.5 acres, while the Rainvilles would be the owners of 34 acres, including the treed unserviced acres, with an equalization payment being made to them after the accounting on the two properties and the elk farm operations.

They sought, in any event, a right of way and easement to them on the Fanta property providing access to the Rainville Property.

They did not provide any grounds for those aspects of their cross-application. [ 64 ] The Pontins oppose the subdivision as proposed on the basis that although the 34 acres are unserviced they are the acres with the most development potential and it was development which primarily motivated their participation in the purchase. [ 65 ] Laura Rainville deposed that in January 2008 and again in May 2008, she met with representatives of the Wetaskiwin County planning office and was advised that as the Rainvilles were co-owners of the Fanta Property and owned the Rainville Property, the County would consider allowing a subdivision of the Fanta Property by way of lot line redistribution and a closure of the road allowance if permanent access to the Rainville Property was provided for over dry land. [ 66 ] While possible subdivision was discussed, it was not agreed on, there is no subdivision plan for the property and there is no planning approval for a subdivision.

In the circumstances, there is no basis for physical division of the land. Furthermore, there is no appraisal evidence valuing each of the parcels proposed by the Rainvilles. Physical division would not be an appropriate remedy ( Sheffield Welsing and Fabricating Ltd. v. 958760 Alberta Ltd. , 2003 ABQB 181 ). 3.

Easement [ 67 ] The Rainvilles have asked for an easement over the Fanta Property to access their adjacent property. [ 68 ] Laura Rainville deposed in her November 14, 2008 affidavit that Johanna Pontin said she was interested in the Fanta property because it would be a good investment and she would like to help the Rainvilles solve their access problem by acquiring the property so that they could acquire an easement over it to the Rainville Property.

Laura Rainville also deposed that after Christopher Fanta died, Johanna Pontin again told her she was interest in purchasing the property with them and assured her that if the Rainvilles bought the property, an easement to provide access to the Rainville Property would be granted to solve their access problem.

Laura Rainville asserted that in early June 2007, Thomas Pontin told her: “Just wait until you get your easement on the Fanta property, you won’t have to worry about this [the Coggans denying them access over the easement on the Coggan property] anymore.” [ 69 ] Laura Rainville deposed that the Hennings told the Pontins they were interested in becoming partners in the Fanta Property because it would be a solution to the Rainville property’s access problem. [ 70 ] In an April 9, 2009 cross-examination on his affidavits of October 16, 2008 and January 29,2009, Thomas Pontin denied that he agreed with Laura Rainville that the purchase of the Fanta Property would provide a resolution to the Rainville’s easement problem, and denied that he said anything about granting an easement.

He admitted that he did state that acquisition of the quarter and its future subdivision would solve their access problems. In his cross-examination on affidavit, he explained that it was his understanding from information provided by Laura Rainville that a panhandle form of access to the Rainville Property from the county road likely would be required by the County as a condition of subdivision approval.

[ 71 ] The minutes of a meeting held between the parties on January 19, 2008, which are attached as an exhibit to Laura Rainville’s affidavit, state: Rob and Laura have requested an easement on the CCE Farm to access their property. No decision was reached at the meeting.

Further discussions within our group will be necessary before any application [for subdivision] can be considered or submitted. [ 72 ] In her November 14, 2008 affidavit, Laura Rainville deposed that Thomas Pontin acknowledged at the meeting that an easement had been promised but expressed concern that establishing an easement on the Fanta Property would devalue the property. In cross-examination on her affidavit, she agreed there was no written easement agreement.

She also agreed there was no verbal agreement about lot line distribution. [ 73 ] The Rainville’s written argument states that a service trail is maintained across the Fanta Property to the Rainville Property to allow access for larger vehicles that cannot cross the bridge on the Coggan Property easement due to weight and the sharp turn after the bridge. [ 74 ] The Rainvilles have access to their other property by way of an easement over the Coggan Property. This access has been problematic.

I accept that one of the reasons they purchased their interest in the Fanta Property was to acquire an alternative access to their other land. [ 75 ] While there is a dispute between the parties as to what was said between them about a possible easement prior to their purchase of the Fanta Property, the Rainvilles do not claim that the Pontins, after purchasing their interest in the land, agreed to or did grant the Rainvilles an easement over the property. None of the materials filed suggest or evidence such an agreement.

At most, Laura Rainville appears to allege the Rainvilles and Hennings purchased their interest in the Fanta Property based on representations by the Pontins that it would provide an opportunity for Rainvilles to have an easement over the property. [ 76 ] In my view, there is no basis for me to order or grant a right-of-way or easement over the Fanta Property in favour of the Rainvilles. 4. Sale to a Co-owner [ 77 ] In C.

Keay Investments Ltd. (Ocean Trailer) v. 1157089 Alberta Ltd. , 2007 ABCA 74 at para. 9 , the court held that principles of fairness, reasonableness, practicality and equality should be considered by the court when exercising its discretion under s. 15(2) (

c) of the LPA . [ 78 ] In his cross-examination on affidavit, Thomas Pontin indicated that he did not object to the Rainvilles and Hennings purchasing the Pontins’ interest in the property for an acceptable price.

In answer to an undertaking given, he advised that the other co- owners [presumably referring to his wife and Timothy and Jackie Pontin] of the Pontins’ interest in the property similarly would have no objection. [ 79 ] In written argument, however, the Pontins say there is insufficient evidence that the Rainvilles are ready and willing to buy out the Pontins’ interest. [ 80 ] The Rainvilles indicated in written argument filed in November 2009 that they were opposed to the sealed bid process suggested by the Pontins as that process would allow the party with deeper pockets to acquire the property.

They proposed in their argument that the Court direct they purchase the Pontins’ interest in the Fanta Property for $101,000.00 on the following terms:

(1) The Rainvilles will assume or refinance the ATB mortgage;

(2) The Rainvilles will assume or refinance the Henning mortgage;

(3) No adjustments, contributions or compromise to increase or decrease that figure is to be made in relation to the Fanta Property or its tenancies;

(4) The elk herd and equipment shall be sold back to the elk rancher that it was acquired from with the proceeds divided equally between the parties;

(5) My order shall remain in effect as it relates to the White House Property;

(6) The Rainville’s claim for damages shall be deemed to be satisfied;

(7) The Rainvilles shall have their costs paid by the Pontins. [ 81 ] The Rainvilles responmded in written argument that they were ready, willing and able to buy the Pontin’s interest in the Fanta Property. [ 82 ] The Pontins assert that they should be allowed to purchase the Fanta Property for the following reasons: (

a) The parties wanted to develop the property for subdivision for profit in the future. (

b) The Rainvilles’ access problem could be resolved on subdivision of the property. (

c) The Rainvilles already have access to their adjacent property through the Coggan Property. (

d) The Pontins have demonstrated a readiness and willingness to purchase the Rainvilles’ interest in the property. They have not made offers involving the White House Property or CCEF operations. [ 83 ] In written argument, the submit it would be reasonable for them to buy out the Rainvilles’ interest for $154,000.00 on the following terms: (

a) Pontins assume the ATB mortgage. (

b) Pontins pay out the Henning mortgage. (

c) No adjustments, contributions or compromises to increase or decrease that figure. (

d) The Pontins support any requirement for access by the County as a result of future subdivision applications. [ 84 ] The Pontins assert this figure takes into account any claims, even those without merit, advanced by the Rainvilles in the sum

of $53,000.00. [ 85 ] The difficulty with the proposals being put forward by both parties is that seek to incorporate and ostensibly compromise collateral matters involving their overall business relationship notably the disputes over leasing and management of the tenancies. Fundamentally, although both parties are prepared to purchase the Fanta lands from the other neither agrees the other is offering a fair price. With the evidence before the Court at this point it is impossible to assess the validity and value of their respective claims for damages or otherwise. 5.

Valuation [ 86 ] Section 15(4) of the LPA provides that in making an order under subsection 15(2)(c), the Court is to fix the value of the land sold and the terms of the sale. [ 87 ] The parties became registered owners of the Fanta property in October, 2007. The transfer of land gave the value of the property as $850,000, which was the purchase price. [ 88 ] In an affidavit sworn on January 15, 2009, Ken Kirk, an accredited appraiser, deposed that he was retained by the Pontins to conduct an appraisal of the Fanta Lands. He prepared an appraisal dated August 23, 2008.

The purpose of the report was to provide a market value estimate for partnership buyout purposes. The effective date of the analysis was August 6, 2008. The property was assigned a value estimate of $850,000.00. The actual appraiser’s certificate is signed by Michael J. Cearns of Accord Appraisal Company, but endorsed by Mr.

Kirk, who did not inspect the property. [ 89 ] On November 3, 2009, Gary Stratichuk, a certified residential appraiser, deposed that on March 10, 2009, he personally inspected the exterior and interior of the Fanta Property and attached to his affidavit is a report as to the condition and value of the land and improvements. The report indicates it was prepared for the Pontins.

The land and improvements were valued at $745,000.00. [ 90 ] In a supplemental affidavit filed on April 26, 2010, Timothy Pontin, one of the beneficial owners of the Fanta Property, deposed on behalf of himself, the Pontins and Jackie Pontin that he had been informed by his solicitors that by mid October 2009 the Pontins and Rainvilles had agreed the Fanta Property was worth $725,000.00 to $730,000.00. [ 91 ] In written argument, the Pontins stated that the parties agreed that as of September 28, 2009 the value of the Fanta Property was between $725,000.00 and $730,000.00. 6.

Manner of Sale and Proceeds [ 92 ] The Court must craft a process which practically and effectively allows for marketing of the Fanta lands in the context of these proceedings and in light of the issues between the parties. It is clear that all parties participating purchased the lands for their perceived development potential and for the making of a profit. The Rainvilles and Hennings were, with the knowledge of the Pontins, also strongly motivated by the collateral benefit to the Rainvilles of obtaining a more favourable access to their adjoining lands.

Although there was no agreement reached among the participants in my view fairness dictates that some consideration must given to that factor.

[ 93 ] Although the Rainvilles expressed concern over the financial strength of the respective parties in opposing a sealed bid process by the parties I believe such an approach would provide one last opportunity for them to retain the lands and resolve their access issue. However, I do not propose to foist that approach upon the Rainvilles but will give them the choice to proceed in this fashion if they so wish. Alternatively, the property will be listed for sale as set out below.

The Rainvilles choice of alternatives shall be communicated to the Pontins on or before January 15th, 2011 with sealed bids being delivered to the Masters Office no later than January 25th, 2011. Offers will be opened by the Master and his decision to the parties as to which offer is accepted will be in morning chambers on January 28 th , 2011. Offers shall be unconditional, made on an as is basis, accompanied with a good faith deposit of not less than 5% of the purchase price and closing no later than 30 days following Court approval.

The mortgages on the property may only be assumed with the consent of the Mortgagees. [ 94 ] If the Rainvilles do not wish to proceed with the sealed bid then the property will be immediately listed for sale with a licensed realtor for a period of 120 days at $730,000 or such higher amount as may be recommended by the listing realtor following completion of a comparative market analysis. If the parties are unable to agree on a realtor, each party may present their recommendation and the Court will make the selection.

Commissions will be the usual 7 % on the first $100,000 and 3% on the remainder unless the realtor is prepared to accept a lesser amount. [ 95 ] All offers will be presented by the realtor to the parties within 3 days of their receipt and an application to accept or reject an offer shall made to the Court within 14 days thereafter. Proceeds of sale shall be used firstly to pay property taxes, any GST payable to Canada Revenue Agency arising from this sale, realtor’s commissions including GST, and reasonable legal fees and disbursements incurred for the sale. 7.

Issues Affecting Payment of Balance of Proceeds [ 96 ] Prior to distribution of the balance of the proceeds of sale there are a number of issues that must be addressed and resolved. [ 97 ] Section 17(1) of the Act provides that in making an order terminating co-ownership, the Court may direct that an accounting, contribution or adjustment take place in respect of the land and compensation, if any, be paid for an unequal distribution.

The Court, in determining whether to direct an accounting, contribution, adjustment or compensation, is to consider, together with any matter it regards as relevant in making the determination, the following factors set out in ss. 17(2): (

a) one co-owner has excluded another co-owner from the land; (

b) an occupying co-owner was tenant, bailiff or agent of another co-owner; (

c) a co-owner has received from third parties more than the co-owner's just share of the rents from the land or profits from the reasonable removal of its natural resources; (

d) a co-owner has committed waste by an unreasonable use of the land; (

e) a co-owner has made improvements or capital payments that have increased the realizable value of the land; (

f) a co-owner should be compensated for non-capital expenses in respect of the land; (

g) an occupying co-owner claiming non-capital expenses in respect of the land should be required to pay a fair occupation rent;

(

h) a co-owner has at the time the application is made under this Part rights in the land for which the co-owner would receive compensation under the Dower Act if an order had been made under that Act dispensing with that co-owner's consent to the disposition of that land. [ 98 ] Laura Rainville has deposed that the Pontins have committed waste by not making sufficient efforts to rent out some of the facilities and by letting the property deteriorate, letting the commercial tenant not pay rent, letting the crane in the barn go unattended, and not evicting the commercial tenants.

The Rainvilles are claiming $53,000.00, including approximately $13,000.00 for contribution. [ 99 ] In argument, the Pontins respond that Thomas Pontin did what he could to collect rent and find other tenants and there is no evidence he forgave rent or authorized or participated in causing damage to the property. Further, they argue there is no evidence they consented to or participated in causing damage to the house.

They deny the Rainvilles’ allegations of waste and mismanagement except that they acknowledge $1,869.15 would be the contribution they would have to pay, subject to the direction of the Court on further accounting where the Pontins have made direct mortgage payments to ATB, to the Hennings and have paid over the sum of $1,869.15. [ 100 ] There is clearly a dispute over the allegations of waste. [ 101 ] There is also the matter of the characterization and terms of the business relationship among the parties. [ 102 ]

Section 28 of the Partnership Act states that: 28. Subject to

section 12 and subject to an agreement, express or implied, between the partners, the interest of partners in the partnership property and their rights and duties in relation to the partnership shall be determined by the following rules: (

a) all the partners are entitled to share equally in the capital and profits of the business and shall contribute equally toward the losses, whether of capital or otherwise, sustained by the firm, but a partner is not individually liable to contribute to losses arising from a liability for which the partner is not liable under

section 12; (

b) the firm shall indemnify each partner in respect of payments made and personal liabilities incurred by the partner (

i) in the ordinary and proper conduct of the business of the firm, or (ii) in or about anything necessarily done for the preservation of the business or property of the firm, but a partner is not required to indemnify or make contributions to other partners in respect of debts or obligations of the partnership for which the partner is not liable under

section 12; (

c) a partner who makes for the purpose of the partnership a payment or advance beyond the amount of capital that the partner has agreed to subscribe is entitled to interest from the date of the payment or advance; (

d) a partner is not entitled before the ascertainment of profits to interest on the capital subscribed by the partner; (

e) each partner may take

part in the management of the partnership business;

(

f) no partner is entitled to remuneration for acting in the partnership business; (

g) no person may be introduced into the firm as a partner without the consent of all existing partners; (

h) a difference arising as to ordinary matters connected with the partnership business may be decided by a majority of the partners; (

i) no change may be made in the nature of the partnership business without the consent of all existing partners; (

j) the partnership books are to be kept at the place of business of the partnership, or the principal place of business if there is more than one, and each partner may have access to and inspect and copy any of the books. 32.

Each partner is bound to render true accounts and full information of all things affecting the partnership to any partner or any partner's legal representative. [ 103 ] Pursuant to s. 36(1)(c), a partnership is dissolved if entered into for an undefined time or by a partner giving notice to the other partner or partners of that partner's intention to dissolve the partnership. [ 104 ] Laura Rainville takes the position that the parties were involved in a partnership or joint venture and seeks an accounting, contribution and adjustment in terms of not only the Fanta Property but also of the White House Property and the CCEF operations. [ 105 ] In the affidavit evidence filed in support of the Rainville’s cross-application and in their written submissions, they allege the parties were involved in a partnership or joint venture and that the Fanta Property, White House Property and the elk farm operations were partnership property.

They ask that the Fanta Property and the elk farm operations on it be transferred to them and the Hennings, with an equalization payment being made to the Pontins after the Pontins have provide an accounting of the properties and business operations. [ 106 ] Laura Rainville stated in her affidavit of November 14, 2008 that although the joint venture partners at a meeting on January 19, 2008 decided that Thomas Pontin would draw up a joint venture agreement, he did not do so.

The Rainvilles have not specifically sought in their cross-application to terminate the partnership or joint venture, if there is one, although they ask in their cross-application that the elk farm operations be transferred to them and in their 2010 action seek partition and sale of the White House Property.

The Pontins take the position there was no partnership and not sufficient consensus to justify preparation of a joint venture agreement. [ 107 ] From the materials filed in support of the applications, it is clear there is dispute as to whether there was a partnership or joint venture agreement between the parties and, if there was, what the terms of that agreement were. [ 108 ] These matters together with the claims for accounting are inextricably connected. It simply isn’t possible to resolve all of the disputes in a chambers setting.

Proper pleadings must be issued to define the issues and set the parameters of the litigation going forward. [ 109 ] Under these circumstances I direct the balance of funds be held and not distributed further except upon express agreement by the parties or further Court Order. V. Conclusions

[ 110 ] The application for termination of the co-ownership of the Fanta Property is granted. [ 111 ] The Fanta property will be disposed of through the sealed bid process if so elected by the Rainvilles failing which it will be listed for sale as described above. [ 112 ] Directions are required to deal with the seeming myriad of disputes and issues among these parties. Some of these are already before the Case Management Judge. It is unworkable for a number of Masters or Judges to deal with the remaining matters and attempt to move them forward in an efficient and logical manner.

It is entirely appropriate in my view for the parties to bring an application before the Case Management Judge for the required directions. [ 113 ] Costs of these applications are best dealt with in the discretion of the trial judge at the end of the day. Dated at the City of Edmonton, Alberta this 9 th day of December, 2010. L.A. Smart M.C.C.Q.B.A. Appearances: John C. Bilsland Weir Bowen LLP for the Pontins and Timothy Pontin and Jackie Pontin William B. Hogle for the Rainvilles