Bank of Montreal v Bala, 2017 ABQB 38

Court of Queen’s Bench of Alberta Citation: Bank of Montreal v Bala, 2017 ABQB 38 Date: 20170119 Docket: 1403 00577 Registry: Edmonton Between: Bank of Montreal Appellant/Cross-Respondent/Plaintiff - and - Renu Bala and Fryad Singh Pannu Defendants - and - The Owners: Condominium Plan No. 812 0494 o/a Marilyn & Lyn Manor Respondent/Cross-Appellant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice K.P. Feehan

_______________________________________________________ I.

Introduction [ 1 ] The Bank of Montreal (“BMO”) appeals, and The Owners: Condominium Plan No. 812 0494 o/a Marilyn & Lyn Manor (“Manor Condo Corp”) cross-appeals, the decision of the Master on an application of Manor Condo Corp to vary an amount owing on a Redemption Order pronounced May 8, 2014 during the course of foreclosure proceedings, pursuant to the Condominium Property Act , RSA 2000, c C-22, as amended (“ CPA ”): Bank of Montreal v Bala , 2015 ABQB 166 , [2015] AJ No 274. [ 2 ] Manor Condo Corp claimed various costs were “contributions”, and therefore caveatable charges under the CPA . II.

Overview [ 3 ] A short chronology of BMO’s foreclosure action follows: January 14, 2014: BMO filed a Statement of Claim in foreclosure against Renu Bala as original Unit owner and mortgagor for failure to pay monthly installments on a mortgage on the Unit; January 14, 2014: Certificate of Lis Pendens registered against the Unit; March 10, 2014: Noting in Default of the defendant Renu Bala; March 18, 2014: Statement of Claim amended to add defendant Fryad Singh Pannu, as subsequent Unit owner and mortgagor; April 17, 2014: Noting in Default of the defendant Fryad Singh Pannu; April 22, 2014: BMO filed Notice of Application for, amongst other remedies, an order setting redemption period, directing advertising, and appointing Receiver of Rents; with attached filed Land Title Certificate, Affidavit of Value and Valuator’s Report, and Affidavit of Default; May 13, 2014: Redemption Order filed, setting the amount outstanding from the defendants to BMO at $82,013.63, allowing one month to apply to vary the amount declared owing, setting a one day redemption period, allowing for Judicial Sale of Mortgaged Lands, and awarding costs on a solicitor/client basis, amongst other directions; May 29, 2014: Posting of the Notice of Judicial Sale of Mortgaged Lands with a return date of June 11, 2014; June 18, 2014: Filing of an Affidavit of Search indicating that no monies had been paid into Court and no tenders received pursuant to the Redemption Order, filing of an Order of Sale to Plaintiff for $80,000, and requiring the then current tenant to vacate the Unit on or before June 30, 2014; June 26, 2014: Order that the current tenant pay rent on or before July 1, 2014 and deliver up vacant possession of the Unit on or before July 31, 2014; and July 5, 2014: Transfer to BMO of title to the Unit. [ 4 ] On March 18, 2014, prior to transfer of title to the Unit to BMO, Manor Condo Corp filed a caveat against title in the sum of $16,132.99.

In response to the Redemption Order, Manor Condo Corp filed an application on June 6, 2014 to vary the amount declared owing to BMO, claiming priority for certain amounts pursuant to the Condominium Property Act , RSA 2000, c C-22, as amended ( CPA ). The Master rendered her decision on that application March 10, 2015, and the resulting Order varying amounts owing was filed August 10, 2015. III.

Master’s Decision [ 5 ] The Master considered whether certain costs incurred by Manor Condo Corp are caveatable interests, being “contributions” due and owing to it within the meaning of ss 39 and 41 of the CPA , or merely debts against the Unit owners and mortgagors entitling the corporation only to in personam remedies. She determined that: 1. A $20,000 insurance deductible and $3,640.69 paid for repair expenses were “contributions” levied under s 39 of the CPA , constituting a caveatable interest; 2.

The interest on those amounts were “contributions” by virtue of ss 40 and 41 of the CPA , constituting a caveatable interest; 3. Reasonable expenses incurred by Manor Condo Corp for the preparation, registration and enforcement of the caveat filed to protect its interests were recoverable by it as part of the caveatable interest; and 4. The full indemnity costs were recoverable as an in personam debt. [ 6 ] BMO appeals the first three determinations.

Manor Condo Corp cross-appeals with respect to the fourth determination. [ 7 ] I note that Paragraphs 1 and 2 of the resulting order filed on August 10, 2015 do not address the $3,640.69 in repair costs. As

well, Paragraph 3 of the order provides that Manor Condo Corp’s claim for recovery of solicitor/client costs is not recoverable from BMO. The Master did declare that Manor Condo Corp was entitled to costs to be assessed on a solicitor and own client full indemnity basis, to be collected as an in personam debt. IV. Standard of Review [ 8 ] The standard of review on an appeal from the Master is correctness: Bahcheli v Yorkton Securities Inc , 2012 ABCA 166 , [2012] AJ No 540 at paras 3 , 30. V. Issues [ 9 ] On this appeal, the Court must determine the following issues: A.

Is the disproportionate contribution levied by Manor Condo Corp on the Unit owners valid? B. If so, are the insurance deductible and repair costs “contributions” attracting a statutory priority over a foreclosing mortgagee? C. If so, is the interest accruing on the insurance deductible and repair costs a “contribution” attracting a statutory priority? D. Do solicitor/client or indemnity costs attract a similar priority? E. Do expenses related to the caveatable interest of Manor Condo Corp attract a similar priority? F.

Do any priorities available to Manor Condo Corp affect the in personam claims against the original and subsequent Unit owners and mortgagors? VI. Law A. CPA [ 10 ] The following provisions of the CPA are most germane to the issues: 39

(1) In addition to its other powers under this Act, the powers of a corporation include the following: (

a) to establish a fund for administrative expenses sufficient, in the opinion of the corporation, for the control, management and administration of the common property, for the payment of any premiums of insurance and for the discharge of any other obligation of the corporation; (

b) to determine from time to time the amounts to be raised for the purposes mentioned in clause (a); (

c) to raise amounts so determined by levying contributions on the owners (

i) in proportion to the unit factors of the owners’ respective units, or (ii) if provided for in the bylaws, on a basis other than in proportion to the unit factors of the owners’ respective units; (

d) to recover from an owner by an action in debt any sum of money spent by the corporation (

i) pursuant to a bylaw, or (ii) as required by a municipal authority or other public authority, in respect of the unit or common property that is leased to that owner under

section 50.

(2) A contribution levied as provided in subsection (1) is due and payable on the passing of a resolution to that effect and in accordance with the terms of the resolution, and may be recovered by an action for debt by the corporation (

a) from the person who was the owner at the time when the resolution was passed, and (

b) from the person who was the owner at the time when the action was instituted, both jointly and severally.

(3) Where a contribution is levied under subsection (1) and is not paid by the owner, the mortgagee may pay any amount owing in respect of that contribution and add that amount to the amount owing to the mortgagee under the mortgage. ...

(7) A corporation may file a caveat against the certificate of title to an owner’s unit for the amount of a contribution levied on the owner but unpaid by the owner.

(8) On the filing of the caveat under subsection (7), the corporation has a charge against the unit equal to the unpaid contribution.

(9) A charge under subsection (8) has the same priority from the date of filing of the caveat as a mortgage under the Land Titles Act and may be enforced in the same manner as a mortgage.

(12) Notwithstanding subsection (9), if (

a) a corporation has filed a caveat under this section, (

b) subsequent to the caveat’s being filed another person gains title to the unit pursuant to (

i) a foreclosure action, and (

c) an amount remains owing to the corporation with respect to the contribution for which the caveat was filed, that caveat shall remain registered against the certificate of title of the unit until the amount owing is paid to the corporation. 40

(1) A corporation may charge interest on any unpaid balance of a contribution owing to it by an owner.

(2) Notwithstanding subsection (1), the rate of interest charged under subsection (1) is not to be greater than the rate of interest provided for by regulation. 41 If any interest referred to in

section 40... is owing by an owner to a corporation, the corporation may, in addition to any rights of recovery that it has in law, recover that amount in the same manner as a contribution under

section 39 and for that purpose that amount is to be considered as a contribution under

section 39. 42 Where a corporation takes any steps to collect any amount owing under

section 39, the corporation may (

a) recover from the person against whom the steps were taken all reasonable costs, including legal expenses and interest, incurred by the corporation in collecting the amount owing, and (

b) if a caveat is registered against the title to the unit, recover from the owner all reasonable expenses incurred by the corporation with respect to the preparation, registration, enforcement and discharge of the caveat. B. Case Law [ 11 ] In Condominium Plan No 8222909 v Francis , 2003 ABCA 234 at paras 26-27 , 330 AR 297, leave denied [2003] SCCA No 446, the Court of Appeal held that a condominium corporation is created by the CPA and derives all of its powers from that statute.

It noted that s 20(4) of the CPA expressly states that a condominium corporation does not have the powers of a natural person bestowed on corporations under the Business Corporations Act , RSA 2000, c B-9. [ 12 ] The Court cautioned at paras 30 and 32 that broad, liberal, and remedial

interpretations do not permit courts to ignore the words of an enactment.

The Court emphasized that it is not the role of the court to enlarge what the legislature had chosen to enact by imposing what it considers to be fair on a case-by-case basis in order to avoid inequities that might occur as a result of the enforcement of the plain meaning of the legislative provisions. [ 13 ] The Court concluded that the CPA did not permit a condominium corporation to establish a scheme whereby it would collect fees on a basis other than unit factors, even in order to avoid perceived inequity. [ 14 ] The Legislature responded to Francis by amending the CPA in 2000, including the addition of s 39(1)(c)(ii) which allows a corporation to levy contributions “if provided for in the bylaws, on a basis other than in proportion to the unit factors of the owners’ respective units”. [ 15 ] In Condominium Plan No 8722887 v Callaghan , 2011 ABQB 638 , [2011] AJ No 1103, the condominium corporation filed a caveat in relation to expenses resulting from a bed bug infestation in a unit.

There was no foreclosure or claimed priority by the condominium corporation over a mortgagee. The corporation sought to recover money spent by the corporation from an owner by an action in debt under s 39(1)(d), not a levy pursuant to s 39(1)(c)(ii) of the CPA . Relying on cases pre-dating the 2000 amendment of the CPA , Master Schlosser held that collective obligations achieve an in rem quality and are thought to have a “super-priority” whereas individual remedies remain in personam and are enforced with the usual range of personal remedies.

Since the amendment of the CPA and the addition of s 39(1)(c)(ii), individual obligations which are specifically contemplated in the bylaws as a result of levying a disproportionate contribution, would also achieve an in rem quality and a “super-priority”. [ 16 ] Master Schlosser noted at paras 7 and 8 that in recognition of the priority, a practice has developed whereby foreclosing mortgagees pay the outstanding contributions together with legal expenses. He stated that s 42(

a) of the CPA permits recovery of costs and expenses incurred by the corporation but does not give any priority to legal fees or expenses. He held that s 42(

b) permits recovery of reasonable expenses arising from the preparation, registration, enforcement and discharge of the caveat, but this does not otherwise include legal fees. [ 17 ] In Condominium Corporation No 0425117 v Jessamine , 2011 ABQB 644 , 527 AR 342, the condominium corporation applied for

summary judgment for outstanding condominium fees plus interest and costs. Once again, this application was between the condominium corporation and a unit owner. It did not involve a claim of a priority in a foreclosure action, nor did it engage s 39(1)(c)(ii). Master Smart found that outstanding contributions constituted a charge against the property under s 39(7) of the CPA , as did interest by virtue of s 41. He found that s 42(1) permitted the condominium corporation to recover legal fees only “from the person against whom steps were taken”. He held that reasonable expenses for the preparation, registration, enforcement and discharge of the caveat under s

42(2) may be recovered as part of the action with appropriate evidence, but that legal expenses were not part of the expenses contemplated by s 42(2). [ 18 ] In Condominium Plan No 8210034 v King , 2012 ABQB 127 , 534 AR 161, condominium corporations had enacted bylaws allowing for inclusion of various types of expenses in assessments levied from owners. Master Prowse observed that condominium corporations usually levy assessments from owners of units based on the square footage of a unit. He considered s 39(1)(

a) of the CPA and concluded at para 18 that a condominium corporation can only levy assessments for expenses incurred or to be incurred and not for such things as unpaid fines or unpaid rent. [ 19 ] He found that the intent of the amendments was to allow a condominium corporation to pass a bylaw authorizing it to levy assessments against a particular unit for expenses incurred as a result of the conduct of that unit owner, and that this could result in disproportionate assessments due to the conduct of one unit owner which has led to the increased expenses. [ 20 ] Master Prowse set out four steps to evaluating a condominium corporation’s claim: 1.

If the claim is for a typical assessment, or overdue interest on such assessment, then the claim is protected by the statutory charges under sections 39 and 41 of the CPA . There is no need for any review of the bylaws in this regard, other than to confirm the interest rate chargeable on overdue assessments. 2. If the claim is for other expenses incurred with respect to a particular unit then the bylaws of the corporation must be examined to determine if they allow these expenses to be included as part of the assessment against that particular unit.

If the bylaws clearly allow this, then these expenses, and interest on them, are statutory charges under ss 39 and 41 of the CPA . 3. Claims which do not fall under item 1 or item 2 may be subject to a contractual charge pursuant to the corporation’s bylaws. Some bylaws grant a charge against units to secure all amounts owed by that unit owner to the corporation. If adequately worded, this contractual charge would cover things such as collection expenses not brought under item 2, unpaid fines, unpaid rents, etc. 4.

Any claims which do not fall under items 1, 2, or 3 are unsecured. [ 21 ] Master Prowse determined that the condominium corporations before him were entitled to recover unpaid monthly assessments, unpaid special assessments levied by two of them, and interest, as secured by a statutory charge which ranked in priority to registered mortgagees. [ 22 ] He concluded that recovery of all other amounts was dependent upon the specific bylaws of the condominium corporation.

He examined each set of bylaws to determine whether different types of expenses were secured by a statutory charge, the subject of only a contractual charge, or were not contemplated at all in the bylaws. [ 23 ] In Bank of Montreal v Rakaruna , 2014 ABQB 415 , [2014] AJ No 728, a condominium corporation placed a caveat on title in relation to an unpaid fine for a noise violation. The mortgagee paid related amounts on the owner’s behalf during a foreclosure action and then unsuccessfully applied for

summary judgment against the owner before the Master. Further appeal before Dario J. was dismissed. She held that the remedies in ss 39(7) and (9) of the CPA were reserved for “contributions” which are defined in s 39(1)(

a) as administrative expenses sufficient for the control, management and administration of the common property, for the payment of any insurance premiums and for the discharge of any other obligation of the corporation. She said that while there may be some expenses that pertain to collection fees or interest that could be characterized as contributions, the breadth of this remedial right does not extend to anything a corporation condominium chooses. She found that the mortgagee did not satisfy its evidentiary burden to show that a fine for a noise violation constituted a property claim pursuant to the mortgage.

She also found that non-payment of a witness fee for the participation by a representative of the management company at a related residential tenancy hearing did not constitute a default under the mortgage triggering the mortgagee’s right to reimburse the condominium corporation and then collect from the unit owner. [ 24 ] In Condominium Plan No 052 6233 v Seehra , 2014 ABQB 588 , [2014] AJ No 1059, the owner of a condominium unit rented it to tenants who engaged in a marijuana grow-op.

The condominium corporation obtained court orders to inspect the unit for health hazards, effect repairs and restore utilities at the unit. Lee J. found that “improper conduct” had taken place under s 67(1)(a)(

i) of the CPA , entitling the condominium corporation to recover costs. Lee J. further found that the bylaws provided that expenses incurred in remedying an infraction, including solicitor client costs, would be added to the assessment of the unit owner, and therefore they were covered by the statutory charges under ss 39 and 41. [ 25 ] In Condominium Corp No 0312235 v Scott , 2015 ABQB 171 , [2015] AJ No 333, two individuals purchased units in condominium property. The bylaws provided for voluntary participation in a rental pool. That provision was later amended to require mandatory participation in the pool.

The individuals withdrew their units from the pool and began renting them individually, ceasing to share income and expenses with the rental pool. Section 32(5) of the CPA prohibits bylaws from restricting lease of units. Ackerl J. found that the rental provisions of the bylaws did not comply with s 32(5).

He held that the CPA prevails over bylaws, and that the amendments purporting to compel the owners to participate in the rental pool were contrary to the CPA and invalid. [ 26 ] In Sager v Condominium Plan No 9523979 , 2015 ABQB 549 , [2015] AJ No 950, the condominium corporation registered a caveat relating to a fine imposed on a unit owner for parking a minibus in his assigned parking space. The mortgagee paid these amounts and demanded reimbursement as part of the default under its mortgage.

Master Smart held that the claim was for improperly alleged condominium fee arrears; in substance, they were unproven fines. There was no provision in the bylaws permitting the condominium corporation to add expenses or fines to an assessed contribution, nor did the bylaws purport to create a contractual charge on a unit for such things.

Master Smart adopted Ackerl J.’s reasoning in Scott , and rejected the reasoning in Seehra , finding it to be at odds with Francis in allowing the creation of charges on land by a condominium corporation not expressly authorized by the CPA . [ 27 ] In Condominium Corp No 311443 v Goertz , 2016 ABCA 362 at para 36 , [2016] AJ No 1195, the Court of Appeal held that neither a specific nor an accurate amount need be identified in the caveat, as a caveat does not create a right of recovery in a certain amount, but only gives third parties notice of a claim to some entitlement, the value of which is to be separately determined.

VII. Analysis [28] The Master found two lines of case law espousing distinct statutory

interpretations: the “restrictive” approach followingJessamine, Callaghan and a more “liberal” approach following King. Master Schlosser in Condominium Corp No 052 4877 v Bonner,2015 ABQB 263, [2015] AJ No 472 at para 16, found a similar division in the case law. [29] With respect, I find it neither necessary nor helpful to divide the foregoing cases in this way and to opt for one approach overthe other. [30] The Supreme Court in Rizzo & Rizzo Shoes Ltd (Re), (SCC), [1998] 1 SCR 27, [1998] SCJ No 2 at para 21,cited with approval Driedger on the Construction of Statutes, 2nd ed (Toronto: Butterworths, 1983) at 87: Today there is only one principle or approach, namely, the words of

an Act are to be read in their entire context and in their grammaticaland ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. [31] I do not interpret Francis as laying down a contrary rule of

interpretation. [32] Section 39(1)(c)(ii) is clear when read in the entire context of the CPA, in its grammatical and ordinary sense, harmoniouslywith the scheme of the statute, its object, and the intention of the Legislature’s amendments in 2000. [33] A condominium corporation is entitled to levy a disproportionate contribution against one or more units, but the right to raiseamounts by levying contributions in this fashion must be provided in the bylaws. [34] While the word “contributions” are not defined in s 1(1) of the CPA, ss 39(1)(

a) to (

c) clearly described them as creating afund to cover “administrative expenses sufficient, in the opinion of the corporation, for the control, management and administration ofthe common property, for the payment of any premiums of insurance and for the discharge of any other obligations of the corporation”.Section 39(1)(

c) refers to levying contributions to raise “amounts so determined” (referring to s 39(1)(b)), being those amounts to beraised for the purposes mentioned in s 39(1)(a). [35] Administrative expenses exclude fines, unpaid rent, penalties or sanctions imposed by the condominium corporation. Theyinclude actual out-of-pocket expenses that arise from the control, management and administration of the common property, the paymentof insurance premiums and the discharge of any other obligation of the corporation. [36] Section 39(1)(c)(ii) requires that the bylaws provide for any disproportionate levy.

Section 39(2) provides that a contributionis due and payable on the passing of a resolution to that effect. When the contribution remains unpaid, the mortgagee may pay theamount owing and add it to the amount owing under the mortgage pursuant to s 39(3). [37] A condominium corporation may file a caveat against title for the unpaid contribution under s 39(7), giving it a charge againstthe unit equal to the unpaid contribution. [38] I conclude that Manor Condo Corp can levy disproportionate contributions on the condominium owners within theseparameters if: (

a) its bylaws authorize a disproportionate contribution; and (

b) it has passed a resolution authorizing a contribution to be levied. [39] If these criteria are met and a caveat is registered on title, s 39(8) creates a statutory charge in favour of Manor Condo Corphaving priority over a prior registered mortgage, as the caveat remains registered against the title until the amount owing is paid to thecorporation pursuant to s 39(12). A. Is the disproportionate contribution levied by Manor Condo Corp on the Unitowners valid? 1. Bylaws [40] Based on a plain reading of Manor Condo Corp’s bylaws, adopting the same principled approach to statutory

interpretationespoused in Rizzo, I find that: 1. Manor Condo Corp has authorized a disproportionate contribution to be levied against a condominium owner under the followingcircumstances: (

a) A claim is made under a policy of insurance maintained by the corporation; and (

b) The cause of the loss or damage for which the claim is made is a negligent or wrongful act, omission or a breach of the bylawsby the owner or his tenants, family, guests, invitees or licensees (bylaw 46, final paragraph). 2. The deductible amount of such insurance is recoverable by the condominium corporation “as if it were a Common Expenselevy”, on the basis that: (

a) It is the duty of the condominium board to obtain and maintain insurance on all units for replacement value (bylaw 46, firstparagraph);

(

b) It is the duty of the condominium corporation to provide and maintain all insurance required by the CPA and the bylaws (bylaw 9(m)); (

c) An owner is required to pay to the condominium corporation the amount of any insurance deductible applicable to loss or damage caused by the negligent or other wrongful act or omission or breach of the bylaws (bylaw 46, final paragraph); (

d) That deductible amount is recoverable by the condominium corporation “as if it were a common expense levy upon the Owners Unit or Units and will be a charge upon such Unit or Units” (bylaw 46, final paragraph), thereby authorizing the condominium corporation to raise amounts for administrative expenses to discharge an obligation of the condominium corporation (s 39(1)(a), CPA ) on a basis other than in proportion to the unit factors of the owners respective units, or disproportionately (s 39(1)(c)(ii), CPA ) providing that there is a negligent or wrongful act, an omission or breach of the bylaws.

Such negligent or wrongful act or omission or breach of the bylaws must be proven to the satisfaction of the condominium corporation, and a reasonable inference that such has occurred must be available to the Court; and (

e) Collection of such a deductible amount is to be made as if it were a common expense levy (bylaw 46, final paragraph). It is not necessarily a common expense levy, it is only recoverable as if it were so. 3. Common Expense levies are collectable against a Unit with interest: (

a) It is the duty of the condominium corporation to “establish, levy, collect and administer Common Expense levies … as may be determined by the Board …” (bylaw 9(q)); (

b) It is a duty of the board of the condominium corporation to cause to be assessed to each owner “in proper proportion his contribution towards Common Expenses … and enforce payment of same …” (bylaw 15(g)); and (

c) It is a duty of an owner to pay to the condominium corporation “then due all Common Expenses levied or assessed against his Unit together with interest on any arrears thereof at the rate of twelve (12%) percent per annum (bylaw 2(i)); 4. Unit Repair Costs are also recoverable as if they were Common Expense charges: (

a) It is the duty of an owner to repair and maintain his unit and all plumbing equipment in his unit (bylaw 2(d)), and to allow the condominium corporation into the unit for the purpose of dealing with defaults or bylaw breaches in the unit (bylaw 2(a)); (

b) It is the duty of the condominium corporation to “maintain and keep in a state of good repair” all water and utilities that provide or are intended to provide service to more than one unit (bylaw 9(l)(x)); and (

d) Each owner is responsible for damage caused by the wilful or negligent acts of himself or others associated with him, that are not required to be insured against by the condominium corporation, and if they fail to do so the condominium corporation may do such repairs and collect reimbursement from the owner. The condominium corporation “may use all or any of the remedies” as set out in the bylaws to recover those monies and “such monies shall be a charge upon his Unit to the same extent as they would be if they were Common Expense charges assessed upon his Unit” (bylaw 81(b)).

Once again, those repair charges are not necessarily common expense charges, but may be recovered as if they were common expense charges. 5. The condominium corporation has a right to file a caveat to protect its interest: (

a) The condominium corporation has a lien or charge with respect to any unpaid assessment, installment or payment in respect of each owner’s unit and the right to file a caveat against the unit for such unpaid assessment, installment or payment (bylaw 84(a)); and (

b) The condominium corporation is entitled to be paid by the defaulting owner the cost incurred in preparing and registering the caveat, enforcing or seeking to enforce a corporation’s lien and in discharging the caveat all on a full indemnity basis (bylaw 84(a)). [ 41 ] I conclude that the bylaws of Manor Condo Corp do provide for a disproportionate assessment against the owner of the Unit. 2. Resolutions [ 42 ] The Affidavit evidence of Stephen Kasowski sworn on June 5, 2014 is uncontested.

[ 43 ] On or about November 20, 2013, the actions or inactions of the occupants of the Unit caused or contributed to a water loss.

The invoices related to that water loss were initially less than the insurance deductible of $20,000, but eventually increased above the deductible, and the amount of the deductible, with interest, was charged against the Unit. [ 44 ] On January 27, 2014, the actions or inactions of the occupants of the Unit caused or contributed to a second water loss, which amount was charged back against the Unit, as the amount of the invoice for the second water loss was less than the amount of the deductible.

Counsel, and the Master in her decision, referred to the first amount as the “insurance deductible amount” and the second amount as the “repair costs amount”. [ 45 ] Review of the resolutions of the condominium corporation is necessary to determine whether the cause of the loss or damage is the “negligent or other wrongful act or omission of or a breach of Bylaws by an Owner” or others associated with him, as required in bylaw 46 (final paragraph), or “any wilful or negligent acts” of the owner or those associated with him as required in bylaw 81(b). [ 46 ] On November 20, 2013, Manor Condo Corp received a bill from Federal Environmental Systems for attendance on November 20, 2013 at Unit 9 to: Shut off water.

There were multiple bursts in the pipe. Repaired all leaks and leak checked. Tested zone valve and thermostat – working well. Recommended to customer to set thermostat at minimum of 20 degree C. The amount of the related bill is $842.63. [ 47 ] On November 26, 2013, the Board of Directors passed a resolution providing in part: 6. b. Unit 9 – 10141 has multiple Bylaws infractions. With 2 warning letters sent previously the Board would like the Tenants evicted …. The pipe that burst on November 20, 2013 has severely damaged unit 4, but we will not know if it’s an insurance claim until it is dry and quoted.

We also do not know it was due to neglect until the Plumber report is in. If a claim is made due to neglect, the Owner is to pay the deductible portion. [ 48 ] On December 2, 2013, Manor Condo Corp received three estimates from SERVPRO, Edmonton Southside, for repairs to Unit 4 due to water damage, the first for “Repair Flood 1” for $9,526.10, the second for “Repairs,

part 2” for $7,118.29, and the third for $3,062.44, totalling $19,706.83. [ 49 ] On December 4, 2013, Manor Condo Corp received a further estimate from SERVPRO, Edmonton Southside, without a unit number specified, for “Emergency Work, Flood #1” for $4,660.76. [ 50 ] On January 21, 2014, the Board of Directors of Manor Condo Corp passed a further resolution with respect to the Unit: 6. h. Unit 9 to 4 – 10141 water damages are slow to repair, the Owner has not been paying for power to the unit (4), so the contractor can only work daylight hours and plug into hallway power.

The Tenants have vacated unit 4 due to unfit living conditions. Unit 9 has been charged back for the damages not meeting the deductible as the loss was due to

an act of Tenant; the Board reviewed the plumber comments. KDM to keep charging back until/if it reaches the deductible of $20,000. Also a caveat must be placed for these costs and outstanding contributions. [ 51 ] On January 27, 2014 there was a second flooding incident. The plumber’s invoice indicates that Unit 9 had a “Pipe Burst” and indicated: “Bedroom on left hand side had a burst pipe. Shut off water and repaired fin.” The cost for that emergency attendance was $578.25. [ 52 ] On February 18, 2014 the board of Manor Condo Corp passed a third resolution: 6. h.

Unit 9 to 4 water loss - #4 – 10141 electricity set up by Corporation to ensure work can be completed in a swift time frame. The unit (4) was complete other than the carpet, and then the unit above (9) caused another flood to the newly repaired unit. The Owner of unit 9 intends to dispute the charge backs of the first flood. KDM has advised the Owner should speak with a lawyer prior to disputing as the Bylaws outline the insurance requirements.

Second flood incurred costs will also be billed back to the Owner, pending Plumber report of events. [ 53 ] A fourth resolution was passed by Manor Condo Corp on March 18, 2014: 6. a. Unit 9 - 10141 Eviction & RV ownership has been objected by the Tenant. The Owner has indicated the end of March 2014 they will be out. Collection of outstanding charges, a caveat has been filed. The water loss has reached the deductible; that is the most that the Corporation can chargeback for the first loss. The second loss is also due to

an act of the Tenant and is chargeable under the Bylaws back to the Owner. The corporation cannot operate with such large arrears, KDM to charge back, caveat and seek legal collections. [ 54 ] Finally, on June 5, 2014, the Owner Ledger had the following additions: 04/02/14 Corporation Bylaws 49a and 46 Deductible $20,000 04/02/14 As per corporation bylaws 49a $3,640.69. [ 55 ] It is apparent from these documents and resolutions that the board of the condominium corporation was well aware of their bylaws and the CPA .

By November 26, 2013 they were unsure whether this would be an insurance claim and whether the fault would be due to the neglect of the owner or tenants of Unit 9, but they took the view that only if a claim were to be made due to neglect would it be entitled to collect the deductible portion. By January 21, 2014, they had determined to charge back the deductible after they had

reviewed the plumber comments and determined that the cause of the flood was

an act of the tenant. [ 56 ] By February 18, 2014, there had been a second flood and advice was given to the Unit owner that he should seek legal counsel, given the insurance provisions in the bylaws. At this time there was also discussion as to the costs for the second flood being billed back to the Unit owner pending the plumber report. [ 57 ] By March 18, 2014, it had been determined that the second loss was also due to

an act of the tenant and was chargeable back to the owner under the bylaws. In addition, a determination was made to file a caveat against title and to seek collection. The plumber’s estimates and bills make it clear that the first water damage was caused by multiple bursts in a pipe.

The thermostat was working well but the plumber recommended that it must be set at a minimum of 20 degrees Centigrade. [ 58 ] Likewise, the second flood was as a result of a pipe burst. [ 59 ] Although none of the plumbers’ estimates or bills, nor any of the condominium resolutions, specifically state that the pipe bursts were due to a wilful, negligent, or wrongful act, or omission of or breach of the bylaws by the Unit owner or the tenants, it is a reasonable inference from the affidavit exhibits that the thermostat in the Unit was turned down, although it was working well, and that the pipes froze at this time of year resulting in multiple pipe bursts. [ 60 ] The result of this examination of the documents and resolutions of Manor Condo Corp leads to the conclusion that it passed the resolutions required by s 39(2) of the CPA , and bylaws 46, final paragraph and 81(b). 3.

Caveat [ 61 ] Pursuant to ss 39(7), (8) and (12) of the CPA , Manor Condo Corp filed a caveat in the sum of $16,132.99 on March 18, 2014.

This caveat set out only partial claims with respect to the first flood, not the second, but counsel have agreed that based upon the Goertz decision, it is not essential that the full and proper amount of the damages be set out in the caveat and it is sufficient that it gives third parties notice of a claim to some entitlement. [ 62 ] I conclude that the disproportionate contribution levied by Manor Condo Corp on the Unit owners is valid to the extent that the amounts claimed constitute “contributions” under the CPA . B.

Are the insurance deductible and repair costs “contributions” attracting a statutory priority over a foreclosing mortgagee? [ 63 ] Given the above findings, I conclude that Condo Manor Corp achieved a priority over BMO with respect to the amount of the insurance deductible, $20,000, and the repair costs, $3,640.69 as a result of the operation of ss 39(8) and (12) of the CPA . The Master did not err in so concluding. [ 64 ] I note that only the insurance deductible is reflected in para 1 of the Order of March 10, 2015, filed August 10, 2015.

That should be interpreted to properly include the repair costs of $3,640.69. C.

Is the interest accruing on the insurance deductible and repair costs a “contribution” attracting a similar priority? [ 65 ] As indicated above, s 40 of the CPA allows a condominium corporation to charge interest on any unpaid contribution owing to it by an owner, providing that the rate of interest charged, in this case 12%, is not greater than the rate of interest provided for by regulation. [ 66 ] Condominium Property Regulation , AR 168/2000, s 76 provides that a rate of interest charged by a condominium corporation under s 40 of the CPA shall not be greater than 18% per annum. [ 67 ]

Section 41 of the CPA provides that if interest referred to in s 40 is owing by an owner, the condominium corporation may recover that amount in the same manner as a contribution under s 39 and for that purpose the amount is to be considered as a contribution under s 39. Therefore, the Master did not err in deciding that the interest attracted a statutory priority. [ 68 ] Paragraph 2 in the Order of March 10, 2015, filed August 10, 2015, should be interpreted to properly include interest on the repair costs of $3,640.69. D. Do solicitor/client or indemnity costs attract a similar priority? [ 69 ]

Section 42 of the CPA provides that where a condominium corporation takes steps to collect any amount owing under s 39, it may recover “from the person against whom the steps were taken” all reasonable costs, including legal expenses and interest and, if a caveat is registered, recover “from the owner” all reasonable expenses incurred by the corporation with respect to the preparation, registration, enforcement and discharge of the caveat. [ 70 ] In the present case, the method adopted by the condominium corporation to collect the amount owing was to file an application on June 6, 2014 to vary the amount of the Redemption Order pronounced May 8, 2014.

The person against whom those steps were taken was BMO. As a result, on the plain wording of s 42(

a) of the CPA , Manor Condo Corp is entitled to its reasonable costs, including legal expenses in collecting that amount. However, that provision does not make those reasonable costs and legal expenses themselves a “contribution” pursuant to s 39 of the CPA . As a result, although reasonable costs and legal expenses are recoverable as

taxable costs in the proceedings before this Court and the Court below, they do not become a contribution and do not attract a statutory priority. [ 71 ] The Master awarded these costs, in an amount to be assessed on a solicitor and own client full indemnity basis, to be collected as an in personam judgment. She did not indicate from whom those costs could be collected. The proper

interpretation of s 42(

a) of the CPA is that those costs can be collected in personam against “the person against whom the steps were taken”, in this case BMO. [ 72 ] As indicated above, paragraph 3 of the Order of March 10, 2015 does not correctly reflect the decision of the Master in that regard, as it states: The claim of the Applicant for recovery of its solicitor and client costs [is] not recoverable by it from the Plaintiff. [ 73 ] Such costs are in fact recoverable from BMO, but they do not form part of the “contribution”, do not constitute a statutory charge against the Unit, and do not attract a priority.

They are recoverable in personam , much as other costs in an action. [ 74 ] I find, therefore, that the Master did not err in her determination with respect to the costs and legal expenses claimed. However, that determination is inaccurately recorded in para 3 of the Order. That paragraph should be interpreted to properly read: The Applicant’s full indemnity costs are not recoverable by it as a contribution, nor do they constitute a statutory charge against the Unit, nor attract a statutory priority under the CPA , but they are recoverable in personam against the Plaintiff. E.

Do expenses related to the caveatable interest of Manor Condo Corp attract a similar priority? [ 75 ] In King at paras 29 and 32, Master Prowse held that expenses incurred in collection of unpaid amounts are “part of the administration of the common property” and attract both a statutory charge and priority over mortgagees. [ 76 ] In Callaghan at para 8 , Master Schlosser held that s 42(

b) permits the recovery of reasonable expenses (by which he meant disbursements and other charges) arising from the preparation, registration, enforcement and discharge of the caveat, but not legal fees. [ 77 ] In Jessamine , Master Smart found that legal expenses (by which he meant legal fees) are not permitted pursuant to s 42(b), for preparation, registration, enforcement and discharge of the caveat, but only reasonable expenses (by which he means disbursements and other charges) may be recovered as part of the action with appropriate evidence.

He stated at para 28 that legal costs are not characterized as contributions constituting a statutory charge under the CPA . [ 78 ] In Seehra at para 54 , Lee J. held that expenses (by which he meant legal fees, disbursements and other charges) incurred by an applicant may be charged to or added to or become part of the assessment. [ 79 ] The filing of a caveat is provided for in s 39(7) of the CPA .

It is the filing of the caveat that secures and provides notice of a statutory charge against the Unit equal to the unpaid contribution pursuant to s 39(8), and if the corporation has filed the caveat and an amount remains outstanding, that amount enjoys a statutory priority pursuant to s 39(12) of the CPA . [ 80 ]

Section 42(

b) provides that if a caveat is registered against title to the Unit, the condominium corporation may “recover from the owner” (as opposed to “from the person against whom the steps are taken” as in s 42(a)) all reasonable expenses incurred by the corporation with respect to the preparation, registration, enforcement and discharge of the caveat. [ 81 ] However, unlike the addition of interest to the contribution in s 41, the CPA does not expressly provide that the cost of preparation, registration, enforcement and discharge of the caveat may be considered as a contribution under s 39. [ 82 ] I recognize that the costs of preparation, registration, enforcement and discharge of the caveat are necessary components in order to achieve a statutory charge against the Unit and a priority over the mortgagee.

Nevertheless, I find on a plain reading of s 42(

b) that such costs are not amounts owing under s 39, nor are they equated to such amounts. Therefore, I find the Master erred in finding that those charges formed part of the caveatable interest. Those charges remain recoverable only in personam “from the owner”. F. Do any priorities available to Manor Condo Corp affect the in personam claims against the original and subsequent Unit owners and mortgagors? [ 83 ] Counsel for BMO correctly noted that there were many remedies available to a condominium corporation under the CPA in order to collect unpaid amounts from the Unit owners. Sections 39(1)(

d) and (2) provide that an action may be taken in debt and usual collection proceedings can be followed: see King at paras 36 to 40. Additionally, a claim against an owner is caveatable against a unit title, even though it is not a statutory charge nor does it obtain priority over a mortgagee. All of those in personam remedies as against an owner are unaffected by the achievement of a statutory charge and priority over a mortgagee pursuant to the CPA , subject to arguments against double recovery by the condominium corporation. VIII.

Conclusion [ 84 ] BMO’s appeal in relation to the $20,000 in insurance deductible and $3,640.69 for repair costs is dismissed. Paragraph 1 of the Order of March 10, 2015 is to be interpreted to include the repair costs of $3,640.69. BMO’s appeal in relation to interest on those amounts is also dismissed. Paragraph 2 of the Order of March 10, 2015, filed August 10, 2015, is also to be interpreted to include interest on the repair costs of $3,640.69.

[ 85 ] Manor Condo Corp’s cross-appeal is dismissed. It can collect its legal expenses as an in personam judgment, but not with in rem priority, against BMO.

Paragraph 3 of the Order of March 10, 2015 filed August 10, 2015, is to be interpreted to reflect that although such legal costs do not constitute a statutory charge, nor attract a priority over BMO, they are collectable against BMO as taxable costs in personam . [ 86 ] The reasonable expenses incurred by Manor Condo Corp with respect to the preparation, registration, enforcement and discharge of the caveat against the Unit do not constitute a statutory charge and achieve a priority as being a “caveatable interest”. However, those charges remain collectable in personam against the owner of the Unit. IX.

Costs [ 87 ] If the parties are unable to agree to costs, they are invited to speak to the matter within 30 days of the date of this decision. Heard on the 14 th day of December, 2016. Dated at the City of Edmonton, Alberta thi s 18 th day of January, 2017 . K.P. Feehan J.C.Q.B.A. Appearances: Stephanie C. Chau and Andrea M. Steen Witten LLP for the Plaintiff (Appellant) Natasha Sutherland Willis Law for the Respondents