Condominium Corporation No, 2017 ABQB 396

Court of Queen’s Bench of Alberta Citation: Condominium Corporation No 0321365 v Prairie Communities Corp, 2017 ABQB 396 Date: 20170623 Docket: 0701 00737 Registry: Calgary Between: Condominium Corporation No. 0321365, and Lynnette Weisbeck, as Representative Plaintiff Plaintiffs - and - Prairie Communities Corp., Joanne Wright, Hans Kneppers, Kneppers Consultants Inc., James Cuthbert, Cuthbert Smith Consulting Inc., Cuthbert Smith Consulting Partnership Inc., Residential Warranty Company of Canada Inc., Kingsway General Insurance Company, Jevco Insurance Company, Alberta Permit Pro Inc., Archiasmo Architectural Works Limited, Macleod Dixon LLP, Burstall Winger LLP, David Marshall, European Housing Corporation Inc., formerly known as Nascor Incorporated Defendants - and - Prairie Communities Corp., Joanne Wright, Hans Kneppers, Kneppers Consultants Inc., Alberta Permit Pro Inc., Archiasmo Architectural Works Limited, David Marshall, Real Estate Strategies Group Inc., David Bamber, Allan Penner and European Housing Corporation Inc.

Third Parties _______________________________________________________

Memorandum of Decision of the Honourable Mr. Justice R.J. Hall _______________________________________________________ [ 1 ] The applicant, David Marshall, is a named Defendant in the within action. He seeks to have the pleadings against him struck pursuant to Rule 3.68 of the Alberta Rules of Court ; or alternatively to have the claims against him summarily dismissed pursuant to Rule 7.3 of the Alberta Rules of Court . [ 2 ] Mr. Marshall, along with David Marshall Project Management Ltd. and Prairie Communities Corp. previously sought

summary dismissal of the claims against them in an application before Mr. Justice Wilkins on April 7, 2009. Justice Wilkins dismissed Marshall’s application for

summary dismissal after hearing submissions from Marshall’s counsel, including how Marshall was shielded from personal liability by the corporate veil, and how the claims against him were limitations barred. Justice Wilkins concluded that both of these were triable issues. The Plaintiff Respondents, therefore, maintain that Marshall’s current application for

summary dismissal should be dismissed as being barred by the doctrines of abuse of process, res judicata , and issue estoppel. [ 3 ] In reply to those submissions, the Applicant says the application is not res judicata , as the decision was based on a substantially different Statement of Claim, which has been since been amended five times; was decided prior to months of discovery; and was decided prior to the change in the law regarding the test for

summary judgment brought about by Hyrniak v Mauldin 2015 SCC 7 . Further, the Applicant says that a denial of

summary dismissal is not a final disposition. [ 4 ] I agree with the Applicant’s submissions in this regard. See Milne v Barnes , 2013 ABCA 379 at para 6 . I note that Justice Wilkins indicated in his decision he thought it was “highly unlikely” that the Plaintiffs would succeed in piercing the corporate veil, but it was not “beyond doubt”. The decision in Hyrniak , supra , has changed the test from “beyond doubt” to whether a review of the evidence allows the judge to make the necessary findings of fact, to apply the law to the facts, to determine whether

summary judgment is a proportionate, more expeditious and less expensive means to achieve a just result. In such a case if there is no genuine issue requiring a trial, the matter can be decided in a

summary fashion. I also agree that a dismissal of a

summary dismissal application is not finally determinative and therefore not res judicata . I agree that, with changed pleadings and additional evidence there is not issue estoppel; nor is this application an abuse of the Court’s process. See Milne v Barnes , supra . [ 5 ] The applicant has argued, firstly, that the pleadings against it should be struck pursuant to Rule 3.68 because they are insufficiently pleaded. [ 6 ] It is to be noted, however, that the Applicant has never served a request for particulars about anything in the 6x’s Amended Statement of Claim.

Had the Applicant made such a request, it is, in my view, quite certain the Court would order that such particulars of the Applicant’s wrongdoing be provided by the Plaintiffs. [ 7 ] In the course of argument of this application, the Plaintiffs have put forth particulars that they allege are wrongdoings by the Applicant, which they say would justify the piercing of the corporate veil. Those particulars do not allege a new cause of action, but rather particularize the rationale for the existing, pleaded claim, that the Court should pierce the corporate veil.

The 6x’s Amended Statement of Claim, pleads various causes of action against the Applicant. In order for those pleadings to be struck the claim must have “no reasonable prospect of success”. I am not satisfied that the rationale for striking the Plaintiffs’ pleadings against the Applicant has been established. Any deficiency in the pleading is in respect to a lack of particulars, which may be remedied by a demand by the Applicant as to these particulars. Accordingly the application to strike the pleadings against the Applicant is dismissed. [ 8 ] In the alternative, the Applicant seeks

summary dismissal of the Plaintiffs’ claim against him, on various bases. I will review each of those bases in turn. [ 9 ] The test for

summary judgment in Alberta is found in Hyrniak , supra and Windsor v Canadian Pacific Railway Ltd , 2014 ABCA 108 . The latter decision states that the modern test for

summary judgment is to examine the record to see if a disposition that is fair and just to both parties can be made on the existing record. [ 10 ] The first basis upon which the application is made, is that there is no genuine issue with respect to the Plaintiff’s claim that the court should pierce the corporate veil. The Applicant says, firstly, while the Applicant was a Director of 970365 Alberta Ltd. (“970”), by virtue of a Pierringer Agreement that Defendant is no longer a party.

The Plaintiffs and 970 agreed that the Plaintiffs have been fully compensated for any and all losses caused by 970 in tort, contract and breach of duty, and agreed not to pursue any other parties in respect of those losses. I agree that any claim against the Applicant that is based upon piercing the corporate the veil of 970 cannot succeed. [ 11 ] At all material times the Applicant was a Director, Shareholder and the directing mind of Prairie Communities Corp. (“Prairie”). [ 12 ] On the evidence, Prairie Communities Corp. was a developer of the project as that term is defined in

section 1 and in

section 14 of the Condominium Property Act , RSA 2000, c C-22 (the “ Act ”). In addition, Prairie was the builder of the project. [ 13 ] The Applicant maintains, and I accept, that the Plaintiffs cannot assert a cause of action against the Applicant which is founded on acts identical with those alleged against Prairie ; Petrobank Energy and Resources Ltd v Safety Boss Ltd , 2012 ABQB 161 ; Condominium Corporation No 0321364 v Prairie Communities Corp, 2015 ABQB 753 at para 59 .

[ 14 ] In order to pierce Prairie’s corporate veil and impose liability on the Applicant in his personal capacity, the Plaintiffs must establish that the Applicant committed

an act that was independently tortious or exhibited a separate identity or interest from Prairie: Blacklaws v Morrow , 2000 ABCA 175 . [ 15 ] In 807608 Alberta Ltd v Medichair Ltd , 2006 ABQB 781 para 13 , a handful of instances were identified where piercing the corporate veil may be justified, as follows: (

a) a corporation is formed specifically for doing a wrongful act; (

b) those in control specifically direct the doing of a wrongful act; (

c) where a fraud is committed; (

d) the corporation is the mere agent of another legal entity; (

e) two separate entities are in fact, one enterprise or operation; and (

f) the corporation is a mere “alter ego” of the controlling shareholder. [ 16 ] None of items (a), (c), (d), (e), or (

f) are applicable herein. However, the root question is in relation to (b): whether the Applicant, being a person in control, specifically directed the doing of a wrongful act, to the detriment of the Plaintiffs. [ 17 ] In argument, the Respondent Plaintiffs maintain that the Applicant personally directed Prairie to commit the following allegedly wrongful acts: (

a) The Applicant’s files were thrown out and his computer “malfunctioned” so all of his e-mails and records were “lost”. (

b) The funding letter between 970 and MCAP Financial Corporation (“MCAP”) dated July 8, 2002 required the developer to obtain a soils report from an acceptable professional engineer confirming that the proposed construction of the project was feasible under the existing soil conditions. The Applicant was responsible for completing this task but failed to ensure that a soils report was obtained and provided to MCAP. The Applicant did not obtain a soils report, in flagrant disregard of the contract. (

c) The project was built on fill material. The fill had to be placed on six inch lifts, compacted, tested and this process repeated for each six inches of fill. The Applicant told 970 that he was following this compaction protocol, however, he has admitted during questioning that he did not do so. (

d) The Applicant never obtained a geo-technical report, in flagrant disregard of the Alberta Building Code requirements. (

e) An experienced project manager prepared a report dated October 2, 2003 that outlined deficiencies in the common areas of the project. The report was given to the Applicant who was asked to implement its suggestions. However, the Applicant convinced the project manager not to implement all of the recommendations. (

f) The Applicant insisted that EIFS was an appropriate building envelope material. Yet the Applicant never obtained confirmation that the EIFS complied with the Alberta Building Code. (

g) The Applicant agreed to the preparation of structural drawings for the construction of the project, was provided the structural drawings, and was expected to build the project in accordance with those structural drawings. However, the Applicant gives evidence that he did not even look at those structural drawings. (

h) The Applicant also acknowledged that he instructed Earth Tech’s Romeril to disregard the structural drawings when conducting site inspections. (

i) The Applicant was responsible for ensuring that all of the Regional Municipality of Wood Buffalo and Permit Pro’s permitting requirements were met. However they were not. (

j) The Applicant purposely attempted to mislead the Defendant lawyers regarding the development permit deficiencies, by sending a letter to Regional Municipality of Wood Buffalo listing development permit deficiencies, while that same day sending 970’s lawyers an e-mail stating that there was “nothing outstanding”. (

k) The Applicant generally resisted doing things the way the Regional Municipality wanted, and insisted on doing things his way since he was in charge of construction. (

l) The Applicant never obtained foundation drawings containing the information about the allowable bearing pressures and allowable loads, contrary to the requirements of the Alberta Building Code. (

m) Nissen asked the Applicant for the as-built drawings many times, but the Applicant never provided them. (

n) The Applicant convinced Nissen to sue RESG for slander based on the RESG September 2003 letters. (

o) The Applicant convinced Nissen and the rest of the developer group to use RESG’s letters against Penner in order to attempt to turn his own purchasers against him and have his purchasers cancel their purchase contracts, in order to sell them to other purchasers for more money. [ 18 ] The Plaintiff Respondents allege that the Applicant expressly did, or directed Prairie to do, these things. They maintain that these actions by the Applicant were wrongful and tortious in and of themselves. They maintain that the Applicant’s wrongful actions

were outside the scope of his duties to Prairie. [ 19 ] The Applicant has responded to these allegations in his reply brief, citing various parts of the evidence in order to persuade the Court that they have no merit. [ 20 ] The grave difficulty that I have in this matter is in trying to determine whether the acts complained of were wrongful, whether they were causative of any of the damages alleged by the Plaintiffs, and the extent to which they were independent of the duties and obligations of Prairie. There is a great deal of evidence on these subjects.

Much of it has not been subjected to cross-examination. [ 21 ] I am unable to conclude, based upon the record placed before me, that there is no genuine issue requiring a trial. [ 22 ] Accordingly, the application to summarily dismiss the claim for piercing the corporate veil and finding the Applicant personally liable for alleged wrongful acts is dismissed. [ 23 ] The 6x’s Amended Statement of Claim goes on to maintain that the Applicant was a “developer”, as that term is described in

section 14 of the Act , and as such he may be held liable for a breach of the statutory trust created

section 14 of the Act . [ 24 ] In

section 14 the word “developer” is defined as follows: (c) “developer” includes any person who, on behalf of a developer, acts in respect of the sale of a unit or a proposed unit or receives money paid by or on behalf of a purchaser of a unit or a proposed unit pursuant to a purchase agreement. [ 25 ] The Plaintiffs ask me to infer that the Applicant received money that was paid by a purchaser of a unit or a proposed unit.

It is clear from the evidence which has been placed before me that Prairie may qualify as a developer, in that it may be found to have acted on behalf of a developer, it may be held to have received money paid by a purchaser or proposed purchaser, pursuant to a Purchase Agreement. However, there is no evidence that the Applicant did so in his personal capacity. The Plaintiffs must put their best foot forward in resisting this application.

I summarily dismiss the claim against the Applicant that he may be liable as a developer for breach of the statutory trust. [ 26 ] The pleadings allege that the Applicant knowingly participated and/or assisted in a breach of trust created by

section 14 of the Act by: (

a) Not ensuring that sufficient monies were retained by the developer or the lawyers; (

b) Releasing holdbacks for his own individual gain; or (

c) Instructing or causing the lawyers to release the trust monies, all while he knew a holdback was needed to remedy the alleged deficiencies. [ 27 ] The thrust of these allegations is that the developer, 970, and/or the lawyer Defendants breached a trust by not holding back sufficient funds; and that the Applicant knowingly participated or assisted in that breach of trust. [ 28 ] There is no evidence that the Applicant instructed the lawyer Defendants to release holdbacks.

The evidence is that the Applicant did not deal with the lawyers in that regard. [ 29 ] The evidence is that Prairie did nothing to instruct the release of holdbacks. Therefore the allegation of knowingly assisting the developer to breach trust must refer to 970 as the developer. However, the Plaintiffs have settled with 970 under a Pierringer Agreement, in which the Plaintiffs acknowledged full settlement of all of the claims that it had against 970.

If the Plaintiffs have settled with 970 as a developer/trustee, then they cannot claim against others for participating in or assisting in an alleged breach of trust by 970. [ 30 ] Accordingly, the allegations against the Applicant, of knowingly participating in or assisting in a breach of the statutory trust created by

section 14 of the Act , are dismissed. [ 31 ] The Plaintiffs allege that the Applicant has been unjustly enriched. [ 32 ] If it is the case that the trial Court determines that the Applicant has committed wrongful acts, such as to justify the piercing of the corporate veil and find him personally liable, then the claim for unjust enrichment against the Applicant could also succeed. It is a genuine issue to be tried.

Accordingly, the pleadings for unjust enrichment against the Applicant are not dismissed. [ 33 ] The Applicant seeks to have the claims dismissed against him, on the basis that they are barred by the Limitations Act . The Applicant argues that, more than two years before the Statement of Claim was filed, the claimant knew, or in the circumstances ought to have known: (

a) that the injury for which the claimant seeks a remedial order had occurred, (

b) that the injury was attributable to conduct of the defendant, and (

c) that the injury, assuming liability on the part of the defendant, warrants bringing a proceeding, Limitations Act , RSA 2000, c L-12, s 3(1)(a) [ 34 ] This same argument was made before Justice Wilkins, and rejected in his decision given April 7, 2009. His decision regarding limitations was upheld on appeal. [ 35 ] All of the evidence that is before me relating to the determination made by the Plaintiffs as to when to commence their action

was before Justice Wilkins. [ 36 ] The determination of the limitations defence continues to be far from being without doubt. I consider that it remains to be a genuine issue to be tried. Accordingly, I do not dismiss the claim against the Applicant on the basis of the limitations defence. [ 37 ] In the result, the pleadings against the Applicant are not struck. Should the Applicant wish, he may demand particulars of the allegations and wrongdoings by him alleged to justify the piercing of the corporate veil. The application for

summary dismissal is partly allowed, in that the allegations that the Applicant was a developer and breached the statutory trust, and the allegations that the Applicant knowingly participated in or assisted a breach of trust are dismissed. However, pleadings against the Applicant seeking the piercing of the Prairie corporate veil, and allegations the Applicant was unjustly enriched are not dismissed. [ 38 ] There has been mixed success in this Application. I order that costs of this application shall be costs in the cause. Heard on the 15 th day of May, 2017.

Dated at the City of Calgary, Alberta this 23 rd day of June, 2017. R.J. Hall J.C.Q.B.A. Appearances: L. Grant Vogeli, QC and Jonathan Selnes for the Plaintiffs Kenneth E. Staroszik, QC and Aimee Louie for Applicant, David Marshall