Willott v. Northwynd Resort Properties Ltd, 2021 ABQB 747

Court of Queen’s Bench of Alberta Citation: Willott v. Northwynd Resort Properties Ltd, 2021 ABQB 747 Date: 20210917 Docket: 1801 17477 Registry: Calgary Between: Dominic Willott and Garfield Ganong Plaintiffs - and - Northwynd Resort Properties Ltd., Paul Hamilton, Ken Bateman, John Andersen, Ron Ferber, Northmont Limited Partnership, Northmont Resort Properties Ltd., 2008164 Alberta Ltd., Kirk Wankel, Philip K. Matkin Professional Corporation, Carthew Registry Services Ltd.

Defendants Corrected judgment: A corrigendum was issued on October 8, 2021; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Decision of the Honourable Mr. Justice R.A. Neufeld _______________________________________________________

I. Overview [ 1 ] In 2005, Dominic Willott and Garfield Ganong purchased high-yield junk bonds in FRPL Finance Ltd. (“FRPL Finance”), along with 850 or so other investors (the “Bondholders”). The bonds were to yield 10 -12 % compounded interest – a handsome return. [ 2 ] Over $40,000,000 was raised by FRPL Finance, and lent to its affiliate Fairmont Resort Properties Ltd. (“Fairmont”).

Fairmont needed the money to finance its operations at its resort in Fairmont, British Columbia, and at its other locations, such as in the Okanagan Valley. [ 3 ] The resort located in Fairmont, British Columbia (the “Resort”) was built years earlier as a timeshare development. Vacation interval agreements were sold under which purchasers would become entitled to use specified weeks and types of villas. Purchasers did not receive fee simple, registerable title.

Instead, their interest was protected by a trust agreement under which the Resort lands were held for the benefit of the timeshare owners, and Fairmont as owner of the residual interest in those lands. [ 4 ] Despite the 2005 refinancing initiative, Fairmont continued to be plagued by financial and, ultimately, legal problems. Fairmont was unable to service its debt to FRPL Finance, leading to an application under the Companies Creditors Arrangement Act , RSC 1985, c C-36 (the “ CCAA ”) for protection in 2009.

No one, including any of the Bondholders, opposed the application. [ 5 ] Justice Romaine of this Court granted the application for an arrangement under the Business Corporations Act , RSA 2000, c B-9 (the “ ABCA ”): Fairmont Resort Properties Ltd. (Re), 2012 ABQB 39 . The debt owed to the Bondholders was converted to equity in the newly formed Northwynd Real Estate Investment Trust (the “Northwynd REIT”). The Bondholders were now unitholders in the Northwynd REIT (the “Unitholders”).

A March 4, 2010 Declaration of Trust provided that the Unitholders owned the Northwynd REIT (the “Declaration of Trust”). [ 6 ] The assets and operations of Fairmont were transferred to newly formed limited partnerships and companies, the relevant ones for this application being: Northwynd Limited Partnership (“Northwynd LP”), Northmont Limited Partnership (“Northmont LP”) and Northwynd Resort Properties Ltd. (“NRPL”). The Northwynd REIT owned, either directly or indirectly, 100% of these entities. Northmont Resort Properties Ltd. ( “ Northmont”) managed Fairmont’s resort properties.

Northmont is the general partner of Northmont LP. [ 7 ] While insolvency was staved off through the CCAA process, Fairmont’s financial problems continued. [ 8 ] In 2012, an ambitious program was undertaken to improve the financial position of Fairmont, under the leadership of Kirk Wankel - the Chief Executive Officer of NRPL. This had two components. [ 9 ] The first was a program designed to revitalize the Resort.

This was to be done through renovations funded by imposing a levy on timeshare owners or, for timeshare owners not wanting to pay such charges, imposing a levy on departing timeshare owners for cancellation of their vacation interval agreements (the “Resort Realignment Plan”).

It was expected that if sufficient cancellations occurred, the Resort could be reduced in size, with surplus land and buildings being freed up for sale for the benefit of Northmont LP and indirectly to the advantage of remaining timeshare owners: see JEKE Enterprises Ltd. v Northmont Resort Properties Ltd . , 2016 BCSC 401 for a complete description of the program. [ 10 ] The second initiative was monetization of Fairmont’s assets for distribution to Unitholders.

This included the sale of Fairmont’s Lake Okanagan Resort; the sale of Fairmont’s land surplus to the Resort’s requirements; and the recovery of the levies imposed on timeshare owners under the Resort Realignment Plan. The distribution to Unitholders was to be done in the form of a return of capital through winding up the Northwynd REIT. The wind-up was to be completed within thirty (30) months in order to ensure a favourable tax treatment.

Hence, there was a deadline to monetize Fairmont’s assets of December 31, 2016. [ 11 ] Neither of these initiatives went smoothly. [ 12 ] The sale of the Lake Okanagan Resort went ahead in May of 2014, allowing for an interim distribution of capital to the Unitholders.

However, it took several years of litigation in Alberta and British Columbia for the charges levied under the Resort Realignment Plan to be recovered from timeshare owners (also referred to in these reasons as the Geldert Group Owners) and for surplus Resort lands to be sold with court approval. [ 13 ] As the thirty-month deadline for wind-up of the Northwynd REIT approached in 2016, the timeshare litigation dragged on, holding up the receipt of funds from the Resort Realignment Plan as well as the sale of surplus land, which was opposed to by the timeshare owners.

The Northwynd REIT trustees (the “Trustees”) advised the Unitholders in mid-2016 that a cash transaction of the Northwynd REIT’s assets at that time would yield a minimal distribution to Unitholders. Instead, the potential for a greater benefit for Unitholders would be achieved by the continued operation of the business into 2017, post wind-up. [ 14 ] In December of 2016, Mr.

Wankel stepped into the breach by agreeing through his sole-owned company, 2008164 Alberta Ltd. (“200 Alberta”), to purchase Fairmont’s assets. [ 15 ] A Purchase and Sale Agreement (the “PSA”) was entered into between 200 Alberta and the Northwynd REIT. 200 Alberta agreed to purchase all of the Northwynd REIT’s assets, allowing it to complete its wind-up by December 31, 2016, as previously contemplated. The main assets governed by the PSA were: (1) all of the shares of NRPL and (2) all of the partnership units of Northwynd LP.

The PSA was negotiated with the Trustees, who were advised by corporate counsel. [ 16 ] Under the terms of PSA, Unitholders who surrendered their units prior to the December 31, 2016 wind-up would be compensated pursuant to a Promissory Note given by 200 Alberta. The Defendants say that the overarching purpose of the PSA was to continue the business operations of Fairmont for an additional year, allowing it to conclude various transactions in order to generate a larger potential return on the Unitholders’ investments.

[ 17 ] The PSA stipulated neither a precise cash value nor a fixed purchase price for the assets purchased by 200 Alberta. Pursuant to the Promissory Note, a contingency agreement of sorts was entered into.

The price to be paid under the PSA was based on the available cash held by Northmont LP as of December 31, 2017, less outstanding obligations, plus any non-cash consideration received from the purchaser. [ 18 ] This contingent value was informed by two main events: (1) the outcome of the litigation with the timeshare owners regarding the levies imposed by the Resort Realignment Plan and (2) the Trustees’ willingness and ability to close the sale of surplus land (the “Hillside Transaction”). The Hillside Transaction involved the sale of a portion of the Resort lands, referred to as the Hillside lands.

The arms-length purchaser was only willing to purchase the lands if title could be transferred to them. However, the timeshare owners opposed this sale. [ 19 ] Once the PSA was executed, the Northwynd REIT was wound-up. The Trustees were discharged; no further duties or obligations were owed under the Declaration of Trust and there were no longer any Unitholders. A letter to this effect was sent by the ex- Trustees to the former Unitholders on January 16, 2017.

Nonetheless, the Promissory Note entered into between 200 Alberta and NRPL gave surrendering Unitholders a proportionate interest in the ultimate value of the Promissory Note. [ 20 ] As of December 31, 2017, the litigation regarding the Resort Realignment Plan had essentially been agreed upon, but the settlement was not final and no money had been received (the “Timeshare Settlement”). Similarly, the sale of the Hillside Lands had been agreed upon, but no monies had yet been received. [ 21 ] Mr. Wankel delivered a Declaration of Nil Value under the Promissory Note to the former Unitholders on January 15, 2018.

The Timeshare Settlement was achieved as of January 8, 2018, for $36,000,000 (with the settlement funds being subsequently paid by individual timeshare owners a few weeks later). The Hillside Transaction closed for $6,600,000, on March 7, 2018. All of these funds were retained by 200 Alberta. [ 22 ] The result was that the surrendering Unitholders in the Northwynd REIT received nothing from the sale of Fairmont’s assets to Mr. Wankel’s company. They were left with only the interim distributions of approximately 32 cents on the dollar from the sale of the Lake Okanagan Resort years earlier. [ 23 ] Mr.

Willott and Mr. Ganong now apply for certification of a class action against each of the Defendants named in the Amended Statement of Claim (other than Philip K. Matkin Professional Corporation and Carthew Registry Services Ltd., against whom they have discontinued). They seek compensation on behalf of the former Unitholders for their lost investment, asserting that Mr. Wankel and his company were unjustly enriched at their expense. II.

General Principles [ 24 ] Class action proceedings have three primary advantages over individual claims: judicial economy, improved access to justice and behavioral modification: Western Canadian Shopping Centres Inc. v Dutton , 2001 SCC 46 at para 27 .

While such advantages are clear and undisputed, the suitability of any particular action as a class proceeding must also be considered within the broader context of the post- Hryniuk era; that is, the need to manage all cases, including proposed class actions, with a view toward streamlining the litigation process and avoiding unnecessary trials. [ 25 ] In considering a certification request, the court must be careful not to prejudge the merits of the action.

A representative plaintiff need not prove the merits of her case at certification, but only that there is some evidence or basis in fact to support each of the certification criteria: Pro-Sys Consultants Ltd. v Microsoft Corp. , 2013 SCC 57 at para 99 . [ 26 ] Section 5(1) of the Class Proceedings Act , RSA 2003, c C-16.5 (the “ Act ”) sets out five prerequisites for certification. 5(1) In order for a proceeding to be certified as a class proceeding on an application made under

section 2 or 3, the Court must be satisfied as to each of the following: (

a) the pleadings disclose a cause of action; (

b) there is an identifiable class of 2 or more persons; (

c) the claims of the prospective class members raise a common issue, whether or not the common issue predominates over issues affecting only individual prospective class members; (

d) a class proceeding would be the preferable procedure for the fair and efficient resolution of the common issues; (

e) there is a person eligible to be appointed as a representative plaintiff who, in the opinion of the Court, (

i) will fairly and adequately represent the interests of the class, (ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding, and (iii) does not have, in respect of the common issues, an interest that is in conflict with the interests of other prospective class members. [ 27 ] Each of these prerequisites must be met. If they are satisfied, the court must certify the action as a class proceeding: Spring v

Goodyear Canada Inc, 2021 ABCA 182 at para 17. [28] Where more than one cause of action is alleged, certification may be granted in whole or in part: see for example, Setoguchi vUber BV, 2021 ABQB 18; Heller v Uber Technologies Inc., 2019 ONCA 1. [29] With these general principles in mind, I turn to whether the Plaintiffs have satisfied the criteria for certification. III. Criteria for Certification 1.

Does the Statement of Claim Disclose a Cause (or Causes) of Action? [30] It is settled law that the test to be met to satisfy this criterion is essentially the same as that which applies on a motion to strike.The Supreme Court of Canada describes that test and its application as follows in Atlantic Lottery Corp. Inc. v Babstock, 2020 SCC 19at paras 87-89: A pleading may be struck or amended on the ground that it discloses no reasonable cause of action or defence (Rules of the SupremeCourt, 1986, r. 14.24(1)(a)).

When considering whether to strike a pleading on this ground, the question is whether the claim has "noreasonable prospect of success" (Knight v. Imperial Tobacco Canada Ltd., 2011 SCC 42, [2011] 3 S.C.R. 45 (S.C.C.), at para. 17), orwhether it is "plain and obvious" that the action cannot succeed (Hunt v. T & N plc, (SCC), [1990] 2 S.C.R. 959(S.C.C.), at p. 980). This is a high standard that applies to determinations of fact, law, and mixed fact and law. The facts pleaded areassumed to be true "unless they are manifestly incapable of being proven" (Imperial Tobacco, at para. 22).

On a motion to strike, the statement of claim should be read "as generously as possible and to accommodate any inadequacies in the formof the allegations which are merely the result of drafting deficiencies" (Operation Dismantle Inc. v. R., (SCC), [1985] 1S.C.R. 441 (S.C.C.), at p. 451), because "cases should, if possible, be disposed of on their merits" (Montreal Trust Co. of Canada v.Hickman, 2001 NFCA 42, 204 Nfld. & P.E.I.R. 58 (Nfld. C.A.), at para. 12).

At times, a proposed cause of action is so obviously at oddswith precedent, underlying principle, and desirable social consequence that regardless of the evidence adduced at trial, the court can saywith confidence that it cannot succeed. But this is not often the case, and our common law system generally evolves on the basis of theconcrete evidence presented before judges at trial. This is why claims that do not contain a "radical defect" (Hunt, at p. 980) should nevertheless proceed to trial.

Courts should considerwhether the pleadings are sufficient to put the defendant on notice of the essence of the plaintiff's claim (Holland v. Saskatchewan(Minister of Agriculture, Food & Rural Revitalization), 2008 SCC 42, [2008] 2 S.C.R. 551 (S.C.C.), at para. 15) and whether "the factspleaded would support one or more arguable causes of action" (Anderson v. Bell Mobility Inc., 2009 NWTCA 3, 524 A.R. 1 (N.W.T.C.A.), at para. 5). In Markevich v.

Canada, 2003 SCC 9, [2003] 1 S.C.R. 94 (S.C.C.), this Court explained that a cause of action is "onlya set of facts that provides the basis for an action in court" (para. 27). [31] In response to the application for certification, the Defendants have cross-applied to strike the Statement of Claim.

In supportof that application, and their response to the certification application, they have filed extensive affidavit evidence comprised of severalhundred pages of materials detailing the history of Fairmont, its financial and legal difficulties and the eventual sale of the NorthwyndREIT’s assets to 200 Alberta. [32] The Plaintiffs have also filed extensive affidavit evidence pertaining to the history of their investment, and several days ofquestioning on affidavits took place. [33] The Defendants argue that all of this evidence can be relied on in considering both certification and the motion to strike.

Atminimum, they say, the Court is entitled to rely on findings of fact made in decisions in the Fairmont timeshare owner litigation and ondocuments referred to in the Statement of Claim, such as the Information Circular provided to the Unitholders regarding wind-up and theDeclaration of Trust governing the activities of the Trustees on wind-up. [34] It is not uncommon for certification applicants to be afforded a degree of latitude in the nature and quality of evidenceadduced at certification – particularly in respect of issues such as the existence of an identifiable class of claimants, and common issues tobe tried: Cardinal v Alberta, 2020 ABQB 528.

These criteria are truly procedural and go to the heart of whether the action is bestpursued on an individual basis or as a class proceeding. Historical information such as that provided in the affidavits of Mr. Wankel andMr. Ganong is also helpful to the Court’s understanding of the issues before it on certification, even though the merit of the claim is amatter for trial. [35] When the certification criterion under consideration is disclosure of a cause of action at all, however, the outcome is notmerely procedural. Accordingly, it is, in my view, important to exercise caution.

The facts as set out in the Statement of Claim arepresumed to be true.

They may be contextualized by reference to the affidavit evidence submitted on the certification application andmay be supplemented by reference to documents referred to and relied upon in the Statement of Claim itself, but only to the extent thatthey bear on the issue of whether the claim discloses a cause of action under the Class Proceedings Act, or put another way, whether across-application to strike the claim has merit. [36] In that context, documents referred to in a statement of claim may be relied upon, as may previous court decisions dealingwith the same issue, even at the certification stage.

Both may bear on whether the facts pleaded are manifestly incapable of being provenand consequently whether a cause of action has been disclosed that has a reasonable prospect of success: Knight v Imperial TobaccoCanada Ltd., 2011 SCC 42 at para 22. [37] To disclose a cause of action with a reasonable prospect of success, a statement of claim must not only articulate the legalbasis for the claim, but also sufficient material facts to support that claim. Bare allegations and unexplained characterization of impugnedactions as unlawful, conspiratorial, wrongful, or fraudulent are not enough.

A claim must fairly disclose to the defendants the “Who,

When, Where, How, and What” in respect of the actions alleged to give rise to liability so that they can be meaningfully responded to and understood: Mancuso v Canada (Minister of National Health and Welfare) , 2015 FCA 227 . [ 38 ] In this case, the Statement of Claim alleges multiple causes of action against the Defendants. The claim advanced against all of the Defendants is that of conspiracy. I turn to that claim first. i. Conspiracy [ 39 ] Conspiracy is an intentional tort.

It is committed when two or more persons enter into an agreement and take actions to carry out that agreement that are done for the predominant purpose of injuring another person, or are comprised of unlawful actions that they know, or ought to know, would injure another person. The first form is referred as predominant purpose conspiracy. The latter is commonly referred to as unlawful act conspiracy. [ 40 ] Conspiracy cannot be committed accidentally or by negligence.

The parties must know what they are doing or intend to do, and be aware that another person will be harmed or that they are acting wrongfully: Andrew Botterell et al, Fridman’s The Law of Torts in Canada , 4th ed (Toronto: Carswell, 2020) at 901. [ 41 ] The Statement of Claim is not entirely clear as to what form of conspiracy is alleged and in argument the Plaintiffs primarily focused on wrongful act conspiracy.

The allegations of conspiracy are contained in paragraphs 56 to 59 of the Statement of Claim, as follows: Between the time of the Wind-Up Resolution and present, the Defendants intentionally and unlawfully conspired to, among other things, surreptitiously use the authorization conferred by the Wind-Up Resolution to cause the Fairmont Vacation Villa Assets, Sale Funds, and the Settlement Funds to be wrongfully transferred to Mr. Wankel’s corporation, 200 Alberta, for no consideration and some or all of the Fairmont Vacation Villa Assets to ultimately be transferred to Mountain View.

In particular, the Defendants entered into an agreement, arrangement or joint plan, formed a common intention, or otherwise acted together in a planned or concerted manner for the purpose of, among other things, entering into the Sales Agreement and Promissory Note that were intentionally structured to lead to the transfer of the Fairmont Vacation Villa Assets, Sale Funds, and the Settlement Funds to 200 Alberta and Mountain View for no consideration. The Defendants agreed to engage in the unlawful acts directed towards the Representative Plaintiff and the Class Members, in order to further their conspiracy.

In particular, and among other things: (

a) The Trustees wrongfully breached their fiduciary duties to the Northwynd REIT Unitholders, breached their obligations under the Wind-Up Resolution, exceeded their authority under the Wind-Up Resolution, and preferred the interests of Mr. Wankel’s corporation over those of the Trust Unitholders; (

b) Carthew and Matkin unlawfully assisted, facilitated, and profited from the transfer of the Fairmont Vacation Villa Assets by transferring assets pursuant to the Promissory Note despite knowing that such transfer constituted a breach of trust and that the communications regarding the Promissory Note to the Northwynd REIT Unitholders were misrepresentations; (

c) The Defendants wrongfully concealed the Sales Agreement; (

d) The Defendants wrongfully concealed the PSA and receipt of the Sale Funds; (

e) The Defendants wrongfully mispresented the state of the settlement discussions with the Time Share Owners; (

f) The Defendants wrongfully failed to inform the Northwynd REIT Unitholders when the Settlement occurred, which rendered prior statements by the Defendants misrepresentations; and (

g) The Defendants wrongfully mispresented the amount owing on the Promissory Note. The Defendants knew, or ought to have known, that injury to the Representative Plaintiff and the Class Members was likely to result from their unlawful conduct.

In fact, the Representative Plaintiff and Class Members suffered substantial harm as a result of the various acts undertaken by the Defendants in furtherance of their unlawful conspiracy. [ 42 ] Although appearing earlier in the Statement of Claim under the heading of “The Trustees Breached Their Obligations to the Northwynd REIT Unitholders”, paragraph 55 of the Statement of Claim adds context to the subsequent claim of conspiracy: Further to the above breaches, the Defendants acted in breach of the Declaration of Trust and their other obligations to the Northwynd REIT Unitholders by attempting to circumvent the beneficial interest of the Northwynd REIT Unitholders.

Specifically:

(

a) The Promissory Note was wrongfully engineered to have all obligations of 200 Alberta expire if the assets of the Northwynd REIT were not sold by December 31, 2017, effectively providing that 200 Alberta would keep all the value of those assets, for no consideration, if they were not sold in 2017; (

b) The timing of the payment of funds from the Settlement was wrongfully engineered in an attempt to circumvent or defeat the interests of the Northwynd REIT Unitholders by, among other things, delaying the payment of the Settlement funds such that the proceeds would not be captured by the terms of the Promissory Note, and (

c) The Defendants specifically conducted the sale to Mountain View to attempt to circumvent or defeat the interests of the Northwynd REIT Unitholders by, among other things, delaying the dates of the Mountain View transaction to attempt to conduct the transaction such that its proceeds would not be captured the terms of the Promissory Note. [ 43 ] Thus, the unlawful acts taken in carrying out the conspiracy are apparently comprised of the allegedly “wrongful” breach of fiduciary duties by the Trustees, “wrongful” concealment of the Hillside Transaction sales agreement and PSA, “wrongful” misrepresentation of the state of Timeshare Settlement discussions with the timeshare owners and “wrongful” misrepresentations of the amount owing on the Promissory Note. [ 44 ] The Defendants argue that the claim of conspiracy is largely comprised of bare allegations, and that insufficient facts are pleaded to disclose a cause of action in conspiracy.

They also argue that the conspiracy claim is fundamentally implausible. [ 45 ] In Warner v Smith and & Nephew Inc ., 2016 ABCA 223 , the Alberta Court of Appeal noted that the striking of a pleading as disclosing no cause of action should rarely occur. The civil litigation process is designed to allow parties to an action to discover evidence subsequent to the commencement of an action, and the

summary judgement or trial remedy can be used to weed out claims that have no merit following the close of pleadings. [ 46 ] It follows that a motion to strike pleadings as disclosing no cause of action should only be granted where it is plain and obvious that the claim cannot succeed. The conspiracy claim advanced by the Plaintiffs is one such claim. [ 47 ] The essential allegation made in this portion of the Statement of Claim is that commencing in June of 2014 to present, there was an agreement between the Defendants to give all of the assets of the Northwynd REIT to Mr. Wankel for little or no consideration.

However, no material facts are pleaded to support the existence of an agreement, per se, such as the indicia of an agreement, arrangement or joint plan, including meetings, coordinated acts or communications to that end. At best, we are asked to infer that an agreement must have been in place to harm the Unitholders because Mr.

Wankel eventually ended up taking ownership of the Northwynd REIT’s assets for little or no consideration in return. [ 48 ] Similarly, while allegations of “wrongful” or “unlawful” acts are made, no material facts are pleaded as to how, when, and why the actions taken were wrongful or unlawful in nature, or, in the case of the Trustees, how, when, and why they are said to have engaged in the “wrongful engineering” of events such as the delay in the Timeshare Settlement or the delay in closing the Hillside Transaction. [ 49 ] It is possible that the deficiencies within the Plaintiffs’ conspiracy claim could be mitigated through future demands for particulars and discovery.

However, the shortcomings are fundamental in nature and bear directly on the matters in issue on certification itself, including whether a cause of action has been disclosed, the identification of class members, the common issues to be tried and potentially the suitability of Mr. Willott as a Representative Plaintiff.

Absent basic material facts, certification of such a broad ranging conspiracy claim is unfair to the alleged co-conspirators and is an invitation to pointless litigation. [ 50 ] Not only is the disclosure insufficient to allow those accused to understand and defend themselves against the conspiracy accusations, the limited disclosure before me shows that it is plain and obvious that a claim on that basis cannot succeed. [ 51 ] In particular, I agree with the Defendants that the conspiracy argument alleged here is fundamentally implausible.

There is no evidence of an agreement between the alleged co-conspirators having been entered into for the purpose of injuring the Unitholders or to take unlawful acts that could reasonably be foreseen to do so. The Statement of Claim does not allege fraud on the part of the co- conspirators or, for that matter, any personal benefit to the four Trustees.

The Information Circular distributed to Bondholders in advance of the 2014 wind-up meeting (and referred to in the Statement of Claim) discloses that those Trustees were not only elected by the Bondholders, but were also significant Bondholders in their own right. [ 52 ] They are, therefore, being accused by the Plaintiffs of agreeing in 2014 to take, or participate in, a series of steps over the years to come in order to enrich Mr. Wankel at their own expense.

This includes “engineering” events that were beyond the control of one or more of the conspiracy participants, in one case (the Hillside Transaction) was subject to court approval, and even events that took place after the Northwynd REIT ceased to exist, and its Trustees discharged. This is not plausible. [ 53 ] I find that the facts pertaining to the conspiracy claim advanced by the Plaintiffs are insufficiently pleaded and that the conspiracy claim has no reasonable prospect of success. It is struck and will not be certified as part of the class proceeding along with paragraph 55 of the Statement of Claim. ii.

Breach of Trust and Negligence of Trustees [ 54 ] The affairs of the Northwynd REIT were managed under a Declaration of Trust. As an officer and director of Northmont, Mr. Wankel was actively involved in communicating with the Unitholders. Under the Declaration of Trust, Unitholders were represented by elected Trustees whose duties and obligations were set out in the declaration. [ 55 ] The Statement of Claim alleges that Mr. Wankel began sending communications to the Unitholders in 2014, advising them of

difficulties with the timeshare owners who were threatening the financial position of the Northwynd REIT. Mr. Wankel, however, allegedly failed to have the financial statements of the Northwynd REIT audited so that the accuracy of his advice could be determined. It also alleges that the Trustees failed to retain a commercial real estate firm to market the Resort properties on wind-up, which the Plaintiffs say was a “condition” of the wind-up authorization. Instead, the Trustees agreed to transfer substantially all of the Northwynd REIT’s assets to Mr.

Wankel’s company for “no guaranteed consideration”, thus breaching their fiduciary duties, their obligations under the Declaration of Trust and their obligations under the wind-up resolution. In the alternative, the Plaintiffs say that the Trustees acted negligently in respect of the series of transactions that followed the wind-up resolution. [ 56 ] The Defendants say that the claims against the Trustees in respect of these transactions should be struck as being vague and as having no prospect of success.

Among other things, they argue that the obligations of the Trustees are defined by the Declaration of Trust relied on in the Statement of Claim, and that the activities of the Trustees were in keeping with those obligations. For example, they say that under the terms of the declaration, the remaining obligation of the Trustees after wind-up was only to act in good faith with a view to the best interests of the Northwynd REIT. Mere negligence would not be actionable. [ 57 ] The Trustees may ultimately be successful in defending the actions taken by them during the wind-up of the Northwynd REIT.

It seems to me that at least some of the delay in the monetization of assets that were indirectly owned by the Northwynd REIT was beyond the Trustees’ control and may have been unforeseeable when the wind-up was undertaken. [ 58 ] Nonetheless, it is not plain and obvious at this stage that this component of the action has no reasonable prospect of success. As discovery takes place, further evidence will be obtained regarding the actions taken by the Trustees and the degree to which the interests of the Unitholders as a whole were considered.

However, the allegations of negligence and breach of duty under the Declaration of Trust and the basic facts supporting those allegations as currently pleaded are sufficient for the action to proceed. iii. Claims Against Mr. Wankel, 200 Alberta and Mountain View [ 59 ] The Plaintiffs allege that Mr. Wankel, 200 Alberta and Mountain View were unjustly enriched by virtue of the transfer to them of Fairmont’s assets, the Hillside Transaction sale funds, and the Timeshare Settlement funds received from timeshare owners.

They plead that there was a corresponding deprivation to the Representative Plaintiff and Class members.

They say that there was no juristic reason for the Defendants’ enrichment because the transfer of such funds was not bona fide. [ 60 ] The Plaintiffs also plead knowing assistance and receipt by 200 Alberta and Mountain View of funds received on the sale of property that was beneficially owned by the Unitholders, for no consideration, or alternatively, insufficient consideration. [ 61 ] The Statement of Claim alleges that the Unitholders were the beneficial owners of all of Fairmont’s assets, including the land and buildings on which the Resort is situated and that they were entitled to receive renovation and cancellation fees from the timeshare owners.

It says that those assets were worth approximately $85,000,000, but were transferred to Mr. Wankel’s company for nothing. [ 62 ] The Defendants argued at length that the Unitholders did not have a beneficial interest in the Resort lands as claimed. They referred me to the British Columbia Supreme Court decision in JEKE , which found that the Resort lands were held in trust for the benefit of the timeshare owners and Northmont LP as to the residual interest thereafter. [ 63 ] I accept the Defendants’ characterization of the JEKE decision on this point.

However, it remains that there was some value in the Resort that was being monetized when the wind-up of the Northwynd REIT took place. Under the PSA, the assets indirectly owned by the Northwynd REIT (through its ownership of all shares in Northmont and NRPL) were transferred to 200 Alberta. As the Defendants concede in argument, if the Timeshare Settlement funds and surplus land sale proceeds pursuant to the Hillside Transaction had been received in 2017, the Promissory Note would have had value.

It is the amount of that value that is dispute and would need to be determined at trial. [ 64 ] While the benefit received by 200 Alberta and the corresponding deprivation of the Unitholders remains to be determined, it does not follow that the unjust enrichment claim against Mr. Wankel and 200 Alberta should be struck or not certified. [ 65 ] The facts pleaded in the Statement of Claim, and the documents to which it refers, show that Mr. Wankel wore many hats before, during and after the wind-up of the Northwynd REIT and the attempted monetization of assets for the benefit of the Unitholders.

This included: (1) being a director and officer of Northmont and Northmont LP; (2) being the CEO of NRPL; (3) conceptualizing and implementing the Resort Realignment Plan; (4) instructing legal counsel in respect of defending the renovation and cancellation fees levied by Northmont LP on the timeshare owners under the Resort Realignment Plan; (5) overseeing the negotiation and sale of surplus Resort lands to Mountain View; (6) reporting to Unitholders regarding financial performance prior to wind-up; (7) ultimately agreeing to personally acquire the Northwynd REIT’s assets in 2016, through his wholly owned company 200 Alberta, following negotiations with Trustee, Paul Hamilton; and (8) issuing a Declaration of Nil Value to the surrendering Unitholders in January of 2018 when the Timeshare Settlement and Hillside

Transaction proceeds had not yet been received by Northmont LP, only to be received approximately two months later. [ 66 ] Given the variety of roles played by Mr. Wankel, it is not possible or appropriate to determine at this stage the nature and extent of his legal duties to Unitholders before and after they surrendered their units under the PSA and associated Promissory Note. The Statement of Claim properly pleads that Mr. Wankel and his company, by receiving the proceeds of the Timeshare Settlement, the surplus land sale monies and the interest in the Resort lands, was enriched.

Whether there was a juristic reason for that enrichment cannot be determined without additional pleadings, pretrial discovery and ultimately a trial. [ 67 ] The Statement of Claim alleges that Mountain View knowingly assisted in the Trustees’ breach of fiduciary duty by closing the Hillside Transaction with 200 Alberta even though it knew that the transaction was in breach of such duty. As Mountain View was a third-party purchaser for value, it can be inferred that it is named as a Defendant to support avoidance of the transaction – one of the remedies sought.

The facts pleaded in support of the claim are sparse and verge on consisting of only bare allegations. I am not prepared to strike them at this stage, however, as the more appropriate approach is to allow Mountain View to demand particulars, following which an application to summarily dismiss the claim can be made if necessary. iv. Oppression Claim [ 68 ] The Statement of Claim seeks relief against the various corporate defendants in this action and Mr. Wankel in his capacity as an officer and director of Northmont and NRPL.

The Northwynd REIT, either directly or indirectly, owned 100% of the shares of both companies prior to being wound up. The Defendants argue that entitlement to a remedy under s. 242.1 of the ABCA requires the Plaintiffs to show that the Unitholders were security holders, creditors, directors, or officers of Wankel, NRPL, and Northmont and that each of Wankel, NRPL, and Northmont are corporations subject to s. 242.1. [ 69 ] With respect, the Defendants’

interpretation of the scope of s. 242.1 is much too narrow.

Section 239 defines “complainant” in very broad terms. It includes current and former registered holders or beneficial owners of securities in a company or any of its affiliates. It also includes any other person who, in the discretion of the court, is a proper person to make an application under

Part 19. Sections 241 and 242 are similarly broad in scope in respect of the powers of the court in deciding an oppression action, and the relief that can be granted. [ 70 ] Given these broadly defined obligations, it cannot be said at this stage that an oppression action against one or all of the corporate entities named as Defendants in the Statement of Claim has no reasonable prospect for success. Nor is it clear that relief could not be granted under s. 242 against Mr. Wankel directly. v. Conclusion Regarding Disclosure of a Cause of Action [ 71 ] By way of

summary, I find that the conspiracy claim against the Defendants has no reasonable prospect of success and is insufficiently pleaded. It is struck and will not be certified. This includes the “wrongful engineering” allegations made against the Trustees in paragraph 55 of the Statement of Claim. [ 72 ] I am satisfied that the balance of the Statement of Claim is sufficiently pleaded and discloses causes of action that warrant certification under s. 5(1) (

a) of the Act . 2. Is there an Identifiable Class? [ 73 ] The application for certification seeks an Order defining the Class of persons to be included in the proceeding as “All persons who held Series A and B Trust Units (the Unitholders) of Northwynd Properties Real Estate Investment Trust (the Northwynd REIT) between June 3, 2014 and the Final Notice of Wind-up and Termination of Northwynd REIT dated January 16, 2017 (the Class Period)”.

The Defendant Trustees are excluded. [ 74 ] The Defendants argue that the definition of “Class” is too broad and is inconsistent with the Statement of Claim, which refers to the Class as “being all persons in Canada who held Series A and B Trust Units between June 3, 2014 and present”.

They also point out that the definition would include Unitholders who did not surrender their units prior to wind-up of the Northwynd REIT and who consequently would not be entitled to compensation under the Promissory Note, as well as Unitholders who did not rely on representations made in the Information Circular distributed prior to the wind-up meeting. They also say that some of the Unitholders (including Mr.

Willott) are barred from bringing a claim against the Defendants because they signed a broadly worded release in the Timeshare Settlement process. [ 75 ] The Plaintiffs respond that all of the complaints made by the Defendants regarding the definition of Class can be dealt with at a later stage in the proceedings as an individual issue and, if necessary, through the identification of sub-classes as the action proceeds. [ 76 ] I agree with the Plaintiffs and find that the definition of Class is suitable at the certification stage and satisfies the requirement under s. 5(1) (

b) of the Act . It allows prospective claimants to understand their eligibility to remain in the action and they can determine based on their individual circumstances whether it is best to opt out. It also allows the Defendants to fairly defend the action by understanding the composition of the Class and assessing whether the individual circumstances applying to Class members or groups of Class members warrant further response.

3. Do the Claims of Prospective Class Members Raise a Common Issue? [77]

Section 1(

e) of the Act defines “common issue” as: (

i) common but not necessarily identical issues of fact, or (ii) common butnot necessarily identical issues of law that arise from common but not necessarily identical facts. [78] In this case, the Unitholders have claims against the Defendants that arise from the same set of events and circumstances. Thefacts bearing on each claim will not be identical and it is possible that defences may emerge against some but not all of the claimants aslitigation progresses. Nonetheless, there are basic common issues that are raised such as the nature and scope of the Trustees’ duties tothe Unitholders, and those of Mr.

Wankel, that can be determined on a Class basis, and where there is alignment of interests of Classmembers. Moreover, if individual issues are present, they can be accommodated through a bifurcated proceeding at which commonissues are first dealt with, followed by a separate proceeding to resolve individual issues. [79] For example, if necessary, the question of whether Unitholders who signed Releases in the timeshare litigation are barredfrom bringing this action, is one that could be considered separately. [80] I find, therefore, that this criterion for certification under s. 5(1)(

c) of the Act is satisfied. The specific questions to be dealtwith as part of the common issues proceeding will need to be re-evaluated by the parties, and the Court, given my findings regarding theconspiracy claim. If the parties cannot agree, that can be determined in a subsequent application for advice and direction. 4. Is a Class Proceeding the Preferable Procedure? [81] In considering whether a class proceeding is the preferred procedure, the court should take a broad view of the claim itself,the issues raised and the factual matrix surrounding the making of the claim.

The objective is to contextualize the proposed claim withinthe framework and objectives of class proceedings generally, to determine whether it is best litigated on an individual or class basis:Metera v Financial Planning Group, 2003 ABQB 326 at paras 88-89, citing Carom v Bre-X Minerals Ltd., (ONSCDC), [1999] OJ No 1662 at para 25; 46 BLR (2d) 247. [82] The claim advanced here is brought on behalf of over 300 Unitholders. Each held their interest in the Northwynd REIT underthe same form of security, and under the same Declaration of Trust.

Most, but not all, surrendered their unit in return for an entitlement toreceive monies under a Promissory Note after the Northwynd REIT had been wound up and its Trustees discharged. [83] The Plaintiffs say that individual circumstances will vary but will not predominate the proceeding. They say that it would bemuch more efficient for the claims to proceed as one class proceeding rather than as individual actions.

In addition, a class proceedingwould be in the interest of providing access to justice for the claimants, as their individual claims would be unlikely to proceed given thelitigation costs involved. [84] The Defendants argue that certification as a class action is not preferable because the proposed action would result in the re-litigation of numerous matters already decided by Courts in both British Columbia and Alberta.

They also say that a crucial element ofthe Plaintiffs’ conspiracy claim – that the Defendants deliberately delayed the Timeshare Settlement – is contradicted by a new classproceeding in British Columbia which alleges that the settlement delay was caused by the negligence of the law firm that represented thetimeshare owners at the time of the Timeshare Settlement. They also argue that Mr.

Willott had an active role in the timeshare litigationwhere the timeshare owners were found to have engaged in abusive litigation tactics, and may yet become a member of the more recentclass proceeding against counsel for the timeshare owners. [85] In a related attack on the certification application, the Defendants go one step further and apply to strike the claim in itsentirety pursuant to the Alberta Rules of Court, AR 124/2010, vol 1, Rules 3.68(2) (

c) and (

d) as being frivolous and vexatious. I willdeal with both attacks here. [86] As discussed earlier, the conspiracy allegations made in the Statement of Claim are insufficiently pleaded and have noreasonable prospect for success due to their implausibility. In making that finding, I am mindful of the unfortunate litigation tacticsemployed on behalf of the timeshare owners as discussed in JEKE and in Northmont Resort Properties Ltd. v Goldberg, 2017 BCCA404.

Those cases demonstrate the need for proactive case management in situations involving a large number of claimants, regardless ofwhether the proceeding in question is brought as a class action or as a multitude of individual actions. [87] It does not follow, however, that an action by the Unitholders against the Defendants in this case is frivolous, vexatious orunmanageable. The legal relationship between the Unitholders, the Trustees, Mr.

Wankel and the various corporate defendants isfundamentally different than those involving the timeshare owners, even if the economic interests at play are somewhat intertwined.While the timeshare litigation may have resolved certain discrete legal issues, the proposed class action cannot fairly be characterized asan exercise in re-litigation. Nor is it an abuse of process. [88] I find that a class action proceeding is the preferable procedure for litigating the Unitholders’ claims in this case. Section5(1)(

d) of the Act is satisfied. To the extent that there remain concerns that the abusive tactics used in the timeshare litigation will berepeated, and issues unnecessarily relitigated, they can be navigated through the case management process. The Plaintiffs will berepresented by different legal counsel, who have shown themselves to be courteous and cooperative to the Court and opposing counselthroughout this proceeding, and I expect all involved to continue in that fashion. [89] As for the role played by Mr. Willott in the timeshare litigation, this is best considered in the context of his suitability to act asa Representative Plaintiff in this proceeding. I turn to that next.

5. Are the Proposed Representative Plaintiffs Eligible and Appropriate? [ 90 ] Section 5(1) (

e) of the Act provides that in order to certify a proceeding as a class action, the Court must be satisfied that there is a person eligible to be appointed as a representative plaintiff who, in the opinion of the Court, (

i) will fairly and adequately represent the interests of the class; (ii) has produced a plan for the proceeding that sets out a workable method of advancing the proceeding on behalf of the class and of notifying class members of the proceeding; and (iii) does not have, in respect of the common issues, an interest that is in conflict with the interests of other prospective class members. [ 91 ] The Defendants challenge the suitability of both Mr. Willott and Mr. Ganong.

They say, rather harshly, that: “In this case there is one conflicted, very compromised proposed representative plaintiff, and one entirely uninformed proposed representative plaintiff, both of whom have serious issues with credibility and both of whom have failed to take due care in preparing for and conducting this action to date”. [ 92 ] During the course of case management, I was called upon to decide on many objections taken to questions put to both Mr. Willott and Mr. Ganong in questioning, and in that context reviewed the transcripts of several days of testimony.

In my view, both testified in a responsive and courteous fashion. On occasion they were not as familiar with their affidavit evidence as might be expected, and their recollection of Unitholders’ correspondence and meetings held in years gone by was incomplete. However, the Defendants’ criticism of their preparedness in conducting the action goes too far, as it was clear that both individuals had devoted time and effort to prepare to be questioned and did so to the best of their ability. [ 93 ] My primary concern regarding suitability is Mr. Willott’s history as a member of the Geldert Group of timeshare owners.

While the extent of his participation is not entirely clear, it included early efforts in organizing opposition to the renovation/cancellation levies, and the swearing of an extensive affidavit in the Goldberg action (evincing a belief in the existence of a longstanding and broad conspiracy by NRPL/Northmont to gain control of the Resort). In questioning, Mr.

Willott maintained his belief in the existence of a conspiracy dating back to the CCAA proceedings involving Fairmont, notwithstanding the finding of the British Columbia Supreme Court in JEKE that the Resort Realignment Plan was undertaken for legitimate reasons. [ 94 ] With respect, it is my view that Mr. Willott’s considerable history as one of the organizers of the timeshare owners’ group, and apparently entrenched views as to the dishonesty of Northmont and its related companies, would not be conducive to the efficient prosecution and resolution of the Unitholders’ claim as a class proceeding.

Therefore, even though there is no current conflict with other Unitholders, I do not consider him to be a suitable Representative Plaintiff, given the availability of an alternative. [ 95 ] Mr. Ganong has no potential spectre of conflict due to ownership of a timeshare and participation in the timeshare litigation, and is ready, willing and able to act as a Representative Plaintiff. He does not need to know the particulars of the Unitholders’ relationship with Mr.

Wankel, the Trustees and the related group of corporate defendants to properly instruct counsel and communicate with other Class members as the case proceeds. It should be anticipated and expected that a representative plaintiff will seek and follow the advice of counsel: Warner at para 129 . [ 96 ] I am confident that Mr. Ganong will do so. I find that he is a suitable Representative Plaintiff and that the litigation plan proposed is workable. IV.

Conclusion and Next Steps [ 97 ] The application for certification of the proposed action against the Defendants is granted, in part, as is the cross-application to strike the Statement of Claim for failure to disclose a cause of action.

The cross-application to strike the whole of the Statement of Claim as being frivolous and vexatious is denied. [ 98 ] The common issues as proposed in Appendix B to the certification application will need to be revised to reflect my findings regarding the conspiracy, alleged in paragraphs 56 to 59 of the Statement of Claim, and the allegations of “wrongful engineering” by the Trustees, contained in paragraph 55 of the Statement of Claim.

If the parties cannot agree on a revised set of common issues within sixty days, that matter can be brought back to me for determination when settling the terms of the certification Order to be issued. [ 99 ] The proposed Notice of Certification Opt-out Form and Litigation Plan are acceptable to the Court, but will need to be revised to reflect the striking of portions of the Statement of Claim and the discontinuance of the action against Philip K. Matkin Professional Corporation and Carthew Registry Services Ltd., prior to approval by the Court.

Disagreements regarding these matters may also be brought back to me for determination after sixty days. Heard on the 28 th and 29 th days of June, 2021.

Dated at the City of Calgary, Alberta this 17 th day of September, 2021. R.A. Neufeld J.C.Q.B.A. Appearances: Robert Martz, Andrew Sunter and Allison Scott for the Plaintiff Lara Mason and Sarah Ivany for 2008164 Alberta Ltd. and Kirk Wankel David Bishop and Ricki Johnston for Northwynd Resort Properties Ltd., Paul Hamilton, Ken Bateman, John Andersen, Ron Ferber, Northmont Limited Partnership, Northmont Resort Properties Ltd. and Kirk Wankel

_______________________________________________________ Corrigendum of the Decision of The Honourable Mr. Justice R.A. Neufeld _______________________________________________________ Garfield Ganong is added as a Plaintiff in the style of cause. Added as additional Defendants in the style of cause are Paul Hamilton, Ken Bateman, John Andersen, Ron Ferber, Northmont Limited Partnership, Northmont Resort Properties Ltd., 2008164 Alberta Ltd., Kirk Wankel, Philip K. Matkin Professional Corporation and Carthew Registry Services Ltd.

In the Appearances section, Lara Mason and Sarah Ivany are representing 2008164 Alberta Ltd. and Kirk Wankel In the Appearances section, David Bishop and Ricki Johnston are representing the Defendants, Northwynd Resort Properties Ltd., Paul Hamilton, Ken Bateman, John Andersen, Ron Ferber, Northmont Limited Partnership, Northmont Resort Properties Ltd. and Kirk Wankel.