BUSINESS DEVELOPMENT BANK OF CANADA Applicant And: SPORTS VILLAS RESORT, INC. v. TWIN RIVERS GOLF INC., 2020 NLSC 109

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION In Bankruptcy and Insolvency Citation : Sports Villas Resort, Inc. (Re) , 2020 NLSC 109 Date : August 7, 2020 Docket : 201901G1157 In The Matter of the Receivership of Sports Villas Resort, Inc. and Twin Rivers Golf Inc. And In The Matter of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 , as amended Between: BUSINESS DEVELOPMENT BANK OF CANADA Applicant And: SPORTS VILLAS RESORT, INC. and TWIN RIVERS GOLF INC.

RespondentS And: 83848 NEWFOUNDLAND AND LABRADOR INCORPORATED FIRST Intervenor And: PROJECT MANAGEMENT AND DESIGN LIMITED SECOND Intervenor And: NWS HOLDINGS INC. THIRD Intervenor And: CLARKE INC. MASTER TRUST FOURTH Intervenor And: BASIL DOBBIN FIFTH Intervenor

Before: Justice Robert P. Stack Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: June 18, 2020

Summary: The receiver’s application for sale of the assets of the insolvent corporations was denied because the proposed sale included the interestsof third parties in a condominium property. The receiver had not complied with the sale provisions of the Condominium Act and so couldnot convey the third party interests to the proposed purchaser. Appearances: Neil L. Jacobs, Q.C. and Kimberley A. Walsh Appearing on behalf of the Applicant No Appearance On behalf of the Respondents Gregory K. Pittman, Q.C. Appearing on behalf of the First Intervenor Gregory M. Smith, Q.C. and Shane R.

Belbin Appearing on behalf of the Second and Fifth Intervenors John J. Hogan, Q.C. Appearing on behalf of the Third Intervenor Timothy W. Hill, Q.C. Appearing on behalf of the Fourth Intervenor Authorities Cited: CASES CONSIDERED: Barnes, Re, 2016 NLTD(G) 106; Penney v. Newfoundland and Labrador (Service NL), 2017 NLCA 25; RoyalBank v. Soundair Corp. (1991), (ON CA), 4 O.R. (3d) 1, 83 D.L.R. (4th) 76 (Ont. C.A.); White Birch Paper HoldingCo., Re, 2010 QCCS 4915; Denison Environmental Services v. Cantera Mining Ltd. (2005), (ON SC), 11 C.B.R.(5th) 207, 139 A.C.W.S. (3d) 72 (Ont. Sup. Ct.

J.), additional reasons at [2005] O.J. No. 2421, 140 A.C.W.S. (3d) 35 (Ont. Sup. Ct. J.);Canadian Imperial Bank of Commerce (Re), 2018 NLSC 175; 2475813 Nova Scotia Ltd. v. Ali, 2001 NSCA 12. STATUTES CONSIDERED: Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3; Condominium Act, 2009, S.N.L. 2009, c. C-29.1;Condominium Act, R.S.N.S. 1989, c. 85.

REASONS FOR JUDGMENT Stack, J. : INTRODUCTION [ 1 ] This matter deals with the proposed sale of the property of Sports Villas Resort, Inc. (“Sports Villas”) and Twin Rivers Golf Inc. (“Twin Rivers”), the respondents, in the entities commonly known as the Terra Nova Golf Resort and Terra Nova Estates located in Port Blandford, Newfoundland and Labrador, in connection with receivership proceedings pursuant to

section 243 of the Bankruptcy and Insolvency Act , R.S.C. 1985, c. B-3 (“ BIA ”). The property in question is referred to in the application as the Subject Property and I will describe it in more detail below. [ 2 ] The respondents defaulted on certain secured obligations to Business Development Bank of Canada (“BDC”). On application by BDC, BDO Canada Limited was appointed receiver of the respondents pursuant to an order of this Court dated March 20, 2019.

By order dated June 18, 2020, Grant Thornton Limited was substituted as the receiver. [ 3 ] The first intervenor, 83848 Newfoundland and Labrador Incorporated, is the proposed purchaser of the Subject Property and will be referred to as the “Purchaser”. Each of the second, third and fifth intervenors is an owner of a condominium unit in the TNCC Property, as described below. They will be referred to as “Project Management”, “NWS”, and “Dobbin”, respectively. The fourth intervenor, Clarke Inc. Master Trust, holds mortgages on certain of the condominium units.

I will refer to the fourth intervenor as the “Encumbrancer”. [ 4 ] The receiver seeks an order: (1) approving the first report of the court-appointed receiver (the “Receiver’s First Report”) and the receiver's activities as outlined therein; (2) approving the receiver's recommendation to sell the Subject Property (as defined by the receiver) to the Purchaser; (3) authorizing the receiver to complete the sale of the Subject Property to the Purchaser pursuant to its Invitation for Offers, with such minor amendments as the receiver may deem necessary or appropriate; (4) vesting the Subject Property in the Purchaser free and clear of all encumbrances pursuant to an approval and vesting order to be effective upon the receiver’s filing of the receiver's certificate; (5) waiving the requirement of the receiver to obtain a release pursuant to section 61(1) (

b) of the Condominium Act, 2009 , S.N.L. 2009, c.

C-29.1 (the “ Act ”) from the Encumbrancer, and if not waived, provide direction to the receiver; (6) authorizing the receiver to execute conveyances to the Purchaser in respect of the condominium units owned by Sports Villas, Project Management, Dobbin, 68861 Newfoundland and Labrador Inc., ALJO Holdings Inc. and NWS, or alternatively, waiving the requirement pursuant to section 61(2) of the Act to have the conveyance executed by all the owners, or in the further alternative, provide direction to the receiver; (7) approving the receiver's Interim Statement of Receipts and Disbursements dated July 31, 2019; and (8) sealing the Receiver’s First Report and all appendices thereto, such that the materials may be filed with the Court on a confidential basis until completion of the receivership of the respondents. [ 5 ] The intervenors, other than the Purchaser, oppose their condominium units being included in the proposed sale.

Approval of the Receiver’s First Report and the Receiver’s Activities [ 6 ] At the hearing, upon agreement by the parties, I approved the Receiver’s First Report and the receiver’s activities as described in it except as they relate to: (1) the proposed sale of the Subject Property; and (2) approval of the receiver’s Interim Statement of Receipts and Disbursements which will be determined at a later date. Sealing the Receiver’s First Report [ 7 ] I also granted an order sealing the Receiver’s First Report until the transaction contemplated in the application is completed or upon further order of the Court.

As a court of inherent jurisdiction, this Court has authority to seal part or all of a court record ( Barnes, Re , 2016 NLTD(G) 106).

The receiver submits that this is an appropriate case for me to exercise my discretion in accordance with generally accepted insolvency practice to grant a sealing order over the Receiver’s First Report and its appendices, until completion of the sale contemplated by this application. [ 8 ] The information contained in the Receiver’s First Report describes in some detail the operations of the respondents, as well as the efforts undertaken by the receiver since being appointed privately by BDC.

It also contains details of the respondents’ financial circumstances, the financial circumstances of Terra Nova Resort Condominium Corporation (“TNCC”), details of bids, and asset appraisals.

[ 9 ] Because the proposed sale of the Subject Property has not been approved, the receiver is rightly concerned that the sensitive information contained in the Receiver’s First Report could adversely affect the sale of these assets to another party. [ 10 ] It is ordered that the Receiver’s First Report be sealed until the proposed sale closes or further order of the Court. ISSUE [ 11 ] The remaining issues identified by the receiver all relate to the receiver’s proposed sale of the Subject Property to the Purchaser. The sole issue to be decided, therefore, is whether that sale should be approved.

In particular, can the receiver include in the proposed sale condominium units owned by Project Management, NWS, Dobbin and ALJO Holdings Inc., as well as the units over which the Encumbrancer holds a security interest? material facts [ 12 ] BDC financed the respondents commencing on August 22, 2003. Details of this financing relationship and related security are set out in the receiver’s originating application for the appointment of a receiver. The respondents were indebted to BDC jointly and severally for $3,228,664 as of March 20, 2019.

The Subject Property [ 13 ] For the purposes of the proposed sale, the receiver has defined the Subject Property as those assets that are collectively required to operate Terra Nova Golf Resort and Terra Nova Estates as follows:

(1) Property of Sports Villas: (

a) the majority of the real property known as the Terra Nova Golf Resort, subject to a first charge of BDC; (

b) the real property known as the Eagle Creek golf course, subject to a first charge of BDC; (

c) the 38 unsold lots in an adjacent residential real estate development known as Terra Nova Estates, subject to a first charge of BDC; and (d) 45 of the 54 condominium units in TNCC (25 of the 34 residential units and all of the 20 commercial units), subject to a first charge of BDC.

(2) Property of Twin Rivers: (

a) the interest in the Parks Canada lease for the Twin Rivers golf course, subject to the consent of Parks Canada and a first charge of BDC; and (

b) power carts and accessories, grass mowers and accessories, tractors and related attachments, and small tools, primarily leased from the Royal Bank of Canada and De Lage Landen Financial Services Canada Inc., or subject to a first charge of BDC.

(3) Properties owned by Third Parties: (

a) Nine of the TNCC Property units as described below. [ 14 ] The Subject Property is subject to certain security interests as set out in the application. To the extent that any are relevant for the purposes of this decision, they are identified later.

Proposed Sale of the Subject Property [ 15 ] The receiver submits that this application is in furtherance of its powers set out in the receivership order to continue the commercial viability of the Subject Property and to achieve maximum value in accordance with its obligations under the receivership order and the BIA . [ 16 ] The receiver states that its objective in conducting the sales process was to find a bidder who would operate the Terra Nova Golf Resort. This is because the receiver and its appraiser determined this approach most likely to: (

a) maximize the recovery to creditors in the estate; and (

b) provide a future return to other stakeholders such as suppliers, employees, third party creditors, and other interested parties. [ 17 ] The receiver advises that it took the following steps to market and sell the Subject Property: (1) retained competent and experienced property and golf course management, made appropriate repairs on the buildings as required to maintain the properties in a condition similar to that when appointed, or to improve the saleability of the assets, and entered into Operations Agreements with the Purchaser which require the Purchaser to continue to maintain the assets, pay all operating costs, and insure the assets; (2) offered for sale the property of the respondents, and the property comprising the TNCC, through an Invitation for Offers process as detailed in

Section 6 of the Receiver’s First Report; (3) secured an appraisal by Altus Group, dated April 22, 2019, in respect of the lands, excluding the golf courses, the Terra Nova Resort hotel, and the 38 residential lots, as detailed in

Section 7.0 of the Receiver’s First Report; (4) secured an appraisal by Castle Appraisal Limited, dated November 29, 2018, in respect of the equipment of the respondents as

detailed in

Section 7.1 of the Receiver’s First Report; (5) entered into agreements with Royal Bank of Canada and De Lage Landen Financial Services Canada to include in the sale of the Subject Property the equipment of Twin Rivers over which they have a valid security interest; (6) obtained the consent of Parks Canada to the assignment of the lease to the Purchaser; (7) exercised the rights of Sports Villas to vote and/or consent to the sale of units at a meeting of TNCC, in accordance with the by-laws and declaration of TNCC; (8) negotiated the sale of the Subject Property to the Purchaser pursuant to the receiver’s Invitation for Offers (the “Purchase Agreement”) and the Operations Agreements with the Purchaser; (9) insured the Subject Property and negotiated continued services to the Subject Property with utility providers and the Town of Port Blandford for the continued operation of the Subject Property; and (10) met with interested parties such as condominium unit owners, other creditors, and pension claimants in respect of the respondents.

Terra Nova Condominium Corporation (TNCC) [ 18 ] Sports Villas registered a declaration with a legal description in the Registry of Condominiums on July 22, 2011, thereby creating TNCC. As a result, TNCC is governed by the Act . [ 19 ] Sports Villas is the declarant of TNCC. By section 2(1)(

k) of the Act , "declarant" means: … a person who owns the freehold estate in the land described in the description and who submits for registration under this Act a declaration and description that are registered under this Act , and includes a successor or assignee of that person, but does not include a purchaser in good faith of a unit who pays fair market value or a successor or assignee of the purchaser. [ 20 ] The legal description of the property comprising TNCC is attached to the declaration (the “TNCC Property”). The TNCC Property consists of the Terra Nova Park Lodge building and adjacent lands.

The adjoining parking area is not included in the TNCC Property, title to it being held by Sports Villas. The description of the land associated with the TNCC Property suggests that there is a right-of-way or other easement over other lands of Sports Villas to permit access to it. [ 21 ] For the purposes of this application, there are 54 units in the TNCC Property, 20 commercial units and 34 residential units. The percentage of the common elements referable to each unit is as listed in

Schedule D of the declaration. The receiver advises that according to a search at the Registry of Deeds, none of the commercial units has been sold by Sports Villas. The following residential units (together with their corresponding percentage of the common elements) are currently owned as follows:

(1) Unit 310 - Project Management – 2.47%

(2) Unit 210 - Dobbin – 2.52%

(3) Unit 109 - 68861 Newfoundland and Labrador Inc. – 1.27%

(4) Unit 208 - 68861 Newfoundland and Labrador Inc. – 1.77%

(5) Unit 209 - 68861 Newfoundland and Labrador Inc. – 1.27%

(6) Unit 309 - 68861 Newfoundland and Labrador Inc. – 1.27%

(7) Unit 211 - 68861 Newfoundland and Labrador Inc. – 2.47%

(8) Unit 308 - ALJO Holdings Inc. – 1.77%

(9) Unit 311 - NWS – 2.45% [ 22 ] ALJO Holdings Inc. played no role in the application. [ 23 ] The Encumbrancer holds first ranking mortgages over the units owned by 68861 Newfoundland and Labrador Inc. [ 24 ] The residential units conveyed by Sports Villas account for 17.26% of the common elements of the TNCC Property, resulting in Sports Villas, as declarant, retaining 82.74%. the law [ 25 ] This case involves principles of statutory

interpretation as they relate to the Act . It takes place at the intersection of bankruptcy and insolvency law and condominium law. Statutory

Interpretation [ 26 ] As we have seen, the Act governs condominium developments in this jurisdiction. In this case, the principal point of departure between the receiver, the Purchaser, and the other intervenors is on how the Act should be interpreted as it relates to the proposed sale of the Subject Property, and particularly, the TNCC Property.

[27] In Penney v. Newfoundland and Labrador (Service NL), 2017 NLCA 25, at paragraphs 17 to 20, White, J.A. reiterated theproper approach to statutory

interpretation: [17] In order to determine whether, in light of the application of the Regulations, the context of

section 46 indicates “court” can, in thiscase, mean Court of Appeal, it is necessary to employ the principles of statutory

interpretation. The approach to the

interpretation ofprovincially enacted statutes is explained by Green J.A. , as he then was, in Archean Resources Ltd. v. Newfoundland (Minister ofFinance ), 2002 NFCA 43, 215 Nfld. & P.E.I.R. 124, leave to appeal to SCC refused, 29390 (March 20, 2003) at paras. 19 and 22: 19 The starting point for

interpretation of any statute enacted by the legislature of this province is the legislature’s own directive to thecourts as found in s. 16 of the

Interpretation Act: Every Act and every regulation and every provision of

an Act or regulation shall be considered remedial and shall receive the liberalconstruction and

interpretation that best ensures the attainment of the objects of the Act, regulation or provision according to its truemeaning. . . . 22 Instead of mandating some fictionalized search for a collective "legislative intention", s. 16 directs the court to consider everyprovision "remedial" and to interpret it so that it "best" ensures the attainment of its "objects" according to its "true" meaning.

Thisrequires a consideration, as an integral part of the interpretive exercise, of the problem or "mischief" to which the legislature directed itslegislative act as a remedy and then the drawing of an inference, based on the language of the whole enactment and the court's generalknowledge of the state of the pre-existing law and any information as to the broad social context in which the legislative act occurred, asto what, broadly speaking, the object or objects of the legislative act must have been. The end result is to arrive at a "true" meaning.

Thatinevitably requires an examination of more than the bare words of the legislative enactment that is in issue, no matter how clear orunambiguous they may at first blush appear. The surrounding text, the interrelation of other related statutes, the social and legislativecontext in which the provision was enacted, and other extrinsic aids are all sources to be consulted in this exercise.

Obviously, if the barewords of the relevant provision appear to be straightforward and seem on their face to admit of only one meaning, they may end upcontrolling the result, but even in such a case, it is not sufficient to stop the interpretive exercise at this "plain" meaning; s. 16 requiresthat at the very least this plain meaning be given a "reality check" by being tested against other relevant sources of meaning to ensure thatthere is not some nuance or variation in the normal or apparent meaning that might indicate a different meaning in the particular contextunder consideration.

"True" meaning is not plain meaning; it is a conclusion arrived at by reconciling all the appropriate indicators ofmeaning that the court is directed to consider. [18] In

Chapter 11 of the Construction of Statutes Sullivan explores what constitutes the “context” of a statutory provision. While thetext indicates that context is a vague and malleable term, it includes the immediate context (the language of the particular section); thestatute as a whole, including related regulations; the statue book and related legislation; the common law; international law; the externalcontext; and extrinsic aids. Courts in this province have adopted Sullivan’s definition of “context”.

For example, in Wnek v Witless Bay(Town), (NL SC), 2003 NLSCTD 17, 222 Nfld & P.E.I.R. 149 at para 21, Mercer J., as he then was, referencedseveral aspects of Sullivan’s definition when dealing with a matter to which the URPA, 2000 applied. … [20] Further, in Archean Resources it is clearly stated that interpreting a statutory provision requires determining the objective of theact. [28] At the hearing, no reference was made by counsel for any of the parties to any extrinsic sources, excerpts from Hansard forexample, as to the objective of the legislature when it enacted or amended the Act.

As a result, I am left with basing my

interpretation ofthe Act on the principles in Penney by examining the Act itself. Bankruptcy and Insolvency Law [29] The applicable bankruptcy and insolvency provisions are set out in the BIA. Paragraph 3 of the receivership order, made undersection 243(1) of the BIA, empowers the receiver to sell the property of the respondents as defined therein: 3. The Receiver is hereby empowered and authorized, but not obligated, to act at once in respect of the Property and, without limiting thegenerality of the foregoing, the Receiver is hereby empowered and authorized to do any of the following where the Receiver considers itnecessary or desirable: (

a) to take possession and control of the Property and any proceeds or receipts arising from the Property but, while the Receiver is inpossession of any of the Property, the Receiver must preserve and protect it;

… (

l) to market any or all of the Property, including advertising and soliciting offers in respect of the Property or any part of partsthereof and negotiating such terms and conditions of sale as the Receiver in its discretion may deem appropriate; (

m) to sell, convey, transfer, lease, or assign the Property or any part or parts thereof out of the ordinary course of business (

i) without the approval of this Court in respect of any transaction not exceeding $250,000, provided the aggregate consideration forall such transactions does not exceed $500,000; and, (ii) with the approval of this Court in respect of any transaction in which the purchase price or the aggregate purchase price exceedsthe applicable amount set out in the preceding clause; and in each such case notice under

section 60 of the Personal Property Security Act shall not be required subject to the Receiverobtaining the consent of Parks Canada to lease the Twin Rivers Property…. [30] The receiver submits that the property referred to in the receivership order encompasses the Subject Property. It also says that indischarging its powers to sell the Subject Property, it is acting in accordance with its obligations under

section 247 of the BIA to deal withthe respondents’ property in a commercially reasonable manner. [31] The Ontario Court of Appeal in Royal Bank v. Soundair Corp. (1991), (ON CA), 4 O.R. (3d) 1, 83 D.L.R.(4th) 76 (Ont. C.A.), enumerates the following factors to be considered by a court when considering the sale of assets in the course of areceivership: 16 As did Rosenberg J., I adopt as correct the statement made by Anderson J. in Crown Trust Co. v.

Rosenberg (1986), (ON SC), 60 O.R. (2d) 87, 67 C.B.R. (N.S.) 320n, 22 C.P.C. (2d) 131, 39 D.L.R. (4th) 526 (H.C.) , at pp. 92-94 [O.R.], of theduties which a court must perform when deciding whether a receiver who has sold a property acted properly. When he set out the court’sduties, he did not put them in any order of priority, nor do I. I summarize those duties as follows: 1. It should consider whether the receiver has made a sufficient effort to get the best price and has not acted improvidently. 2. It should consider the interests of all parties. 3.

It should consider the efficacy and integrity of the process by which offers are obtained. 4. It should consider whether there has been unfairness in the working out of the process. [32] Soundair was followed in White Birch Paper Holding Co., Re, 2010 QCCS 4915, where, in a slightly different context, theQuebec Superior Court held at paragraph 49, that in deciding whether to grant authorization, the overarching consideration is whetherthe transaction is appropriate, fair, and reasonable. [33] The Ontario Superior Court of Justice in Denison Environmental Services v.

Cantera Mining Ltd. (2005), (ON SC), 11 C.B.R. (5th) 207, 139 A.C.W.S. (3d) 72 (Ont. Sup. Ct. J.), additional reasons at [2005] O.J. No. 2421, 140 A.C.W.S. (3d)35 (Ont. Sup. Ct.

J.), held that a receiver, as a court-appointed officer experienced in the insolvency field, is entitled considerabledeference by the court relating to a sale of assets process and the adequacy of the receiver’s efforts. [34] This Court, citing Soundair, provided the following comments with respect to applications for approval and vesting inreceivership proceedings at paragraphs 20 and 21 of Canadian Imperial Bank of Commerce (Re), 2018 NLSC 175: 20 Based on the information and evidence provided, I am satisfied that the Receiver took the necessary and reasonable steps to obtainthe best price for the assets.

Where the Receiver has achieved its main obligation in obtaining as high a value for the assets as itreasonably could, the Court is entitled to find that the Receiver has acted properly and according to the directions given to it by the Court(Regal Constellation Hotel Ltd., Re (2004), 128 A.C.W.S. (3d) 646, 37 C.L.R. (3d) 207 (Ont. S.C.J. [Commercial List]) 21 The Court’s authority to confirm the actions of the Receiver is recognized in its entitlement to rely on the Receiver’s expertise in

arriving at its recommendations as it is assumed that the Receiver is acting properly unless it is clearly shown to be otherwise (RoyalBank v. Soundair Corp. (1991), (ON CA), 4 O.R. (3d) 1, 7 C.B.R. (3d) 1 (Ont. C.A.)). [35] It is through this bankruptcy and insolvency lens that I will view the receiver’s application for approval of its sale process. Condominium Law [36] In order to understand the position of the receiver and the positions of the intervenors who oppose the sale of their interests inthe TNCC Property, it is necessary to consider the legal nature of a condominium development.

A useful primer is provided byCromwell, J.A. at paragraphs 3 to 6 of 2475813 Nova Scotia Ltd. v. Ali, 2001 NSCA 12: 3 The term “condominium” refers to a system of ownership and administration of property with three main features. A portion of theproperty is divided into individually owned units, the balance of the property is owned in common by all the individual owners and avehicle for managing the property, known as the condominium corporation, is established: see A.H. Oosterhoff and W.B. Rayner, Angerand Honsberger Law of Real Property (1985), Vol. II, s. 3801 and Alvin B.

Rosenberg, Condominium in Canada (1969). Thecondominium may be seen, therefore, as a vehicle for holding land which combines the advantages of individual ownership with those ofmulti-unit development: Oosterhoff and Rayner at s. 3802. In a sense, the unit owners make up a democratic society in which each hasmany of the rights associated with sole ownership of real property, but in which, having regard to their co-ownership with the others,some of those rights are subordinated to the will of the majority: see Robert J.

Owens et al. (eds), Corpus Juris Secundum (1996),Estates § 195, Vol. 31, p. 260. 4 As Oosterhoff and Rayner wisely observed, the success of a condominium depends in large measure on an equitable balance beingstruck between the independence of the individual owners and the interdependence of them all in a co-operative community.

It follows,they note, that common features of all condominiums are the need for balance and the possibility of tension between individual andcollective interests: at s. 3802. 5 From a more purely legal perspective, a modern condominium is created pursuant to detailed legislative provisions such as, in NovaScotia, the Condominium Act, R.S.N.S. 1989, c. 85 (the “Act”). The condominium is, therefore, a creature of statute. But condominiumlegislation reflects the combination of several legal concepts and relies on, and to a degree incorporates by reference, principles drawnfrom several different areas of law.

The law relating to individual ownership of real property is, of course, central because the owners ofthe individual units are, subject to certain limits, entitled to exclusive ownership and use of their units: see s. 27(2) of the Act.

The lawrelating to joint ownership is significant because the owners are tenants in common with respect to the common elements: see s. 28(1).The law relating to easements and covenants is relevant because the unit owners have rights to compliance by the others with theprovisions governing the condominium and certain easements are, by statute, appurtenant to each unit: see s. 30(2) and 29.

The lawrelating to corporations is also of importance because the condominium is administered by the condominium corporation in which theunit holders are in a position analogous to shareholders: see, e.g., ss. 13 and ff and s. 25. While the Condominium Act enables and, to adegree, regulates the legal aspects of condominium ownership, it does so against a vast background of general legal principles which willfrequently be relevant to the

interpretation and application of the Act. As has been said, “[i]n its legal structure, the condominium firstcombines elements of several concepts ... and then seeks to delineate separate privileges and responsibilities on the one hand fromcommon privileges and responsibilities on the other.” Corpus Juris Secundum, supra at p. 260. 6 Not all condominium developments succeed or last indefinitely.

The Act provides for termination and sale. [37] Although Ali is a case from Nova Scotia, these general principles apply to condominium developments in this province as well.Where differences between the Nova Scotia Condominium Act, R.S.N.S. 1989, c. 85 (the “Nova Scotia Act”) and the Act are important, Iwill address them later in this decision. [38] Let us look now at some of the specific provisions of the Act. [39] By section 16(2) of the Act, the unit owners are entitled to exclusive ownership of their respective units.

By section 16(3), eachunit owner is a tenant in common with the other unit owners of the title to the common elements. The percentage ownership of thecommon elements is set out in

Schedule D to the Declaration and conforms to the information provided by the receiver as set out above. [40] By section 17(1) of the Act, the registration of the declaration created a corporation without share capital, the members of whichare the owners of the units. The owners, therefore, each wear two hats – one as an owner of a unit (section 16) and the other as a memberof the condominium corporation (section 17(1)). [41] By section 18(1) of the Act, the objects of the corporation are to manage the property and assets of the condominium.

That is, itsrole is that of a management corporation, managing the condominium property on the collective behalf of the unit owners. By section27(1), a board of directors elected by vote of the unit owners manages the affairs of a condominium corporation itself. [42] As can be seen from the foregoing, the object of the Act is to permit the creation of condominiums and to provide for theirgovernance in accordance with the general principles set out in Ali.

The language of the Act, read in its entire context and in itsgrammatical and ordinary sense harmoniously with the scheme and object of the Act, requires that the distinction be maintained betweenthe roles of the unit owners and the role of the corporation. The unit owners own the condominium property and are members of thecondominium corporation; the condominium corporation manages the property and assets of the condominium. [43] The corporation is governed through votes by the members, primarily by voting for a board of directors which has direct

authority over its day to day affairs. Issues related directly to the property interests of unit owners are decided by consent of the unit owners. It is important, therefore, not to conflate the two. [ 44 ] For example, the allocation of one vote per unit holder as a member of the corporation ( section 21(1) of the Act ) has no application to a unit holder providing or withholding consent as an owner.

That these functions are distinct is confirmed by section 21(4) of the Act which refers to “[p]owers of voting conferred by, or consent required to be given or document required to be executed under this Act ” (emphasis added). These same three actions are referred to in section 21(5). Sections 21(4) and (5) distinguish between the acts of voting and providing consent.

Consequently, I find that the “one vote per unit” provision under section 21(1) applies only to the owners’ powers of “voting” conferred by the Act and not to any “consent” of owners required to be given under the Act . [ 45 ] Another example of the distinction between the requirement to obtain consent as opposed to an entitlement to vote is the consent required by an encumbrancer under section 61(1) (

b) of the Act . An encumbrancer is not a member of the condominium corporation and plays no role in its governance; therefore, it is not given a vote on corporation issues. [1] I will discuss this provision in more detail later in this decision.

Approval and Authorization of the Proposed Sale of the Subject Property [ 46 ] It is against this backdrop of the relationship among unit owners, as owners of the condominiums and as members of the corporation, that I will asses the receiver’s application. [ 47 ] As we have seen, paragraph 3 of the receivership order empowers the receiver to sell the property of the respondents.

The receiver advises that the proposed sale of the Subject Property will require conveyances of: (1) the receiver's interest in the Subject Property, including 100% of the interests in TNCC Property; (2) the receiver's interest in the Twin Rivers Golf Course land lease with Parks Canada; and (3) the interests of Royal Bank of Canada and De Lage Landen Financial Services Canada in leased golf carts and maintenance equipment. [ 48 ] No opposition is taken to the ability of the receiver to convey the property of Sports Villas and Twin Rivers or the property interests of third parties who have consented to the sale.

Project Management, Dobbin, NWS and the Encumbrancer object to the attempt by the receiver to convey their property rights in the TNCC Property.

Section 61 of the Act [ 49 ] The receiver claims that its authority to convey the TNCC Property, including the nine condominium units owned by third parties, comes from

section 61 the Act which provides in relevant part: 61(1) Sale of the property or a part of the common elements may be authorized by the consent of (a) 80% of the owners of the common elements; and (

b) the persons having registered claims against the property or the part of the common elements created after the acceptance for registration of the declaration and description. [ 50 ] There are two ways that the property of a condominium can be sold. The first is by a unit holder to a purchaser. [2] A unit holder can do this in the ordinary course by way of a direct sale of the unit owned by them. The second method is by a sale of the entirety of the condominium property instigated pursuant to

section 61 of the Act , provided that the consents contemplated by sections 61(1) (

a) and (

b) are obtained. [3] Dissenting unit owners – Section 61(1) (a) [ 51 ] As to section 61(1) (

a) of the Act , the receiver says that based upon the property interests of Sports Villas, it represents ownership of more than 80% of the common elements of TNCC. Consequently, it submits, it can force the sale of the TNCC Property pursuant to

Section 61 notwithstanding the objections of the unit owners who appeared at the application. [ 52 ] The dissenting unit owners argue that although Sports Villas owns more than 80% of the common elements, it is only one of the six owners of those units. Therefore, they say, it represents just 17% of the owners of the common elements and so cannot force a sale under section 61(1) (

a) without the consent of a substantial number of the other unit owners. They submit that where consent of the owners is required, the Act distinguishes between the consents of a “percentage of the owners of the common elements” and the consents of the “owners of a percentage of the common elements”. I agree that the use of different language in different sections of the Act gives rise to different

interpretations. [ 53 ] Examples of circumstances calling for the consent of owners of a percentage of the common elements include the following: 52(1) The corporation, by a vote of members who own 80%, or a greater percentage that is specified in the declaration, of the common elements , may make a substantial addition, alteration or improvement to or renovation of the common elements or may make a substantial change in the assets of the corporation.

… 62(2) Where there has been a determination that there has been substantial damage as provided in subsection (1) and owners who own 80% of the common elements, or the greater percentage as specified in the declaration, vote for repair within 60 days of the determination, the corporation shall repair. … 66(1) Two or more corporations may amalgamate by registering a declaration and description where (

b) the owners of at least 80% of the units of each corporation vote in favour of approving the declaration and description. [Emphases added.] [ 54 ] In the circumstances referred to above, Sports Villas represents ownership of more than 80% of the common elements and so could, therefore, unilaterally effect a change contemplated by sections 52(1), 62(2) and 66(1). [ 55 ] In contrast, the circumstances calling for a percentage of owners are more limited: 61

(1) Sale of the property or a part of the common elements may be authorized by the consent of (a) 80% of the owners of the common element … 63

(1) Withdrawal of the government of the property by this Act may be authorized by the consent of (

a) all the owners of the common elements ; [Emphasis added.] [ 56 ] These latter provisions go to the very foundation of a unit holder’s property interest in the condominium. I find that although the receiver’s interest represents ownership of more than 80% of the common elements, it does not represent 80% of the owners of those common elements. [ 57 ] The receiver argues that it does not matter how one interprets the phrase “80% of the owners of the common elements” in section 61(1)(a).

It suggests that the same result is reached if the language used had been “the owners of 80% of the common elements” because Sports Villas could have avoided any confusion by holding each of its units in a separate corporation. This would have had the effect of making each individual corporation an owner with an interest in its unit and the appurtenant common elements, and at the same time giving each individual corporate owner one vote as a unit holder. Although Sports Villas could have arranged its ownership in such a way, it did not.

The flaw in this argument, therefore, is that it does not reflect the facts before me. Furthermore, the legislature could have employed language in

section 61 that would coincide with the receiver’s position. It did not. [ 58 ] It was also suggested by counsel for the receiver that it would be irrational to interpret section 61(1) (

a) as requiring consent of 80% of the owners rather than the owners of 80% of the common elements. To understand the receiver’s position, consider, for example, a declarant who has developed a fifty-unit condominium but has only sold one unit to a third party. That declarant may decide that the development would be better put to another use and seek to sell it. In such a case, each party, the declarant with 49 units, and the third party, with one unit, would each represent 50% of the owners.

Consequently, the single third-party purchaser would have a veto over the sale, which the receiver suggests would be unfair to the declarant who owns 98% of the units. [ 59 ] The flaw in this argument is that the property rights of owners representing a minority of the ownership overall is recognized elsewhere in the Act . See

section 63, for example, which applies to the removal of the property from operation of the Act . In such a case, every unit holder is given an express veto insofar as section 63(1) requires the consent of all of the owners of the common elements: 63

(1) Withdrawal of the government of the property by this Act may be authorized by the consent of

(

a) all the owners of the common elements ; … [Emphasis added.] [ 60 ] Consequently, giving the owners of a minority of the common elements a veto over the fundamental ownership aspect of a condominium property is a value recognized in the Act . The Giving of Consent versus the Exercise of a Right to Vote [ 61 ] I wish to address one other position put forward on behalf of the receiver in respect of

section 61 of the Act . It was submitted that on the principle of one vote per unit ( section 21(1) ), Sports Villas would have more than 80% of the votes. [ 62 ] Section 61(1) refers to matters being determined by the consent of a percentage of the owners of the common elements. The requirement of consent where significant issues affecting property rights or fundamental expenditures affecting the property itself are contemplated can be contrasted with other circumstances where condominium business is conducted by a vote of the membership. For example, we saw above that the board of directors is elected by vote of the members pursuant to

section 27 of the Act . Other examples include: 35

(1) The corporation may, on a resolution of not less than 66% of its members , make by-laws not inconsistent with this Act , the regulations or the declaration …

(4) By-laws made under this

section may be amended or revoked by the corporation on a resolution of not less than 66% of its members and subsection (3) shall apply to the amendment or revocation of the by-laws as it applies to the by-laws. … 36

(2) The rules shall be reasonable and consistent with this Act , the declaration and the by-laws and shall be approved by 66% of the members of the corporation. ...

(4) The rules made under this

section may be amended or revoked by the corporation on a resolution of not less that 66% of its members. [Emphasis added.] [ 63 ] The issues that are determined by a vote of the membership go to the governance of the condominium corporation and not to the property interests of owners. [ 64 ] The receiver relies on Ali and submits that on a consent sought under section 61(1) (

a) it should receive a number of “votes” equivalent to the number of units held by Sports Villas. The flaw in this reasoning is that the corresponding language of the Nova Scotia Act differs from section 61(1) of our Act . In Nova Scotia, to sell the condominium property a vote of the unit owners is contemplated as is consent by the encumbrancers.

Section 40 of the Nova Scotia Act provides: 40

(1) Sale of the property or any part of the common elements may be authorized by (

a) a vote of owners who own eighty per cent of the common elements; and (

b) the consent of the persons having registered claims against the property or the part of the common elements, as the case may be, created after the acceptance for registration of the declaration and description. (Emphasis added)

[ 65 ] Our Act contemplates consent s from a threshold percentage of the unit owners and consents from all of the encumbrancers. Voting is distinct from the giving of consent, as we saw above in reference to sections 21(4) and (5). The Nova Scotia Act contemplates votes by unit owners, and consents by encumbrancers. Furthermore, the Nova Scotia Act contemplates owners who own eighty per cent of the common elements; not eighty percent of the owners as is required by section 61(1)(

a) of our Act . Consequently, the reasoning in Ali on this issue is of no assistance to the receiver. Conclusion on the Application of Section 61(1)(

a) of the Act [ 66 ] Because the receivership order over the assets of Sports Villas does not capture the TNCC Property other than those units owned by Sports Villas itself, the receiver could not effect the sale of the entire TNCC Property without complying with section 61(1) (

a) of the Act . The receiver has not obtained the necessary consents from 80% of the owners of condominium units. I find that the property of Project Management, Dobbin, and NWS should not have been bundled with the property of Sports Villas for the purposes of the sale. The receiver could have included its right, title and interest in the Sports Villas units in the tender package, but nothing more. [ 67 ] The application for approval of the sale to the Purchaser is denied on this basis. The Encumbrancer – Section 61(1) (b) [ 68 ] The foregoing deals with the matter before me.

Nevertheless, I wish to comment on another aspect of the receiver’s application. [ 69 ] Aside from the unit owners who do not consent to the sale, the receiver is also faced with the Encumbrancer refusing to consent. Section 61(1) (

b) of the Act requires the consent of any encumbrancers to a sale of the TNCC Property. The Encumbrancer is a registered encumbrancer, holding mortgages over five of the units. Its position is, therefore, different from that of the dissenting unit owners. [ 70 ] The receiver proposes to invoke section 21(5) of the Act to circumvent the refusal of consent by the Encumbrancer. In certain circumstances, section 21(5) provides that application can be made to the Court to have another person consent in respect of a unit:

(5) Where the court, upon application of the corporation or of an owner, is satisfied that there is no person capable or willing or reasonably available to exercise the power of voting, giving consent or executing a document, in respect of a unit, the court, (

a) in cases where unanimous vote or unanimous consent is required by this Act , the declaration or the by-laws, shall; and (

b) in another case, may authorize another proper person to exercise the power of voting, to give the consent or to execute the document, in respect of the unit. [ 71 ] The receiver acknowledges that it cannot comply with section 61(1) (

b) of the Act unless the Court grants it the requested authority pursuant to section 21(5) to execute a deed of conveyance in respect of the units subject to the security interest of the Encumbrancer. The receiver submits that because the Encumbrancer will obtain no proceeds from the proposed sale as is set out in

Schedule JJ to the Receiver’s First Report, the Court should impose the sale upon it by invoking section 21(5) . In essence, the receiver suggests that I should infer bad faith on the part of the Encumbrancer from its refusal to consent in such circumstances. Because of that bad faith, says the receiver, it would be appropriate for the Court to order that the receiver be authorized to consent to the sale and to execute any instruments otherwise required to be executed by the Encumbrancer. [ 72 ] The Encumbrancer takes the position that it is entitled to the protection of section 61(1)(

b) of the Act and that there is no provision for obtaining a waiver of its requisite consent. It argues that if the sale is approved and it receives no payment in respect of its security, the receiver will have succeeded in disposing of its security interest without compensation. [ 73 ] It is not clear to me that section 21(5) of the Act would apply to an encumbrancer refusing to consent to a sale of a condominium property pursuant to section 61(1)(b). This is because, subject to limited and express exceptions, encumbrancers do not fall within the governance scheme of the Act . Section 21(5) is found under the heading “voting” with

section 20 that addresses the quorum requirements for the transaction of the business of the corporation.

Section 21 , among other things, allocates one vote to each unit holder and prohibits voting by an encumbrancer unless it is a mortgagee in possession. The Encumbrancer is not a mortgagee in possession. Therefore section 21(5) would not apply to any consent required of the Encumbrancer as a stranger to the ownership of the units and the governance of the corporation. [ 74 ] Even if section 21(5) of the Act does apply to the Encumbrancer, however, the receiver has not met the onus of establishing that the Encumbrancer is acting in bad faith by not consenting to the sale of the Subject Property.

No authority was provided to me upon which I could come to such a conclusion. That the Encumbrancer has refused to consent to a transaction that will see it realize no return on its security interest is not sufficient, on its own, to establish unreasonableness. Conclusion on the Application of Section 61(1)(

b) of the Act

[ 75 ] The receiver has not obtained consent from the Encumbrancer as required by section 61(1) (

b) of the Act . I am not prepared to invoke section 21(5) to obviate the need for such consent. [ 76 ] The application for approval of the sale to the Purchaser would also be denied on this basis. disposition [ 77 ] The application by the receiver is granted in respect of sealing the First Receiver’s Report and in approving the Receiver’s First Report and activities as qualified above. [ 78 ] Although Project Management and Dobbin raised other objections to the proposed sale, the failure by the receiver to obtain the requisite consents under

section 61 of the Act is sufficient to dispose of the application. The application by the receiver for approval of the sale of the Subject Property to the Purchaser is dismissed. [ 79 ] Because the request for approval of the sale was the main substantive matter considered on the application, the intervenors, other than the Purchaser, shall have their costs against the receiver in accordance with Column 3 of the Scale of Costs. The Purchaser shall bear its own costs. _____________________________ Robert P. Stack Justice