Peel Condominium Corp. No. 505 v. Cam-Valley Homes Ltd.

Peel Condominium Corporation No. 505 et al. v. Cam-Valley Homes Limited. et al.; Greater Toronto Home Builders' Association et al., Intervenors [Indexed as: Peel Condominium Corp. No. 505 v. Cam-Valley Homes Ltd.]

53 O.R. (3d) 1

[2001] O.J. No. 714

Docket No. C33234

Court of Appeal for Ontario

Finlayson, Labrosse and Weiler JJ.A.

March 6, 2001

Contracts--Interpretation--Doctrine of good faith --Distinction between good faith in pre-contractual negotiations and good faith in contract performance--No overarching fiduciary duty arising out of the relationship of a vendor and purchaser--Condominium marketed as having outdoor recreational area--Disclosure Statement and related documents providing that recreational area might not be built--Developer deciding to build townhouses on recreational area lands --Condominium corporation opposing use of recreation area lands for townhouses--No breach of doctrine of good faith --Purchaser protected by the statutory requirement of full disclosure, not the extension of fiduciary principles to the bargaining process.

Real property--Condominiums--Interpretation of Disclosure Statement--Doctrine of good faith--Distinction between good faith in pre-contractual negotiations and good faith in contract performance--No overarching fiduciary duty arising out of the relationship of a vendor and purchaser--Condominium marketed as having outdoor recreational area--Disclosure Statement and related documents providing that recreational area might not be built--Developer deciding to build townhouses on recreational area lands--Condominium corporation opposing use of recreation area lands for townhouses--No breach of doctrine of good faith--Purchaser protected by the statutory requirement of full disclosure, not the extension of fiduciary principles to the bargaining process.

Cam-Valley Developments Ltd. and its successor in title, Cam- Valley Homes Ltd., were the developers (the "developer") of a multi-phased condominium project. Their plan was that each phase would be an independent condominium corporation. The project was marketed as a woodland community with an outdoor recreational area at its centre nestled among trees. The recreational area was to be conveyed to the corporations when the last one was registered. The Disclosure Statement stated that the declarant did not warrant that any phase would ever be built. The Disclosure Statement and related documents provided for the construction of common facilities and for the signing of a "Reciprocal Agreement" for the sharing of expenses. The documents described the facilities for the recreational area with the proviso that they would not be built until after the terraced apartments were built (which never occurred) and that they might never be built. The budget stated that the declarant was under no obligation to complete the outdoor recreational area. The Reciprocal Agreement provided that if a facility was not constructed, then the agreement was deemed to be amended to delete reference to it and that Cam-Valley should be under no obligation to construct the facility or be liable with respect to it. The agreement of purchase and sale in its Schedule F contained the purchaser's acknowledgment that the vendor may in the future construct another building on parts of the lands and the purchaser consented to any required re-zoning.

The development started with Peel Condominium Corporation 447, but by the time Peel Condominium Corporation 505 ("PCC 505") was marketed, the developer decided that the outdoor recreational area would be used for townhouses and it razed the forest on these lands. PCC 505 objected to the proposed townhouses and it sued for damages and sought a declaration that it had a beneficial interest in the recreational lands. The claim for damages was reserved for trial, and Epstein J. dismissed PCC 505's claim for ownership but permanently enjoined the developer from developing the recreational lands for residential purposes, although an injunction had not been sought. She concluded that although the developer did not have to convey the lands and although it was under no obligation to construct recreational facilities on these lands, it had not reserved the right to build if its plans for recreational facilities were abandoned. She found that the wording of the documents supported a finding that the developer never in tended a reasonable purchaser to conclude that the developer planned to develop the recreational lands for a use other than as a recreational facility. She stated that it would be contrary to the principles of good faith between contracting parties and contrary to the consumer protection objectives of the Condominium Act, R.S.O. 1990, c. C.26 (ss. 1 to 60 repealed 1998, now S.O. 1998, c. 19, in force as of May 5, 2001, except s. 45(2), in force July 4, 2001) and to the developer's fiduciary obligations to purchasers to rely on an obscure contractual provision in such a way as to defeat the reasonable expectations of the purchaser. The developers appealed, and PCC 505 cross-appealed.

Held, the appeal should be allowed; the cross-appeal should be dismissed.

Per Finlayson J.A. (Labrosse J.A. concurring): Assuming that the documents were ambiguous as to the status of the recreational lands if they were not developed as originally planned, this ambiguity could not support an action for specific performance or an injunction. The obligation to convey arose only if the recreational facilities were built. It was clear from the budget and the Reciprocal Agreement that the developer was under no obligation to build. The trial judge did not correctly set out the relationship in law between the developer and the purchasers of units. The trial judge's emphasis on the Condominium Act as having consumer protection objectives did not reflect the balance between those objectives and the commercial realities of the condominium industry. Further, a prospective purchaser cannot be the fiduciary of the developer in any accepted equitable sense. The weakness of the trial judge's analysis was the failure to distinguish between the status of the developer and purchaser before signing a binding agreement and their obligations to complete a binding agreement in good faith. The obligation to perform a contract in good faith was misapplied to the pre-contractual phase. The notion that the developer has an obligation to incorporate all the purchaser's reasonable expectations into the disclosure statement was unrealistic and unsupported by authority. The suggestion by the trial judge that a prospective purchaser is entitled to repose some element of trust in the developer that it will deal with the purchaser's reasonable expectations in the disclosure documents introduced an element of paternalism that was unjustified. There was supporting case law that there is no duty in Canadian law to bargain in good faith. The developer's good faith obligation is to carry out the agreement and deliver whatever title the contract between the parties calls for. This duty is circumscribed by the documentation required by the Condominium Act. There is no overarching fiduciary duty arising out of the relationship of a vendor and purchaser as such. The purchaser is protected by the statutory requirement of full disclosure, not the extension of fiduciary principles to the bargaining process. It was an error to fashion an ad hoc remedy in equity because there was a perception that the documentation constituted inadequate disclosure. The remedy for inadequate disclosure is either rescission or damages. Rescission was not asked for in this case, and the claim for damages had not yet been decided. For these reasons, the appeal should be allowed and PCC 505's application should be dismissed. The cross-appeal should be dismissed.

Per Weiler J.A. (concurring in the result): For different reasons, the appeal should be allowed and the cross-appeal dismissed. Finlayson J.A.'s interpretation of Schedule F, that is, that the developer had reserved the right to build on the recreational lands was incorrect. The reference to the right to change plans was a reference to those parts of the project already intended for development and reserved to the developer flexibility concerning the housing mix that was built on those parts. However, accepting Finlayson J.A's interpretation, this did not negate a duty of good faith by the developer. The immediate case was concerned with good faith in the execution of a contract and not simply good faith in pre-contractual negotiations. Thus, the policy reasons expressed by the Supreme Court of Canada in Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860, 2000 S.C.C. 60, where the court stated that an overarching duty to bargain in good faith at common law has not yet been recognized by Canadian courts, had no application to this case. The Supreme Court left open the question of the existence of an implied duty of good faith at common law in the performance of existing contracts. The requirement to exercise a contractual right in a reasonable manner is recognized in special categories of relationships and equity may also be the foundation for an independent doctrine of good faith in the performance of a contract. The fact that the developer intended a reasonable purchaser to conclude that the recreational lands would be left in its natural state if no recreational facilities were built, the imbalance in bargaining power, combined with the disparity of access by PCC 505 condominium owners to relevant and essential information concerning the development of the recreational lands, made the imposition of a duty of good faith on the developer a logical extension of the common law. The imposition of a duty of good faith obliged the developer to exercise its ownership with candour and in a reasonable manner taking into consideration the interest of the PCC condominium owners in having the land left in its natural state. The appropriate remedy for breach of a duty of good faith was an increase in damages within the context of a broader action. Epstein J. erred in granting a permanent injunction. Damages were an appropriate remedy.

APPEAL from the judgment of Epstein J. (1999), 28 R.P.R. (3d) 186 granting a permanent injunction.

Cases referred to Abdool v. Somerset Place Developments of Georgetown Ltd. (1992), 1992 CanLII 8658 (ON CA), 10 O.R. (3d) 120, 96 D.L.R. (4th) 449, 27 R.P.R. (2d) 157 (C.A.); Bank of Montreal v. Bail Ltée, 1992 CanLII 71 (SCC), [1992] 2 S.C.R. 554, 93 D.L.R. (4th) 490, 138 N.R. 555 (sub nom. Banque de Montréal v. Hydro-Québec); Banque de Montréal v. Leong, 1989 CanLII 30 (SCC), [1989] 2 S.C.R. 429, 26 Q.A.C. 20, 62 D.L.R. (4th) 1, 100 N.R. 203, 28 C.C.E.L. 1 (sub nom. Bank of Montreal v. Ng); Banque Nationale du Canada v. Houle, 1990 CanLII 58 (SCC), [1990] 3 S.C.R. 122, 74 D.L.R. (4th) 577, 114 N.R. 161, 5 C.B.R. (3d) 1 (sub nom. Houle v. Canadian National Bank); Banque Nationale du Canada v. Soucisse, 1981 CanLII 31 (SCC), [1981] 2 S.C.R. 339, 43 N.R. 283; Carter v. Boehm (1766), 97 E.R. 1162, 3 Burr. 1905, 1 Wm. Bl. 593; Coronation Insurance Co. v. Taku Air Transport Ltd., 1991 CanLII 16 (SCC), [1991] 3 S.C.R. 622, 61 B.C.L.R. (2d) 41, 85 D.L.R. (4th) 609, 131 N.R. 241, [1992] 1 W.W.R. 217, [1992] I.L.R. 1-2797; Downtown King West Development Corp. v. Massey Ferguson Industries Ltd. (1996), 1996 CanLII 1232 (ON CA), 28 O.R. (3d) 327, 133 D.L.R. (4th) 550, 1 R.P.R. (3d) 1 (C.A.) [Leave to appeal to S.C.C. refused (1996), 96 O.A.C. 233]; Freedman v. Mason, 1958 CanLII 7 (SCC), [1958] S.C.R. 483, 14 D.L.R. (2d) 529; Hidden Valley Lakeside Condominiums Inc. v. Vercaigne (1997), 12 R.P.R. (3d) 227 (Ont. Gen. Div.); Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, 97 B.C.L.R. (2d) 1, 117 D.L.R. (4th) 161, 171 N.R. 245, [1994] 9 W.W.R. 609, 16 B.L.R. (2d) 1, 22 C.C.L.T. (2d) 1, 57 C.P.R. (3d) 1, 95 D.T.C. 5135, 5 E.T.R. (2d) 1; International Corona Resources Ltd. v. Lac Minerals Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574, 69 O.R. (2d) 287n, 36 O.A.C. 57, 61 D.L.R. (4th) 14, 101 N.R. 239, 44 B.L.R. 1, 26 C.P.R. (3d) 97, 35 E.T.R. 1, 6 R.P.R. (2d) 1; LeMesurier v. Andrus (1986), 1986 CanLII 2623 (ON CA), 54 O.R. (2d) 1, 12 O.A.C. 299, 25 D.L.R. (4th) 424, 38 R.P.R. 183 (C.A.); Mannpar Enterprises Ltd. v. Canada (1999), 1999 BCCA 239, 67 B.C.L.R. (3d) 64, 173 D.L.R. (4th) 243 (C.A.); Martel Building Ltd. v. Canada (2000), 2000 SCC 60, 2000 S.C.C. 60, 186 F.T.R. 231n, [2000] 2 S.C.R. 860, 193 D.L.R. (4th) 1, 262 N.R. 285, 36 R.P.R. (3d) 175, 3 C.C.L.T. (3d) 1; Middlesex Condominium Corp. No. 87 v. 600 Talbot Street London Ltd. (1998), 1998 CanLII 3245 (ON CA), 37 O.R. (3d) 22, 156 D.L.R. (4th) 587, 17 R.P.R. (3d) 146 (C.A.) [Leave to appeal to S.C.C. refused (1998), 232 N.R. 199n]; Simone v. Daley (1999), 1999 CanLII 3208 (ON CA), 43 O.R. (3d) 511, 170 D.L.R. (4th) 215, 24 R.P.R. (3d) 1, 8 C.B.R. (4th) 143 (C.A.); Stepps Investments Ltd. v. Security Capital Corp. (1976), 1976 CanLII 648 (ON SC), 14 O.R. (2d) 259 (H.C.J.); Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, 123 Man. R. (2d) 1, 152 D.L.R. (4th) 1, 219 N.R. 161, 159 W.A.C. 1, [1999] 4 W.W.R. 86, 36 C.C.E.L. (2d) 1, 97 C.L.L.C. 210-029, 3 C.B.R. (4th) 1; Weiss v. Schad, [1999] O.J. No. 4356 (S.C.J.); York Condominium Corp. No. 167 v. Newrey Holdings Ltd. (1981), 1981 CanLII 1932 (ON CA), 32 O.R. (2d) 458, 122 D.L.R. (3d) 280, 14 R.P.R. 62 (C.A.) Statutes referred to Civil Code of Lower Canada, Art. 1024 Condominium Act, R.S.O. 1990, c. C.26 [now the Condominium Act, 1998, S.O. 1998, c. 19, in force May 5, 2001, except s. 45(2), in force July 4, 2001], s. 52 Authorities referred to Chitty, J., Chitty on Contracts, vol. I, General Principles, 28th ed. (London: Sweet and Maxwell, 1999) Gonthier, C.D., "Liberty, Equality, Fraternity: The Forgotten Leg of the Trilogy, or Fraternity: The Unspoken Third Pillar of Democracy" (2000) 45 McGill L.J. 567

Colin P. Stevenson, for appellants/respondents by cross- appeal. P.M. Conway, for respondent/appellant by cross-appeal. Jonathan F. Lancaster and Harry Herskowitz, for intervenor Greater Toronto Home Builders' Association. Theodore B. Rotenberg and Howard D. Gerson, for intervenor Ontario Real Estate Lawyers' Association.

[1] FINLAYSON J.A. (LABROSSE J.A. concurring):--The appellants, Cam-Valley Homes Limited and Cam-Valley Developments Ltd. appeal from the judgment of Madam Justice Epstein, dated June 10, 1999 in which she permanently enjoined Cam-Valley Homes Limited (successor in title to Cam-Valley Developments Ltd.) from developing for residential purposes certain lands adjacent to the condominium corporations Peel Condominium Corporation No. 447 ("PCC 447") and the respondent Peel Condominium Corporation No. 505 ("PCC 505"). PCC 505 cross-appeals from the trial judge's decision that the adjacent lands are not held in trust by Cam-Valley Homes for the respondent. The trial judge's reasons are reported at (1999), 28 R.P.R. (3d) 186.

Facts

[2] At the return of the application in appeal on June 10, 1999, the condominium corporations sought a declaration that they were the beneficial owners of the adjacent lands registered in Cam-Valley Homes' name and ancillary orders requiring the transfer of the disputed lands. It was common ground that the application could not deal with the damages claim, which was put over for a subsequent trial. In the absence of oral evidence, the basic issue was the proper interpretation of the disclosure statement, declaration and reciprocal agreement and whether the adjacent lands were held in trust for the condominium corporations. A permanent injunction was neither sought in the notice of application nor argued in court.

The disputed lands

[3] The adjacent lands that are in dispute comprise approximately two acres. They are referred to in the judgment as the Outdoor Recreation Area Lands ("ORA Lands"). The property makes up a part of Parcel Block II-1, Section M-199, in the City of Mississauga. Cam-Valley Homes is the assignee of these lands from Cam-Valley Developments.

[4] PCC 447 is a high-rise, residential tower comprising 164 units. Cam-Valley Developments registered PCC 447 on October 3, 1991. PCC 505 comprises 56 townhouses adjacent to the property and in close proximity to PCC 447. Cam-Valley Homes finished PCC 505's 56 residential units in 1995. The units were sold between 1993 and 1994 and were registered on October 3, 1995.

[5] PCC 447 and PCC 505 are part of an overall development: the Granite Gates Community in Mississauga. Between 1991 and 1993, the Granite Gates community was expected to comprise up to 750 units with a possible Outdoor Recreation Area ("ORA") consisting of four tennis courts, an outdoor pool and a putting green to serve the various residential projects within the Granite Gates community. Instead of the envisioned ORA, other recreation facilities have been provided for the Granite Gates Community.

Findings of the trial judge

[6] These findings are clearly and succinctly set out in paras. 7 to 16 of the reasons. The trial judge found that this was a multi-phased condominium development, the concept being that each phase would be created as an independent condominium corporation with a different style and density, resulting in a unique urban community with a rural atmosphere.

[7] The overall project was conceptualized and marketed as a woodland community with a recreation complex nestled among a grove of trees at its centre. Each condominium corporation would have an interest in, use of, and responsibility for, the ORA, which was to be conveyed to the condominium corporations when the last corporation was registered. The concept of an attractive wooded area centred around the ORA was used as a marketing tool by the developer. Purchasers relied upon representations made by the developer with respect to the overall nature of the development around the ORA.

[8] The development was started with the construction of PCC 447. However, because of changes in the real estate market, the developer changed its plans for later phases of the development. The new plan focused on building more townhouses and fewer residential towers by reducing the original number of units of 670 to 440. By the time units in PCC 505 were marketed and sold, the developer decided that the recreational and social core of the development, the ORA, would be used for another townhouse development. This change, the trial judge found, would "no doubt" alter the character of the community.

[9] PCC 505 objected to the proposed townhouse development in place of the ORA and attempted to preserve its rights with respect to the ORA Lands. With the prospect of initiating negotiations to resolve the dispute, Cam-Valley Homes razed the forest on the ORA Lands, precipitating the application in appeal. The trial judge found that damages would be wholly inadequate to compensate the respondents, not only for the loss of the wooded area which they believed would be part of their community, but also for the loss of enjoyment of the overall character of their neighbourhood.

Supplementary affidavits from unit owners

[10] There is no affidavit in the record from any unit owner in PCC 447. PCC 447 has withdrawn from this appeal and abandoned its cross-appeal. In a letter to the Registrar of this court dated October 25, 2000, a new counsel for PCC 447 enclosed a notice of change of solicitors and explained that his client was only joined in the original application at the opening of the hearing below and did not take an active part in the proceedings. Another corporation, PCC 489, comprised of townhouses, had originally joined with PCC 505 in filing a caution with respect to this dispute but it has since indicated that it does not intend to pursue the matter.

[11] The statements from PCC 505 unit-owners are very general. They state that some of them were shown a model of the development; some were told that the ORA Lands might be maintained as a preserve for wildlife; some say they paid a premium for a townhouse adjacent to the ORA Lands; and others say they were told that there would be outdoor recreational facilities built on the lands in question. PCC 505's own witnesses concede that they understood the outdoor recreational facilities might never be built and there is no mention of any oral representation that the subject lands would be conveyed to PCC 447 or PCC 505 in the event that they were not used for the ORA.

[12] An affidavit provided by Alfred Roberts is interesting. Roberts and his wife reside in one of the units in PCC 505. He is a retired architect and a former director on the board of PCC 505. His affidavit is evidence of the residents' lack of interest in the ORA. In fact, his affidavit suggests that there is support to scrap the recreation centre plans in favour of building $500,000 homes because the high quality of the housing development proposed for the property will enhance the present value of the condominium units. Roberts indicates that he had no interest in seeing the recreation centre built because "the maintenance costs would be unreasonable and divisive." He relays his understanding from the various salespersons for the developer that "it was unlikely that the outdoor recreation area would be built, in particular because the residents in the high-rise [PCC 447] which had already been completed were reluctant to participate in the costs associated with such a recreation area."

[13] Roberts goes on to suggest that the board of PCC 505 has pursued a risky and expensive strategy that is detrimental to all PCC 505 unit-owners. Roberts' cross-examination by opposing counsel on his affidavit did not attack any of the above statements.

Analysis

[14] The affidavit evidence of representations made by salespersons regarding the conveyance of the ORA Lands is of little assistance in this case. There is no serious suggestion that the representations were false at the time they were made. All indications are that the developer intended to go through with a much grander scheme but market forces compelled it to undertake a more modest development. Any representations that were made could only serve to concentrate the attention of prospective purchasers on the disclosure documents required by the Condominium Act, R.S.O. 1990, c. C.26 and its amendments, wherein the developer's obligations with respect to the ORA Lands are set out in detail. For the purposes of this case, they are the Disclosure Statement, the Proposed First Year Budget, the Proposed By-Law No. 2 (Reciprocal Agreements) and the Agreement of Purchase and Sale.

[15] The Disclosure Statement for PCC 447 was used as the model before the trial judge and in this court. It places PCC 447 in Phase I and proposes that Cam-Valley Homes construct up to seven more condominium corporations in later phases. The Disclosure Statement then states that the construction timetable for future phases will be totally at the discretion of the declarant and that the declarant does not warrant that any phases will ever be constructed except for PCC 447. If the other proposed phases are not built, the common expenses for PCC 447 may increase in the future. The key clause for our purposes is:

The Declarant intends that the Proposed Corporations will all be operated and managed in a manner of co-operation between the Proposed Corporations. Each of the Proposed Corporations will be given a proportional interest (based on the number of dwelling units in each Corporation) as tenants in common in the outdoor recreation area to be constructed on Block II, Plan M-199, as outlined in this Disclosure Statement . . .

Precisely where on Block II of Plan M-199 the ORA is to be located is nowhere delineated on any drawing or in any document.

[16] The Disclosure statement and related documents provide for the construction of "common facilities" and the execution of a "Reciprocal Agreement" for the sharing of the costs of the common facilities and the Gateway Entrance by the corporations. There is a description of the facilities that are to be built on the ORA Lands with the proviso that they will not be built until after the Terraced Apartments are built and in the event that they are not the ORA may never be constructed. The Terraced Apartments were not built.

[17] The Proposed First Year Operating Budget states that the ORA may be constructed on Part Block II, Plan M-199 "if, and when the last Phase is constructed". It states unequivocally that "[t]he Declarant is under no obligation to complete the Outdoor Recreation Area".

[18] The Proposed By-Law No. 2 (Reciprocal Agreement) deals with four common facilities: the Gateway Entrance, shared common element areas, outdoor road network and the ORA, collectively the "Common Facilities". Article 4.03 provides:

In the event that Cam-Valley does not proceed with the construction and registration of all Proposed Corporations or does not construct any of the Common Facilities contemplated herein, then this Agreement shall be deemed to be amended to delete references herein to any Common Facilities not constructed and Cam-Valley shall be under no obligation to construct or create same or shall Cam-Valley suffer any liability with respect thereto.

[19] The Agreement of Purchase and Sale also contains a significant clause in "Schedule F--Phased Developments". Schedule F is an integral part of the agreement. It says:

The purchaser acknowledges that the Vendor and/or its successors and assigns and/or any related companies may in the future construct another building or buildings on parts of the Lands and the Purchaser agrees not to object to such construction nor deem such construction as an inconvenience or nuisance, or make a claim for damages or injuries or otherwise. The Purchaser hereby consents to any re-zoning required by the Lands in order for the Vendor to proceed with its future plans and hereby agrees not to object to any re- zoning and Committee of Adjustment applications brought by the Vendor.

(Emphasis added)

[20] The agreement also defines "Lands":

3. a. "Lands" means that that certain parcel or tracts of lands and premises in the City of Mississauga . . . described as part of block HH and II, Registered Plan M-199, Mississauga.

[21] And the agreement contains the standard clause:

38. . . . It is agreed that there is no representation or warranty other than as expressed herein in writing.

[22] After reviewing these documents in detail, the trial judge concluded that the developer did not have to convey the ORA Lands to the condominium corporations until the ORA was completed and that the developer was under no obligation to construct an ORA of any nature on the Lands. She also said (at para. 39, p. 199 R.P.R.) that only if the ORA was built would there be an obligation on the developer to convey the ORA Lands:

The documents, if read with care, also contain provisions to the effect that only if the [ORA] is built would [Cam- Valley] have to convey the Lands to the participating condominium corporations.

[23] In the next paragraph, the trial judge refers to the arguments of PCC 505 as an "attempt to counter the logical conclusion based on this wording (that they are not entitled to a conveyance of the [ORA] Lands) by relying on the principles set out in Middlesex Condominium Corporation No. 87 v. 600 Talbot Street London Ltd. (1998), 1998 CanLII 3245 (ON CA), 37 O.R. (3d) 22 (C.A.)." At para. 42, the trial judge recites the submissions of counsel for PCC 505 that the documents in issue "clearly describe the [ORA] as part of the common facilities of the development and that reasonable purchasers would justifiably assume that the centre would be built and that the Lands would be conveyed. As such, following the lead of the Ontario Court of Appeal in Middlesex Condominium Corp. No. 87 v. 600 Talbot Street London Ltd. (1998), 37 O.R. (3d) 22, 156 D.L.R. (4th) 587, the Declarant should be required to do just that."

[24] In response to that submission, the trial judge recognized that in Middlesex the trial judge made a "strong finding" that there was an original intention that the asset in question (a superintendent's suite) would be one of the common elements. She then stated "I am not in a position to make such a finding in relation to the [ORA]."

[25] The trial judge stated further at para. 44 [pp. 200-01 R.P.R.]: "The fiduciary argument advanced by [PCC 505] is similarly flawed. The authority relied upon of York Condominium Corp. No. 167 v. Newrey Holdings Ltd. (1981), 1981 CanLII 1932 (ON CA), 32 O.R. (2d) 458 (C.A.) at p. 467 involved [additional parking spaces]. The Court of Appeal found that the evidence was sufficient to support a finding that there was a common intention that the [parking spaces] would form part of the common elements of the corporation . . .". She added at para. 45 [p. 201 R.P.R.]:

What is of particular interest is that in Newrey Holdings Ltd. Wilson J.A. described the position of a developer, once sales of units started to take place, as follows:

I think he has . . . placed himself in a fiduciary relationship to the unit purchasers not only with respect to their units but also with respect to the interest appurtenant thereto. He therefore holds the property in trust for the unit purchasers, present and prospective, and for the condominium corporation which will come into being upon registration of the declaration. I believe he is under a duty to protect the interests of all unit owners present and prospective and cannot put his own interests in conflict with theirs even although he himself continues to be an owner as long as any units remain unsold.

[26] The trial judge sums up Middlesex and York Condominium Corp. No. 167 v. Newrey Holdings Ltd. (1981), 1981 CanLII 1932 (ON CA), 32 O.R. (2d) 458, 122 D.L.R. (3d) 280 (C.A.) by stating that while they stand for the proposition that a declarant is bound not to prefer its interests over those of the unit owners, the Court of Appeal has made it clear that the starting point must be the reasonable intention of the parties based on the evidence. She then concludes at para. 47 [p. 201 R.P.R.] with the following remarks:

I have found that the evidence in this case does not support a finding that the Declarant intended that the purchasers believe the [ORA] was to be built and that the Lands would be conveyed and that a reasonable purchaser would assume that such would be the case.

[27] The trial judge should have ended her analysis right here. Up to this point, she was correct. Instead, she commenced a fresh analysis based on the lack of clarity in the documentation. She stated that her findings above do not extinguish the rights of PCC 505 and PCC 447 because she finds that with two exceptions "the various documents do not contain any terms under which the Developer reserves to itself the right to build on the Lands if it abandons its plans to build [the ORA]".

[28] The two exceptions are both found in Schedule F to the Agreement of Purchase and Sale, cited in full above. The one exception is an acknowledgement that the developer may in the future construct another building on parts of the property, the definition of which includes the ORA Lands. The second exception is that the purchaser agrees not to object to such construction and consents to any re-zoning such construction might entail. Nevertheless, the trial judge found that "the wording of the condominium documentation supports a finding that [Cam-Valley] never intended a reasonable purchaser to conclude that it planned to develop the [ORA] Lands for use other than as a recreation facility".

[29] This is strange language. It suggests that Cam-Valley was attempting to conceal from prospective purchasers that it intended from the outset to develop the lands in question for a use other than an ORA. The history of the Granite Gates Community and the earlier findings of the trial judge belie such a conclusion. There is no suggestion that the developer was other than genuine in its original intention to build an ORA although its scope had not been settled. There is no evidence that the developer was acting in bad faith in reconfiguring the project because of market considerations over which it had no control. Whatever the frailty of language in the disclosure documents, it is clear to me that the language which is presently so controversial was designed to alert prospective purchasers that if the ORA did not go forward, the developer could use the lands for further development.

[30] Accepting for the purpose of this analysis that the wording in the disclosure documents is ambiguous as to the status of the ORA Lands if they were not developed as originally planned, this ambiguity cannot support an action for specific performance or for an injunction. On any construction of the language, the affirmative obligation to convey the ORA Lands to the participating condominium corporations only arises in the event that the ORA is constructed. The ORA was not built and it is clear from the Budget and the Reciprocal Agreement that the developer was under no obligation to do so.

[31] It must be remembered that the ORA Lands were not part of the land belonging to the condominium corporations. We are not dealing with a straightforward designation of common elements as in Middlesex and Newrey. The ORA Lands were retained by the developer and were to be conveyed to those condominium corporations that wanted to enter into a reciprocal agreement for sharing the costs of the construction of the common facilities and the carrying charges on the completed ORA. Where, as the trial judge found, the land did not have to be conveyed to the participating condominium corporations because the ORA was not going forward, the developer was free to deal with the ORA Lands as it chose. The affirmative obligation to convey the ORA Lands to participating condominiums no longer existed. Nothing further had to be said or done to enable the developer to retain title to the vacant land. It was only because the developer required a modification of the zoning to build additional units that it had the purchasers of qualified units agree in the Agreement of Purchase and Sale to any re-zoning required by the ORA Lands. This was included in order for the developer to proceed with its future plans without objection to re-zoning and Committee of Adjustment applications brought by the developer. The purchasers also agreed, interestingly enough, "not to object to such construction nor deem such construction as an inconvenience or nuisance, or make a claim for damages or injuries or otherwise".

[32] The trial judge appears to have accepted the argument of counsel for PCC 505, which was repeated in this court, that all the saving clauses that protect the developer are buried away in voluminous documentation. The trial judge reasoned that the definition section of the agreements of purchase and sale includes a description from which an "astute purchaser" may have been fortunate enough to decipher that the area referred to in Schedule F includes the ORA Lands. I am sure that developers of condominiums are just as frustrated at having to produce these mountains of documents as the prospective purchasers are with having to read them. However, these documents are required of developers by the Condominium Act and non-compliance with the Act usually redounds to the prejudice of the developer. The detail required in the disclosure documents is a statutory burden, not a matter of choice. As for the purchasers, they were not buying paper plates: they were making a substantial investment in residential housing units that most intended to be their homes. If they proceeded without professional advice, that was their decision.

[33] This brings us to the trial judge's analysis of the relationship between a purchaser and a developer that attracted the attention of the intervenors. Starting at para. 55 [p. 203 R.P.R.] the trial judge states:

Finally, I turn to an important point that, in my view, can clearly be made by the facts of this case. It is based on the vulnerability of the purchaser in the course of a purchase of a condominium unit from the Developer. The point is that a developer should not be allowed to rely on obscure or unclear contractual provisions in the condominium documentation in such a way as to defeat the reasonable expectations of the purchaser. Such would be contrary to the principles of good faith and fair dealing between contracting parties, contrary to the consumer protection objectives of the Act and to the developer's fiduciary obligations to purchasers of units.

(Emphasis added)

While I may generally agree with the learned judge's critique of the legislation, I am unable to accept his approach to the current disclosure requirements. In my respectful opinion, this approach fails to construe s. 52 in a manner that properly balances consumer protection and the commercial realities of the condominium industry and, if adopted, would require a disclosure document incompatible with the underlying aim of the section.

[35] The objective of consumer protection is attained by the requirement of full disclosure under s. 52 of the Condominium Act and must be seen in the context of the full disclosure package. As Robins J.A. stated at p. 145:

The vagueness of the requirements and the absence of statutory guidelines mandate a broad and flexible approach --not a rigid or stringent one--in determining whether a given disclosure statement is adequate. As I indicated earlier, the disclosure statement cannot be viewed as separate from and unrelated to the other documents called for by s. 52(6) and (7); it must be seen in the context of the entire disclosure package. The narrative section of the disclosure statement can realistically be expected to do no more than highlight or summarize the most important features of the condominium documents and assist purchasers in comprehending those documents by directing them to the full text.

[36] Earlier, Robins J.A. dealt with the standard of compliance by which disclosure is to be measured by the court. He said at p. 136:

These disclosure provisions must of course be given a construction consistent with their consumer protection objectives. However, in judging the adequacy of the disclosure for the purposes of deciding whether an agreement is binding, the rights of both parties to the agreement must be taken into consideration. The purchaser is clearly entitled to the information called for by the Act in order to make an informed decision about his or her condominium purchase. At the same time however, once the ten-day period has expired, the vendor is entitled to assume that it has a binding agreement of purchase and sale and to rely on the certainty of that agreement in developing the project and conducting its business affairs.

[37] The trial judge does not have any difficulty accepting that the general law of real property applies to condominiums. She relies on Wilson J.A.'s comments in Newrey at p. 467 O.R.:

It would be wholly unreal to view those transactions as agreements for the sale of separate pieces of real estate . . . I think [the court] must also look to the general law of real property as to the status of a purchaser once his offer has been accepted. I do not think the position of the owner-developer remains unchanged after he starts to sell units. I think that at that point he has committed the character of the project to that of condominium under the Act and declaration.

[38] However, to the extent that Wilson J.A.'s statement can be read along with her earlier statements in Newry to hold that the developer is in a fiduciary relationship with prospective unit holders, this position is unsupported by the general law and is contradicted by recent decisions: see Simone v. Daley (1999), 1999 CanLII 3208 (ON CA), 43 O.R. (3d) 511, 170 D.L.R. (4th) 215 (C.A.); and see generally Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860, 2000 S.C.C. 60. I think that the weakness of the trial judge's analysis is that she fails to draw a bright line between the status of the respective developer and purchaser prior to executing a binding agreement of purchase and sale and the obligation of the contracting parties to complete the closing of the sale in good faith.

[39] The trial judge continues in her analysis by stating [at p. 203 R.P.R.] that "I start with the principle that contracting parties owe one another a duty to act reasonably and in good faith and to perform contracts honestly made." She relies on LeMesurier v. Andrus (1986), 1986 CanLII 2623 (ON CA), 54 O.R. (2d) 1 at p. 7, 25 D.L.R. (4th) 424 (C.A.) where the court dealt with a dispute between a vendor and purchaser over the removal of an objection to title prior to the closing of the sale. The purchaser had complained that the private driveway was not fully within the property lines and the vendor, in response to a requisition on title had moved the curb of the driveway to a point within the property line and obtained a quit claim from the neighbour. However, the purchaser would not close and repudiated the contract. In an action for specific performance that was converted into an action for damages, Grange J.A. for the Court of Appeal held that the conduct of the purchaser was "capricious or arbitrary". He further stated at p. 7 O.R.:

Vendors and purchasers owe a duty to each other honestly to perform a contract honestly made. As Middleton J. put it in Hurley v. Roy (1921), 1921 CanLII 522 (ON CA), 50 O.L.R. 281 at p. 285, 64 D.L.R. 375 at p. 377: "The policy of the Court ought to be in favour of the enforcement of honest bargains . . .".

[40] LeMesurier is referred to by Robins J.A. in the same context at p. 136 in Abdool. However, the concern in LeMesurier was with the parties' conduct in performing an executory contract: one already made. The trial judge appears to have taken this authority a step further by applying the principles in LeMesurier to the pre-contractual phase of the parties' relationship and, in particular, to the time that the agreements were being prepared by the developer. This notion that the developer has an obligation to incorporate all the purchasers' "reasonable expectations" into the disclosure documents is unrealistic and unsupported by authority. LeMesurier does not decide that arm's length parties owe each other a duty of good faith during the bargaining phase of their relationship. In fact, there is supporting case law that there is no duty to bargain or negotiate in good faith: Mannpar Enterprises Ltd. v. Canada (1999), 1999 BCCA 239, 173 D.L.R. (4th) 243 at pp. 265-67, 67 B.C.L.R. (3d) 64 (C.A.) and Weiss v. Schad, [1999] O.J. No. 4356 at para. 123 (S.C.J.). As Iacobucci and Major JJ. stated for the court in Martel Building, supra, at p. 887 S.C.R.:

As a final note, we recognize that Martel's claim resembles the assertion of a duty to bargain in good faith. The breach of such a duty was alleged in the Federal Court, but not before this Court. As noted by the courts below, a duty to bargain in good faith has not been recognized to date in Canadian law.

[41] The trial judge continued at para. 57 [pp. 203-04 R.P.R.]:

The developer has the resources to craft a carefully written series of documents and insert in the mass of inter-related clauses any contingency or qualification upon which it might later want to rely. The purchaser, who is entitled to rely upon the developer's obligations of good faith and fair dealing and upon the purposive application of the Act, cannot be expected to invest the amount of resources necessary to decipher the intricacies of the voluminous documentation that is fundamental to the relationship between the developer and the purchaser.

The element of trust that the prospective purchaser is entitled to have in terms of the fairness of the developer's drafting of the documents that record the transaction between the parties is in keeping with the fiduciary relationship identified by Wilson J.A. in Newrey Holdings Ltd. It follows that the purchaser is entitled to expect that if the developer wants to reserve certain material matters to its own unqualified discretion, such reservations must clearly and distinctly be set out in the documents.

[42] Despite the fact that the trial judge had expressly found that Newrey did not apply to the facts of this case, she relied upon the good faith principle therein. Unfortunately, as with LeMesurier, she took the principle a step too far by applying it to the pre-contractual phase of the parties' relationship, i.e., before any sales of units have taken place.

[43] In my respectful opinion, the fiduciary aspect of the relationship between a developer and the purchasers of units is not fully understood. The developer does not hold the condominium property in trust for the purchaser of the unit, it holds the title to the unit in trust for the prospective purchaser who has executed an agreement of purchase and sale to purchase a unit. The developer's good faith obligation, or duty, is to carry out the terms of the agreement and deliver whatever title the contract between the parties calls for. This obligation or duty is circumscribed by the documentation required by the Condominium Act. The purchaser, for his or her part, has an equitable interest in the unit by virtue of the agreement that is signed; an equitable interest that equity will enforce by specific performance. However, there is no overarching fiduciary duty arising out of the relationship of a vendor and purchaser as such. The suggestion by the trial judge that a prospective purchaser is entitled to repose some element of trust in the developer that it will deal with the purchaser's reasonable expectations in the disclosure documents introduces an element of paternalism that is totally unjustified in such a relationship. As I have indicated, the protection of the consumer rests with compliance by the developer with the disclosure provisions of the Condominium Act. It is inappropriate to refer to the unit holder as a fiduciary in any circumstance. The prospective purchaser is protected by the statutory requirement of full disclosure, not the extension of fiduciary principles to the bargaining process. After executing an agreement of purchase and sale, he or she is entitled to rely on the good faith of the developer to carry out the agreement honestly.

[44] In Simone, supra, this court dealt with a sale of a house where the vendor became bankrupt and the deal could not be completed. The trial judge held that the vendor had been acting in "a fiduciary capacity" and that his breach of the agreement of purchase and sale constituted a "misappropriation" and "defalcation" under the Bankruptcy and Insolvency Act. In reversing the trial judge, Blair J. sitting ad hoc and speaking for the court said at p. 517 O.R., pp. 222-23 D.L.R.:

The relationship between the parties was that of vendor and purchaser, and in my opinion the existence of such a relationship does not, in itself, give rise to fiduciary duties. Nor does the fact that the vendors and purchasers happened to be friends, elevate the relationship to a fiduciary level. The normal contractual relationship between a vendor and purchaser is not characterized by the reposing of a trust or confidence by one person in another and a consequent dependence resulting therefrom, which the authorities indicate give rise to a fiduciary duty. It is true that the vendor acts as trustee of the title for the purchaser pending completion of the transaction. However, to the extent that there may be an obligation of the vendor "to take no steps to deal with the title in a manner harmful to the purchaser's beneficial interest", as the trial judge concluded, it is only in the sense of an obligation to be in a position to deliver title on closing. . . . Breach of the obligation to convey the title, on tender of the purchase price at closing, is remedied by damages, or, in appropriate circumstances--because of the equitable requirement to hold title--by the equitable remedy of specific performance. There is no need to resort to the fiduciary concept.

(Emphasis added)

[45] The trial judge accepted that there was no basis upon which she could order the appellants to convey the ORA Lands to PCC 505. However, she was sympathetic to the respondent and elected to grant a remedy that the respondents did not ask for and which the remaining respondent PCC 505 does not consider to be adequate. Indeed, I believe it is an undesirable remedy from the standpoint of all parties. If the appellants were obliged to convey the ORA Lands under the Agreement of Purchase and Sale, they would be entitled to receive a Reciprocal Agreement whereby the respondent corporation would be obliged to contribute to the carrying costs of the ORA Lands. By simply freezing the lands with an injunction, the trial judge denies the use of the ORA Lands to all parties. The appellants cannot build on it and would have considerable difficulty in selling it. The remaining respondent may have succeeded in preventing further development of the ORA Lands, but it has no right to use them nor has it any say in their maintenance.

[46] Injunctions are not intended to be punitive. The applicants sought an interim injunction to maintain the status quo while its rights were adjudicated. This made sense, but they are clearly not happy with the status quo as a permanent solution.

[47] I think the error in this case was in the attempt to fashion an ad hoc remedy in equity where there was a perception that the language of the documentation under s. 52 of the Condominium Act constituted inadequate disclosure. However, the remedy for inadequate disclosure in an appropriate case is either rescission or damages. The language of the Agreement of Purchase and Sale does not constitute an obligation to convey the ORA Lands in the circumstances that prevailed here. It is not the function of the court to replace the absence of an obligation with a remedy based on an unstated expectation of the purchaser grounded on some result-driven concept of equity. As Blair J. stated in Simone at p. 518 O.R., p. 224 D.L.R.:

A fiduciary obligation must be grounded in the nature of the relationship which exists between the parties, however, and not on the result in law or equity which it is sought to reach. The courts have cautioned against the latter approach and the resort to what have been referred to as "false indicators of a fiduciary relationship", one of which may be the presence of conduct which attracts judicial sanction: see Hodgkinson v. Simms, [1994] S.C.R. 377 at p. 463, 117 D.L.R. (4th) 161, per Sopinka J. and McLachlin J.

[48] Rescission was not asked for in these proceedings and since the claim for damages is not before us, I decline to make any comment as to its appropriateness.

Disposition

[49] For the reasons set out above, I would allow the appeal, set aside the judgment below and enter a judgment dismissing the application with costs. I would dismiss the cross-appeal. I would award the costs of the appeal and cross-appeal to the appellants.

[50] WEILER J.A. (concurring in the result):--I have had the benefit of reading the reasons for judgment of Finlayson J.A. I concur with his disposition but, with respect, I am of the opinion that the Developer owes a duty of good faith to the PCC 505 condominium owners.

I. Overview

[51] The issue on this appeal is whether Epstein J. erred in granting an injunction against the appellant, Cam-Valley Homes Limited ("the Developer"), enjoining it from building 25 townhouses on 2.2 acres of land known as the Outdoor Recreation Area ("ORA") that was part of the Granite Gates development in Mississauga.

[52] Peel Condominium Corporation 505 ("PCC 505"), the respondent and appellant by cross appeal, claims that in its marketing and disclosure documentation the Developer represented that it would build recreational facilities on the ORA land and would then transfer the facilities and land to PCC 505 condominium owner[s] and others. Consequently, PCC 505 seeks a declaration of title to the ORA land or its proportionate share. The Developer asserts that it was made clear to prospective purchasers that it was not obliged to build any recreational facilities on the ORA land and that only if the facilities were built did it have an obligation to transfer the ORA land. Epstein J. found for the Developer on these two points.

[53] On appeal to this court, Finlayson J.A. agrees with these two findings of Epstein J. I am also in agreement with these two findings.

[54] Epstein J. went on to make a third finding. She found that the Developer intended for a reasonable purchaser to believe that if no recreational facilities were built, then the attractively wooded ORA land would be left in its natural state. Finlayson J.A. disagrees with this third finding. He is of the opinion that in Schedule F of the agreement of purchase and sale with the PCC 505 condominium purchasers, the Developer reserved to itself the right to build on the ORA land. On his interpretation, the Developer is free to develop the ORA by building townhouses on it without regard to the interests of the PCC 505 condominium owners.

[55] I respectfully disagree with the interpretation placed on Schedule F of the agreement of purchase and sale by Finlayson J.A. For ease of reference I have reproduced Schedule F:

The purchaser acknowledges that the Vendor and/or its successors and assigns and/or any related companies may in the future construct another building or buildings on parts of the Lands and the Purchaser agrees not to object to such construction nor deem such construction as an inconvenience or nuisance, or make a claim for damages or injuries or otherwise. The Purchaser hereby consents to any re-zoning required by the Lands in order for the Vendor to proceed with its future plans and hereby agrees not to object to any re- zoning and Committee of Adjustment applications brought by the Vendor.

(Emphasis added)

I am of the opinion that Schedule F refers to those parts of the ORA land that the Developer had already disclosed it would be developing. Consequently, the agreement does not automatically reserve to the Developer the right to develop the ORA land in its own interests in the event that no recreational facilities are built.

[56] If I accept Finlayson J.A.'s interpretation of Schedule F, however, I would nevertheless uphold Epstein J.'s imposition of a duty of good faith on the Developer. The imposition of a duty of good faith obliges the Developer to exercise its ownership rights with respect to the ORA land with candour and in a reasonable manner taking into consideration the interests of the PCC 505 condominium owners in having the land left in its natural state.

[57] Such a duty is appropriate having regard to the manner in which Epstein J. found the Developer marketed the property, the unequal bargaining power between the Developer and the PCC 505 condominium owners and the lack of access of PCC 505 condominium owners to information concerning the future development of the ORA lands.

[58] Epstein J. granted an injunction against the Developer enjoining it from developing the ORA lands. Finlayson J.A. would set aside the injunction enjoining the Developer from developing the lands and dismiss PCC 505's cross-appeal for a declaration of title. The injunction granted appears to be a final one, as opposed to an interlocutory injunction, the balance of the application for damages under several heads has been heard.

[59] In the result, I agree with Finlayson J.A. that Epstein J. erred in granting a permanent injunction against the Developer and that it should be set aside. I would also refuse to grant PCC 505 an interest in the ORA land because I am of the opinion that, at this time, damages are an appropriate remedy. Although I concur that the appeal should be allowed, my basis for doing so is quite distinct from that of Finlayson J.A. and, for this reason, I have written this opinion.

II. Analysis

[60] It is helpful at this juncture to briefly review the first three findings of Epstein J. She found:

(1) At para. 37 [p. 199 R.P.R.]: "While I find the wording of the contractual documentation to be confusing . . . the repeated references to the uncertainty surrounding the construction of the Outdoor Recreation Area are sufficient to alert a prospective purchaser to the possibility that the development may include a recreational centre scaled down from that originally contemplated or may not contain such a facility at all."

Further at para. 38: ". . . a reasonable purchaser knew or ought to have known that there was a possibility that there might never be a recreation centre on the Lands."

Consequently, Epstein J. held she was not in a position to make a finding that the ORA would be one of the common elements.

(2) In addition, at para. 43 [p. 200 R.P.R.]: ". . . only if the Outdoor Recreation Area were to be constructed would the Developer have any obligation to convey the Lands."

(3) At para. 48 [p. 201 R.P.R.]: "With two exceptions . . . the various documents do not contain any terms under which the Developer reserves to itself the right to build on the Lands if it abandons its plans to build an Outdoor Recreation Area . . . I do not see how the wording of the documents permits the Developer to deny that the owners, present and prospective, have some interest in the Lands. The clause that automatically amends the documents in the event that the Developer decides to change the nature of the project justifies the Developer in saying that it does not have to build but not that it can appropriate the Lands for itself. In short, I find that the Developer intended that the purchasers believe that the Lands would not be used for residential development and that a reasonable purchaser would assume that the Lands, if not used as a recreational facility, would not be otherwise developed."

(Emphasis added)

[61] Epstein J. further stated at para. 53 [pp. 202-03 R.P.R.]: "[The Developer] never intended a reasonable purchaser to conclude that it planned to develop the [ORA] Lands for use other than as a recreation facility." Epstein J. supported her third finding on the basis of a fiduciary duty owed by the Developer, as well as a duty of good faith, and in reliance on the consumer protection objectives behind the Condominium Act, R.S.O. 1990, c. C-26 ("the Act").

[62] As indicated, I agree with Finlayson J.A. that the first two findings made by Epstein J. are correct. My reasons will focus on her third finding.

A. Would a reasonable purchaser conclude that the ORA land would remain in its natural state if not developed as a recreational facility?

[63] At para. 29, Finlayson J.A. finds that the language in the disclosure documents: "was designed to alert prospective purchasers that if the ORA did not go forward, the Developer could use the lands for further development". By this, he means all of the land, including the ORA land. This finding is based on his interpretation of two sentences found in Schedule F to the agreement of purchase and sale. These two sentences were the two exceptions considered by Epstein J. before making a finding to the opposite effect. In Schedule F, the purchaser first acknowledges that the vendor can construct other buildings on "parts of the 'Lands'". "Lands" is defined to include all of the land for the project, including the land for the proposed ORA. Second, the purchaser agrees not to object to such construction or to any necessary rezoning.

[64] Lands is defined as follows:

"Lands" means that certain parcel or tract of lands and premises in the City of Mississauga, in the Regional Municipality of Peel, described as Part of Block HH and II, registered Plan M-199, Mississauga. [See Note 1 at end of document]

[65] Epstein J.'s interpretation of Schedule F is found in para. 51 [p. 202 R.P.R.]:

First, the provisions of the contractual documentation concerning the possible use of the Lands that if the Lands were developed at all they would be used for a recreation facility and the clause in schedule "F" of the agreement of purchase and sale together with that in the disclosure statement, are capable of reconciliation. These latter clauses make reference to the possibility that the Developer may, in the future, construct another building or buildings on parts of the Property. It seems to me that they could be interpreted as referring to those parts already identified by the Developer as intended for residential development.

(Emphasis in original)

[66] In my opinion, Epstein J.'s interpretation of Schedule F that changes could be made to those "parts" of the property already identified for development accords with the general principles of contractual interpretation. In interpreting the wording of a document, the intention of the parties at the time the document was entered into is a factor to consider with respect to the construction to be placed on the wording of the document: see Chitty on Contracts, vol. I, General Principles, 28th ed. (London: Sweet and Maxwell, 1999) at p. 604. When the purchase and sale of a condominium takes place, the expressed intention of the Developer concerning "recreational and other amenities together with any conditions that apply that to the provision of amenities" must be contained in the Disclosure Statement: see s. 52(6) of the Act.

[67] The Disclosure Statement is intended to be a readable description outlining what is in the other documents: Hidden Valley Lakeside Condominiums Inc. v. Vercaigne (1997), 12 R.P.R. (3d) 227 (Ont. Gen. Div.). [See Note 2 at end of document] The adoption of a contextual approach to the interpretation of schedule F also requires recognition that purchasers and their lawyers would normally expect a developer to comply with s. 52(6)(b). Therefore, any reservation of a right by the Developer to build on the ORA should be specifically disclosed in the Disclosure Statement. In order to ascertain the intention and expectations of the parties it is necessary to have regard to the Disclosure Statement in interpreting Schedule F. I recognize, however, that the question of whether the Developer is in breach of its statutory obligation of disclosure under the Act is not before us.

[68] The relevant portion of the Disclosure Statement provides:

The Declarant also owns the lands adjacent to the Phase IV Lands (Additional Property) and currently proposes to register pursuant to the Condominium Act on part of the Additional Property, up to three (3) more Condominium Corporations. The project is proposed to consist of three (3) highrise towers (Adjacent Corporations) containing 154 dwelling units (Phase I) now registered as Peel Condominium Corporation 447 (PCC 447); about 186 dwelling units (Phase II) proposed; about 280 dwelling units (Phase III) proposed, in addition to the 56 townhouses of Phase IV. The Declarant may increase the number of units to the allowable limit of the current zoning or rezoning of the site may be required in order to construct a different number of units proposed and the building types, sizes and heights proposed. The Declarant may reduce or increase the number of phases and/or combine two or more buildings into one (1) condominium corporation. In the event that the Vendor cannot sell any of the buildings as condominiums so me of the future phases may be rental apartments or may be downscaled to lower density housing. The exact and the final number may be substantially more or less than indicated herein.

The Declarant also intends to construct a townhouse community (Phase V) located on Block OO which is situated on the North side of the Collegeway.

The Declarant reserves the right to combine any one or more proposed phases into one condominium corporation and to register them as such rather than register them as two or more separate condominiums.

The construction timetable for the other phases will be totally at the discretion of the Declarant and the Declarant does not warrant that any other phase will ever be constructed. The Declarant is under no obligation to complete any portion of the project other than Phase IV. If the other phases are not built, common expense payments for Phase IV may increase in the future.

(Emphasis added)

[69] The Disclosure Statement describes lands adjacent to the Phase IV Lands as Additional Property on which the Developer proposes to build three more Condominium Corporations (Adjacent Corporations) and the references to zoning or rezoning of the site and changes in the density of development must be read in this context. A further townhouse community is projected on another part of the property, Block OO. The word "proposed" means "suggested" or "offered" for consideration: Webster's Encyclopedic Unabridged Dictionary, (New York: Grammercy Books, 1989) S.V. There is no suggestion of development on the ORA lands in the Disclosure Statement.

[70] The Disclosure Statement makes reference to the Reciprocal Agreement to be entered into by the condominium owners. In the Reciprocal Agreement, Adjacent Corporations is defined as, "the highrise and/or townhouse buildings to be built on the Future Phase Lands and currently intended to be registered as condominiums". The word "currently" means "presently, at the moment": Webster's, supra, S.V.

[71] The reference to "proposed phases" in the disclosure statement and to "highrise and/or townhouse buildings . . . currently intended to be registered as condominiums" in the reciprocal agreement support the interpretation of Epstein J. that the "parts of the Property" described in the agreement of purchase and sale were intended to be land on which the Developer proposed to build at the time that the documents were signed. This was not the ORA land.

[72] Where, as in Schedule F, the wording "parts of the Lands" is more general than the specific wording in other documentation, there is ambiguity. In such cases, the court is entitled to look to the surrounding circumstances in interpreting the wording of the document. Here, the surrounding circumstances include the oral or affidavit evidence of the parties concerning the circumstances under which the agreement of purchase and sale was signed. The evidence of the PCC 505 unit purchasers that the property was marketed as being centred around the ORA, an attractive wooded area, is uniformly consistent and unchallenged. Some purchasers were told that the ORA lands might be maintained as a preserve for wildlife; while other purchasers stated they paid a premium for a townhouse adjacent to ORA lands. As noted by Finlayson J.A. at para. 7, the "[p]urchasers relied upon representations made by the Developer with respect to the overall nature of the development around the ORA." Thus, part of the Developer's repre sentation was that unit holders were buying an urban home with a wooded area at its centre. On part of the wooded area, according to the Developer, amenities such as tennis courts or a swimming pool might be built or they might not be built. Although it is clear the Developer would not be liable if it did not build the amenities, there is no suggestion that if the amenities were not built, the Developer was entitled to cut down all of the trees and build townhouses.

[73] The sequence of events also confirms the interpretation given to Schedule F by Epstein J. PCC 505 was registered October 3, 1995. However, it was only in 1996 that the directors of PCC 505 were advised that the Developer's plans for the ORA had changed. Thus, it was only after the units in PCC 505 were marketed and sold that the Developer changed its mind and decided that the ORA land would be used to build an additional 25 townhouses. [See Note 3 at end of document]

[74] The wording of the Disclosure Statement and Reciprocal Agreement, the evidence of the purchasers with regard to the circumstances under which they entered into agreements to purchase, and the sequence of events, all support the interpretation placed on Schedule F by Epstein J. Undoubtedly, the reference to the right of the builder to change its plans concerning "parts of the property" was meant to be a reference to those parts already intended for development and reserved to the Developer flexibility concerning the mix or type of housing that was to be built on those parts. It was not intended to reserve to the Developer the right to develop and build on the ORA if no recreational facilities were ever built. Thus, while the words in Schedule F could be interpreted so as to bear the construction put on them by Finlayson J.A., I am of the opinion that the construction adopted by Epstein J. more accurately reflects the intention and understanding of the parties at the relevant time.

[75] At the time this application was initially heard, PCC 505's claim for damages against the Developer for breach of its disclosure obligations was, on common ground, argued but put over to a later date. This is regrettable. The effect of s. 52(1) of the Act is that an agreement of purchase and sale is binding only after the purchaser receives a disclosure statement that complies with ss. 52(6) and (7). If the Developer did not comply with its statutory disclosure obligations, the agreement of purchase and sale, including Schedule F, is not binding on the purchasers. The basis on which the Developer relies in order to build on the ORA land would then be completely undermined. Bifurcated applications are rarely, if ever, a good idea.

[76] In accordance with her interpretation of the documentary evidence, Epstein J. made a finding that Cam-Valley "never intended a reasonable purchaser to conclude that it planned to develop the ORA Lands for use other than as a recreation facility". In other words, a reasonable purchaser would not have concluded that if the ORA was not built, the Developer could use the lands for its own profit as opposed to leaving them in their natural state. This finding is reasonably supported by the evidence and is entitled to deference. I would uphold it.

B. What is the basis for the imposition of a duty on the Developer to take into account the interests of the unit holders in PCC 505 in developing the ORA land?

[77] PCC 505 submits that a fiduciary relationship exists between a condominium developer and a purchaser once the developer begins to sell units in the project. PCC 505 submitted that the Developer breached its fiduciary duty by representing that the ORA land would form part of the common elements of the condominium corporations or would be a unit in one of the condominium corporations owned proportionately by all.

[78] Epstein J. rejected PCC 505's submission and held that as argued, the factual basis for the imposition of a fiduciary duty was lacking. She found that the Developer did not unequivocally represent that the ORA land would be proportionately transferred. It was only if the recreational amenities were built that the Developer had an obligation to convey the ORA lands and the Developer did say it might not build any recreational facilities. Epstein J. thus distinguished the decision in York Condominium Corp. No. 167 v. Newrey Holdings Ltd. (1981), 1981 CanLII 1932 (ON CA), 32 O.R. (2d) 458, 122 D.L.R. (3d) 280 (C.A.) on the factual basis that in that case there was a clear finding that the area at issue, a superintendent's suite, would form part of the common elements. She stated at para. 44 [pp. 200-01 R.P.R.]:

The fiduciary argument as advanced by the applicants is similarly flawed. The authority relied upon of York Condominium Corp No. 167 v. Newrey Holdings Ltd. et al. (1981), 1981 CanLII 1932 (ON CA), 32 O.R. (2d) 458 [See Note 4 at end of document] also involved a superintendent's suite. The Court of Appeal found that the evidence was sufficient to support a finding that there was a common intention that the suite would form part of the common elements of the corporation and that a prospective purchaser would be justified in assuming that the suite would be one of the common elements. The Court felt justified in overcoming the potential problems created by the actual registered title and ordered a conveyance of the suite to the corporation.

While the Middlesex Condominium Corp. No. 87 and Newrey Holdings Ltd. cases stand for the proposition that a declarant is bound not to prefer its interests over those of the group of unit owners, the Court of Appeal has made it clear that the starting point must be a finding as to the reasonable intentions of the parties based on the evidence.

I have found that the evidence in this case does not support a finding that the Declarant intended that the purchasers believe the Outdoor Recreation Area was to be built and that the Lands would be conveyed and that a reasonable purchaser would assume that such would be the case.

[79] Accordingly, Epstein J. was of the opinion that the factual basis for the imposition of a fiduciary relationship between the Developer and the unit holders of PCC 505 was lacking at this point.

[80] However, Epstein J. states at para. 55 [p. 203 R.P.R.]:

. . . an important point that, in my view, can clearly be made by the facts of this case . . . is based on the vulnerability of the purchaser in the course of a purchase of a condominium unit from the Developer. The point is that a developer should not be allowed to rely on obscure or unclear contractual provisions in the condominium documentation in such a way as to defeat the reasonable expectations of the purchaser. Such would be contrary to the principles of good faith and fair dealing between contracting parties, contrary to the consumer protection objectives of the Act and to the developer's fiduciary obligations to purchasers of units.

(Emphasis added)

[81] At this point in her reasons, Epstein J. had made a factual finding that the Developer intended a purchaser to believe, and reasonable purchasers would have believed, that if no recreational amenities were built, the ORA land would be left in its natural state. Based on her factual finding, she had a starting point in the evidence for considering whether the Developer could nevertheless ignore the interests of the unit holders of PCC 505. Epstein J. based the imposition of the Developer's duty not to prefer its interests over those of PCC 505 condominium owners on three principles: 1) a requirement of good faith and fair dealing between contracting parties; 2) the consumer protection objectives of the Act; and 3) the Developer's fiduciary obligations.

[82] The imposition of a duty of good faith and a fiduciary duty are closely related. There is, however, at least one important difference. If, for example, A owes a fiduciary duty to B, A must act only in accordance with B's interests when A exercises its powers or exercises a discretion arising out of the relationship: see Newrey Holdings; Hodgkinson v. Simms, 1994 CanLII 70 (SCC), [1994] 3 S.C.R. 377, 117 D.L.R. (4th) 161. If, on the other hand, A owes a duty of good faith to B, A must give at least as much consideration to B's interests as it does to its own interests before exercising its power. Thus, if A owes a duty of good faith to B, so long as A deals honestly and reasonably with B, B's interests are not necessarily paramount: see e.g. Mason v. Freedman, 1958 CanLII 7 (SCC), [1958] S.C.R. 483, 14 D.L.R. (2d) 529.

1. The developer's fiduciary obligations

[83] Finlayson J.A. takes issue with the imposition of a fiduciary obligation on the Developer on the basis that it does not accurately set out the relationship between a developer and a prospective purchaser of condominium units. Epstein J., however, speaks of "purchasers" in her judgment and not prospective purchasers. As I have indicated, it was only after PCC 505 was sold that the Developer disclosed its intention to use the ORA for its own purposes. In any event, on the basis of Newrey Holdings, once the developer begins to sell units in the project, a fiduciary duty towards prospective purchasers can be imposed depending on the factual circumstances of the case.

[84] In Hodgkinson at p. 407 S.C.R., pp. 174-75 D.L.R., the Supreme Court held that the existence of a contract does not necessarily preclude the existence of fiduciary obligations between the parties. In some cases, such as those involving principal and agent, the legal incidents of the contractual relationship give rise to a fiduciary duty. In others, by statute, agreement, or based on some unilateral undertaking, or, as in Hodgkinson, a representation that one party has an obligation to act for the other's benefit and cannot have regard to its own interests. Here, Epstein J. found that if no amenities were built, a reasonable purchaser would conclude that the ORA would not be developed but would be left in its natural state.

[85] Whether or not a fiduciary duty exists is a question of fact: Hodgkinson; International Corona Resources Ltd. v. Lac Minerals Ltd., 1989 CanLII 34 (SCC), [1989] 2 S.C.R. 574 at p. 648, 61 D.L.R. (4th) 14. Factors in the evidence that would support the imposition of a fiduciary duty on the Developer not to prefer its interests over those of the unit holders at this stage include:

(1) the fact that the Developer had a discretion whether or not to build recreational facilities on the ORA;

(2) the Developer exercised power and control over the ORA;

(3) PCC 505 unit holders were obliged to rely on the Developer's discretion respecting the ORA after they purchased their units;

(4) the credence and reliance the unit holders were likely to give the Disclosure Statement combined with what they were told at the time of purchase; and

(5) the Developer possessed information concerning the future development of the project not readily accessible to the PCC 505 purchasers.

[86] Although Epstein J. mentions the Developer's fiduciary duties, she earlier rejected the existence of a fiduciary relationship in the circumstances of this case. The tenor of her reasons at paras. 56 to 59 leads me to conclude that she imposed a duty on the Developer not to act solely in accordance with its own interests on the basis of a requirement of good faith.

2. The duty of good faith

[87] The Developer submits that no duty of good faith is owed to the condominium owners in PCC 505. Finlayson J.A. relies on Martel Building Ltd. v. Canada, 2000 SCC 60, [2000] 2 S.C.R. 860, 2000 S.C.C. 60. In that case, Iacobucci and Major JJ. commented at para. 73 that no overarching duty to bargain in good faith at common law has yet been recognized by Canadian courts.

[88] Martel was concerned with whether there was a duty of good faith in pre-contractual negotiations. In Martel, it was contended that the Government of Canada, acting as a tender- calling authority, had a duty to bargain in good faith and was negligent in discharging that duty by not providing Martel, the bidder, with adequate information about the government's bargaining position respecting the renewal of a lease. Martel sued in tort. The Supreme Court reviewed a number of policy considerations that weigh against imposing a duty of care on parties negotiating a contract. First, the primary goal of negotiation is to achieve the most advantageous financial bargain. Second, economically efficient conduct could be deterred and, in some circumstances, is a valid rationale against extending liability. The Supreme Court stated at para. 67 [p. 886 S.C.R.]:

It would defeat the essence of negotiation and hobble the marketplace to extend a duty of care to the conduct of negotiations, and to label a party's failure to disclose its bottom line, its motives or its final position as negligent. Such a conclusion would of necessity force the disclosure of privately acquired information and the dissipation of any competitive advantage derived from it, all of which is incompatible with the activity of negotiating and bargaining.

[89] Negotiations respecting the purchase of condominiums involve a very different atmosphere than the paradigm of a freely negotiated commercial contract between two equally sophisticated parties as in Martel. The developer is by statute mandated to disclose its "bottom line" because it is required to give full and accurate disclosure of information that a purchaser would regard as material to his or her decision to purchase in the Disclosure Statement.

[90] A third reason given by the Supreme Court for not imposing a duty of good faith in the negotiation process is that it would interject after-the-fact insurance against the failure of a party to act with due diligence (at para. 68, p. 886 S.C.R.). This policy would have limited application to the purchase of a condominium where all pertinent information must be disclosed in the Disclosure Statement and the amount of independent due diligence a purchaser is required to exercise is thus mitigated. Because the scope and extent of a condominium project is within the unique knowledge of the Developer, the Act requires the Developer to provide the purchaser with information as opposed to placing the onus on the purchaser to try and independently seek out the information.

[91] The fourth reason articulated by the Supreme Court for not imposing a duty of good faith in the negotiation process is that it could lead to courts having a regulatory function. A fifth and related reason is that to extend the tort of negligence to the conduct of negotiations could result in increased litigation (at para. 70, pp. 886-87 S.C.R.). In the case before us, a regulatory function already exists by virtue of the Act and the courts are the arbiters and enforcers of that function. The reason for the Act is the protection of condominium purchasers. The Act regulates an activity that the Legislature has determined cannot be left entirely open to free market forces.

[92] Finally, in this case, we are concerned with good faith in the execution of a contract and not simply pre-contractual negotiations leading to a tort action. The policy reasons of the Supreme Court for not imposing a duty of good faith have no application to this case.

[93] If Finlayson J.A. is correct in his interpretation of Schedule F, that the developer would have a right to develop the ORA land, then the question that arises is whether the Developer is free to develop the ORA land without taking into consideration the reasonable expectations of the PCC 505 condominium purchasers concerning the ORA land the Developer engendered. The decision in Martel does not deal with the question of whether there is an implied duty of good faith on the parties in the performance of an existing contract.

[94] That issue did, however, arise in three cases on appeal from the Quebec Court of Appeal to the Supreme Court. In the Civil Code context, the Supreme Court held that there was an implied duty of good faith: see Houle v. Canadian National Bank, 1990 CanLII 58 (SCC), [1990] 3 S.C.R. 122, 74 D.L.R. (4th) 577; Banque de Montréal v. Leong, 1989 CanLII 30 (SCC), [1989] 2 S.C.R. 429, 62 D.L.R. (4th) 1; and National Bank of Canada v. Soucisse, 1981 CanLII 31 (SCC), [1981] 2 S.C.R. 339, 43 N.R. 283. The three cases, affirmed in Bank of Montreal v. Bail Ltée, 1992 CanLII 71 (SCC), [1992] 2 S.C.R. 554, 93 D.L.R. (4th) 490, deal with the interpretation of article 1024 of the Civil Code of Lower Canada as it existed at the time. Article 1024 simply stated:

The obligation of a contract extends not only to what is expressed in it, but also to all the consequences which, by equity, usage or law, are incident to the contract, according to its nature.

[95] Equity may also be the foundation for an independent doctrine of good faith in the performance of a contract at common law. As noted by Grange J.A. in LeMesurier v. Andrus (1986), 1986 CanLII 2623 (ON CA), 54 O.R. (2d) 1 at p. 7, 25 D.L.R. (4th) 424 (C.A.):

As Middleton J. put it in Hurley v. Roy (1921), 1921 CanLII 522 (ON CA), 50 O.L.R. 281 at p. 285: "The policy of the Court ought to be in favour of the enforcement of honest bargains . . .".

The approach may be merely an example of the development of an independent doctrine of good faith in contract law at least in the performance of contracts, one explicitly set forth in the American Uniform Commercial Code and in the American Restatement and exhibited, although perhaps in disguised form, in many English and Canadian cases--see the lecture of Professor Belobaba, Special Lectures of the Law Society of Upper Canada (1985), p. 73, particularly the examples set forth on p. 83 et seq. [See Note 5 at end of document]

(Emphasis added)

[96] Given the current state of the law, it is hardly surprising that the Supreme Court in Martel specifically left the question of the existence of an implied duty of good faith at common law in the performance of existing contracts to be definitively decided another day. The trend, as noted by the Supreme Court in Houle, is towards a just and fair approach to rights and obligations. Concurrent with this development is the requirement to exercise a contractual right with candour and in a reasonable manner based on an implied duty of good faith. [See Note 6 at end of document]

[97] The requirement to exercise a contractual right in a reasonable manner is already recognized at common law in special categories of relationships. One example that readily comes to mind is the obligation of good faith and fair dealing on employers in the manner in which they dismiss an employee: Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 S.C.R. 701, 152 D.L.R. (4th) 1. At paras. 91-95, Iacobucci J. held that contracts of employment have unique characteristics that set them apart from ordinary commercial contracts. One of the unique characteristics is that the formation of the contract is not the result of the exercise of bargaining power between two equals. Further, the power imbalance is not limited to the formation of the contract itself but informs virtually all facets of the relationship because the relationship is typically one between a bearer of power and one without power.

[98] In addition to a lack of bargaining power, the employee lacks the information necessary to achieve more favourable contractual terms. Iacobucci J. holds that the law ought to encourage the employers who exercise their right to terminate an employee to do so in a manner that minimizes the damage to the employee, both economically and in personal terms. To ensure that employees receive adequate protection from employers, Iacobucci J. holds employers to a duty of good faith and fair dealing in the manner they dismiss employees. Breach of this duty by conduct that is not candid or reasonable can be compensated for by adding to the length of notice the employer is obliged to give the employee upon termination.

[99] Another relationship upon which the common law imposes a duty of good faith because of a disparity in access to information is that between an insurer and an insured. When an insured applies for insurance, it is really only the insured that is aware of certain information that is of critical importance to the insurer's assessment of the risk. The disparity in access to relevant and essential information led to the imposition of a duty of good faith on an applicant for insurance by requiring the prospective insured to communicate all relevant factors to the insurer: see Carter v. Boehm (1766), 97 E.R. 1162, 3 Burr. 1905; Coronation Insurance Co. v. Taku Air Transport Ltd., 1991 CanLII 16 (SCC), [1991] 3 S.C.R. 622 at p. 636, 85 D.L.R. (4th) 609. The passage of various insurance statutes has not displaced this longstanding common law duty of good faith.

[100] Purchasers of condominiums share many of the same characteristics of both these special relationships. The purchaser of a condominium enters into a contract with a developer that is basically dictated by the developer and is not the result of the exercise of bargaining power between two equals. This power imbalance continues so long as the developer is developing the project. In addition to the lack of bargaining power, the condominium purchaser lacks the information necessary to achieve more favourable contractual terms with the developer. It is only the developer that is aware of the information with respect to the risks concerning the project and the extent to which those risks may require further modification of the projected development. While the developer has the right to change the development, just as an employer has a right to terminate an employee, that right must be exercised with candour and reasonableness, taking into consideration the interests of the condominium owners. The fact the De veloper intended a reasonable purchaser to conclude the ORA land would be left in its natural state if no recreational facilities were built, the imbalance in bargaining power, combined with the disparity of access by PCC 505 condominium owners to relevant and essential information concerning the development of the ORA land, makes the imposition of a duty of good faith on the Developer a logical extension of the common law.

[101] Indeed, having regard to the fact that a fiduciary duty, a much higher duty, has been imposed on condominium developers at common law (depending on the factual circumstances of a particular case), it would be logical to exact a duty of good faith from condominium developers when circumstances warrant. At the very least, the circumstances of this case warrant the imposition of such a duty on the facts as found by the trial judge. The existence of the Act in no way stands in the way of the imposition of such a duty. Both the insurance cases and the fact a fiduciary duty can be imposed notwithstanding the existence of the Act illustrate that the common law and statute law can be, and often are, interwoven.

III. Remedy

Should a declaration of ownership be granted?

[102] The appropriate remedy for breach of a duty of good faith appears to be an increase in damages within the context of a broader action: United Grain Growers.

[103] Although PCC 505 alleged that the Developer breached its fiduciary duty, PCC 505 does not appear to have alleged the breach of the lesser duty of good faith. The original application does contain claims for damages for failing to construct the recreational facilities on the ORA, punitive or exemplary damages for the Developer's highhanded conduct in cutting down the trees, and a declaration that PCC 505 is entitled to damages against the Developer for breach of the disclosure statement pursuant to s.52(5) of the Act.

[104] Bearing in mind that the issue of damages is yet to be argued, I would, if necessary, grant leave to PCC 505 to amend its pleadings, if it desired to claim damages for breach of a duty of good faith with liberty to the Developer to respond. Assuming an amendment to the pleadings is made to claim damages at common law for breach of a duty of good faith, the damages, if any, could be assessed at the same time or immediately after PCC 505's other claims for damages have been heard.

IV. Conclusion

[105] For the reasons I have given, I agree with Finlayson J.A.'s disposition.

Order accordingly.

Notes

Note 1: The evidence file in support of the application indicates that registered Plan M-199 was not included in the Agreement of Purchase and Sale. In addition, the site plan purchasers received with their Agreement did not refer to Blocks HH and II.

Note 2: Feldman J. held, on facts similar to the case at bar, that the Developer was in breach of its disclosure obligations pursuant to s. 52 of the Condominium Act. An appeal from the decision of Feldman J. was abandoned on February 21, 1998. In Hidden Valley, the plaintiffs were the developers, marketers and declarants of a resort condominium project that was located close to recreational facilities. The plaintiffs did not have control over those recreational facilities, but, through inter-corporate relationships, did have control over a hotel. The promotional materials for the condominium units indicated that the hotel was to be upgraded by the addition of an outdoor swimming pool and new boat docks facilities. Hidden Valley maintained that their intention was to build the second pool and docks, even though they were not technically obliged to do so. It was also their understanding that as the resort was zoned for commercial use, the units were not for residential purposes and accordingly, there was no need to provide a disclosure statement pursuant to the Condominium Act. However, based on legal advice as to an abundance of caution, the plaintiffs provided the purchasers with all the documentation required for residential units and in particular the Disclosure Statement as required by s. 52 of the Act. Because of the recession, occupancy of the hotel was down in 1991, and there was already a lot of construction on the site, so by the closing date they had not built the second pool. Several of the purchasers wanted to rescind the contract on the ground that the disclosure statement was deficient regarding the pool, the boat docks, and access to the hotel facilities. When the purchasers failed to close, the plaintiffs sold the units to others at a considerable loss. The plaintiffs brought an action for damages for the losses sustained as a result of the defendants' failure to close.

Note 3: Finlayson J.A. states at para. 8: "By the time units in PCC 505 were marketed and sold, the Developer decided that the recreational and social core of the development, the ORA, would be used for anohter townhouse development." It seems to me that the reasons of Epstein J. indicate the opposite. The Developer originally decided to build a series of condominium towers. However, in 1991, after PCC 447, the first tower consisting of 164 dwelling units was constructed, the Developer decided that instead of more towers, townhouse units would be built. PCC 489, registered May 22, 1994, comprised 24 townhouses. PCC 505, registered October 3, 1995, consisted of 56 townhouses. Another project of 34 townhouses, the fourth phase, and a second tower of 134 units, the fifth phase, were approved. The direction of the project changed to less towers and more townhouses prior to the building of PCC 505. The Developer did not, however, disclose its intention to build 25 townhouses on the ORA lands until after PCC 505 was marketed, sold and registered.

Note 4: This is a reference to Middlesex Condiminium Corp. No. 87 v. 600 Talbot Street London Ltd. (1998), 1998 CanLII 3245 (ON CA), 37 O.R. (3d) 22, 156 D.L.R. (4th) 587 (C.A.). That case held that where the reasonable interpretation of the evidence is that, notwithstanding the registered title, the declarant intended a reasonable purchaser to believe, or to justifiably assume, that the disputed area (a superintendent's suite) was a common element or an asset of the corporation. Section 52 of the Condominium Act did not change this common law right. The court also held that it is a question of fact whether the disputed area was intended to be part of the common elements.

Note 5: An example of the application of the doctrine of good faith in disguised form is the decision of Grange J.A. in Stepps Investments Ltd. v. Security Capital Corp. (1976), 1976 CanLII 648 (ON SC), 14 O.R. (2d) 259 (H.C.J.). In that case, Grange J. held that the vendor ought to have brought to the attention of the purchaser the significance of a proposed change to an agreement for the sale of shares. At p. 272, he stated:

It is not unreasonalbe, in my view, in modern commercial relations, to require the parties, where an important amendment is being made, to ensure that knowledge of such amendment comes to the other side. I do not mean that a party must overcome obtuseness in his opposite number but he must at least give him a real opportunity to appreciate the change. And if the circumstances are such that the amendment might readily be missed he should be particularly reluctant to assume such knowledge.

Robins J.A., after reviewing this passage in Downtown King West Development Corp. v. Massey Ferguson Industries Ltd. (1996), 1996 CanLII 1232 (ON CA), 28 O.R. (3d) 327 at p. 338, 133 D.L.R. (4th) 550 (C.A.); leave to appeal to S.C.C. refused (1996), 96 O.A.C. 233, agreed with the approach of Grange J.A. on the basis of "equity and fair dealings".

Note 6: See the Hon. Justice Charles D. Gonthier, "Liberty, Equality, Fraternity: The Forgotten Leg of the Trilogy, or Fraternity: The Unspoken Third Pillar of Democracy" (2000) 45 McGill L.J. 567 at p.. 583-84, subtitled "Good Faith in Contracts".