COURT FILE NO.: CV-17-586602

DATE: 20180516

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ALTERRA-FINER (POST-HOUSE) LTD.

Applicant

– and –

TORONTO STANDARD CONDOMINIUM CORPORATION NO. 2481

Respondent

Arnie Herschorn, for the Applicant

Megan Mackey, for the Respondent

HEARD: March 13, 2018

G. DOW, J.

REASONS FOR DECISION

[1] Each party brought an Application against the other regarding Alterra-Finer (Post-House) Ltd.’s (“Alterra”) efforts to compel Toronto Standard Condominium Corporation No. 2481 (“TSCC2481”) to pay to it the HST on four parcels of property TSCC2481 was compelled to buy from Alterra as part of the development. TSCC2481’s Application is court file number CV-17-584095. The purchase price of the four parcels totaling $612,000.00 was not in dispute. TSCC2481 not only objects to payment of the HST in the amount of $79,560.00 but seeks recovery of other damages in the form of legal costs it incurred in its refinancing efforts due to Alterra’s conduct. Further, it sought removal of two notices to vendor liens currently registered on title.

Background

[2] Alterra was the developer of a 294 unit residential building at 105 George Street, Toronto. As required under Section 72 of the Condominium Act, Alterra prepared and distributed to prospective purchasers a Disclosure Statement (Tab 2A of the Application Record of TSCC2481) which detailed TSCC2481’s obligation to purchase the superintendent’s unit for $392,000.00, the guest suite unit for $150,000.00 and two parking spaces for $70,000.00 (totaling $612,000.00). The first reference to this requirement, without mentioning the amounts or terms is in the table of contents at item 17 of the Disclosure Statement with reference to Article Z which begins at page 30 of the Disclosure Statement. On that page, the units were identified and the price set out without reference to any requirement to also pay HST. On page 6 of the disclosure statement under the heading “The Condominium’s Duty to Acquire the Guest Suite Unit, the Superintendent Unit and the Car Share Parking Units”, there was an initial reference to entering into an Agreement of Purchase and Sale of the said units for $612,000.00 (in total) “plus applicable taxes” with payments restricted to interest only for the first two years.

[3] The Disclosure Statement required revisions and a “Corrigenda” was provided. This document included the first budget for the common expenses.

[4] Counsel for TSCC2481 also relied on the first year budget, which Alterra was required to provide to prospective purchasers in order to comply with Section 72 of the Condominium Act. This referenced the Agreement of Purchase and Sale of the four units under the heading “Contracts” for a “total purchase price” without reference to TSCC2481 paying taxes, or specifically HST. There was also provision for the two year interest only financing. The first annual budget totalled $1,296,871.00. Included in the budget were entries for superintendent and guests suite mortgages in the amount of $40,129.00 and $15,355.00 respectively (or $55,484.00 in total, or by my calculation, $4,623.67 per month). This is greater than the actual costs of either the $1,060.00 per month TSCC2481 was initially paying which excluded the $79,560.00 of HST or the $1,152.60 it began to pay after the discrepancy was noticed. The first year budget was relied on given Alterra’s obligation to pay any amount incurred in excess of this budgeted amount.

[5] The general notes to the budget included a statement there were no services left out or might reasonably be expected to become a common expense.

[6] It is not uncommon that, units were offered for sale, before, during and after construction of the building as occurred in this situation. The directing mind of Alterra, here its president, was also president of the condominium corporation at its outset.

[7] As obligated under the Condominium Act, within 30 days after the sale of the initial 50% of the units, the initial condominium board was turned over to its first board of directors and unit holders became involved. This occurred following registration of TSCC2481 in September, 2013 with a turnover meeting in November, 2015.

[8] The initial property manager for the building, appointed by Alterra, was replaced shortly after the turnover meeting. However, this was not before the initial property manager received notice from Alterra that the amount being paid on the vendor take-back, interest only mortgage with regard to the units in question was only on the purchase price of $612,000.000 without consideration for the HST or the additional $79,560.00. That property manager increased the payment from $1,020.00 per month to $1,152.60 per month, a difference of $92.60 per month.

[9] The Document General registered on title contains TSCC2481’s By-law No. 4 which also references purchase of the four units “plus all applicable taxes” in sub-paragraph 1(a) while omitting these words in reference to the price in sub-paragraph (b) which detailed the two year interest take-back mortgage financing for the purchase of the four units. Schedule “A” to By-law No. 4 makes separate reference to the cost of the units both with and without “plus applicable taxes”.

[10] Similarly, the Agreement of Purchase and Sale repeats the description of the purchase price of the four units both with and without the phrase “plus applicable taxes”.

[11] None of the documents which state “plus applicable taxes” specifically define it to be HST or quantify the amount in question, being $79,560.00.

[12] The property manager was replaced before Alterra forwarded a Mortgage Amending Agreement late in 2015. This was never signed or returned. The chief financial officer of Alterra deposed it included and paid the HST of $79,560.00 to the Canada Revenue Agency as part of calculating its monthly remittance.

[13] When it came time to refinance in October 2017, Alterra, having not received the Mortgage Amending Agreement, initially refused to release the discharge of the vendor take-back mortgages unless the full ($612,000.00 plus $79,560.00 =) $691,560.00 was repaid. This resulted in (re)financing agreements falling through and additional legal expenses being incurred by TSCC2481 in the amount of $11,293.24 and $9,304.66 (for a total of $20,597.90).

Analysis

[14] TSCC2481 relies on Section 133 of the Condominium Act which obligates the developer to not make any “material statement or provide material information that is false, deceptive or misleading” or omit information that is required to provide.

[15] This section also provided for the condominium corporation to recover “any loss sustained” as damages. At issue is whether the Alterra documentation is so flawed as to meet that legal test. It is obvious the information could have been clearer. However, it was not completely absent from the material provided as required by statute.

[16] Regarding the applicable law, the parties agreed the principles to consider are:

1. oppression is a remedy available to TSCC2481 under Section 135 of the Condominium Act;

2. the oppression remedy weighs determining the objective reasonable expectation of the unit owners, balanced against the condominium board’s ability to exercise management of its business in an efficient manner (see paragraph 37) of Hakim v. Toronto Standard Condominium Corporation No. 1737, 2012 ONSC 404;

3. a significant purpose of the Condominium Act statute is consumer protection legislation, thus the need for and the existence of broad and flexible court powers to reach a just and equitable result; again see Hakim v. Toronto Standard Corporation Corp. No. 1737, supra (at paragraph 37);

4. Disclosure Statements are required to be “readable and understandable so as to provide full and accurate disclosure to condominium purchaser (Hidden Valley Lakeside Condominiums Inc. v. Vercaigne, [1997] O.J. No. 4032 (at paragraph 76) ; and

5. it is not necessary for the unit owners to demonstrate reliance on the information (or lack thereof) particularly where, as here, rescission is not being sought and the claims advanced by the condominium corporation are on behalf of the owners as a whole (Wellington Condominium Corp. No. 71 v. Marilyn Drive Holdings Ltd., 1998 CanLII 2289 (ON CA), [1998] O.J. No. 448 (at paragraphs 49 and 52).

Conclusion

[17] My conclusion is the repeated references to “plus all applicable taxes” was sufficient to alert prospective purchasers and TSCC2481 to this additional expense. It did not amount to being “false, deceptive or misleading” as contemplated by Section 133(1)(a) of the Condominium Act. I am satisfied that Alterra remitted the HST it seeks to collect from TSCC2481 and ought not to be deprived of the declaration it seeks for reimbursement of $79,560.00. I am reinforced in this conclusion by the general knowledge of the public and business persons alike that Ontario’s Harmonized Sales Tax applies to almost all financial transactions. An order shall issue in favour of Alterra in this regard (subject to my comments below). Given same, I also order the notices of vendor liens be deleted from the records of the Toronto Land Registry Office.

[18] However, in my view, that is not the end of the matter. The conduct of the developer when TSCC2481 sought to refinance on October, 2017 requires sanction. The documentation it created and relied on, as I have stated, could have been clearer. The Application of TSCC2481 before me was not without merit. This issue between the parties could and ought to have been brought forward without what resulted in refinancing efforts. In my view, Alterra ought to be responsible for the additional legal costs incurred by TSCC2481 with regard to the refinancing required on October, 2017.

[19] As a result, TSCC2481 is entitled to recover, whether directly or as a set-off, the $9,304.66 plus the $11,293.24 (or a total of $20,597.90) of additional legal costs it seeks as damages from oppression from Alterra under Section 185 of the Condominium Act.

[20] I would also exercise my discretion, whether it would be under Section 135(3) of the Condominium Act to make “any order the judge deems proper” or Section 131 of the Courts of Justice Act R.S.O. 1990 c.C.43 to deny either party interest on the amounts each is entitled to recover from the other or the net amount of $58,962.10 Alterra is entitled to recover from TSCC2481.

Costs

[21] The Cost Outline of Alterra claimed $27,057.62 at partial indemnity rates inclusive of fees, HST and disbursements. The Costs Outline of TSCC2481 was only $7,409.98 at partial indemnity rates, inclusive of fees, HST and disbursements. I was advised that Rule 49 offer to settle exists and note same was referenced in the Costs Outline prepared by counsel for Alterra. I do not have a record of why there is such a disparity in the amounts claimed by each party.

Offers to Settle

[22] I would have relied on the success of Alterra and the partial success of TSCC2481 to award no costs. Should the existence of offers to settle warrant reconsideration of that disposition, the party seeking to vary my proposed disposition may serve on opposing counsel and forward to me, with proof of service, written submissions setting out their position. It shall not be more than three pages, and be double spaced in length. It is due within the next 14 days. The opposing party shall have 14 days to respond in the same manner and length.

Mr. Justice G. Dow

Released: May 16, 2018

COURT FILE NO.: CV-17-586602

DATE: 20180516

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

ALTERRA-FINER (POST-HOUSE) LTD.

Applicant

– and –

TORONTO STANDARD CONDOMINIUM CORPORATION NO. 2481

Respondent

REASONS FOR DECISION

Mr. Justice G. Dow

Released: May 16, 2018