



COURT OF APPEAL FOR ONTARIO

CITATION: Simcoe Vacant Land Condominium Corporation No. 272 v. Blue Shores Developments Ltd., 2015 ONCA 378

DATE: 20150527

DOCKET: C58302

MacFarland, LaForme and Lauwers JJ.A.

BETWEEN

Simcoe
    Vacant Land Condominium Corporation No. 272,

Simcoe
    Vacant Land Condominium Corporation No. 299,

Simcoe
    Vacant Land Condominium Corporation No. 312 and

Simcoe Vacant Land
    Condominium Corporation No.  321

Applicants (Appellants)

and

Blue
    Shores Developments Ltd. and

Duca Financial Services
    Credit Union Ltd.

Respondents (Respondents)

Jonathan H. Fine and Benjamin J. Rutherford, for the
    appellants

Stephen Schwartz, for the respondent, Blue Shores
    Developments Ltd.

Reeva Finkel, for the respondent, Duca Financial
    Services Credit Union Ltd.

Heard: October 7, 2014

On appeal from the order of Justice Edward M. Morgan of
    the Superior Court of Justice, dated January 9, 2014, reported at 2014 ONSC 187.

Lauwers J.A. (dissenting in part):

A.

Introduction

[1]

The appellants are four condominium corporations. They are part of a
    large project that comprises about 200 dwelling units, some recreational
    facilities including a marina, and a Clubhouse, located on the shores of
    Georgian Bay near Collingwood, Ontario. The respondent, Blue Shores
    Developments Ltd., developed the project.

[2]

The dispute between the appellants and Blue Shores relates to the
    ownership and control of the Clubhouse, which Blue Shores has owned and
    operated it from the outset.

[3]

The appellants applied for a declaration that they own the Clubhouse,
    and that the mortgage over it granted by Blue Shores to the respondent, Duca
    Financial Services Credit Union Ltd., is void or subordinate to their interests.
    The application judge dismissed their application He also dismissed their request
    for an accounting of Clubhouse expenses and revenues, and their claims that
    Blue Shores was liable for oppression under s.135 of the
Condominium Act,
    1998
, S.O. 1998, c. 19.

[4]

For the reasons that follow, I conclude that the
    appellants have an equitable interest in the Clubhouse based on an executory
    contract between Blue Shores and the appellants. This executory contract
    compels Blue Shores to transfer ownership of the Clubhouse to the appellants
    after Blue Shores no longer owns any lands within the project. Although I would
    set aside the application judges contrary holding, I do not accept the
    appellants argument that their equitable interest in the Clubhouse precluded
    Blue Shores from placing a mortgage on the Clubhouse. I also would reject the
    appellants arguments that the mortgage is void, that Blue Shores is required
    to operate the Clubhouse on a non-profit basis, and that Blue Shores conduct
    has been oppressive towards them.

B.

FACTUAL OVERVIEW

[5]

Blue Shores is the developer of this lakeside condominium project. The
    development is governed by five condominium corporations, including the four
    appellants. The fifth condominium corporation governs only the marina and
    vacant undeveloped lands and is not a party to this appeal. The dispute centres
    on the ownership and operation of the Clubhouse.

[6]

The disclosure statements that Blue Shores gave to purchasers of the
    condominium units, under s. 72 of the
Condominium Act
,
provided
    for the conveyance of the Clubhouse to the appellants within 120 days after the
    date that Blue Shores is no longer registered owner of any lands within the
    project (the conveyance obligation).

[7]

The Easement and Cost Sharing Agreement (the EACSA) between the appellants
    and Blue Shores provides that so long as Blue Shores owns and operates the
    Clubhouse, each condominium unit owner is required to pay a monthly Clubhouse
    membership fee to the condominium corporation in which the unit is located; the
    corporation in turn is required to remit the aggregate of these fees to Blue
    Shores. Blue Shores has used these payments for its own purposes and refuses to
    provide an accounting to the appellants.

[8]

Since Blue Shores had not yet sold all of the vacant units or the lands
    within the project, the conveyance obligation had not been triggered. As a
    result, Blue Shores continues to own and operate the Clubhouse.

[9]

In November 2009, Blue Shores granted a mortgage to Duca in the amount
    of $1 million, which Duca registered against title to the Clubhouse. The
    mortgage was renewed in November 2011.

[10]

In
    April 2012, after the registration and renewal of the Duca mortgage, the
    appellants registered a notice of an unregistered estate, right, interest or
    equity against title to the Clubhouse under s. 71 of the
Land Titles Act
,
    R.S.O. 1990, c. L.5. With this registered instrument, the appellants gave
    public notice that they claim a property right in the title to the Clubhouse.

[11]

In
    August 2012, the appellants brought an application for a declaration of
    ownership over the Clubhouse. Their application was dismissed and they now
    appeal.

C.

Analysis

[12]

This
    appeal raises the following issues:

1.

Do the appellants have an
    equitable or inchoate interest in the Clubhouse?

2.

Did Blue Shores have the
    right to mortgage the Clubhouse to Duca?

3.

Is Ducas mortgage
    subordinate to or void against the appellants interest in the Clubhouse?

4.

Are the appellants entitled
    to an order that Blue Shores take steps to convert the Clubhouse from a freehold
    interest to a unit within a condominium corporation?

5.

Is Blue Shores required to
    operate the Clubhouse on a non-profit basis and account to the appellants?

6.

Does the limitation period
    is s. 113 of the
Condominium Act

bar the appellants claim?

7.

Does Blue Shores conduct constitute
    oppression under s. 135 of the
Condominium Act
?

I address each issue in turn.

(1)

Do the appellants have an equitable or inchoate interest in the Clubhouse?

[13]

The
    appellants argue that they have an equitable interest in the Clubhouse, which
    entitles them to the relief they seek.

(a)

The Application Judges Decision

[14]

The
    application judge explained his understanding of the role of the Clubhouse in
    the development, at para 8:

The Disclosure Statements make it clear that Blue Shores kept
    for itself the ownership of the Clubhouse until all of its interest in the
    balance of the project and abutting property was sold. The reason for this has
    always been obvious to all concerned: the Clubhouse, with its social, athletic,
    and other recreational facilities, is an essential amenity in the marketing of
    the project. Ensuring that it was properly operated and maintained until the
    last of Blue Shore's property is sold is important to Blue Shores as developer
    of the entire project.

[15]

The
    standard form purchase agreement for each condominium unit provided that the
    purchaser took title subject to the Condominium Documents. The application
    judge found, at paras. 20-21, that this phrase could not be read as
    incorporating the disclosure statements into each purchase agreement, so as to
    give each purchaser some form of legal or equitable interest in the Clubhouse.

[16]

The
    application judge found that the appellants do not have an equitable interest
    in the Clubhouse. He rejected their characterization of the conveyance
    obligation in the disclosure statements as an executory contract for the
    purchase of the Clubhouse that gave them an equitable interest in it. In his
    view, the disclosure statements, and the conveyance obligation in particular,
    were not clearly written as existing and paid-for contracts for the purchase
    and sale of property, as he asserted was required by s. 1(1) of the
Statute
    of Frauds
, R.S.O. 1990, c. S.19.

[17]

Rather,
    the application judge found, at paras. 20-23, that the disclosure statements specifically
    provide[] that an interest in the Clubhouse is
not
being conveyed with
    each sale. In his view, the incorporation of the disclosure statements into
    the agreement of purchase and sale of each unit confirms that each of those
    agreements excludes the purchase and sale of the Clubhouse.

[18]

The
    application judge noted, at para. 24, that the standard form purchase agreement
    for each condominium unit did not allocate any portion of the purchase price to
    the Clubhouse and did not convey an interest in the Clubhouse to the appellant
    condominium corporations as consideration for the unit purchasers payments.

[19]

Instead,
    the application judge found, at para. 25, that the conveyance obligation imposed
    a future requirement that the appellants and Blue Shores enter into an
    agreement for the purchase and sale of the Clubhouse once Blue Shores sold the
    remaining properties. The appellants would only get a legal or equitable
    interest in the Clubhouse upon the completion of this future agreement.
    Although Blue Shores has a future obligation to convey the Clubhouse, the
    application judge found, at para. 41, that it was entitled to retain ownership
    of the Clubhouse until it sold the remaining properties.

[20]

While
    the application judge acknowledged, at para. 32, that Blue Shores had a
    statutory obligation under s. 78(1) of the
Condominium Act
to take
    all reasonable steps to sell the other residential units  without delay, he
    found, at para. 41, that the appellants had not proven Blue Shores had breached
    this obligation.

[21]

According
    to the line of cases flowing from
York Condominium No. 167 v. Newrey
    Holdings Inc
. (1981), 32 O.R. (2d) 458, [1981] O.J. No. 2965, (Ont. C.A.),
    discussed in detail below, condominium developers hold the common elements and
    fixtures in trust for condominium corporations, such that the corporations have
    an equitable interest in those elements. However, the application judge, at
    para. 30, distinguished the situation before him from
Newrey
on the
    basis that the Clubhouse was not a fixture or a common element and, therefore, found,
    at para. 3, that Blue Shores did not hold the Clubhouse in trust for the
    appellants.

[22]

In
    the application judges view, expressed at para. 30, if the Clubhouse were a
    common element, each purchaser would have obtained an interest in the Clubhouse
    with the purchase of his or her condominium unit, which the standard form
    purchase agreement and the conveyance obligation in the disclosure statements
    made clear did not occur. He found, at para. 31, that classifying the Clubhouse
    as a common element would render meaningless and unnecessary Blue Shores
    future conveyance obligation in the disclosure statements to transfer title to the
    Clubhouse, which could not have been the intention of the parties.

(b)

The Positions of the Parties

[23]

The
    appellants submit that the unit owners paid for an interest in the Clubhouse
    when they purchased their units. As a result, the conveyance obligation in the
    disclosure statements functions as an executory contract of purchase and sale, which
    gives the appellants an equitable interest in the Clubhouse. Alternatively, they
    argue they have an inchoate interest in the Clubhouse, that is, a proprietary
    interest that has not as yet vested. The appellants submit the
Newrey

line of cases supports their claims, contrary to the application judges
    interpretation.

[24]

Blue
    Shores argues that even if the conveyance obligation were an executory contract
    of purchase and sale, the transfer date has not yet arisen; the appellants do
    not, therefore, presently have an equitable or inchoate interest in the
    Clubhouse.

[25]

Blue
    Shores and Duca together argue the application judge correctly distinguished
    the
Newrey

line of cases on the basis that, even though the
    Clubhouse is subject to a future conveyance obligation, it is not a common
    element or asset in which the unit owners obtained an equitable interest along
    with the purchase of their units.

[26]

Before
    attending to the analysis of this issue, I describe the relevant condominium
    documents.

(c)

The Condominium Documentation

[27]

As
    the evolving language shows, the condominium documentary edifice in this case was
    a work in progress; all the documents must be read together to understand their
    full meaning.

[28]

The
    standard form purchase agreement provides that the purchaser accepts title to
    the unit subject to the Condominium Documents, defined to include the
    disclosure statements. The documents evolved somewhat over the four phases of
    the project as build-out progressed. In the disclosure statement for the first
    condominium
, for example,
the
    Clubhouse was described as something that the Declarant Blue Shores intends to
    develop. The disclosure statement for the fourth condominium stated simply
    that the Declarant has developed a clubhouse.

[29]

Blue
    Shores obligation to convey the Clubhouse to the appellants is found in a
    paragraph in article 4.4 of the phase I disclosure statement, in article 4.3 of
    the phase II and phase III disclosure statements, and in article 4.2 of the
    phase IV disclosure statement. Although its language evolved somewhat, the
    conveyance obligation in the phase IV disclosure statement is materially the
    same as that found in the three previous disclosure statements, and provides:

Ownership of the Clubhouse Facilities unit shall ultimately be
    transferred to the Phased Condominiums [each according to their ownership as
    tenants-in-common] by the Declarant (or any successor or assignee thereof for
    total consideration of Two dollars ($2.00). Such conveyance shall occur within
    one hundred and twenty (120) days following the date that the Declarant (or any
    successor or assignee thereof) is no longer the registered owner of any lands
    within the Project (including the Phased Condominiums and/or the Future
    Development Lands) or such earlier time as the Declarant may determine in its
    sole and unfettered discretion (the Clubhouse Transfer Date).

[30]

Blue
    Shores declarations under the
Condominium Act
for each phase refer to
    a Cost Sharing Agreement that each new condominium corporation must enter into with
    respect to Shared Facilities and clubhouse facilities.

[31]

It
    is common ground that the Cost Sharing Agreement referred to in the
    disclosure statements is the EACSA, dated August 28, 2003. The EACSA recitals
    note that: [t]he Declarant intends, but is under no obligation to construct
    the Clubhouse Facilities within the Future Phase Lands and to register the
    Clubhouse Facilities as a unit within the Future Phase Corporations. (This
    recital was overtaken by the construction of the Clubhouse.) The EACSA is
    intended to cover shared costs for shared facilities and to allocate the costs
    among the condominium corporations, both while Blue Shores, as the Declarant,
    is on the scene and after it has departed.

[32]

The
    declarations also refer to the Clubhouse Transfer Date. Despite the provision
    in the declarations that the Clubhouse Transfer Date would be defined in the
    Cost Sharing Agreement, it is not found in the EACSA, but only in the
    disclosure statements.

[33]

The
    shared facilities include the Clubhouse, but subject to art. 5.00. Article
    5.00 governs the ownership and use of the Clubhouse facilities by Blue Shores
    as the Declarant, and substantiates the application judges view that Blue
    Shores retained ownership and control over the Clubhouse as an essential
    amenity in the marketing of the project. Article 5.01 provides:

The Clubhouse Facilities shall be registered as one
    recreational unit by the Declarant to be located within the Future Phase
    Condominium and the Declarant shall continue to own the Clubhouse Facilities
    for its use and for the use and enjoyment of residents and their guests of the
    Condominium Corporations, and/or, on a user fee basis (or as otherwise
    determined by the Declarant in its sole discretion) any other members of the
    public.  Accordingly, the Declarant, its sales staff, agents employees and
    invitees, shall have a continued right of access to inspect and view the
    Clubhouse Facilities, and to use, without fee or charge, any portion of the
    Clubhouse Facilities, as part of its marketing/sales program, as a
    sales/rental/administrative office, and for advertising, signage and displays.
    The Declarant shall not be charged for the use of such space nor any utility
    service supplied thereto, nor shall the Condominium Corporations prevent or
    interfere with the Declarants right of access to use and operate the Clubhouse
    Facilities in the manner aforesaid.  The Declarant shall have the exclusive
    right to establish reasonable hours of use and permitted uses of the Clubhouse
    Facilities.

Discussion

[34]

Justice
    Wilson remarked prophetically in the early days of condominium law: There is
    no doubt that special problems arise out of the peculiar character of ownership
    in condominium project:
Newrey
, at para. 16. The barrage of cases
    under the
Condominium Act
confirms the perduring accuracy of her
    remark. She identified the courts task as reconciling the ordinary law of
    contract and real property with condominium law.

[35]

In
    undertaking that task in this appeal, I conclude that the appellant condominium
    corporations have an equitable interest in the Clubhouse, notice of which is
    capable of being registered under s. 71 of the
Land Titles Act
. I
    reach this result by application of the principles of contract law and real
    estate law in the statutory and regulatory context governing condominiums.
    Although the appellants argue forcefully that the
Newrey
line of cases
    also compels this result, I do not agree.

(i)

The conveyance obligation in the disclosure statement is an executory
    contract

[36]

Stepping
    back, I note that the Clubhouse is to be conveyed to the appellants for the
    nominal consideration of $2.00; while it may be true, as the application judge
    noted, that the standard form purchase agreement did not expressly allocate any
    portion of a units purchase price to the Clubhouse, the revenue generated by
    the sale of the units must have funded its construction and eventual
    conveyance, since there is no other available source of funds for those
    purposes.

[37]

In
    my view, with respect to the conveyance of the Clubhouse, the essential terms
    of an agreement for purchase of land  the parties, the properties, the price
    and the date of conveyance  are all clearly set out in the conveyance
    obligation in the disclosure statements:
McKenzie v. Walsh

(1920),
    61 S.C.R. 312, at para. 1. No contractual element is missing. This was not in
    any sense a mere agreement to agree; there is no need for a new contract to be
    negotiated on, or immediately before, the Clubhouse Transfer Date, as the
    application judge suggested at para. 25.

[38]

Therefore,
    the conveyance obligation is a valid contract. Specifically, it is an executory
    contract because one or other of the parties [has] not fully performed its
    obligations: Angela Swan & Jakub Adamski,
Canadian Contract Law
,
    3d ed. (Markham: LexisNexis Canada, 2012), at para. 8.164. As Kevin P.
    McGuinness explains in
Halsburys Laws of Canada
, Guarantee and
    Indemnity (Markham: LexisNexis Canada, 2014 Reissue), at para. HGI-21

Guarantees
    as Executory Contracts:

An executed contract is one under which one party has fully
    performed its obligations (the most obvious example being in the case of a
    sales contract, where the buyer pays the full purchase price). In contrast, an executory
    contract is one that requires further performance by both of the parties
    (although either or both may have already completed part of their performance
    obligations under the contract).

[39]

Two
    decisions from this court support the proposition that condominium documents
    can be enforceable contracts that may give rise to obligations to convey
    property in the condominium context. First, in

Peel Condominium Corp.
    No. 417 v. Tedley Homes Ltd
.
(1997), 35 O.R. (3d) 257,

[
1997] O.J. No. 3541, at para. 3, the
condominium
    declaration and the disclosure statements both provided that the condominium
    corporation was under a "duty and obligation" to purchase a
    superintendent's unit and two guest units in each of the two buildings pursuant
    to the terms of the conveyance and purchase agreement, which was attached to
    the statements in draft form. The court framed the issue, at para. 17, as, whether
    the [condominium] corporation can be required by means of a provision in the
    declaration to purchase such units. The court concluded, at para. 16, that
    obliging the condominium corporation to purchase the units from the Declarant
    was consistent with [the corporation's] objects, as required by s. 3(3),
    now s. 7(4)(d), of the
Condominium Act
.

[40]

While
    that section of the Act is not at issue in this case,
Tedley

demonstrates
    that a disclosure statement and declaration can impose an enforceable
    obligation on a condominium corporation to purchase property, and, therefore, a
    reciprocal obligation on the Declarant to convey it. The court made this clear at
    para. 21:

I would not think it open to the elected directors after
    closing to effectively amend the declaration by refusing to complete a
    transaction that had been accepted by all of the owners, including the
    directors themselves  [I]n completing the agreement the first directors were
    acting in compliance with a
contract
the terms of which had been
    approved by the unit owners. [Emphasis added.]

[41]

The
    documentary package in
Tedley
appears to have been more complete and
    consistent than the package in this case. The terms of the sale in
Tedley
were found in an attached purchase agreement rather than only in the provisions
    of the disclosure statement, as in this case. Further, the purchase agreement
    in
Tedley
had terms a good deal more elaborate than the simple
    conveyance terms in this case: it identified the units to be purchased by the
    condominium corporation, their full prices, the financing terms, and so on.
    However, I do not consider the absence of a similar purchase agreement to be
    fatal to this case, nor a good reason to distinguish between
Tedley

and this appeal, because the essential contractual elements are all set out
    in the conveyance obligation.

[42]

In
    the second decision,
Peel Condominium Corp. No. 505 v. Cam-Valley Homes Ltd
.
    (2001), 53 O.R. (3d) 1, the disclosure statements provided for the potential
    construction of an outdoor recreational area (ORA). The Declarant reserved
    the right not to move forward with the ORA, and retained title to the lands
    pending development. However, the statements also provided that if the ORA were
    developed, it would be conveyed to the condominium corporations. After the Declarant
    decided not to construct the ORA, the corporations sought a declaration that
    they were the beneficial owners of the ORA lands.

[43]

The
    court affirmed the trial judges conclusion that if the Declarant had completed
    the ORA, it would have been required to convey it to the condominium
    corporations. At para. 14 of
Cam-Valley Homes
, the court characterized
    the disclosure documents as setting out the developers obligations with
    respect to the ORA lands. More specifically, at paras. 30-31, the court stated
    that the Declarant would have had an 
affirmative obligation
to convey
    the ORA Lands (emphasis added) if they had been developed. This is precisely
    Blue Shores situation, since it did build the Clubhouse.

[44]

I
    conclude that the conveyance obligation in the disclosure statements contains
    the requisite elements of a valid executory contract of purchase and sale for real
    property  the Clubhouse  between Blue Shores and the appellants. The compliance
    of the contractual package as a whole with the
Statute of Frauds

is
    manifest; the motion judges conclusion to the contrary, at para.19, was, with
    respect, wrong in law.

[45]

I
    now turn to the principles of real estate law.

(ii)

The principles of real estate law give rise to an equitable interest

[46]

The
    common law has long recognized that a valid contract for the purchase and sale
    of land gives rise to a trust relationship, with the purchaser acquiring a
    beneficial interest in the property: Jessel M.R. summarized this principle in
Lysaght
    v. Edwards

(1876), 2 Ch. D. 499 at p. 506:

[I]t appears to me that the effect of a contract for sale has
    been settled for more than two centuries  [T]he moment you have a valid contract
    for sale the vendor becomes in equity a trustee for the purchaser of the estate
    sold, and the beneficial ownership passes to the purchaser

See also Anne Warner La Forest,
Anger and
    Honsberger Law of Real Property
, 3d ed., loose-leaf (Toronto: Canada Law
    Book, 2014), ch. 11 at p. 52; Anthony Duggan, "Constructive Trusts from a
    Law and Economics Perspective" (2005) 55 U.T.L.J. 217, at p. 218.

[47]

The
    trust relationship, known as equitable conversion, has been described as
    [p]ossibly the oldest, and certainly the most frequent, use of the
    constructive trust: Robert Chambers, "Constructive Trusts in Canada"
    (1999) 37 Alta. L. Rev. 173, at p. 186.

[48]

This
    court described the qualified nature of the trust that arises from an agreement
    of purchase and sale in
Buchanan v. Oliver Plumbing & Heating Ltd
.,
    [1959] O.R. 238 at pp. 242 and 244 (C.A.):

The relationship created by such a contract does not entail all
    the obligations of an ordinary trusteeship. The vendor is not a mere dormant
    trustee; he is a trustee having a personal and substantial interest in the
    property, a right to protect, and an active right to assert that interest if
    anything is done in derogation of it

***

[T]he trusteeship is not from the beginning an absolute one,
    for it is recognized that the vendor has a personal and substantial interest in
    the property which he is bound to protect.

[49]

This
    principle also applies to condominiums, as Finlayson J.A. observed in
Peel
    Condominium Corp. No. 505 v. Cam-Valley Homes Ltd
.
(2001), 53 O.R.
    (3d) 1, at para 43:

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. [Emphasis added.]

Disposition of the Issue

[50]

Since
    the conveyance obligation in the disclosure statements is a valid executory
    contract for the conveyance of the Clubhouse by Blue Shores to the appellants,
    I conclude that the principles of contract law and real estate law operate to
    give the appellants an equitable interest in the Clubhouse. The corollary is
    that ss. 71 and 71(1.1) of the
Land Titles Act
apply and permit the
    appellants to register a notice of an unregistered interest in respect of the
    Clubhouse conveyance obligation. Therefore, the application judge was wrong in
    finding, at paras. 104-109, that the appellants were not entitled to register
    the notice on the Clubhouse title and in ordering its discharge. To be clear,
    it is the appellants who have the equitable interest, not the unit owners.
    However, this does not give the appellants the remedy they seek, as I note
    below.

[51]

Given
    the central role that the Clubhouse plays physically and socially in this
    project, and, more specifically, played in its design and marketing by Blue
    Shores, I do not think that damages would be an adequate remedy. See
Semelhago
    v. Paramadevan
, [1996] 2 S.C.R. 415. It would be unconscionable, in
    equitys sense of the term, if Blue Shores were to take an action that would
    frustrate the conveyance obligation, such as by selling the Clubhouse to a
    third party. In my view, equity should intervene to prevent that possibility.
    That is the purpose of my proposed disposition.

[52]

I
    do not rely on
Newrey
to reach this conclusion, for the following
    reasons.

(iii)

The
Newrey
Line of Cases does not assist the Appellants

[53]

My
    conclusion that the appellants have an equitable interest in the Clubhouse is
    based on the executory contract for its purchase and sale. I reject the
    appellants argument that their equitable interest arises from the
Newrey

line of cases. As I explain below, the principle in these cases applies
    only to common elements and fixtures. The Clubhouse is neither.

[54]

The
    application judge was correct in noting that the Clubhouse is not a common
    element, nor is it intended to become one. Article 5.01 of the EACSA and the
    disclosure statements related to two of the appellants provide that Blue Shores
    is to register the Clubhouse as a condominium unit in one of the appellants.
    Blue Shores has not yet done so and instead continues to hold it in freehold
    ownership. Once the Clubhouse is conveyed, it will be owned proportionately by
    the appellants and will become an asset, but not a common element.

[55]

As
    will be seen from the following discussion, the application of
Newrey
is presently confined to common elements and fixtures, consistent with the
Condominium
    Act
.
The appellants urge this court to enlarge the reach of
Newrey
so that it applies not only to common elements and fixtures, but also to assets
    like the Clubhouse. This requires the court to confront the principle set in a
    number of cases that, while the court, as in
Newrey
, will enforce
    statutory obligations related to condominiums, it will otherwise give effect to
    the language of the condominium documents.

[56]

I
    begin with a discussion of the
Newrey
principle and the cases that
    have followed it, followed by a discussion of the cases that limit
Newreys
reach to common elements and fixtures.

The Principle in
Newrey

[57]

The
    root principle in
Newrey
set out by Wilson J.A. at para. 15:

It seems to me that as soon as a unit purchaser enters into an
    agreement of purchase and sale of a unit he becomes the equitable owner of the
    unit and the interests appurtenant thereto even although the agreement cannot
    be closed until registration of the declaration.

In her view, noted at para. 17, the parties have
    incorporated into their agreements by reference the
provisions
of the Act and declaration.

[58]

The
    dispute in
Newrey
was about whether the janitors suite, to which the
    developer had retained title, was properly a common element that belonged to
    the condominium corporation. The court there followed the result of a similar
    dispute in
Frontenac Condominium Corporation No. 1 v. Joe Macciocchi &
    Sons Ltd
. (1975), 11 O.R. (2d) 649, in which the developer was required to
    convey the suite to the condominium corporation at no cost.

[59]

Justice
    Wilson found that once the declarant has embarked upon the sale of units, even
    before registration, the policy orientation of the
Condominium Act
comes into play. She said:

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. I think he has also placed himself in a fiduciary relationship to
    the unit purchasers not only with respect to their units but also with respect
    to the interests 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.

[60]

Newrey
was invoked in
Middlesex Condominium Corporation No. 67 v. 600 Talbot Street,
    London Ltd
.
[1998] O.J.
    No. 450
, 37 O.R. (3d) 22, which also concerned the conveyance of a
    Superintendents suite. The principle in
Newrey
was affirmed at para.
    39, where Rosenberg J.A. said:

To summarize,
Frontenac
and
Newrey Holdings
stand for the proposition that
with respect to the common elements
,
    the declarant is bound not to prefer its interests over those of the group of
    unit owners. 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 superintendent's suite
    was a common element or an asset of the corporation, the declarant will be
    required to convey the unit to the corporation. If this constituted a departure
    from established contract and real property law, it was a departure required by
    the exigencies of condominium ownership.

[61]

He
    concluded at para. 41:

To protect both the purchaser and the declarant the test surely
    must be an objective one. If the declarant caused the purchasers to assume that
    the superintendent's suite was a common element, and if a reasonable purchaser
    would make such an assumption, a matter of interpreting the disclosure
    documents, this is sufficient to overcome the registered title.

[62]

This
    court reached a similar conclusion in
Metropolitan Toronto Condominium
    Corp. No. 1250 v. Mastercraft Group Inc
. 2009, ONCA 584, where the issue
    concerned the developers attempt to hive off the HVAC equipment and lease it
    back to the condominium. The court found that it was part of the common
    elements. The principle in
Newrey
was recited at para. 37, and applied
    at paras. 38-41.

Newrey
does not limit
    contractual rights beyond common elements and fixtures

[63]

As
    noted earlier, any extension of Newrey beyond common elements and fixtures
    would require the court to confront the principle set out in a number of cases
    that, while the court will enforce statutory obligations applicable to
    condominiums, it will otherwise give effect to the language of the documents.

[64]

In
Tedley
the court compelled the condominium corporation to purchase a
    superintendent's unit and two guest units in each of the two buildings, as
    required by the condominium documents.

[65]

In
Cam-Valley Homes
,
this
    court held that the developer's good faith obligation to carry out the purchase
    agreement was circumscribed by the documentation required by the
Condominium
    Act
. There was no overarching fiduciary duty arising out of the
    relationship of the vendor and purchaser to prevent the developer from
    constructing townhouses on project land originally intended for recreational
    facilities, since the agreement of purchase and sale indicated clearly that the
    recreational facilities might not be built and
contained the purchaser's acknowledgment that the
    vendor may construct another building on the land
. Finlayson J.A noted,
    at para 38:

However, to the extent that Wilson J.A.'s statement can be read
    along with her earlier statements in
Newrey
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

[66]

Similarly,
    in
Toronto Standard Condominium Corp. No. 2095 v. West Harbor City (I)
    Residences Corp
.
, 2014 ONCA 724, 46 R.P.R. (5th) 1, this court upheld
    an agreement entered into between the Declarant and the captive board it appointed
    to limit the Declarant's liability for construction deficiencies, on the basis
    that the agreement was not contrary to the
Condominium Act

and
    had been fully disclosed to the unit purchasers.

[67]

I
    have noted that the application judge was correct in finding that the Clubhouse
    is not a common element, and is not intended to become one. He did not err in
    refusing to apply
Newrey
to the Clubhouse. Based on the case law, I
    would decline the appellants invitation to enlarge the reach of
Newrey
so that it applies not only to common elements and fixtures, but also to assets
    like the Clubhouse.

[68]

This
    courts observation in
Tedley
, at para. 16, may be apt:

Whether developers should be entitled to exclude from the
    common elements facilities of this nature or, indeed, other amenities
    ordinarily expected to be included in the common elements so as to have them
    purchased or otherwise dealt with after the unit purchases have been completed
    is a matter of policy for legislative and not judicial determination.

(2)

Did Blue Shores have the right to mortgage the Clubhouse to Duca?

[69]

The
    appellants submit that the existence of their equitable interests meant that Blue
    Shores had no right to mortgage the Clubhouse. Blue Shores and Duca support the
    application judges decision that Blue Shores could do so.

(a)

The Application Judges Decision

[70]

The
    application judge held that his answer to the first issue applied to the second
    issue; since Blue Shores owns the Clubhouse and the appellants have no interest
    in it, Blue Shores was entitled to mortgage the Clubhouse. He pointed out, at
    paras. 50 and 61, that nothing in any of the relevant documentation prohibited
    Blue Shores from mortgaging the Clubhouse.

[71]

The
    application judge noted, at paras. 50-51, there has always been a mortgage on
    the property including the Clubhouse. Blue Shores purchase of the property in
    2003 was financed by a mortgage loan from HSBC Bank for $6 million; the
    principal amount was increased in 2004 to $17 million, and it has since been
    discharged. The Duca mortgage in the amount of $1 million was placed in 2009
    and renewed in 2011.

(b)

The Positions of the Parties

[72]

The
    appellants submit that Blue Shores was prohibited from dealing with the
    Clubhouse in a manner that could defeat the appellants equitable or inchoate
    interests, including mortgaging the Clubhouse.

[73]

Blue
    Shores and Duca submit that because Blue Shores had title to the Clubhouse, it
    was permitted to mortgage the property. There was nothing in the condominium
    documents to the contrary, and the Clubhouse was already subject to a mortgage
    when the disclosure statements were executed. Duca argues the appellants are
    effectively asking the court to imply a term into the disclosure statements
    prohibiting Blue Shores from mortgaging the property.

(c)

Discussion

[74]

The
    condominium documents in this case, including the disclosure statements and the
    standard form purchase agreement, do not contain a provision prohibiting Blue
    Shores from granting encumbrances on the Clubhouse property, as the application
    judge noted. Even though I have concluded that the principles of contract and real
    estate law give the appellants an equitable interest in the Clubhouse, in my
    view Blue Shores was entitled to place a mortgage on the Clubhouse, and doing
    so was not an interference with the appellants interest.

[75]

The
    trust that arises from an agreement of purchase and sale of land is qualified.
    At least until the full purchase price is paid and the vendor is bound to
    convey, the vendor retains for certain purposes its ownership over the
    property:
Wall v. Bright
(1820), 37 E.R. 456 at p. 459; see also J.
    Victor Di Castri,
Law of Vendor and Purchaser
, loose-leaf (Toronto:
    Carswell, 1988), ch. 13 at p. 16.1; La Forest, ch. 11 at p. 53. As noted
    earlier, this principle was accepted by this court in
Buchanan v. Oliver Plumbing
    & Heating Ltd
., and applied to condominiums in
Cam-Valley Homes
.

[76]

Di
    Castri suggests that while the vendor whose title is subject to an equitable
    interest cannot deal with the property in a manner that would defeat the
    interest, it can do anything that does not cause prejudice: Di Castri, at pp.
    13-17, citing
Hadley v. London Bank of Scotland Ltd
.
(1985), 3
    De G.J. & Sm. 63, at p. 69. This view appears to be consistent with
    this courts decision in
Robinson v. Moffatt

(1916), 31 D.L.R.
    490. Explaining the relationship between a vendor and purchaser under an
    agreement for purchase and sale of land, the court wrote, at para. 14:

Both at law and in equity, the vendor is the owner of the land
    in the sense of having the lawful title to it; the purchaser has only an
    equitable right to it  An agreement may never be carried into effect, it may
    end in nothing by various ways, and it may be that Equity, however measured,
    may refuse specific performance, and so the vendor may remain owner, unaffected
    by the agreement, without the aid of any Court. But, whether he does or not, he
    is still owner and can convey his ownership, subject of course to any equitable
    right which the purchaser may have: he has none at law except a personal action
    against the vendor if he should refuse or be unable to carry out his contract.

(The last sentence of the quote has to do with the
    arcanities of the different remedies at law and at equity, which do not concern
    us here.)

[77]

In
    other words, the vendor can deal with the property as it sees fit, provided it
    can still comply with the terms of the conveyance obligation. Applying this
    principle to the facts of this appeal, the Duca mortgage has not prevented Blue
    Shores from conveying the Clubhouse in accordance with the disclosure
    statements. Blue Shores stated, at para. 20 of their application factum, that the
    Duca Mortgage will be discharged from title prior to or at the time Blue
    Shores transfers ownership of the Clubhouse to the Applicants.

[78]

Therefore,
    I conclude that Blue Shores was not precluded, by its trustee role or
    otherwise, from mortgaging the Clubhouse.

(3)

Is Ducas mortgage subordinate to or void against the appellants
    interest in the Clubhouse?

[79]

This
    issue follows from the preceding issue in which it was determined that Blue
    Shores was entitled to mortgage the Clubhouse. It considers the effect of the
    appellants registration of the notice of unregistered interest on the
    Clubhouse title on April 27, 2012, after the mortgage in favour of Duca had
    been both registered and renewed.

(a)

The Application Judges Decision

[80]

The
    application judge found, at paras. 53-55, that the issue of priority as between
    Duca and the appellants, should Blue Shores default on the mortgage, was
    premature, since [t]here is no claim or suggestion that Blue Shores has
    defaulted or that Duca is exercising its mortgage remedies, and no hint in the
    evidence that a default is likely. He declined to answer this speculative
    and merely hypothetical question, noting that Blue Shores indicated it would
    discharge the Duca mortgage before conveying the Clubhouse to the appellants;
    there was no reason to doubt this statement at the time of the application.

(b)

The Positions of the Parties

[81]

The
    appellants argue that if the Duca mortgage is valid, it is subordinate to their
    interest in the Clubhouse, notice of which was registered on title. They submit
    that the application judges finding, at para. 51, that Duca had actual
    knowledge of the conveyance obligation when it renewed its mortgage in November
    2011, is sufficient reason to subordinate Ducas mortgage to the appellants
    interest in the Clubhouse.

[82]

Blue
    Shores and Duca submit that since the application judge was correct in finding
    that Blue Shores had the right to mortgage the Clubhouse, questions about
    priority are premature.

(c)

Discussion

[83]

I
    agree with the application judge that the issue of priority as between Duca and
    the appellants, should Blue Shores default on the mortgage, is premature and
    might never arise for practical purposes in this development.

[84]

Given
    the prospect that a condominium corporation could register a notice of an
    unregistered interest against a declarants title might have implications for
    the financing of condominium projects more generally, I make a few
    observations.

[85]

The
    financing pattern in this project shows that the developer borrowed money to
    buy the property and later to finance construction, and then paid down the
    mortgage security as units were sold. It is possible that the registration of a
    notice of an unregistered interest by a condominium corporation against
    property owned by the developer that is eventually to be transferred to the
    corporation could interfere with the projects financing, since lenders understandably
    abhor priority fights over their security.

[86]

Duca
    cites

Holborn Property Investments Inc. v. Romspen Investment Corp
.
(2008), 77 R.P.R. (4th) 262, for the proposition that it would take express
    language in the relevant agreement to permit the future recipient of title to
    prevent the registered owner from encumbering the property. In that case, the
    purchaser agreed, in the contract for sale of land, that it would not register
    its interest under s. 71(1.1) of the
Land Titles Act
. After the
    agreement was signed, the vendor refinanced two mortgages and granted a new
    mortgage, then defaulted. Addressing the question of priority between the
    purchaser and the mortgagee, Wilton-Siegel J. wrote, at para. 45:

By precluding registration of the Agreement on title, clause
    20(d) of the Agreement constitutes an interest in the Property that is
    subordinated to Romspen's interest as chargee under the First Mortgage and the
    Second Mortgage. The only reasonable inference from a covenant not to register,
    in an agreement that does not contain a covenant against further encumbering
    the Property, is that the Agreement is intended to be subordinate to any
    encumbrance registered against the Property after the date of the Agreement.

[87]

Whether
    the
Holborn Property
type of contractual subordination is an available
    approach in the condominium area is not raised on the facts in this case and is
    best left to one where it is directly in issue. As noted earlier in these
    reasons, while the court will enforce statutory obligations, it will otherwise
    give effect to the language of the documents, as illustrated by
Tedley
,
Cam-Valley Homes
, and
West Harbor City
.

[88]

The
    context of the ongoing tension between condominium corporations and developers
    is shown in the cases discussed earlier. Some developers do seek opportunities
    to increase their profits at the expense of condominium corporations and unit
    owners. As the
Newrey

line of cases shows, these efforts are sometimes
    not successful. Other times, they are. As this court observed in
Tedley
,
    the adjustment of the balance of power is a matter for legislation.

(4)

Are the appellants entitled to an order that Blue Shores take steps to
    convert the Clubhouse from a freehold interest to a unit within a condominium
    corporation?

[89]

As
    noted, article 5.01 of the EACSA and the disclosure statements related to two
    of the appellants provide that Blue Shores is to register the Clubhouse in one
    of the appellant corporations as a condominium unit. However, Blue Shores has
    not yet done so and instead continues to hold it in freehold ownership.

[90]

On
    the application judges reading of the disclosure statements and the EACSA, the
    Clubhouse could be registered as a unit at any time. He found that Blue Shores
    failure to register the Clubhouse as a unit had not resulted in any prejudice to
    the appellants and did not give rise to any remedy. There is no error in the
    application judges reasoning.

[91]

Blue Shores indicates in its factum that it is
    prepared to consent to the conversion of the Clubhouse from freehold tenure to
    a condominium unit. Blue Shores took the same position before the application
    judge.

[92]

Section 109(3) of the
Condominium Act
permits a judge of the Superior Court of Justice to make an order
    to amend the declaration or description registered under s. 2 of the Act. 
    Given Blue Shores consent to the amendment, I would grant an order to amend
    the declarations and descriptions to convert the Clubhouse to a condominium
    unit
, but I would direct the parties to prepare the text of it.

(5)

Is Blue Shores required to operate the Clubhouse on a non-profit basis
    and account to the appellants?

[93]

As
    noted earlier, the EACSA between the appellants and Blue Shores provides that,
    as long as Blue Shores owns and operates the Clubhouse, each condominium unit
    owner is required to pay a monthly Clubhouse membership fee to the owners
    respective condominium corporation. Each appellant condominium corporation is
    required to remit the aggregate of these membership fees to Blue Shores, which
    constitute each appellants allocated cost contribution (ACC) for the
    Clubhouse under the EACSA. Article 6.01 of the EACSA sets the initial monthly
    fee payable by each unit owner at $100, and provides for an increase of up to
    10 percent per year.

[94]

The
    preamble to the EACSA provides that:

The Phase 1 Corporation and the Declarant have on its own behalf
    and on behalf of the Future Phase Corporations entered into this Agreement on a
    non-profit basis in order to confirm the mutual use, management, operation,
    maintenance, repair, replacement and cost sharing of the Share Facilities

(a) The Application Judges
    Decision

[95]

The
    application judge concluded, at para. 68, that the monthly fee at the time of
    the application, $128.26 per month per unit, was well within the permissible
    range of a $100 starting fee plus up to 10 percent annual increase from 2006 to
    2011 set out in the EACSA. He noted, at paras. 78-79, that article 6.01
    demonstrates that the ACC calculation is not dependent on operating costs,
    since it provides that the ACC would be calculated irrespective of  the cost
    of operating and maintaining the Clubhouse.

[96]

The
    appellants rely on the preamble of the EACSA to argue that Blue Shores was
    obliged to operate the Clubhouse on a non-profit basis and to account to the
    appellants. The application judge rejected their interpretation of the meaning
    of non-profit basis, since it would render other portions of the EACSA
    essentially meaningless, such as the provision for a 10 per cent annual fee
    increase regardless of operating costs. He found no basis on which the
    appellants could claim an accounting with respect to the operation of the
    Clubhouse.

[97]

The
    application judge also rejected the appellants argument that Blue Shores could
    not use the ACC to pay the Duca mortgage. He found that Blue Shores was
    entitled to use its revenues to pay its bills in the ordinary course of
    business, which includes making payments on the Duca mortgage.

(b) The Positions of the Parties

[98]

The
    appellants argue the application judge erred by not recognizing that the
    Clubhouse is a community centre, rather than a health club, which led him to misinterpret
    the ACC as a monthly membership fee rather than as a contribution toward the
    costs incurred by the Declarant in connection with the Clubhouse Facilities.  They
    reiterate their argument that the preamble of the EACSA, which calls for the
    operation of
EACSA
on a non-profit
    basis, applies also to the Clubhouse and prohibits Blue Shores from earning a
    profit on it. They assert that the application judge should have applied the
    principle of
contra proferentem

in favour of the appellants to
    conclude that none of the parties can profit at the other parties expense. The
    appellants sought an accounting of the Clubhouses revenue and expenses to
    ensure this had not occurred.

[99]

The
    appellants submit that the permitted annual increase of the ACC, not exceeding
    10%, must be interpreted in light of the requirement that the Clubhouse be
    operated on a non-profit basis. They argue that the inclusion of this provision
    in the EACSA is evidence that the parties intended some criteria be applied
    to determine the appropriate annual increase to the ACC. In particular, the ACC
    can only be increased to the meet operating costs.

[100]

Blue Shores
    adopts the application judges conclusion that the appellants proposed
    interpretation of the EACSA does not make commercial sense.

(c) Discussion

[101]

The application
    judges interpretation of the non-profit basis phrase in the preamble to the EACSA
    was reasonable. The appellants interpretation would result in a preambular
    provision effectively rendering important substantive provisions of the EACSA
    meaningless. Similarly, the appellants request for an accounting of clubhouse
    expenses and profits has no basis in the EASCA.

[102]

In context, the
    EACSA is intended to govern the Clubhouse during the time that Blue Shores is
    there and after it leaves. The commercial purpose of the arrangement while Blue
    Shores is on the site as the Declarant must be taken into account. Most of the
    provisions in the EACSA govern what are called the Shared Facilities and the
    Shared Costs, and these are meant to be allocated on a non-profit basis,
    hence the preamble.

[103]

The important
    qualifier for the purpose of this appeal is that the Clubhouse is a Shared
    Facility under article 4.01, but subject to the provisions of Article 5.00.
    Articles 5.00 and 6.00 govern the ownership and use of the Clubhouse facilities
    by Blue Shores as the Declarant. Blue Shores preserved for itself the right to
    operate the Clubhouse almost entirely free of constraint, while it is on the
    site marketing units, but leaving it open to use by the residents and the
    guests of the Condominium Corporations. In particular, under article 5.02, Blue
    Shores, as the Declarant, has the right to permit members of the public, on a
    user-fee basis to use the Clubhouse, and shall have no obligation to account
    for same to the Condominium Corporations. These provisions amply substantiate
    the application judges view that Blue Shores retained ownership and control
    over the Clubhouse as an essential amenity in the marketing of the project.

[104]

While the appellants'
    theory is that the Clubhouse is intended to be a community centre will
    eventually hold sway, that will only be after Blue Shores conveys the Clubhouse
    and ceases to be the Declarant.

(6)

Does the limitation period in s. 113 of the
Condominium Act

bar
    the appellants claim?

[105]

Section 113(3)
    of the
Condominium Act

permits a court to amend or terminate an
    agreement such as the EACSA if the disclosure statements did not provide
    sufficient disclosure, and the agreement produces a result that is oppressive
    or unconscionably prejudicial to the condominium corporation.

[106]

The application
    judge found, at paras. 64-65, that, since the appellants did not meet the 12
    month deadline for challenging the terms of the EACSA, as set out in s. 113 of
    the
Condominium Act
, they were limited to claiming damages for breach
    of its terms.

[107]

The appellants
    disclaim any effort to challenge the EACSA, but only sought its interpretation
    in terms favourable to them. Contrary to the appellants submissions, I have
    concluded that the application judges interpretation of the EACSA was
    reasonable. In my view, s. 113 of the
Condominium Act
has no
    application to this case.

(7)

Did Blue Shores conduct constitute oppression?

[108]

Under s. 135 of
    the
Condominium Act
, a court can make an order to rectify conduct that
    is or threatens to be oppressive or unfairly prejudicial to the applicant or
    unfairly disregards the interests of the applicant.

[109]

The application
    judge acknowledged, at para. 97, that the oppression remedy in s. 135(2) of the
Condominium Act

can capture conduct that is legal but is
    nonetheless unfair in the sense that it violates the reasonable expectations of
    a party. However, he found that the conduct of Blue Shores did not breach this
    standard. The application judge determined that Blue Shores had not violated
    the appellants contractual or property rights and the appellants had not
    demonstrated any unfair conduct by Blue Shores that undermined their reasonable
    expectations.

[110]

Since I have agreed
    with the application judge that the appellants have not established that Blue Shores
    has done anything wrong in its use and operation of the Clubhouse, it is clear
    that Blue Shores is not liable for oppression.

D.

Disposition

[111]

I would allow
    the appeal. I would set aside paragraph 1 of the judgment ordering that
    Instrument SC976990 be discharged from title to the Clubhouse, and I would require
    the parties to prepare a consent order to convert the Clubhouse from freehold
    tenure to a condominium unit, under s. 109(3) of the
Condominium Act
.

P. Lauwers J.A.


MacFarland J.A. (LaForme J.A. concurring):

[112]

I have read my
    colleagues reasons and part company with him on two related points. First, I
    disagree that the disclosure statement contained an executory contract between
    Blue Shores Developments Ltd. (Blue Shores) and the appellant condominium
    corporations in relation to the Clubhouse. Second, I disagree that the
    appellants have an interest in the Clubhouse that can be registered under s.
    71(1) or (1.1) of the
Land Titles Act
,
    R.S.O. 1990, c. L.5
.

[113]

I would also
    decline to make an order under s. 109 of the
Condominium Act, 1998
,
    S.O. 1998, c. 19 (the Act) to amend the declaration. The parties are free to
    seek such an amendment in the Superior Court on consent. Apart from these
    points of disagreement, I agree with my colleagues disposition on the
    remaining issues.

A.      The disclosure statement is not an executory contract

[114]

The disclosure
    statement provides as follows:
[1]


The Declarant (or if applicable, its successors, or assigns)
    shall retain ownership of the Clubhouse Facilities and shall be responsible for
    the management, operation and control of same.

Ownership of the Clubhouse Facilities shall ultimately be
    transferred to the Phased Condominiums, each as to one-quarter ownership as
    tenants-in-common by the Declarant (or any successor or assignee thereof) for
    total consideration of Two ($2.00) Dollars. Such conveyance shall occur within
    one hundred and twenty (120) days following the date that the Declarant (or any
    successor or assignee thereof) is no longer the registered owner of any lands
    within the Project (including the Phased Condominiums and/or the Future
    Development Lands) or such earlier time as the Declarant may determine in its
    sole and unfettered discretion (the Clubhouse Transfer Date).

[115]

In my opinion,
    the application judge was correct when he concluded, at para. 40, that this
    passage in the disclosure statement is not an executory contract between the
    appellants and Blue Shores:

[40]    In short, the requirement to convey the Clubhouse for
    consideration in the future is an obligation that Blue Shores will have in the
    future. It is not an executory contract which entitles the Applicants, or any
    of the unit purchasers, to equitable title and the equitable remedy of specific
    performance. That is not what any document says because it is not what the
    Applicants, or any of the individual condominium purchasers, bargained for.

[116]

The requirement
    to provide a disclosure statement is set out in s. 72(1) of the Act. Under s.
    72(1), a declarant must provide to every person who purchases a unit or a
    proposed unit from the declarant a copy of the current disclosure statement
    made by the declarant for the corporation of which the unit or proposed unit
    forms part. Agreements of purchase and sale for a condominium unit are not
    binding on the purchaser until the disclosure statement is delivered: s. 72(2).
    When the purchaser receives the disclosure statement, he or she may rescind the
    agreement of purchase and sale before accepting a deed to the unit being
    purchased that is in registerable form: s. 73(1). The Act sets out the formal
    requirements for a rescission: s. 73(2).

[117]

The declarant is
    also required to deliver a revised disclosure statement to the purchaser
    [w]henever there is a material change in the information contained or required
    to be contained in a disclosure statement: s. 74(1). Purchasers again have
    rights to rescind the agreement of purchase and sale after delivery of the
    revised disclosure statement before accepting a deed to the unit being
    purchased that is in registerable form, and in other circumstances: s. 74(6).

[118]

The Act provides
    enforcement mechanisms. For example, s. 133(1) provides that a declarant shall
    not, in a statement that it is required to provide, make a material statement
    or provide material information that is false, deceptive or misleading or
    omit a material statement or material information that the declarant is
    required to provide.  Where such a material misstatement or omission is made,
    a corporation or unit owner may sue for damages in certain circumstances: s.
    133(2).

[119]

One purpose of
    the disclosure statement is to enable individuals contemplating the purchase
    of a condominium unit to have a full understanding of their rights and
    obligations on unit purchase but more importantly, what the costs of owning it
    will be:
90 George Street Ltd. v. Ottawa-Carleton Condominium Corp. No. 815
,
    2015 ONSC 336, 51 R.P.R. (5th) 287, at para. 7. Furthermore, as Rosenberg J.A.
    observed in
Middlesex Condominium Corp. No. 87 v. 600 Talbot Street London
    Ltd.
(1998), 37 O.R. (3d) 22 (C.A.), at p. 37:

[A]n aspect of the disclosure requirement is to assist in
    resolving disputes between the declarant and the owners and the corporation
    about which assets and common elements are intended to be included in the
    purchase price.

[120]

Accordingly, a
    disclosure statement provided under s. 72 of the Act has a unique purpose
    within the condominium law regime.

[121]

My colleague
    relies on
Peel Condominium Corp. No. 417 v. Tedley Homes Ltd.
(1997), 35
    O.R. (3d) 257 (C.A.), for the proposition that condominium documents can be
    enforceable contracts that may give rise to obligations to convey property in
    the condominium context. In my view, however,
Tedley
is distinguishable.
    In
Tedley
, the disclosure statement and declaration given to prospective
    purchasers specified that the condominium corporation was under a duty and
    obligation to purchase a superintendents unit and two guest units in each of
    the buildings, pursuant to the terms of the conveyance and purchase
    agreement, which was attached to the disclosure statement in draft form. The
    condominium documents also provided the total purchase price and a payment
    schedule. The first directors of the condominium corporation subsequently
    enacted a by-law authorizing the execution of the conveyance and purchase
    agreement and completed the agreement on behalf of the condominium corporation.
    The condominium corporation then brought an application seeking a declaration
    that the conveyance and purchase agreement was void.

[122]

My colleague
    refers to Robins J.A.s remarks on the effect of the declaration and disclosure
    statement, at p. 265:

I would not think it open to the elected directors after
    closing to effectively amend the declaration by refusing to complete a
    transaction that had been accepted by all of the owners, including the
    directors themselves. The agreement to purchase the six suites cannot be
    considered unilateral in these circumstances or treated as having been
    foisted on the corporations or its directors or the unit owners. To the
    contrary, as I have said, in completing the agreement the first directors were
    acting in compliance with a
contract
the terms of which had been
    approved by the unit owners. [Emphasis added.]

[123]

When Robins J.A.
    used the word contract, he was referring to the draft conveyance and purchase
    agreement that had been appended to the disclosure statement. This is made
    clear by his description of the purchase documents, at p. 263:

Clearly, each of [the condominium unit owners] agreed by way of
    their purchase documents that the superintendent and guest suites were not
    included in the purchase price. The disclosure statement and declaration made
    it abundantly clear that these suites were to be purchased by the condominium
    corporation and used as common elements
in accordance with the terms of the
    conveyance and purchase agreement
. [Emphasis added.]

[124]

Therefore,
Tedley
does not support the proposition that the disclosure statement could, in and of
    itself, constitute a contract between the developer and the condominium
    corporation. Indeed, in
Tedley
, the condominium corporation executed a
    separate conveyance and purchase agreement in order to purchase the
    superintendents unit and guest units.

[125]

Moreover, I
    agree with the application judges conclusion that, in this case, the disclosure
    statements expressly indicated that an interest in the Clubhouse was not being
    conveyed with the sale of each condominium unit.  The application judge wrote,
    at paras. 23-25:

[23]    The purchasers take their title to each unit subject
    to the Condominium Documents, which means that the Condominium Documents must
    actually be read in order to determine their actual impact on title. While the
    Applicants [
i.e.
, the appellant condominium companies] are correct that
    the phrase Condominium Documents includes the Disclosure Statement, they are
    incorrect in their interpretation of the impact of that inclusion. As indicated
    above, article 4.3 of the Disclosure Statement specifically provides that an
    interest in the Clubhouse is
not
being conveyed with each sale. The
    Disclosure Statements incorporation by reference into the agreement of
    purchase and sale of each unit confirms that each of those agreements excludes
    the purchase and sale of the Clubhouse.

[24]    The agreements of purchase and sale allocate no money
    to the purchase of the Clubhouse, and contain no requirement that the Clubhouse
    be conveyed to the Applicants in return for the purchasers respective purchase
    prices. Article 4.3 provides that a contract for the purchase of the Clubhouse
    shall be entered into in the future between the Applicants and Blue Shores, and
    at that point the Applicants will pay the stipulated purchase price. The
    purchase price, although nominal, has not yet been paid by the Applicants, as
    the contract of sale for the Clubhouse has not yet been entered into.

[25]    In other words, Blue Shores, as developer, is obliged
    under the statutorily required Disclosure Statement to contract with the
    Applicants for the sale of the Clubhouse once all of the units and other
    property have been sold. The basic terms of that future contract, but not its
    date, have been described in art. 4.3, but no consideration has flowed and
    there is no existing executory contract. No equitable title has passed to the
    Applicants as it would if Blue Shores had actually entered an agreement of
    purchase and sale of the Clubhouse with the Applicants, and there is therefore
    nothing on which specific performance might operate in the usual way that it
    does with agreements to convey real estate.

[126]

My conclusion
    that the disclosure statement did not constitute a binding executory contract
    between Blue Shores and the appellants does not necessarily leave the latter
    without a remedy. As mentioned above, under s. 133(2) of the Act, a condominium
    corporation has a statutory right to sue for damages in certain circumstances,
    in the event that the disclosure statement contains a material statement or
    material information that is false, deceptive or misleading:

A corporation or an owner may make an application to the
    Superior Court of Justice to recover damages from a declarant for any loss
    sustained as a result of relying on a statement or on information that the
    declarant is required to provide under this Act if the statement or
    information,

(a)     contains
    a material statement or material information that is false, deceptive or
    misleading; or

(b)     does
    not contain a material statement or material information that the declarant is
    required to provide.

[127]

However, as the
    parties have not raised s. 133(2), I should not be taken as expressing an
    opinion on its application in the circumstances of this case now or in the
    future.

[128]

Accordingly, I
    agree with the application judge that the provision in the disclosure statement
    obliging Blue Shores to ultimately transfer ownership of the Clubhouse to the
    appellants does not constitute an executory contract.

B.      The appellants have no interest that can be
    registered under the
Land Titles Act

[129]

Given my
    conclusion that the disclosure statement does not constitute an executory
    contract, I do not agree with my colleague that the principles of contract law
    and real estate law operate to give the appellants an equitable interest in the
    Clubhouse. However, I agree with my colleague that the line of cases beginning
    with
York Condominium No. 167 v. Newrey Holdings Inc
. (1981), 32 O.R.
    (2d) 458 (C.A.), does not support the appellants argument that they have an
    equitable interest in the Clubhouse.

[130]

Thus, in my
    view, the appellants have no rights that are capable of registration under
    either s. 71(1) or (1.1) of the
Land Titles Act
. Accordingly, I would
    not interfere with the application judges order vacating the registration that
    the appellants entered on the register.

C.      Duca Mortgage and Priorities

[131]

I agree with my
    colleagues conclusion that the Duca mortgage is valid.

[132]

The evidence
    discloses that Blue Shores is still the owner of the Clubhouse. Under the
    disclosure statement, Blue Shores has no obligation to convey the Clubhouse
    until 120 days after the date on which it is no longer the registered owner of
    any lands within the project. As owner of the property, Blue Shores was
    entitled to mortgage the property and there is no prohibition to it doing so in
    any of the condominium documentation.

[133]

Blue Shores has
    undertaken to discharge the mortgage from title before it conveys title to the
    appellants.

D.      Conversion of the Clubhouse from Freehold to a
    Condominium Unit

[134]

At para. 52 of
    its factum, Blue Shores stated that it is prepared to consent to the conversion
    of the Clubhouse from freehold tenure to a condominium unit, although it points
    out it has no obligation to do so.

[135]

The appellants
    may bring an application on consent to the Superior Court of Justice under s.
    109 of the Act for the necessary order.

E.      Remaining issues

[136]

I agree with my
    colleagues disposition of the remaining issues, namely:

(a)     whether Blue Shores is
    obligated to run the Clubhouse on a                                       non-profit
    basis and to account;

(b)     whether
    the limitation period in s. 113 of the Act bars the appellants claim; and

(c)     whether Blue Shores conduct
    constitutes oppression under                                       s. 135 of
    the Act.

F.       Disposition

[137]

In the result, I
    would dismiss the appeal. I would award costs of the appeal to the respondent,
    Blue Shores, fixed in the sum of $18,000, and to the respondent, Duca Financial
    Services Credit Union Ltd., in the sum of $15,000, both on a partial indemnity
    basis and inclusive of disbursements and HST.

Released: May 27, 2015 JMacF

J.
    MacFarland J.A.

I
    agree H.S. LaForme J.A.





[1]
As my colleague points out, the language of the conveyance obligation evolved
    somewhat through the various disclosure statements. I have quoted from art. 4.2
    of the phase IV disclosure statement.


