



COURT OF APPEAL FOR ONTARIO

CITATION:

Toronto Standard Condominium Corporation No.
    2051 v. Georgian Clairlea Inc., 2019 ONCA 43

DATE: 20190124

DOCKET: C65612

Sharpe, Juriansz and Roberts JJ.A.

BETWEEN

Toronto Standard Condominium Corporation No. 2051

Plaintiff
    (Respondent/Cross-appellant)

and

Georgian Clairlea
    Inc., Residences of Clairlea Gardens Inc., Anthony Maida, Frank Maida, Gene
    Maida, Georgian Corporation
, The Equitable Trust Company and Firm Capital
    Mortgage Fund Inc.

Defendants (
Appellants/Cross-respondents
)

and

Georgian
    Properties Corporation

Plaintiff by Counterclaim (Appellant/Cross-respondent)

Andrew Bernstein, Jeremy Opolsky and Shalom
    Cumbo-Steinmetz, for the appellants/cross-respondents

Megan L. Mackey and Sandra Dawe, for the respondent/cross-appellant

Heard: January 15, 2019

On appeal from the judgment of Justice Jasmine T.
    Akbarali of the Superior Court of Justice, dated May 31, 2018.

Juriansz J.A.:

A.

THE APPEAL

[1]

The appellant, Georgian Properties Corporation (GPC), appeals from the
    summary judgment of Justice Akbarali dated May 31, 2018 reducing the amounts
    owing under two mortgages given by the respondent, Toronto Standard Condominium
    Corporation No. 2051 (TSCC 2051) to the developer of the condominium. The
    developer, which is now in bankruptcy, had assigned the mortgages to GPC. In
    the summary judgment proceeding, GPC agreed to be bound by the judicial
    findings against the developer and to be responsible for any costs award.

[2]

The summary judgment was granted in the action brought by TSCC 2051
    seeking,
inter alia
, relief under s. 135 of the
Condominium Act,
    1998
, S.O. 1998, c. 19 (the Act)
.
    Section 135(2) gives the court jurisdiction to grant an oppression remedy
    within the purview of the
Condominium Act
. It provides:

On an application, if the court determines that the conduct of
    an owner, a corporation, a declarant or a mortgagee of a unit is or threatens
    to be oppressive or unfairly prejudicial to the applicant or unfairly
    disregards the interests of the applicant, it may make an order to rectify the
    matter.

[3]

GPC was the plaintiff by counterclaim and moved for summary judgment on
    three debt instruments, two of which are the mortgages at issue in this appeal.

[4]

Both mortgages are vendor take-back mortgages entered into when the developer
    controlled the board of TSCC 2051.

[5]

The first mortgage relates to the HVAC equipment in TSCC 2051.
    Originally, the developer intended to have a third party supply the HVAC
    equipment and lease it to purchasers of the condominium units. The Agreements of
    Purchase and Sale entered into with 47 persons, who purchased units prior to the
    condominiums registration, reflected this intention. Subsequently, the
    developer decided to purchase the HVAC equipment itself and sell it to the
    condominium corporation in the form of service units. The developer-controlled
    board of TSCC 2051 agreed to pay for the service units by giving the developer
    the mortgage in the amount of $2,228,100 with interest at the rate of 10% per
    annum.

[6]

The other mortgage relates to 32 parking units, 16 storage units, and
    two combination parking/storage units that remained unsold at the time of the
    condominiums registration. The developer conveyed these unsold units to TSCC
    2051. To pay for the units, the developer-controlled board of TSCC 2051 gave
    the developer a vendor take-back mortgage in the amount of $1,026,000 with
    interest at the rate of 10% per annum.

[7]

The motion judge found the developers revised disclosure documents
    infringed s. 74 of the
Condominium Act
and that both transactions were
    oppressive. She reduced the principal amount of the service unit mortgage to
    $652,050 and the principal amount of the parking unit mortgage to $73,000 with
    both accruing interest in accordance with their terms.

(1)

Disclosure was Insufficient

[8]

GPC submits the motion judge failed to apply the statutory standard of
    materiality in assessing the developers revised disclosure documents. Instead,
    GPC submits, the motion judge concluded that the developers revised disclosure
    documents did not meet the requirements of the Act because they failed to use
    simple, readable language. GPC submits: Materiality does not turn on how
    easy the disclosure is to understand, but on the
significance
or
effect
of the alleged misstatement (emphasis in original); and there is no legal
    support for using a simple, readable standard in place of materiality.

[9]

GPCs argument fails to keep distinct materiality
    and the clarity of the information about material changes that must be
    provided. Materiality has to do with the significance of
changes
from what the developer has provided in earlier disclosure.
    Section 74(1) provides:

Whenever
there is a material
    change in the information contained or required to be contained in a disclosure
    statement delivered to a purchaser under subsection 72 (1) or a revised
    disclosure statement or a notice delivered to a purchaser under this section,
    the declarant shall deliver a revised disclosure statement or a notice to the
    purchaser.

[10]

The
    motion judge took note of this provision and set out the statutory definition
    of material change in s. 74(2) of the
Act. A
material change is:

a change or a series of changes
    that a reasonable purchaser, on an objective basis, would have regarded
    collectively as sufficiently important to the decision to purchase a unit or
    proposed unit in the corporation that it is likely that the purchaser would not
    have entered into an agreement of purchase and sale for the unit or the
    proposed unit or would have exercised the right to rescind such an agreement of
    purchase and sale

[11]

The
    motion judge found that the creation of the service units, the service unit
    mortgage and the parking unit mortgage were material changes. There can be no
    doubt that the creation of the service units and the mortgages in the amounts
    of $2,228,100 and $1,026,000, which did not appear in the original disclosure
    statement, were material changes. The motion judge committed no error in
    deciding the issue of materiality.

[12]

On
    the other hand, there is the clarity of the developers communication of the
    material changes. The Act addresses the clarity of the revised disclosure
    expressly. Section 74(3) requires that a developers revised disclosure
    statement under s. 74(1) must clearly identify all material changes and
    summarize the particulars of them. The provision reads:

The revised disclosure statement or notice required under
    subsection (1) shall clearly identify all changes that in the reasonable belief
    of the declarant may be material changes and summarize the particulars of them.

[13]

Cases decided under s. 52 of the
Condominium Act
, R.S.O.
    1990, c. C.26 must be read with the awareness that the earlier version of the
    Act did not have the specific requirements of s. 74(3).

[14]

The
    motion judge said: Disclosure will not meet the requirements of the Act where
    the terms of the deal are not clear, coherent or consistent, or where they do
    not provide full and accurate disclosure. Further, she instructed herself that
    an objective standard must be used in deciding whether a disclosure statement
    complies with the Act, and that the question to be posed is what a reasonable
    person in an Ontario community would think about the disclosures sufficiency. She
    said that purchasers are entitled to know what the terms of the deal are. It
    was in describing the clarity of the disclosure of the material changes that
    the motion judge said that disclosure was not made in simple, readable
    language. However, that is not her only finding about the clarity of the
    disclosure.

[15]

In
    relation to the service unit mortgage, she found the individual documents to be
    confusing and also found the documents to be confusing when she considered
    them collectively. She said she failed to see how any reader of the disclosure
    would have any idea, for example, which pipes they were purchasing. She added
    that the disclosure relating to the service unit mortgage was replete with
    grammatical errors and missing words that exacerbated the problem.

[16]

The
    motion judge was correct to reject GPCs argument that the purchasers could
    have found the deal by reviewing the registered declaration on title, and that
    they should have done so because their APS required them to satisfy themselves
    as to title. In advancing this argument, GPC failed to keep in mind s. 74(3)s
    requirement that the developers revised disclosure statement must clearly
    identify all material changes and summarize the particulars of them.

[17]

Having
    reviewed the documents, I am satisfied that the motion judges description of
    the various documents and her analysis of them are accurate. I agree with her
    conclusion that the developers disclosure relating to the service unit
    mortgage is confusing and does not indicate clearly to purchasers what they
    are buying.

[18]

In
    relation to the parking unit mortgage, the motion judge found the developers revised
    disclosure statement did not tell purchasers the amount of the mortgage. GPC
    points out that at the time it did not know how many parking units would remain
    unsold and argued below that a purchaser could figure out the maximum financial
    liability from the parking unit mortgage from the pricing information in the
    disclosure statement. Before the motion judge, GPC also argued purchasers could
    download amortization schedules from the internet to determine the mortgage
    payments.

[19]

The
    uncertain maximum amount of the mortgage aside, the motion judge found that the
    covering letter that accompanied the revised disclosure statement confused
    matters. The covering letter is the developers summary of particulars
    required by s. 74(3). The covering letter directs purchasers to the revised
    budget statement to see the mortgage payments owing, but the revised budget
    statement shows no mortgage payments. In addition, the revised budget statement
    contains a note telling purchasers that there are no services the declarant
    provides, or expenses the declarant pays, that are reasonably expected to
    become a common expense at a subsequent time. This could be taken to mean that
    the mortgage was not anticipated to have an effect on the purchasers
    maintenance fees in the future. Purchasers could be misled by the revised
    disclosure considered as a whole.

[20]

The
    motion judge also found that the developer did not disclose that purchasers
    were almost uniformly buying only one parking unit with their residential unit.
    There was no way that the purchasers reading the revised disclosure statement
    would know the surplus units would not be sold or that there was no market for
    the unsold units. The motion judge found: Only the developer had that
    information, and it did not share it.

[21]

I
    agree with the motion judges finding that the revised disclosure regarding
    both mortgages was insufficient and did not meet the requirements of the Act.

[22]

Given
    the motion judges finding that the disclosure was confusing, it is unnecessary
    to consider GPCs criticism that she found the disclosure of the material
    changes was insufficient because it was not made in simple, readable
    language. Suffice it to say that the documents a developer uses to make
    revised disclosure must be readable and free of unnecessary complexity.

(2)

Oppression

[23]

GPC
    submits the motion judge erred in finding oppression, and further erred in the
    remedies she granted.

[24]

The
    motion judge applied the two-part test for oppression that the Supreme Court of
    Canada set out in para. 68 of
BCE Inc. v. 1976 Debentureholders
, 2008
    SCC 69, [2008] 3 S.C.R. 560:

In summary, the foregoing discussion suggests conducting two
    related inquiries in a claim for oppression: (1) Does the evidence support the
    reasonable expectation asserted by the claimant? and (2) Does the evidence
    establish that the reasonable expectation was violated by conduct falling
    within the terms oppression, unfair prejudice or unfair disregard of a
    relevant interest?

[25]

GPC
    stresses that the oppression remedy protects what a claimant reasonably expected
    and nothing more. In relation to the service unit mortgage, GPC points out that
    the unit purchasers did not initially expect to own the HVAC appliances and,
    after receiving the revised disclosure, would have reasonably expected TSCC
    2051 had agreed to a mortgage in the amount of $2,122,000 for the purchase of
    the HVAC equipment. GPC, assuming it would be immaterial to unit purchasers
    whether they owned the pipes and wires personally or collectively through the
    condominium, argues that the purchasers reasonable expectations could be met
    by redefining the service units to include only the HVAC appliances, leaving
    the price intact. Given that they expected there would be a mortgage in the
    amount of $2,122,000, there is no basis for the remedy granted by the motion
    judge.

[26]

There
    are three problems with this argument. First, the value of the pipes and wires
    was significant. The HVAC appliances cost the developer only $575,000 but the
    developer took back a $2,122,000 mortgage. Second, whether the unit purchasers
    or the condominium owned the pipes and wires is material as it could affect the
    determination of responsibility for repair and liability for damage. Third, and
    most importantly, the motion judge found the unit purchasers did not reasonably
    expect to be paying a mortgage in respect of items they reasonably thought they
    had already bought when they purchased their residential units.

[27]

Having
    found the purchasers reasonable expectations were violated, the motion judge
    next considered whether the evidence established that TSCC 2051s and the
    purchasers reasonable expectations were violated by conduct that constituted oppression,
    unfair prejudice or unfair disregard of a relevant interest. She concluded
    that they were.

[28]

I
    agree. As she found, the developer ignored the interests of the condominium and
    the unit purchasers. It took advantage of its preferred position and control of
    the condominium board to purport to sell to the condominium unit purchasers
    collectively, service units that included pipes and wires the unit purchasers had
    good reason to believe were included in the purchase of the individual units. Without
    clearly disclosing what it was purporting to do, the developer had unfairly saddled
    the condominium with a vendor take-back mortgage in large measure for the
    purchase price of pipes and wires the purchasers had good reason to believe
    they owned. It had unfairly disregarded the interests of TSCC 2051 and the unit
    purchasers.

[29]

The
    remedy chosen by the motion judge was appropriate to rectify the harm from the
    breach of TSCC 2051 and the unit purchasers reasonable expectations that they
    would not be paying a mortgage in respect of items the unit purchasers reasonably
    thought they had already bought. The motion judge found the unit purchasers did
    not expect that the mortgage would include the wires and pipes, or any other
    fixtures other than the HVAC appliances. The motion judge did not err by
    reducing the principal owing on the mortgage to reflect the cost of the supply
    and installation of the HVAC appliances plus some margin of profit.

[30]

In
    relation to the parking unit mortgage, GPC argues the developer notified the
    purchasers about the conveyance of the unsold parking and storage units and the
    creation of the parking unit mortgage in the revised disclosure statement. It
    disclosed the price of each unit, explained that no payment would be due on the
    mortgage in the first year and disclosed the interest rate. The amount of the
    mortgage could be easily calculated from the number of unsold units and the
    price set for each.

[31]

The
    motion judge properly rejected the argument. She observed: 
As with the service unit mortgage, the
    parking unit mortgage was entered into when the developer was in control of the
    board, prior to the turnover meeting.
As noted earlier, she found the
    developer knew that purchasers were almost uniformly buying only one parking
    unit with their residential unit. On my reading of her reasons, she found there
    was no market for the unsold units and they were almost worthless. She found
    the developer did not share this information with the condominium and the
    purchasers. Using its control of the condominiums board, the developer
    conveyed the unsold units to TSCC 2051 at inflated prices and concealed the
    cost of servicing the mortgage by including a term that specified no mortgage payments
    would be due in the first year. This stratagem enabled the exclusion of the
    annual cost of the mortgage from the revised budget statement and the inclusion
    of a note in the budget statement that there were no services the declarant
    provides, or expenses the declarant pays, that are reasonably expected to
    become a common expense at a subsequent time. The motion judge was entitled to
    find the developer unfairly disregarded the interests of TSCC 2051 and the
    purchasers.

[32]

The
    remedy awarded by the motion judge is premised on TSCC 2051 and the unit
    purchasers reasonable expectations that the unsold units would be conveyed at
    fair market value. Adjusting the principal of the mortgage to the units fair
    market value according to the expert evidence she accepted was appropriate. I do
    not accept GPCs submission that the experts opinion reflected her personal
    experience and was not based on her expertise.

[33]

GPC
    repeatedly drew the courts attention to the fact that 49 purchasers purchased
    under the original disclosure statement and 69 units were sold to purchasers
    under the revised disclosure statement. I do not see this as pertinent. The
    individual unit purchasers were not seeking the remedies available to them
    under s. 74 of the Act. The action was brought by TSCC 2051 seeking an oppression
    remedy based on its claim that the developer had unfairly disregarded its and
    the unit purchasers interests. TSCC 2051 established its claim of oppression
    by showing the nature of the transactions the developer entered into with the
    board it controlled and the insufficient disclosure of those transactions
    contrary to s. 74(3) of the Act.

[34]

For
    these reasons, I would dismiss the appeal.

B.

THE CROSS-APPEAL

[35]

TSCC
    2051 cross-appeals seeking to set aside the motion judges order that the
    interest rate on principal amounts of the mortgages as reduced by her would
    continue to be payable in accordance with the terms of the mortgages, i.e.
    compound interest at the rate of 10% per annum. In relation to the service unit
    mortgage, the motion judge said:

The plaintiff and unit purchasers would have reasonably
    expected the mortgage to accrue compound interest. Mortgages typically do. I
    also find that the interest rate of 10% was properly disclosed, and not
    unreasonable, especially in view of the interest rates the developer was paying
    on its own loans, and the fact that the mortgage was fully open.

[36]

Her
    reasoning was the same in relation to the parking unit mortgage.

[37]

Given
    the motion judges finding that TSCC 2051 and the unit purchasers would have
    reasonably expected the mortgages to accrue compound interest, she could not
    adjust the interest rate as part of the oppression remedy she granted.

[38]

TSCC
    2051 offers a second reason why it should not be required to pay compound
    interest. It submits the mortgages should not be considered in default until
    the date of judgment because of an oral agreement it had with the developer
    that the mortgage payments due to the developer would be set off against the
    condominium fees the developer owed to the condominium.

[39]

The
    parties dispute whether the effect of the oral agreement was raised before the
    motion judge. The motion judges reasons for judgment dated May 31, 2018 and
    her endorsements of June 21, June 28 and July 26, 2018 show she did not
    determine any set-off issue, none was argued before her on the motion, and she
    considered none was pleaded. She explained that paragraph 11 of the formal
    judgment was included at the request of and with the consent of the parties.
    Paragraph 11 deals with GPCs right to set off the amounts, including costs,
    she ordered it to pay TSCC 2051 against the mortgage payments TSCC 2051 owes
    it.

[40]

I
    am not persuaded that the motion judge made any error in deciding that issues
    of set-off were not before her. TSCC 2051 submits that it referred to the oral
    agreement in paragraphs 142 and 148 of its factum on the motion. The general oblique
    references in those paragraphs do not raise the agreement squarely and, in any
    event, do not seek the disposition sought on appeal.

[41]

I
    would conclude that whether there was an oral agreement that no payments were due
    on the mortgages as long as GPC owed money to TSCC 2051 was not an issue in the
    motion below and is not properly before us on appeal.

[42]

The
    cross-appeal is dismissed.

C.

Conclusion

[43]

I
    would dismiss the appeal and the cross-appeal. As agreed by the parties, I
    would fix costs of the appeal in favour of TSCC 2051 in the amount of $35,000
    and the costs of the cross-appeal in favour of GPC in the amount of $15,000,
    both amounts inclusive of disbursements and taxes.

Released: RJS JAN 24 2019

R.G. Juriansz J.A.

I agree. Robert J. Sharpe J.A.

I agree. L.B. Roberts J.A.


