SWS Marketing Inc. v Zavier

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

SWS Marketing Inc. v. Zavier,

2022 BCSC 743

Date: 20220506

Docket: S138229

Registry: Vancouver

Between:

And:

SWS Marketing Inc.

Plaintiff

Odin Zavier, Thane Lanz, Randall Rogiani, Eduardo Soto, Gary Mythen, Burt

Petersen, Charlene Petersen, Fan Jin, Gordon Lemon, Joseph Lanz, The

Owners Strata Plan KAS 1886 and The Tenants: John Doe #1, Jane Doe #1,

John Doe #2, Jane Doe #2, John Doe #3, Jane Doe #3, John Doe #4, Jane Doe

#4, John Doe #5, Jane Doe #5, John Doe #6, Jane Doe #6, John Doe #7, Jane

Doe #7, John Doe #8, Jane Doe #8, John Doe #9, Jane Doe #9

Defendants

Before: The Honourable Madam Justice Adair

Reasons for Judgment

Counsel for the Plaintiff:

D. Palaschuk

S. Stanley

J. Nieuwenburg

Counsel for the Defendants Odin Zavier,

Thane Lanz, Randall Rogiani, Eduardo

Soto, Gary Mythen, Burt Petersen, Charlene

Petersen, Fan Jin, Gord Lemon and Joseph

Lanz:

M. Canofari

G. Douvelos

A. Grewal

Representative of the Defendant The

Owners Strata Plan KAS 1886, appearing in

person:

R. Gauthier

SWS Marketing Inc. v. Zavier

Page 2

Place and Date of Trial:

Vancouver, B.C.

February 14-18, 22-25 and 28,

March 1-4 and 8-11, 2022

Place and Date of Judgment:

Vancouver, B.C.

May 6, 2022

SWS Marketing Inc. v. Zavier

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1. Introduction......................................................................................................... 4

2. Procedural background....................................................................................... 7

(a)

November 2013: the action is filed and the then-plaintiffs apply for

declaratory relief and an injunction before Sewell J. .............................................. 7

(b)

(c)

(d)

(e)

Amendments to the notice of civil claim....................................................... 8

The January 2021 hearing before Branch J. and the February 8 Order ...... 9

The appeal of the February 8 Order .......................................................... 12

Hearings in May and June 2021 before Lamb J. and Branch J. ................ 14

(f) September 2021: the Defendants file a petition under the Strata Property Act;

rulings from Lamb J. and Branch J....................................................................... 15

(g)

November 2021: the notice of civil claim is again amended and

proceedings are consolidated............................................................................... 16

3. Factual background .......................................................................................... 17

(a)

(b)

(c)

(d)

(e)

2008: Mr. Gauthier, Mr. Zavier and Mr. Lanz meet; SWS is formed ......... 17

The Vernon Project is identified................................................................. 19

Marketing and sale of units in the Vernon Project ..................................... 21

The Joint Venture Agreements.................................................................. 24

April 2011 to August 2013: no problems in the Vernon Project ................ 29

(f) September 2013 and thereafter: many problems in the Vernon Project....... 30

(g) 2017: Defendant-owners begin contacting the Home Buying Centre and

disposing of their units.......................................................................................... 33

(h) Strata Corporation issues after Mr. Saxvik becomes involved................... 39

(i) Mr. Saxvik asserts he is entitled to exercise the rights of the Defendant-

owners; the Gauthier Council refuses to recognize .......................................... 39

(ii)

The November 2020 Bylaws .................................................................. 40

Events after the February 8 Order.......................................................... 42

(iii)

4. Comments on the pleadings ............................................................................. 45

5. Comments on the witnesses, credibility and reliability ...................................... 54

6. SWS’s claims – discussion and analysis .......................................................... 61

(a)

(b)

Introduction................................................................................................ 61

The claim for a declaration the Joint Venture Agreements have been

breached and for an accounting........................................................................... 62

(c)

(d)

Is Mr. Zavier a party to a Joint Venture Agreement? ................................. 63

Have the Joint Venture Agreements been terminated by an accepted

repudiation?.......................................................................................................... 65

(i) Did the Defendants repudiate?.................................................................. 66

SWS Marketing Inc. v. Zavier

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(ii)

Did SWS repudiate?............................................................................... 67

Conclusion: the Joint Venture Agreements have not been terminated . 69

Are Defendants entitled to rescission of the Joint Venture Agreements as a

(iii)

(e)

remedy? ............................................................................................................... 69

(f) SWS’s claims to a legal, or, alternatively, a beneficial, interest in each of the

units and the “SWS Advances Theory” ................................................................ 72

(g)

The claim for judgment against the Defendants for the amounts of the down

payments in the Joint Venture Agreements.......................................................... 80

(h) What remedy should be granted for breach of the Joint Venture

Agreements?........................................................................................................ 82

(i) SWS’s claims for orders that all of the rights and duties of the Defendants that

arise under the Strata Property Act be assigned to SWS “forthwith,” and for a

permanent injunction preventing any of the Defendants from involving themselves

in the affairs of the Vernon Project ....................................................................... 85

(j) Can judgment be pronounced against the Defendant Burt Petersen, who has

filed a consumer proposal? .................................................................................. 87

7. The Counterclaim: Are the Defendants entitled to a remedy under the Strata

Property Act?........................................................................................................... 91

8. Summary and disposition.................................................................................. 99

1.

Introduction

[1]

This action involves two strata-titled buildings in Vernon, B.C. (the “Vernon

Project”). Each building has seven residential strata lots or units that, for many

years, have been operated as rental units, generating income for the unit owners.

[2]

The Vernon Project was purchased by Four Elements Marketing Inc., a

company owned and controlled by the defendant Odin Zavier, in March 2011. The

transaction was structured so that, before completion, Four Elements entered into

separate contracts of purchase and sale for the individual units with end-purchasers,

who provided the necessary financing to allow Four Elements to complete its

purchase.

[3]

Nine of the 14 units were purchased from Four Elements by six of the

individual defendants: Randall Rogiani, Eduardo Soto, Gary Mythen, Burt Petersen,

Fan Jin, Gordon Lemon and Joseph Lanz (the father of the defendant Thane Lanz).

SWS Marketing Inc. v. Zavier

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I will refer to this group of six defendants, collectively, as the “Defendant-owners.”

Mr. Zavier also purchased a unit. I will refer to the Defendant-owners and Mr.

Zavier, collectively, as the “Defendants.” The remaining four units were sold to

others. All the sales completed in March 2011.

[4]

[5]

One of the units is now owned by the plaintiff, SWS Marketing Inc.

SWS was formed in 2008 by Rene Gauthier, Mr. Zavier and Thane Lanz (“Mr.

Lanz”), to carry on business in real estate investment. During the period relevant to

the issues in this case, SWS was controlled by Mr. Gauthier.

[6]

SWS says that, in connection with each purchase of a unit in the Vernon

Project, it entered into a written joint venture agreement (the “Joint Venture

Agreement”) with the purchaser. Thus, each Defendant is a party to a Joint Venture

Agreement. SWS says that, pursuant to the terms of the Joint Venture Agreement, it

was obligated to “secure” the down payment toward the purchase price of the unit,

and (among other things) it was given “full, exclusive and complete authority and

discretion in the management and control of the business” of the joint venture. That

business was owning and renting the unit until SWS either refinanced to buy out the

owner, or SWS and the owner jointly decided to sell. The parties were to share all

profits and losses equally.

[7]

SWS says that, beginning in September 2013, the Defendants breached and

repudiated their respective Joint Venture Agreements by cutting SWS out of the

management and control of the joint venture, and taking over themselves. However,

SWS says that it never accepted the repudiation, with the result that, as of trial, none

of the Joint Venture Agreements has been terminated. SWS seeks to have each

Joint Venture Agreements specifically enforced against the corresponding

Defendant.

[8]

In addition, SWS says that, by virtue of the terms of the Joint Venture

Agreements, it became entitled to at least a beneficial interest (if not a legal interest)

SWS Marketing Inc. v. Zavier

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in 50% of the unit of each Defendant. SWS says that, as such, it is entitled to orders

for sale of each of those units.

[9]

The Defendants say that SWS’s claims against them should be dismissed.

They say that the Joint Venture Agreements cannot be interpreted in the way SWS

asserts, and that the Joint Venture Agreements are, in any event, unenforceable.

They say that SWS repudiated each of those Agreements in September 2013, and

they accepted SWS’s repudiation. They say that, as a result, as of September 2013,

all of the Joint Venture Agreements were terminated. Alternatively, the Defendants

say they are entitled to rescission.

[10] Mr. Zavier says further that he never signed a Joint Venture Agreement, and

that the signature on the Joint Venture Agreement bearing his name is not his.

[11] In addition, the Defendants and Mr. Lanz have brought a counterclaim (the

“Counterclaim”) against both SWS and The Owners, Strata Corporation KAS 1886

(the “Strata Corporation”) for the Vernon Project. They assert that, since February

2021, the strata council, controlled by Mr. Gauthier, has engaged in, or may engage

in, significantly unfair actions, contrary to s.164 of the Strata Property Act, S.B.C.

1998, c. 43. The Defendants seek relief under sections 164 and 165 of the Strata

Property Act, accordingly.

[12] Both the Strata Corporation and SWS say that the Counterclaim must be

dismissed.

[13] As I will describe, what was sold to the Defendant-owners as a relatively low

risk, low stress, self-financing real-estate investment in a unit in a small strata

complex in Vernon, has generated more than eight years of litigation, and many,

many court applications. The Defendant-owners became embroiled in bitter

disputes between Mr. Gauthier, Mr. Zavier and Mr. Lanz about SWS and how the

profits from the Vernon Project should be divided. At the end of the trial, it was

observed that everyone wants the units to be sold, and that appeared to be the one

area of consensus. I agree with that observation. Sale of the units would at least

SWS Marketing Inc. v. Zavier

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bring an end to the prolonged fighting over matters relating to the Strata Corporation

and its governance, and reduce the scope of the war to one over money and the

division of profits from the Vernon Project.

[14] In these Reasons, I will begin by describing the procedural background. It

illustrates some of the origins of deeply entrenched positions and the antagonism

that has fueled this litigation since 2013. In addition, as a result of pre-trial rulings,

some matters are res judicata. I will next describe the factual background, which

begins in 2008. I will then discuss the pleadings on which these claims went to trial,

and the problems created by how the claims and defences were pleaded. Next, I

will comment on the witnesses, as credibility is a significant issue in relation to Mr.

Gauthier, Mr. Zavier and Mr. Lanz in particular. Finally, I will turn to my discussion

and analysis, first of the claims made by SWS, and then those in the Counterclaim.

2.

Procedural background

(a)

November 2013: the action is filed and the then-plaintiffs apply for

declaratory relief and an injunction before Sewell J.

[15] This action was filed on November 6, 2013. The named plaintiffs were SWS,

Mr. Gauthier, William Gauthier and Marlene Gauthier. William and Marlene Gauthier

are Mr. Gauthier’s parents, and they are the owners of two units in the Vernon

Project.

[16] On November 28, 2013, an application made by the then-plaintiffs came on

for hearing before Sewell J. As of the hearing date, responses to the notice of civil

claim had not yet been served, and some defendants had not yet been served with

the notice of civil claim.

[17] In unpublished oral Reasons for Judgment issued on November 28, 2013,

Sewell J. described the application in this way:

[1]

THE COURT: This is an application brought by the plaintiffs SWS

Marketing Inc. and Rene Gauthier, William Gauthier and Marlene Gauthier for

a number of heads of relief. The relief sought by the plaintiffs can be broken

down into two categories. The first relates to declaratory judgments on the

SWS Marketing Inc. v. Zavier

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merits of this litigation. The second relates to the seeking of injunctive relief

against the defendants.

[2]

This dispute related to a joint venture agreement made with respect to

a 14-unit strata titled building located in Vernon, British Columbia. The only

plaintiff that seems to have a direct interest in this litigation is the plaintiff

SWS Marketing Inc. The other plaintiffs are principals of SWS. The main

issue in this litigation is between SWS Marketing and the defendants and

arises out of the joint venture agreements.

[18] Because defendants had not yet been served, Sewell J. was unable to deal

with the plaintiffs’ requests for either declaratory relief or final judgment. However,

Sewell J. addressed the plaintiffs’ request for injunctive relief.

[19] In the result, Sewell J. dismissed the application for injunctive relief,

explaining in part:

[27]

Turning to the balance of convenience, it seems to me that the

balance of convenience in this case favours the defendants. I appreciate that

Mr. Gauthier has said that the defendants put very little money down on the

acquisition of their units. That is so. However, it is quite clear that the

individual defendants did take out substantial mortgage debt and did assume

personal liability with respect to the payment of those mortgages. Their

interest in preserving their equity in this venture to repay those mortgages, is

in my view a greater interest than SWS has in continuing to be a part of the

joint venture.

[28]

I am also mindful of the fact that there has been a complete

breakdown in the relationship between the members of this joint venture, and

it would be in my view impractical if not impossible for the joint venture to

continue on any sort of realistic business-like basis given that breakdown.

[20] A request by counsel representing Mr. Zavier and the Strata Corporation for

an order for special costs payable forthwith was refused.

(b)

Amendments to the notice of civil claim

[21] Thereafter, the parties were before the court frequently. The notice of civil

claim was amended in May 2015, November 2015 and October 2017. The

existence of a Joint Venture Agreement between SWS and Mr. Zavier was

mentioned for the first time when the notice of civil claim was amended in November

2015. However, in that version, no relief was sought against Mr. Zavier based on

the Joint Venture Agreement. It was not until the third amended notice of civil claim

SWS Marketing Inc. v. Zavier

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was filed in February 2018, that SWS finally made a full claim against Mr. Zavier,

relying on a Joint Venture Agreement alleged to have been made with him.

(c)

The January 2021 hearing before Branch J. and the February 8 Order

[22] On January 20 to 22, 2021, cross-applications came on for hearing before

Branch J. For the most part, the applications involved the affairs of the Strata

Corporation. Justice Branch’s oral Reasons for Judgment delivered February 8,

2021 are indexed as SWS Marketing Inc. v. Zavier, 2021 BCSC 312 (the “Branch

Reasons”).

[23] The Branch Reasons began in this way (note omitted):

[1]

“It was the best of times, it was the worst of times, it was the age of

wisdom, it was the age of foolishness…” This is a Tale of Two Councils. For

seven years, this strata has had two groups, each purporting to operate as

the properly constituted strata council, each incurring and paying expenses,

each imposing and collecting strata fees. Finally, these duelling councils

come before this court to bring back “liberty, equality and fraternity” to this

troubled strata.

[2]

There are, not surprisingly, cross-applications. The named defendant

Strata Corporation operates pursuant to control by what I will refer to as the

“Zavier Council”. The defendant Strata Corporation’s application sought the

following relief:

a)

A declaration that the plaintiffs, Rene Gauthier and Walter

Gauthier, are not council members of the Strata Corporation;

b)

An order that Rene Gauthier cease and desist from

representing himself to be the council president until further

order of this Honourable Court or unless duly elected by the

owners within the Strata Corporation and pursuant to the

Strata Property Act;

c)

d)

An order that the plaintiffs’ former counsel, Christ & Co., return

the amount of $47,659.92 or such other amount that they hold

in trust to the TD Bank Group; and

Special costs

[3]

The plaintiffs, who control what I refer to as the “Gauthier Council”,

sought the following orders:

a) The Emergency Annual General Meeting held on 24

September 2013 (the (“EAGM”, which purported to create the

first Zavier Council) be declared void ab initio;

SWS Marketing Inc. v. Zavier

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b)

c)

A declaration that all Strata Meetings arranged and/or held by

the defendants subsequent to September 24, 2013 are invalid

and void; and

Special costs against the contesting defendants.

[24] Branch J. set out some of the background to the disputes, beginning at

para. 6 of the Branch Reasons. He described various steps taken by the duelling

strata councils. Branch J. found (and I agree) that, by April 2014, “the break

between the plaintiff and defendant groups was complete. The plaintiffs and

defendants then purported to carry out separate streams of meetings from that date

up until today” (para. 19). The Defendant-owners, who were in the majority,

supported the Zavier Council. The Gauthier Council was supported by only three

units (and later a fourth).

[25] Beginning at para. 29, Branch J. observed that “there is no shortage of

procedural concerns” relating to how the Strata Corporation had been managed,

both before and after the creation of the “duelling councils,” and he listed 23 of them.

Among other things, both councils imposed strata fees on all units. The Defendants

paid their strata fees as directed by the Zavier Council. The other units paid their

fees as directed by the Gauthier Council. Each council claimed arrears were owing

by the units not paying them fees.

[26] At para. 35, Branch J. identified and declared the members of the strata

council. They were: Mr. Gauthier, William Gauthier and Sacha Elez. He explained

his reasons for drawing that conclusion [the “Original Council” from August 2011

included Mr. Gauthier]:

a)

The Original Council was properly elected. The fact that Rene

Gauthier was elected as a council member at that time, although he was not

an owner, is not fatal to the constitution of that council. Based on the

evidence before me, no party objected to his participation in this role until

2019, at which point his status was promptly addressed through SWS’s

purchase of a unit.

b)

The Zavier Council’s 2013 EAGM and 2014 AGM were not properly

called due to clear notice failings. Further, neither was called pursuant to

s.43 of the SPA, the only proper means for owners to demand a meeting.

Although Lanz and Zavier were on the Original Council, and did participate in

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Page 11

calling these meetings, there is insufficient evidence that 20% of owners

made a formal request to them for a meeting under s.43. There is no

evidence of a request by the necessary number of owners to the properly

elected Original Council, or a subsequent refusal by the Original Council to

respond to this demand. Hence, I find that there was no proper council

election at those two Zavier Council meetings. The failure to provide proper

notice itself is fatal to the validity of these meetings given the importance of

notice to the proper democratic functioning of a strata corporation: [citations

omitted]. The notice problems outlined above were so sufficiently clear,

egregious, and unnecessary that I conclude that s.47’s curative provision is

unavailable to the defendants: [citation omitted].

c)

In relation to the subsequent Zavier Council meetings, they are all

tainted with this “original sin” arising from their failure to be properly elected in

2013 or 2014. All of their later meetings purported to be called by the

improperly constituted Zavier Council. It may have been possible for the

defendants to collectively have demanded and called a meeting pursuant to

s.43, but none of the Zavier Council meetings were called pursuant to the

authority of this section after a demand to the proper council. Given the lack

of authority of the Zavier Council, the Zavier Council was not in a position to

call further meetings on its own initiative.

d)

In terms of the Gauthier Council, I accept that the defendants Zavier

and Lanz lost their status on the Original Council in 2013 and 2014 through

their failure to participate in meetings called by Rene Gauthier. They were

replaced by William Gauthier and Jorg Thielk. This became the properly

constituted Gauthier Council in charge of calling further meetings: SPA,

ss.26, 40.

e)

Although there were certain “glitches” in the conduct of the Gauthier

Council meetings organized thereafter, there can be little dispute as to the

validity of, at a minimum, the December 31, 2019 Gauthier Council AGM at

which William Gauthier, Rene Gauthier and Sacha Elez were elected . The

meeting minutes acknowledged, and on their face respected, the need to wait

30 minutes before freshly determining quorum from the members present.

By this time, SWS had purchased a unit, giving Rene Gauthier the status to

be nominated to Council. Even if there was a problem with the budget

presentation, that would not invalidate the election of the Gauthier Council. A

full complement of three council members was elected. This was the

Gauthier Council’s last properly constituted group, and indeed is the most

recent council properly elected by either group. As such, I find that they are

entitled to serve in that role pending a new strata meeting.

[27] I consider all of these matters res judicata.

[28] In these Reasons, I will continue to refer to a strata council of which Mr.

Gauthier is a member as a “Gauthier Council.” However, since February 2021, a

“Gauthier Council” and the Strata Corporation’s strata council are one and the same.

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[29] At para. 43 of the Branch Reasons, Branch J. set out the orders he concluded

were “necessary to put this strata back on a solid legal footing.” The formal entered

order (the “February 8 Order”) consequent on Justice Branch’s rulings contained

these terms:

THIS COURT ORDERS that:

1.

2.

3.

The court declares that the present strata council members are Rene

Gauthier, William Gauthier and Sacha Elez.

The court orders that the present council will call an SGM to be held

within the next 30 days in which a new strata council will be elected.

The new council will prepare a consolidated set of financial

statements for the year ended December 31, 2020 and the 2 months

January 1, 2021 to February 28, 2021 defined as the consolidated

financial statements that incorporate and combine all transactions on

behalf of the strata corporation by the defendants, plaintiffs, the Zavier

council, or the Gauthier council since January 1, 2013.

4.

To assist in the preparation of the consolidated financial statements

by a date designated by the new council, the defendants, and the

plaintiffs will submit to the new council all strata related accounting

information, including but not limited to general ledgers, cheques,

bank statements, invoices, receipts or other proof of payment of any

strata corporation expenses and financial statements from January 1,

2013 to February 28, 2021.

5.

6.

The new council will call an AGM to be held on or before June 1, 2021

or such later date agreed to by the parties or directed by the court at

which time the new council’s proposed treatment of the defined

transactions will be presented.

If any plaintiff or defendant objects to the new council’s proposed

treatment of the transactions a hearing will be arranged by the new

council with Justice Branch at the court’s earliest availability to

determine the proper treatment of the transactions. The new council

shall make this application for a hearing within 5 days of the receiving

notice of the dispute from any party.

(d)

The appeal of the February 8 Order

[30] The then-plaintiffs (SWS, Mr. Gauthier, William and Marlene Gauthier and

Jorg Thielk) appealed certain aspects of the February 8 Order (the “Appeal”). The

Appeal came on for hearing on May 6, 2021, after the special general meeting

mentioned in para. 2 of the February 8 Order had been held (I will return to this

meeting, held on March 12, 2021, later in these Reasons).

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[31] In the result, the Appeal was allowed in part, with Reasons indexed as SWS

Marketing Inc. v. Zavier, 2021 BCCA 201 and dated May 13, 2021 (the “Appeal

Reasons”). Saunders J.A. (for the court) said (at para. 24):

[24]

As I will explain, I consider that s. 165, relied on by the judge to base

the order for a special general meeting, was not available to him and so the

orders dependent on s. 165 must be set aside. Another provision, s. 164,

was advanced at the hearing to ground a remedy but the necessary findings

of fact to engage that section have not been made—attention having landed

instead on s. 165. . . .

[32] Saunders J.A. rejected the appellants’ argument that Branch J. was in error in

refusing to declare all of the Zavier Council’s past actions void. She said in part

(beginning at para. 32):

[32]

The judge had the difficult task, in the short run, of finding a pathway

to coherent governance of this strata corporation, within legal boundaries,

while protecting financial accountability for actions taken in the irregular

years. In my view, the judge made no reversible error in his appreciation of

the governance issues before him; there is no basis to interfere with his

conclusion that the case did not require express answers at this stage to the

parties’ myriad, dated, complaints against each other. The strata governance

case was always bound to sort itself into the questions of who is properly on

the council, and who owes who for what. In any case, the judge did not

dismiss the claims for relief for non-accounting related past actions of the

Zavier Council; it is still open to the appellants to advance an issue that

requires a remedy beyond the moral vindication a declaration may bring.

Likewise, the order does not erect barriers to inter-party remedies in the

litigation still outstanding.

[33]

As to the accounting issues, it seems to me that all the financial

information relating to the strata corporation should be in the possession of

the recognized strata council and if this does not occur, the appellants of

course may ask for court assistance even without the sweeping declaration of

invalidity they seek. In any case, I see no reason why financial statements

cannot be prepared on the best information available to the council, with

appropriate reservations noted.

[34]

In these circumstances, it was entirely appropriate, in my view, for the

judge to consider, in addition to judicial economy, the possibilities of

unintended consequences from a wholesale order nullifying all actions taken

by the Zavier Council. Such an order risks being arbitrary, is contrary to

modern practice in the case of illegal contracts, and would be made in the

dark as to its effects upon both other vested interests and the strata

corporation itself.

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[33] The Court of Appeal ordered that paras. 2 through 6 of the February 8 Order

be set aside, and that:

the applications are remitted to the Supreme Court to determine the

applicability of section 164 of the Strata Property Act, S.B.C. 1998, c. 43 and

such further aspects of those applications to which the judge may engage or

other matters properly presented by the parties.

(e)

Hearings in May and June 2021 before Lamb J. and Branch J.

[34] On May 17, 2021, the parties appeared before Lamb J. on an application by

the Defendants to dismiss on a summary trial SWS’s claim for judgment against

them for $323,000. This was the amount of the down payments that, at the time,

SWS asserted it “secured” under the Joint Venture Agreements. In response, SWS

sought declarations that the Joint Venture Agreements were valid and not breached

prior to September 2013. Judgment was reserved at the conclusion of the hearing.

[35] On May 25, 2021, the parties again appeared before Justice Branch, on an

application by the Defendants to have the then-plaintiffs found in contempt of court

on the grounds that the plaintiffs had refused to allow the Defendants to vote at the

March 12 meeting, held pursuant to the February 8 Order. The application was

dismissed, with costs in the cause. Among other things, Branch J. noted that the

provision in the February 8 Order requiring the calling and holding of a special

general meeting had been struck down by the Court of Appeal.

[36] On June 11, 2021, the parties and counsel were again before Branch J. At

that time, Justice Branch pronounced an order (the “June 11 Order”), one of the

terms of which concerned the production by the Defendants of certain accounting

information related to the affairs of the Strata Corporation. The information included

a list of strata fees receivable by owner as of December 2013 through to February

28, 2021, together with proof of payments.

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(f)

September 2021: the Defendants file a petition under the Strata

Property Act; rulings from Lamb J. and Branch J.

[37] On September 10, 2021, a petition (now the Counterclaim) was filed under

Action S218058. The respondents named were the Strata Corporation and SWS.

Relief was sought under sections 164 and 165 of the Strata Property Act. Mr. Lanz

was named as a petitioner, in addition to the Defendants. However, Mr. Lanz never

owned a unit in the Vernon Project and was never a proper party to this proceeding.

[38] On September 16, 2021, Lamb J. published her Reasons for Judgment,

indexed as SWS Marketing Inc. v. Zavier, 2021 BCSC 1813, on the application

heard on May 17, 2021. At paras. 17-22, Lamb J. described some of the procedural

background, in particular, the evolution of the pleadings.

[39] In the result, Lamb J. dismissed the application. She concluded that she was

unable to find the facts necessary to resolve the isolated issue identified in the

Defendants’ application, and she was not satisfied that a decision on this one issue

would conclude the non-strata council issues between the parties. Justice Lamb

concluded that, for the same reason, it would not be appropriate to grant the

declarations sought by SWS.

[40] Also on September 16, 2021, Branch J. gave oral reasons, indexed at 2021

BCSC 1950, on an application brought by the then-plaintiffs to have the Defendants

found in contempt of court. The then-plaintiffs asserted that, among other things, the

Defendants had failed to comply with the terms of the June 11 Order requiring

production of accounting information relating to the affairs of the Strata Corporation.

Branch J. said, at paras. 5-6:

[5]

In relation to the relevant aspects of paragraph 1 of the Accounting

Information Order, the defendants say that they generally satisfied this term

through the provision of an electronic Dropbox stuffed full with the required

documentation. In relation to other requests, the defendants say that there

was simply no further documentation in their possession. The plaintiffs say

that there is more that could have been produced.

[6]

Neither party provided sufficient information about the actual content

of the Dropbox so that I could properly assess who is correct. I find that there

SWS Marketing Inc. v. Zavier

Page 16

is insufficient evidentiary basis to establish an intentional breach of the

Accounting Information Order beyond a reasonable doubt, such as is

necessary to support a contempt order. Even if a breach were established, I

would exercise my discretion not to issue an order for contempt on these

grounds, given the apparent good faith effort to satisfy its terms. The mere

fact that the plaintiffs "had the last word" in relation to particularizing their

complaints about the defendants' production in a letter dated June 15, 2021,

does not mean that the order was necessarily breached. The ping-pong of

correspondence between counsel had to end at some point. Eventually the

dispute had to come to the court for resolution.

[41] On the other hand, Branch J. found that Mr. Zavier was in contempt of two

other terms of the June 11 Order, one requiring delivery of an affidavit confirming

certain aspects of the document production, and another requiring that a letter be

sent to branches of TD Canada Trust (“TD Bank”) containing specific language,

including specific identification by name of the members of the strata council. With

respect to the letter, Justice Branch found that the letter sent by Mr. Zavier included

additional language that was not permitted and that undermined the purpose of the

order: see Reasons, paras. 13-15.

(g)

November 2021: the notice of civil claim is again amended and

proceedings are consolidated

[42] An order granting leave to amend the notice of civil claim to the form of the

Fourth Amended Notice of Civil Claim (the “NCC”) was made on November 24,

2021. It was only at this point that William Gauthier, Marlene Gauthier and Jorg

Thielk were removed as plaintiffs. However, Mr. Gauthier continued to be named

personally as a plaintiff, along with SWS. The NCC was filed December 7, 2021.

[43] Also on November 24, 2021, an order consolidating this action with the

petition filed by the Defendants (the “Consolidation Order”) was made on the

application of the Defendants under Rule 22-5(8). However, unlike an order that

proceedings be tried at the same time (where each proceeding continues to exist as

a separate proceeding), an order consolidating proceedings results in a single

proceeding going forward. The Consolidation Order did not address the

consequences of the two proceedings being consolidated into one. As a result, a

further order was pronounced on February 18, 2022 (after the trial started) whereby:

SWS Marketing Inc. v. Zavier

Page 17

the two proceedings were consolidated under Action No. S138229; the petition filed

in S218058 was ordered to stand as a counterclaim; and the responses to petition

filed by SWS and the Strata Corporation were ordered to stand as defences to the

counterclaim.

[44] The trial began on February 14, 2022 and was originally scheduled for 24

days. To the credit of counsel and the parties, the trial was completed in 18 days.

3.

Factual background

(a)

2008: Mr. Gauthier, Mr. Zavier and Mr. Lanz meet; SWS is formed

[45] Mr. Gauthier met Mr. Zavier and Mr. Lanz in 2008. Mr. Gauthier is somewhat

older than Mr. Zavier and Mr. Lanz, and, at trial, Mr. Zavier frequently described Mr.

Gauthier, during the period in which they were working together, as his “mentor.”

The three met when Mr. Zavier and Mr. Lanz attended a game – “Cash Flow” – that

Mr. Gauthier was running and hosting. Mr. Gauthier described Cash Flow as a

game he used to teach people how to invest, and as like “Monopoly on steroids.”

[46] As of 2008, Mr. Gauthier had a background and experience in real estate

investment. He explained that he had done multiple courses in real estate

investment (including as an instructor) and participated in deals. He also had a

background in marketing and computers. He had begun, but not completed, a

Master’s degree in Business Administration.

[47] After graduating from high school, Mr. Zavier briefly attended Douglas

College. According to Mr. Zavier, he started Four Elements in 2007 and was the

sole shareholder. Mr. Zavier explained that in 2007, Four Elements purchased a

marketing licence, which allowed him to take on clients (or “students”) and advise

them on marketing plans. According to Mr. Zavier, prior to the Vernon Project, he

had done some real estate investments through Four Elements.

[48] According to Mr. Lanz, he met Mr. Zavier in around 2006 or 2007 through a

friend. Mr. Lanz explained that he took one of Mr. Zavier’s classes and they became

SWS Marketing Inc. v. Zavier

Page 18

friends. Mr. Lanz explained that he was in the process of leaving his current

employment to go into marketing, and suggested to Mr. Zavier that they work

together. Mr. Zavier took him up on the suggestion, and, as of trial, they remain

friends. As Mr. Lanz recalled, around 2008, one of his and Mr. Zavier’s clients

mentioned the “Cash Flow” game, and that was how they met Mr. Gauthier.

According to Mr. Lanz, at that point, he became interested in real estate investment.

[49] Mr. Gauthier, Mr. Zavier and Mr. Lanz then decided to work together on real

estate investment opportunities. SWS was incorporated in October 2008.

Practically speaking, Mr. Gauthier, Mr. Zavier and Mr. Lanz held all of the common

shares. However, Mr. Gauthier held more than 50% of the shares, and thus

controlled SWS. All three were appointed the directors of SWS. However, Mr. Lanz

ceased to be a director in December 2009. Mr. Gauthier and Mr. Zavier then

continued as the only directors of SWS. There is some dispute about when Mr.

Zavier ceased to be a director. Mr. Gauthier says Mr. Zavier ceased to be a director

of SWS in March 2011. Mr. Zavier says it was not until February 2013 that he

delivered his resignation as a director, and that Mr. Gauthier asked him to “back-

date” his resignation to March 2011.

[50] Prior to the Vernon Project, SWS had been involved in three residential real

estate development projects in the Lower Mainland. As a result, Mr. Gauthier, Mr.

Zavier and Mr. Lanz had some history of working together through SWS. According

to Mr. Gauthier, on these three projects, SWS worked with the developer to add

value to an original development and then marketed the individual homes to end-

purchasers to generate a profit for SWS. Mr. Gauthier explained that the profit-

sharing among him, Mr. Zavier and Mr. Lanz varied from project to project, and it

was not based on shareholdings in SWS. On two of the projects (“Clayton Heights”

and “72nd Avenue”), the profits were split one-third each. On the third project

(“Cressy”), the profits were allocated 25% to Mr. Lanz, and the balance divided

equally between Mr. Gauthier and Mr. Zavier.

SWS Marketing Inc. v. Zavier

(b) The Vernon Project is identified

Page 19

[51] Sometime in 2010, Mr. Lanz (without the involvement of Mr. Gauthier, Mr.

Zavier or SWS) identified the Vernon Project as a possible real estate investment

opportunity. Mr. Lanz explained that he was very good at finding deals, and that

was his area of expertise. Among the features that attracted him to the Vernon

Project were that it was being run as rental accommodation, but the buildings were

strata-titled. The whole project was being offered for sale for about $116,000 per

unit. Mr. Lanz explained that he had the Vernon Project appraised, and the

appraisal came back at about $145,000 per unit, so, in Mr. Lanz’s view, it was a

good deal.

[52] According to Mr. Lanz, he then entered into an agreement of purchase and

sale with the then-owners (two couples, the Gills and the Khuranas) to purchase the

Vernon Project. As Mr. Lanz recalled he was thinking of selling individual units as

“skip transfers,” which he had been taught how to do, and make a profit in that way.

[53] In a skip transfer, a multi-unit development or project (such as the Vernon

Project) would be purchased from the owner by a company such as Four Elements.

Before completion of that transaction, the purchaser would sell the units to end-

purchasers (often at a mark-up). In some cases, the sales to end-purchasers were

necessary to provide the financing required for the original transaction to be

completed. Then, on the completion date, title would be transferred from the owner

directly to the end-purchasers, “skipping” the entity in the middle (Four Elements, for

example). With skip transfers, property purchase tax would only be paid once,

instead of twice, and the middle entity could make a profit on the sales to the end-

purchasers.

[54] However, Mr. Lanz’s agreement did not go forward. In late August 2010, the

parties signed a release agreement, declaring the agreement of purchase and sale

null and void.

SWS Marketing Inc. v. Zavier

Page 20

[55] According to Mr. Zavier, Mr. Lanz then contacted him concerning the Vernon

Project. Mr. Zavier explained that he saw it as a good investment opportunity.

[56] In late August 2010, Four Elements as buyer entered into a written agreement

of purchase and sale with the owners of the Vernon Project (the “August

Agreement”). The purchase price was $1,600,000. This represented an average

price of about $114,285 for each of the 14 units. The August Agreement provided

further:

●

although the purchase price was $1,600,000, the sellers agreed to

provide the purchaser (Four Elements) with an abatement of $100,000

to pay for repairs and marketing of the Vernon Project to sell individual

units. An addendum increased the amount of the abatement by

another $20,000;

●

the sellers acknowledged that Four Elements could sell its rights to

take title to the Vernon Project or a unit or units to an end-purchaser,

and the sellers acknowledged that they would transfer title directly to

an end-purchaser, as directed by Four Elements. This allowed Four

Elements to do skip transfers.

[57] Completion of that transaction, in the result, did not occur until March 2011.

[58] Mr. Zavier explained that after Four Elements signed the August Agreement,

he got Mr. Gauthier involved. He explained that he did so because of Mr. Gauthier’s

experience dealing with financial, strata and legal matters. According to Mr. Lanz,

he reluctantly agreed to have Mr. Gauthier involved.

[59] Mr. Gauthier’s evidence about how and when he became involved with the

Vernon Project was not always consistent. At one point, he said that he was

approached in late July 2010 by Mr. Zavier, and he, Mr. Zavier and Mr. Lanz

discussed SWS’s participation at what Mr. Gauthier said was an SWS directors’

meeting. Mr. Gauthier claims that he made notes of this meeting, and the notes

were marked as Exhibit 8. Both Mr. Zavier and Mr. Lanz denied that any such

SWS Marketing Inc. v. Zavier

Page 21

meeting occurred. At another point, Mr. Gauthier agreed that he and SWS became

involved in the Vernon Project around September 2010. I find the latter is the more

likely.

(c)

Marketing and sale of units in the Vernon Project

[60] The marketing of individual units in the Vernon Project was to be done

through SWS. The purchase price for the units would be marked-up from the

average price per unit under the August Agreement, so that Four Elements would

earn a considerable paper profit as a result of the difference between the price at

which it was buying the units and the price at which it was selling the units to end-

purchasers. Provided individual purchasers were found, Four Elements could then

close on the August Agreement by means of skip transfers. The individual

purchasers would essentially provide the financing and the cash proceeds Four

Elements required to complete the main transaction. According to Mr. Zavier, Four

Elements on its own did not have the financial capability to close on the August

Agreement unless it found individual end-purchasers for the units. Mr. Zavier

explained that, if Four Elements had been unable to find end-purchasers for the

individual units, it would have had to abandon the transaction.

[61] The plan was that each of the 14 units in the Vernon Project would be

marketed by SWS to individuals on the basis that the unit would be rented, and the

owner would enjoy the benefits of a real estate investment that was essentially self-

financing and was fully managed by SWS. The only contribution required from an

individual owner was a small deposit or down payment, and a mortgage sufficient to

provide proceeds to pay the balance of the purchase price. SWS would provide the

rest of the down payment (either $29,000 or $31,000, depending on the total

purchase price of a unit). The mortgage debt and expenses of owning a unit would

be covered and serviced by the rental income. A unit on the ground floor would be

offered for sale at $145,000, and a unit on the second floor would be offered for sale

at $155,000.

SWS Marketing Inc. v. Zavier

Page 22

[62] Mr. Zavier, Mr. Lanz and Mr. Gauthier were all involved in approaching

potential buyers for units. None of the eventual purchasers lived in the Vernon area.

The contact person for the Defendant-owners excluding Joseph Lanz was Mr.

Zavier. Mr. Zavier was also the contact person for Sacha Elez. Mr. Lanz was the

contact person for Joseph Lanz (Mr. Lanz’s father). None of these individuals dealt

with Mr. Gauthier. Most had participated in the real estate investment seminars Mr.

Zavier offered.

[63] One of the Defendant-owners, Mr. Soto, described his dealings with Mr.

Zavier concerning investment in the Vernon Project. Mr. Soto explained that, at the

time, he was in his mid-20s and working in the oil and gas industry in Alberta. He

explained that Mr. Zavier had already coached him quite a bit on real estate. Mr.

Soto explained that the low down payment was an attractive feature of the

investment, and he would not have purchased the unit if he had been required to

fund a $29,000 down payment on his own. The fact that others (namely, SWS) were

going to take care of management of the unit was also a positive feature.

[64] Mr. Soto, like the other Defendant-owners (excluding Mr. Lemon), arranged

for a mortgage through TD Bank to finance the balance of the purchase price. Mr.

Gauthier had identified a mortgage-broker there to assist, and made the

introductions.

[65] Mr. Elez also described how he came to purchase a unit in the Vernon

Project. As of trial, Mr. Elez was running a craft liquor distribution business in

Saskatchewan. Before that, he had been a member of the Canadian Armed Forces.

Mr. Elez explained that he had purchased his first house in Trenton, Ontario when

he was 20, and became interested in investing in real estate. He saw it as

something he could do alongside his career as a pilot.

[66] Mr. Elez explained that he was part of an investor group and mentorship

program, and the opportunity to invest in the Vernon Project was presented by Mr.

Zavier at one of the group meetings. As Mr. Elez recalled, it was presented as a

“hands-off” deal, and that the property would be managed by SWS. Mr. Elez

SWS Marketing Inc. v. Zavier

Page 23

explained that, at the time, he was a pilot awaiting training and he did not want to

burden himself with an investment. The Vernon Project was presented as one

having positive cash flow, and not requiring much cash up front. Mr. Elez explained

that he just needed to provide $2,500 and obtain a mortgage. He explained that

management of the unit by someone else (namely, SWS) was a major selling

feature. The down payment of $31,000, which SWS was providing, was needed to

qualify for a mortgage. Mr. Elez explained that he would not have made the

investment if he had been required to make the $31,000 down payment on his own.

He explained that the amount represented his salary for a year, and having to come

up with it would have limited the number of deals he could do.

[67] As Mr. Elez recalled, Mr. Zavier was his main contact, and Mr. Gauthier was

not involved.

[68] Each of the Defendant-owners entered into a contract of purchase and sale

with Four Elements (the “Purchase Contract”). The basic details are as follows:

Defendant-Owner

Date of Offer

14 Dec. 2010

Purchase Price;

deposit

Comments

Randall Rogiani

(unit 101)

$155,000; $100 on Deposit of $2,275

execution and to be delivered to

$2,275 on removal Four Elements

of conditions

Randall Rogiani

(unit 102)

14 Dec. 2010

same as unit 101

Randall Rogiani

(unit 106)

same as unit 101

Eduardo Soto (unit 14 Dec. 2010

104)

$145,000; $100 on Deposit of $2,275

execution and to be delivered to

$2,275 on removal SWS

of conditions

Gary Mythen (unit

105)

10 Jan. 2011

$145,000; $100 on Deposit of $29,000

execution; $29,000 to be delivered to

on removal of

conditions

SWS

SWS Marketing Inc. v. Zavier

Page 24

Defendant-Owner

Date of Offer

Purchase Price;

deposit

Comments

Burt Petersen (unit 4 Jan. 2011

205)

$155,000; $100 on Deposit of $2,275

execution; $2,275

on removal of

conditions

to be delivered to

SWS

Fan Jin (unit 107)

9 Jan. 2011

21 Jan. 2011

4 Dec. 2010

$145,000; $100 on Deposit of $2,275

execution; $2,275

on removal of

conditions

to be delivered to

SWS

Gordon Lemon

(unit 206)

$155,000; $100 on Deposit of $2,275

execution; $2,275

on removal of

conditions

to be delivered to

Four Elements

Joseph Lanz (unit

204)

$155,000; $100 on Deposit of $2,275

execution; $2,275

on removal of

conditions

to be delivered to

Four Elements

[69] Mr. Zavier also entered into a Purchase Contract, for unit 108. The offer is

stated to be accepted March 12, 2011. The purchase price was $145,000. A

deposit of $2.00 was payable on execution. A further deposit of $2,500 was

required to be delivered to Four Elements on removal of conditions.

[70] Mr. Elez entered into a Purchase Contract for unit 201. The offer is dated

December 14, 2010 and was signed as accepted by Mr. Zavier on behalf of Four

Elements. The purchase price was $155,000. A deposit of $100 was payable on

execution. A further deposit of $2,275 was required to be delivered to SWS on

removal of conditions.

(d)

The Joint Venture Agreements

[71] As part of the transaction, each of the Defendant-owners also signed a Joint

Venture Agreement. At trial, an admission was made that Mr. Zavier signed all of

these Joint Venture Agreements on behalf of SWS.

[72] I conclude that the Joint Venture Agreements were signed by the Defendant-

owners and Mr. Elez at the same time as the Purchase Contracts. The concept of

SWS Marketing Inc. v. Zavier

Page 25

the small down payment required for the investment is not reflected at all in the

Purchase Contracts. Rather, it is only clear through the terms of the Joint Venture

Agreements. Thus, the transaction being described during the marketing of units is

reflected in two documents signed by the Defendant-owners: the Purchase Contract

and the Joint Venture Agreement.

[73] The Joint Venture Agreements in evidence have typed portions and

handwritten additions. The typed portions are, for the most part, identical in all

material respects. The handwritten additions are not identical, but the differences, in

terms of the substantive issues in this case, are not material. With two exceptions

(Mr. Mythen and Mr. Lemon), the profit share and allocation between the owner and

SWS was 50% each.

[74] The Joint Venture Agreement for Mr. Soto shows the material terms, and

provides (in relevant part) as follows [all sic; underlining shows handwritten

additions]:

THIS JOINT VENTURE AGREEMENT (“Agreement”), made and entered into

as of this 18th day of January 2011 by and between Eduardo Soto (referred

to as the “JV”) of Vancouver BC and SWS Marketing Inc. of Surrey, BC.

ARTICLE I GENERAL PROVISIONS

1.01 Business Purpose. The business of the Joint Venture shall be as

follows:

Own and rent [unit number in Vernon Project], Vernon, BC until such

time as SWS Marketing Inc. refinances using commercial funding to buy out

the JV or SWS Marketing, Inc. and the JV jointly decide to sell the property.

1.02 Term of the Agreement. This Joint Venture shall commence on the

date first above written and shall continue in existence until the properties

have been refinanced and/or sold.

. . .

ARTICLE III OBLIGATIONS OF THE JOINT VENTURERS

SWS Marketing Inc. is responsible for all marketing and putting securing

$29000 down payment towards the purchase price. SWS Marketing, Inc. is

also responsible for completing the renovations that have been started, on

going maintenance (fees for this purpose are deducted from the rents prior to

division of profits,) and managing the property.

SWS Marketing Inc. v. Zavier

Page 26

Eduardo Soto is responsible for contributing $2,275.00 as part of the down

payment towards the purchase price and securing financing on the balance of

the purchase price.

ARTICLE IV ALLOCATIONS

4.01 Profits and Losses. Commencing on the date hereof and ending on the

termination of the business of the Joint Venture, all profits, losses and other

allocations to the Joint Venture shall be allocated as follows at the conclusion

of each fiscal month: 50% SWS Marketing Inc. 50% JV.

ARTICLE V RIGHTS AND DUTIES OF THE JOINT VENTURERS

1.

5.01 Business of the Joint Venture. SWS Marketing shall have full,

exclusive and complete authority and discretion in the management

and control of the business of the Joint Venture for the purposes

herein stated and shall make all decisions affecting the business of

the Joint Venture. A[s] such, any action taken shall constitute the act

of, and serve to bind, the Joint Venture. SWS Marketing, Inc. shall

manage and control the affairs of the Joint Venture to the best of its

ability and shall use its best efforts to carry out the business of the

Joint Venture. JV shall not participate in or have any control over the

Joint Venture business nor shall It have any authority or right to act for

or bind the Joint Venture.

. . .

. . . ARTICLE VII PAYMENT OF EXPENSES All expenses of the Joint

Venture shall be paid by either party of the joint venture and shall be

reimbursed by the Joint Venture from the monthly rents.

ARTICLE VIII INDEMNIFICATION OF THE JOINT VENTURERS

The parties to this Agreement shall have no liability to the other for any loss

suffered which arises out of any action or inaction if, in good faith, it is

determined that such course of conduct was in the best interests of the Joint

Venture and such course of conduct did not constitute negligence or

misconduct. The parties to this Agreement shall each be indemnified by the

other against losses, judgments, liabilities, expenses and amounts paid in

settlement of any claims sustained by it in connection with the Joint Venture.

ARTICLE IX DISSOUTION

9.01 Events of the Joint Venturers. The Joint Venture shall be dissolved

upon the happening of any of the following events:

(a) The adjudication of bankruptcy, filing of a petition pursuant to a Chapter

of the Federal Bankruptcy Act, withdrawal, removal or insolvency of either of

the parties.

(b) The sale or other disposition, not including an exchange of all, or

substantially all, of the Joint Venture assets.

(C) Mutual agreement of the parties.

ARTICLE X MISCELLANEOUS PROVISIONS

10.01 Books and Records. The Joint Venture shall keep adequate books

and records at its place of business (as determined by SWS Marketing. Inc.,)

SWS Marketing Inc. v. Zavier

Page 27

setting forth a true and accurate account of all business transactions arising

out of and in connection with the conduct of the Joint Venture.

. . .

10.03 Integrated Agreement. This Agreement constitutes the entire

understanding and agreement among the parties hereto with respect to the

subject matter hereof, and there are no agreements, understandings,

restrictions or warranties among the parties other than those set forth herein

provided for.

. . .

[75] Mr. Mythen’s Joint Venture Agreement had the following written in by hand at

the end of Article IV Allocations:

SWS will pay Gary an additional 10k when this agreement ends.

[76] The Joint Venture Agreement for Mr. Lemon had a similar term added to

Article IV.

[77] Other details concerning the Defendant-owners’ Joint Venture Agreements

are as follows:

Defendant-Owner

Date stated to be

made

Amount SWS was “putting securing”

for down payment per Article III

Randall Rogiani

Gary Mythen

Burt Petersen

Fan Jin

5 January 2011

22 January 2011

4 January 2011

undated

$87,000 ($29,000 for each unit)

$29,000

$31,000

$29,000

$31,000

Gordon Lemon

Joseph Lanz

undated

4 January 2011

[78] Although Article I contemplates the joint venture continuing until SWS

“refinances using commercial funding to buy out the JV,” it is silent with respect to

the terms on which SWS’s buy-out are to be exercised. In particular, it is silent with

respect to the price SWS will be required to pay. Article I provides in the alternative

for the joint venture to continue until SWS and the owner “jointly” decide to sell the

SWS Marketing Inc. v. Zavier

Page 28

unit. This alternative is very important with respect to remedy, as I discuss later in

these Reasons.

[79] SWS says that Mr. Zavier also signed a Joint Venture Agreement. Mr.

Gauthier identified part of Exhibit 16 as a copy of the Joint Venture Agreement

signed by Mr. Zavier (in his personal capacity) and by Mr. Gauthier on behalf of

SWS. The document is dated March 8, 2011. The original was never produced. At

trial, Mr. Zavier was adamant that he never signed a Joint Venture Agreement and

went so far as to assert that Mr. Gauthier had forged his signature.

[80] The terms of this Joint Venture Agreement are the substantially the same as

those in Mr. Soto’s Agreement, with changes as necessary in details.

[81] Mr. Elez also signed a Joint Venture Agreement. The Agreement is dated

January 10, 2011, and was signed by Mr. Zavier on behalf of SWS. Again, the

terms are substantially the same as those in Mr. Soto’s Agreement, with changes as

necessary in details.

[82] No other Joint Venture Agreements were in evidence at trial. Mr. Zavier

asserted that Mr. Gauthier’s parents, William and Marlene Gauthier, who purchased

units 103 and 203 were not asked to sign any Joint Venture Agreement. Mr.

Gauthier disputed this.

[83] The purchase of units by the Defendant-owners and Mr. Elez completed on

March 18, 2011. Mr. Zavier, on behalf of Four Elements, initialled and signed the

vendor’s statement of adjustments (the “Vendor’s Statement of Adjustments”) for all

of these transactions. Under the “Debit” column, each Statement of Adjustments

contained an entry stating “To: SWS Marketing Inc. – Joint Venture Agreement.”

The amount shown was the amount of the down payment that SWS was responsible

for “putting securing,” as described in the corresponding Joint Venture Agreement.

The text above the signature line on p. 2 of each Statement of Adjustments read:

THE VENDOR, having read and reviewed the above, HEREBY APPROVES

this Statement and consents to the disbursement of funds as herein set forth.

SWS Marketing Inc. v. Zavier

Page 29

[84] At trial, when asked on cross-examination about the Vendor’s Statements of

Adjustment, Mr. Zavier asserted that he did not understand what he was signing,

and that he did not attempt to read the documents before he signed them. Rather,

according to Mr. Zavier, the documents were simply given to him and he signed. He

asserted further that, in March 2011, it was his practice not to read legal documents

before signing them. Although Four Elements had its own legal representation for

these transactions, Mr. Zavier asserted that the documents were placed before him

for signature by Mr. Gauthier, his “mentor.” When pressed further, Mr. Zavier said

that he did not really remember exactly what happened, although he knew that he

signed the documents. In any event, Mr. Zavier insisted that Four Elements never

received any of the money reflected in the “debit column” for “SWS Marketing Inc. –

Joint Venture Agreement.”

[85] Mr. Zavier does not dispute that he acquired unit 108 for a purchase price of

$145,000. The Vendor’s Statement of Adjustments for that unit shows a completion

date of March 31, 2011. It is initialled and signed by Mr. Zavier on behalf of Four

Elements. Like the other statements of adjustment, the “Debit” Column shows

$29,000 for “SWS Marketing Inc. – Joint Venture Agreement.” This corresponds to

the amount in Article III of the Joint Venture Agreement in Exhibit 16.

(e)

April 2011 to August 2013: no problems in the Vernon Project

[86] Beginning in April 2011, SWS took over full management of the units in the

Vernon Project. It collected the rents and, from that income, paid expenses,

including the Defendants’ mortgage payments. There was little evidence about

whether there were any profits (or losses) allocated and shared under Article IV of

the Joint Venture Agreements. I conclude there were none of any significance.

[87] In August 2011, Mr. Gauthier, Mr. Zavier and Mr. Lanz convened a meeting of

the Strata Corporation. Mr. Gauthier’s position was that, by virtue of the terms of the

Joint Venture Agreements, SWS controlled all of the units and therefore could vote

(to the exclusion of the owners) to elect the members of the strata council. Nothing

indicates that, at the time, anyone (including Mr. Zavier and Mr. Lanz) expressed a

SWS Marketing Inc. v. Zavier

Page 30

different view, or that any Defendant-owner either wanted or expected to be

involved. Accordingly, at the Strata Corporation meeting, Mr. Gauthier was elected

strata council president, Mr. Zavier was elected vice-president and Mr. Lanz was

elected secretary-treasurer. I will call this (as did Branch J.) the “Original Council.”

[88] As Justice Branch found, the Original Council did not follow many of the

requirements under the Strata Property Act. However, at trial, all of the

Defendants made an admission that no one had any complaint about how SWS

managed the Vernon Project up to August 31, 2013. Indeed, in his evidence, Mr.

Soto described the management of his unit prior to September 2013 as “excellent,”

and said that he was “100% satisfied.” Like Mr. Soto, Mr. Elez said that he was

“totally satisfied.”

[89] The Defendant-owners admitted that, up to August 31, 2013, SWS performed

its obligations under the Joint Venture Agreements. However, they also admitted

that, thereafter, they stopped complying with the Joint Venture Agreements.

(f)

September 2013 and thereafter: many problems in the Vernon Project

[90] In early September 2013, serious disputes between Mr. Gauthier and Mr.

Zavier boiled over. Mr. Lanz, who described his own difficulties and unhappiness

with Mr. Gauthier, took Mr. Zavier’s side. Although I heard evidence at trial from all

three men about these matters, I do not consider it necessary to describe the details

of the disputes any further. I will simply note that some have been the subject of

proceedings before the B.C. Provincial Court.

[91] At trial, Mr. Gauthier explained that, as a consequence of the disputes, he

decided to close the SWS bank account that had been used to manage the Vernon

Project, in particular, to deposit rents and to pay expenses (including owners’

mortgages) (the “Old Account”). Mr. Gauthier then opened a new SWS account (the

“New Account”) for the same purposes. He arranged to transfer all of the funds from

the Old Account (about $15,200) to the New Account. Mr. Zavier had been a

signatory on the Old Account. However, he was not a signatory on the New

SWS Marketing Inc. v. Zavier

Page 31

Account. Mr. Gauthier offered Mr. Zavier and Mr. Lanz “view-only” on-line access

for the New Account, but nothing beyond that. They rejected his offer. Mr. Lanz

took great offence at what he considered Mr. Gauthier’s unilateral actions involving

the SWS bank accounts.

[92] Branch J. aptly described what happened at this time (Branch Reasons, para.

13):

. . . It is sufficient to note that these disputes triggered the onset of hostilities

between the two sides, which dispute has now lasted longer than the French

Revolution.

[93] The Fall of 2013 also marked the beginning of the duelling strata councils:

the “Gauthier Council,” and the “Zavier Council,” of which Mr. Zavier and Mr. Lanz

were members.

[94] Mr. Zavier and Mr. Lanz had a much closer relationship with the Defendant-

owners than did Mr. Gauthier. After Mr. Gauthier closed the Old Account, Mr. Zavier

and Mr. Lanz quickly began contacting the Defendant-owners and Mr. Elez. Mr.

Zavier and Mr. Lanz told them that Mr. Gauthier had stolen money. On September

24, 2013, Mr. Zavier and Mr. Lanz convened what purported to be an “emergency”

meeting of the Strata Corporation. At this meeting, they repeated the claims that Mr.

Gauthier had stolen money.

[95] A new strata council (a Zavier Council) was elected at this meeting, which

included Mr. Zavier and Mr. Lanz. However, as found by Justice Branch, the

members of this strata council were not properly elected.

[96] At this time, the position of Mr. Zavier and Mr. Lanz was that Mr. Gauthier’s

actions resulted in termination of the Joint Venture Agreements. They

communicated that position to the Defendant-owners and Mr. Elez. The Defendant-

owners and Mr. Elez were told they were therefore no longer bound by the Joint

Venture Agreements, and they should stop having SWS collect the rents for their

units. The corollary was that, going forward, individual owners would have to make

all of their own arrangements for management of their units. This included collection

SWS Marketing Inc. v. Zavier

Page 32

of rents, finding tenants and ensuring that their monthly mortgage payments were

made. These were all things that, up to the end of August 2013, SWS had been

managing.

[97] I find that the Defendant-owners and Mr. Elez accepted what they were told

by Mr. Zavier and Mr. Lanz. They stopped complying with the Joint Venture

Agreements. They ceased to deal with SWS, and took the steps Mr. Zavier and Mr.

Lanz told them were now necessary. That included collecting the rents for the units.

They supported the Zavier Council that had been established by Mr. Zavier and Mr.

Lanz, and ignored Mr. Gauthier and the Gauthier Council. They did not attend

Strata Corporation meetings called by the Gauthier Council.

[98] However, at trial, Mr. Soto and Mr. Elez described the many difficulties they

encountered in trying to manage their respective units from locations outside of B.C.

Locating suitable tenants was a serious problem. Repairs after a flood took many

months to organize and complete. Units became infested with bugs. Moreover,

instead of enjoying the benefits of a passive, hands-off real estate investment, Mr.

Elez and the Defendant-owners became embroiled in litigation. Mr. Soto described

the situation as “hell” for many people and one of the worst experiences he has had.

As of trial, the mortgage on his unit was in foreclosure.

[99] As I noted above, this action was filed by SWS and others in November 2013.

A certificate of pending litigation (“CPL”) was claimed and registered against the

units owned by the Defendant-owners excluding Joseph Lanz (who was not yet

named as a defendant) and Mr. Zavier. As I noted above, in the original notice of

civil claim, no claim was made against Mr. Zavier asserting that he was a party to a

Joint Venture Agreement. A title search (part of Exhibit 28) for Mr. Zavier’s unit

shows that a certificate of pending litigation in relation to this action was registered

against title on July 25, 2017. However, as I also noted above, SWS’s claim in

relation to Mr. Zavier’s unit was not fully pleaded until the 3rd amended notice of civil

claim, amended in November 2017 and filed in February 2018.

SWS Marketing Inc. v. Zavier

Page 33

[100] Each of the Gauthier Council and the Zavier Council levied separate strata

fees on the units, creating more confusion. Justice Branch noted, at Branch

Reasons para. 24:

[24]

Seeking to collect on their designated strata fees, the Zavier Council

placed liens and obtained payment from the plaintiffs in the amount of

$65,433. On the other side, the Gauthier Council sent demand letters to the

defendants which resulted in $47,659.92 being held in trust with former

plaintiffs’ counsel.

(g)

2017: Defendant-owners begin contacting the Home Buying Centre and

disposing of their units

[101] By 2017, some of the Defendant-owners had had enough and wanted out of

their investments in the Vernon Project. None contacted SWS about selling. This is

not surprising given what they had been told about the status of the Joint Venture

Agreements and Mr. Gauthier. Instead, encouraged by Mr. Zavier, Defendant-

owners took a different route.

[102] At trial, I heard evidence from Christian Saxvik, who was called in both the

plaintiff’s and the Defendants’ cases. Mr. Saxvik is associated with the “Home

Buying Centre” group, and he is the manager of one of the companies in the group,

1125003 B.C. Ltd. (“112”). Mr. Saxvik explained that the Home Buying Centre helps

people who have properties that are difficult to manage, and it relieves them of the

headache. He explained that, in relation to units in the Vernon Project, 112 would

agree to manage, collect rents, and look after maintenance and repairs, among

other things. According to Mr. Saxvik, 112 has agreements (in the form of a long-

term lease with option to purchase) (the “Lease-Option Agreement”) with Mr.

Rogiani, Mr. Lemon, Mr. Mythen, Mr. Zavier and Mr. Soto in respect of their units in

the Vernon Project. There are no Lease-Option Agreements with Ms. Jin, Mr.

Petersen or Joseph Lanz. However, according to Ms. Jin, Mr. Saxvik approached

her about buying her unit.

[103] 112 was incorporated in June 2017. A corporate search done in June 2018

shows that Mr. Zavier’s wife, Marijana Zavier, was then a director. An admission

SWS Marketing Inc. v. Zavier

Page 34

was made as part of Exhibit 38 that Mr. Zavier “has a beneficial interest in [112] of

25% on the basis of his marriage to Marijana Zavier pursuant to the Family Law Act.”

The inference to be drawn is that Ms. Zavier has a 50% interest in 112.

[104] Mr. Saxvik explained that he first became involved in the Vernon Project in

2017, when he received a phone call from Mr. Rogiani. According to Mr. Rogiani, it

was Mr. Zavier who suggested that he contact Mr. Saxvik concerning Mr. Rogiani’s

investment in the Vernon Project. In the result, in July 2017, Mr. Rogiani entered

into Lease-Option Agreements for all three of his units in the Vernon Project. Mr.

Rogiani explained that he made the Lease-Option Agreements with 112 because his

lifestyle had changed and he did not want the stress of ownership of the units.

[105] The key terms of the Lease-Option Agreements are identical, and include the

following (from the Lease-Option Agreement for Mr. Rogiani’s unit 102) [the

“Tenant/Buyer” is 112, and the “Landlord/Seller” is Mr. Rogiani; bold and underlining

in original]:

In consideration of the sum of $1 and mutual promises and covenants

hereinafter stipulated, the Parties hereby agree as follows:

1.

DESCRIPTION

The Landlord/Seller agrees to lease that the Tenant/Buyer agrees to rent the

real property and improvements located at [address and legal description

given]

. . .

2.

TERM

The Term of this Agreement will continue until the 1st mortgage balance

outlined in section 9 is at zero ($0) and will commence on August 1, 2017

(the “Commencement Date”). A 1st mortgage balance reaching zero ($0),

will be considered an automatic exercise of the Option to Purchase as

outlined in section 17 . . .

3.

RENT

Rent: Rent to be paid by the Tenant/Buyer is an amount equal to the monthly

mortgage payments payable pursuant to the First Mortgage and pursuant to

the property tax (including municipal services water/sewer), strata payment

and property insurance cost in the amount not to exceed $730.00. For the

sake of clarity, if the total pro-rated monthly mortgage, property tax, strata

payment, and insurance payment decrease, the Rent to be paid by the

Tenant shall be reduced accordingly. . . .

SWS Marketing Inc. v. Zavier

Page 35

4.

OPTION TO PURCHASE

The Tenant/Buyer, as part of the consideration herein, is hereby granted the

exclusive right, option and privilege of purchasing the Property at any time

during the term of this Lease/Option agreement or any extension thereof. . . .

. . .

9.

FURTHER ENCUMBRANCES

The Landlord/Seller hereby warrants that the total of the leases, options,

mortgages, liens and any other encumbrances against the Property, whether

of public record or not, are as follows:

(a)

A first mortgage in favour of TD Canada Trust Mortgage [redacted] in

the amount of $99,981.56 (at April 1, 2017) and registered at the Land Title

Office . . .

(c)

The Landlord/Seller covenants and agrees not to further encumber

the Property in any way whatsoever without the prior written consent of the

Tenant/Buyer . . . The Landlord/Seller also covenants and agrees to provide,

at the Tenant/Buyer’s request, a statement that all monthly maintenance fees

(if applicable), municipal taxes and mortgage amounts have been paid on

account of the Property.

. . . The Landlord/Seller further agrees to keep all mortgages, liens, taxes or

other encumbrances on the Property current and in good standing, . . .

. . .

13.

BINDING AGREEMENTS

The Parties hereto agree that this Lease/Option, Power of Attorney, Form C,

and Form D comprises the entire agreement of the parties and that no other

representation or agreements have been made or relied upon, . . .

. . .

OPTION TO PURCHASE TERMS

15.

PRICE AND TERMS

The Tenant/Buyer has the Option to Purchase the Property for the price of

THE FIRST MORTGAGE BALANCE at the Closing Date plus $6,000.

. . .

19.

CLOSING ARRANGEMENTS

The exercise of this Option shall convert it into a binding agreement for the

sale and purchase of the Property . . .

. . .

22.

REGISTRATION OF AGREEMENT

The Tenant/Buyer may register this Agreement in the Land Title Office in the

jurisdiction in which the Property is located and the Landlord/Seller shall

provide the Agreement to the Tenant/Buyer in registrable form.

SWS Marketing Inc. v. Zavier

Page 36

23.

INDEPENDENT LEGAL ADVICE

The Landlord/Seller acknowledges to the Tenant/Buyer that the

Landlord/Seller has had the opportunity to read the contents of this

Lease/Option agreement . . . and obtain legal advice with respect to this

Lease/Option agreement. . . .

. . .

[106] 112 has registered Lease-Option Agreements in the Kamloops Land Title

Office in respect of Mr. Rogiani’s units and Mr. Lemon’s unit.

[107] Mr. Saxvik explained that 112 was aware of this litigation. He explained that

the titles were “pulled” when the Rogiani Lease-Option Agreements were registered,

and he saw the CPL was registered. Mr. Saxvik explained that the Lease-Option

Agreements were registered after the CPL, and that the CPL was not a concern. Mr.

Saxvik was asked whether SWS had approved any of the Lease-Option

Agreements, and he said no. He explained that SWS and 112 have no relationship

with one another, and, from his perspective, 112 did not need permission from

anyone to make an agreement with the registered owner of a unit. According to Mr.

Saxvik, 112 has not been able to register other Lease-Option Agreements (for

example, for Mr. Soto) because it has been unable to obtain a “Form F” for those

units in respect of strata fees, despite requests. A Form F is a certificate of payment

of strata fees, as described in s. 115 of the Strata Property Act.

[108] SWS did not consent to any Defendant-owner or Mr. Zavier entering into the

Lease-Option Agreements. Rather, SWS says that doing so is a breach of the Joint

Venture Agreements.

[109] SWS asserts that Mr. Zavier and Mr. Lanz are using 112 as a means to divert

to themselves profits from the Vernon Project (and, specifically anticipated profits on

the sale of units) that properly belong to SWS. SWS points to the price at which

112’s option can be exercised under the Lease-Option Agreements, and says this

gives 112 the ability to acquire a unit at far below market value. SWS asserts that

Mr. Zavier and Mr. Lanz intentionally created the chaos Defendant-owners

experienced beginning in September 2013 and thereafter, in order to encourage

SWS Marketing Inc. v. Zavier

Page 37

owners to give up their units to 112, as Mr. Rogiani, for example, did. When these

propositions were put to Mr. Zavier on cross-examination, he denied them.

[110] SWS says that, contrary to what Mr. Zavier claimed at trial, this plan can be

seen in Exhibit 55. Exhibit 55 shows screenshots of a series of text messages

exchanged between Mr. Zavier and Mr. Elez (when he was still a defendant in the

action) in the first months of 2019.

[111] In February, Mr. Zavier inquired whether Mr. Elez wanted “Andrew” (who was

associated with Mr. Saxvik and 112) to take over Mr. Elez’s unit. Text messages

from March illustrate Mr. Elez’s frustration with owning a unit in the Vernon Project,

and the difficulties with trying to manage ownership remotely. On March 20, Mr.

Zavier sent the following messages to Mr. Elez:

Sacha, Gord [Lemon] handed his property over the Christian [Saxvik]. Do

you want to do the same thing? Let’s call Christian up and make this happen

for you.

They take care of all the issues and payments.

[112] More texts were exchanged on March 21, and Mr. Zavier repeated the theme

that the Joint Venture Agreements were no longer in force. An exchange begins at

11:23 a.m. [all sic]:

[Mr. Zavier at 11:23 a.m.] Next, what about giving Vernon up and letting

Christian and Andrew take over? No payment, no tenants, no hassles. You

have his email. As i mentioned before Gord just sold his to them and he’s

happy.

[Mr. Elez at 11:30 a.m.] I would prefer if you would formulate your thoughts

into a single text rather than spam my phone. It makes it difficult to reply and

is disruptive to my work. I had always considered you a friend as well,

however now im uncertain. You advised to rent my unit regardless of

cockroaches and find and manage my own tenant. You sold me this deal as

a hands off investment and now, knowing full well that I live several provinces

away you tell me that im on my own. That’s not a very friendly thing to do.

Please send me all the details regarding the promisary note. I’d like copies of

all the contracts, statements and receipts in a single email that I can forward

to my lawyer for review. If she agrees that it all sounds fair then I’d be happy

to comply with your request.

SWS Marketing Inc. v. Zavier

Page 38

[113] Over the next hour or so, Mr. Zavier and Mr. Elez exchanged more text

messages. Mr. Zavier encouraged Mr. Elez to contact Mr. Saxvik about selling his

unit, as others had done. Mr. Elez indicated that he wished to have his lawyer

“review everything” and give him some advice about what to do.

[114] On April 8, 2019, Mr. Zavier sent Mr. Elez several more messages about Mr.

Saxvik. Mr. Zavier continued to press Mr. Elez to contact Mr. Saxvik and repeated

his position (“the position we are all taking”) that the Joint Venture Agreements had

ceased to exist in September 2013 [all sic]:

[Mr. Zavier at 8:59 p.m.] Christian is willing to take your unit over Sacha?

Just call him. FYI there is NO JV...it ended when Rene took all our trust

monies...that’s the position we are all taking.

[Mr. Zavier at 9:31 p.m.] With no JV in place there’s no 50% ownership. That

means you own 100% of the property...

[Mr. Zavier at 9:33 p.m.] Sws didn’t pay for anything, they didn’t offer to pay

either. They didn’t return the security deposit they had. They didn’t pay for

your mortgage... the JV has been over a long time, since sws sued us in

2013.

[Mr. Elez at 9:34 p.m.] Sorry, lost reception while driving. Ill have a chat with

Christian.

[Mr. Zavier at 9:34 p.m.] You’ve also seen all the difficulties r. Gauthier has

caused in the last 6 yrs

[Mr. Zavier at 9:35 p.m.] That may be a good idea, they don’t recognize sws

jv and they will fight with me in court. And pay all the fees and take care of all

the issues. Make sure you make some money please! Negotiate it. Randy

[Rogiani] and Gord [Lemon] did and they are happy.

[115] In submissions, SWS argued that Mr. Zavier’s conduct in encouraging Mr.

Elez and Defendant-owners to contact Mr. Saxvik and make agreements with 112

was relevant to motive and supported SWS’s claim that Mr. Zavier and Mr. Lanz had

intentionally created chaos among the Defendant-owners to achieve their own goals

and cut SWS out of any profits from the Vernon Project. SWS argued that Mr.

Zavier’s conduct and involvement with 112 was also relevant to the credibility of both

Mr. Zavier and Mr. Lanz.

SWS Marketing Inc. v. Zavier

(h) Strata Corporation issues after Mr. Saxvik becomes involved

Page 39

(i)

Mr. Saxvik asserts he is entitled to exercise the rights of the

Defendant-owners; the Gauthier Council refuses to recognize

[116] Mr. Saxvik explained that, after the first Lease-Option Agreements were

made, he took the position that, with respect to Strata Corporation matters, 112, as

the holder of long-term leases pursuant to the Lease-Option Agreements, was

entitled to exercise the rights provided under s. 148 of the Strata Property Act,

which provides in part:

148 (1) In this section, "long term lease" means a lease to the same person

for a set term of 3 years or more.

(2) If a residential strata lot is leased under a long term lease, the tenant is

assigned the powers and duties of the landlord under this Act, the bylaws and

the rules for the term of the lease.

(3) Before exercising any powers of the landlord, the tenant must have given

to the strata corporation written notice of the assignment referred to in

subsection (2), stating the name of the tenant and the time period during

which the lease is effective.

[117] According to Mr. Saxvik, he also held powers of attorney from the Defendants

with whom 112 had Lease-Option Agreements, permitting him to exercise all of the

rights (and duties) of those Defendants in respect of Strata Corporation matters. Mr.

Saxvik explained that, when 112 began entering into Lease-Option Agreements, the

only strata council he was aware of, based on what he was told, was the Zavier

Council. He explained that he had no difficulties dealing with the Zavier Council,

including on matters relating to the payment of strata fees and obtaining Form Fs.

According to Mr. Saxvik, his knowledge about the existence of the Gauthier Council,

as a strata council, was vague. He became more aware of it as a result of

applications and hearings in this action.

[118] According to Mr. Saxvik, the required notice of assignment under s. 148 was

given to the Strata Corporation, and to the Gauthier Council. However, Mr. Gauthier

and the Gauthier Council refused to recognize the assignment or that 112 had rights

as a long-term tenant.

SWS Marketing Inc. v. Zavier

(ii) The November 2020 Bylaws

Page 40

[119] On November 24, 2020, the Gauthier Council caused amended bylaws for the

Stata Corporation (the “November 2020 Bylaws”) to be registered in the Kamloops

Land Title Office. They stated in part as follows, concerning annual and special

general meetings:

26(4) Except on matters requiring a unanimous vote, the vote for a strata lot

may not be exercised if the strata corporation is entitled to register a lien

against that strata lot under section 116(1) of the [Strata Property] Act 7 days

or less prior to the vote.

27(1) If within 1/2 hour from the time appointed for an annual or special

general meeting a quorum is not present, the eligible voters, present in

person or by proxy, constitute a quorum. . . . This bylaw is an alternative to

section 48(3) of the [Strata Property] Act. This bylaw does not apply to a

meeting demanded pursuant to section 43 of the Act . . .

. . .

(7)

For any property that SWS Marketing Inc. has a Joint Venture

Agreement with the owner on title, unless the two parties agree, the vote by

SWS Marketing Inc. carries.

[120] The Zavier Council had caused a set of bylaws to be registered in the

Kamloops Land Title Office on January 2, 2020 (the “Zavier Bylaws”). Branch J.

determined that the Zavier Council was not lawfully entitled to exercise the powers of

a strata council under the Strata Property Act. However, in the context of the

complaints made in the Counterclaim, it is useful to compare some of the provisions

of the Zavier Bylaws with the November 2020 Bylaws.

[121] The Zavier Bylaws provide with respect to the quorum for an annual or

special general meeting as follows:

28.

Quorum

(1)

Quorum for an annual or special general meeting shall be the

eligible voters holding 1/3 of the strata corporation’s votes

present in person or by proxy.

(2)

If at the time appointed for a general meeting, a quorum is not

present:

(a)

a meeting held pursuant to section 43 of the Act is

cancelled; and

SWS Marketing Inc. v. Zavier

(b)

Page 41

for a meeting held other than pursuant to section 43 of

the Act, the persons present in person or by proxy and

entitled to vote at any time during the meeting shall

constitute a quorum.

[122] Section 28(2) corresponds generally to s. 27(1) of the November 2020

Bylaws. However, there is no section in the November 2020 Bylaws corresponding

to s. 28(1) of the Zavier Bylaws. This must simply have been an oversight and

accidental omission in the November 2020 Bylaws, and can be corrected by

reference to s. 48 of the Strata Property Act, which provides:

Quorum for annual or special general meeting

48 (1) Business must not be conducted at an annual or special general

meeting unless a quorum is present.

(2) Subject to the bylaws, a quorum for an annual or special general meeting

is

(a) eligible voters holding 1/3 of the strata corporation's votes, present

in person or by proxy, or

(b) if there are fewer than 4 strata lots or fewer than 4 owners, eligible

voters holding 2/3 of the strata corporation's votes, present in person

or by proxy.

(3) Unless otherwise provided in the bylaws, if within 1/2 hour from the time

appointed for an annual or special general meeting a quorum is not present,

the meeting stands adjourned to the same day in the next week at the same

place and time but, if on the day to which the meeting is adjourned a quorum

described in subsection (2) is not present within 1/2 hour from the time

appointed for the meeting, the eligible voters present in person or by proxy

constitute a quorum.

[123] Section 31 of the Zavier Bylaws deals with voting. With respect to voting by

an owner with unpaid strata fees, it provides in s. 31(7):

An owner will not be entitled to vote at an annual general meeting except on

matters requiring a unanimous vote or a 80% vote if the strata corporation is

entitled to register a lien against the strata lot under section 116 of the Act.

[124] Section 116 of the Strata Property Act provides in relevant part:

Certificate of Lien

116 (1) The strata corporation may register a lien against an owner's strata

lot by registering in the land title office a Certificate of Lien in the prescribed

SWS Marketing Inc. v. Zavier

Page 42

form if the owner fails to pay the strata corporation any of the following with

respect to that strata lot:

(a) strata fees;

. . .

(3) Subsections (1) and (2) do not apply if

(a) the amount owing has, under section 114, been paid into court or

to the strata corporation in trust,

(b) arrangements satisfactory to the strata corporation have been

made to pay the money owing, or

(c) the amount owing is in respect of a fine or the costs of remedying

a contravention.

. . .

[125] Section 31(7) of the Zavier Bylaws corresponds generally to s. 26(4) of the

November 2020 Bylaws.

[126] However, there is nothing in the Zavier Bylaws corresponding to s. 27(7) of

the November 2020 Bylaws. Indeed, the Defendants seek to have s. 27(7) declared

unenforceable. They rely on it as evidence to support their claims that, since

February 8, 2021, the Gauthier Council has engaged in or may engage in

significantly unfair actions, and made decisions that are significantly unfair, in

relation to the Defendants, and favoured the interests of SWS.

(iii) Events after the February 8 Order

[127] Following pronouncement of the February 8 Order, a meeting of the Strata

Corporation was held on March 12, 2021. This was the meeting referred to in

para. 2 of the February 8 Order. At trial, Mr. Saxvik described his unhappiness with

how this meeting was conducted by Mr. Gauthier and called the meeting chaotic.

Mr. Saxvik and Mr. Lanz were especially unhappy with the decision not to permit all

unit-owners to vote at the meeting. The reason given was the non-payment of strata

fees. This decision was the subject of the May 25, 2021 hearing before Justice

Branch, where the Defendants sought (ultimately unsuccessfully) to have the then-

plaintiffs found in contempt of court.

SWS Marketing Inc. v. Zavier

Page 43

[128] In any event, para. 2 of the February 8 Order, requiring the calling of a special

general meeting, was set aside by the Court of Appeal.

[129] Mr. Saxvik explained that when he then reviewed the November 2020

Bylaws, he saw what he described as a provision giving SWS the right to override all

the others, namely, s. 27(7). Mr. Saxvik perceived this as resulting in management

of the Strata Corporation that was neither independent nor unbiased.

[130] Mr. Saxvik asserted that, from his perspective, Mr. Gauthier was using the

Strata Corporation, and management by the Gauthier Council, to further his own

personal interests, while ignoring the interests of the owners of the units represented

by Mr. Saxvik through 112. Mr. Saxvik explained that he did not care about the

fights among the owners, and he did not care who was on the Strata Council, as

long as it operated properly.

[131] Mr. Saxvik expressed frustration that he has been unable to get Form Fs from

the Gauthier Strata Council, despite requests. He explained that he needed a Form

F in order to register a Lease-Option Agreement in the Land Title Office. According

to Mr. Saxvik, units having Lease-Option Agreements had paid strata fees, but as

directed by the Zavier Council. According to Mr. Saxvik, since delivery of the Branch

Reasons, there has not been any reconciliation between the strata fees already paid

to the Zavier Council, and the fees claimed to be owing by the Gauthier Council. He

also claimed not to have received any accounting. The result, from Mr. Saxvik’s

perspective, is that he does not know whether strata fees are owing and if so, how

much. According to Mr. Saxvik, no strata fees have been paid to the Strata

Corporation for the seven units Mr. Saxvik is managing on behalf of 112. Mr. Saxvik

expressed considerable mistrust of Mr. Gauthier and is not prepared to accept what

the Strata Corporation (through the Gauthier Council) has provided by way of an

accounting of outstanding and unpaid strata fees.

[132] On the other hand, according to Mr. Gauthier, there has been a reconciliation

done for strata fees, and he explained that the results are shown for the Defendants’

units in Exhibit 61. For example, according to Mr. Gauthier, the strata fees owing in

SWS Marketing Inc. v. Zavier

Page 44

respect of unit 101 (one of Mr. Rogiani’s units) as of December 2021 were about

$5,500. Based on Exhibit 61, none of the Defendants’ units is paid up to date.

[133] Apart from Mr. Saxvik’s complaints, no Defendant presented evidence to

challenge Mr. Gauthier’s evidence that strata fees are due and owing from each of

the Defendants, as shown on Exhibit 61. The June 11 Order included terms that

required each of the Defendants to submit information about strata fees paid and

proof of payment. However, at trial, no Defendant tendered any evidence about the

strata fees that had been levied against and paid by that Defendant. There was

nothing based on which I could find that, in fact, that Defendant had paid all strata

fees due and owing.

[134] An annual general meeting of the Strata Corporation was held on January 7,

2022. The notice package identified by Mr. Gauthier (Exhibit 63) included a copy of

the proposed budget and the proposed strata fees for each unit. The rhetoric

included in the notice (referring repeatedly to the Zavier Council as “the former

bogus strata council”) may have made Mr. Gauthier feel better, but it did not belong

in a notice of an annual general meeting and was unnecessarily provocative.

[135] According to Mr. Saxvik, because the Strata Corporation (and Mr. Gauthier in

particular) has refused to recognize that 112 has any of the rights under s. 148 of the

Strata Property Act, he did not receive the complete notice package, and

specifically was not sent copies of the ledgers said to be included. Mr. Gauthier did

not deny this. However, Mr. Gauthier’s position (as stated in the minutes for the

January 7, 2022 meeting) was that “due to privacy laws, only the owners themselves

can ask that [Mr. Saxvik] receive a copy of the ledgers.”

[136] At the meeting, a budget was passed, and Mr. Gauthier, William Gauthier and

Mr. Elez were elected as the members of the strata council. Units with unpaid strata

fees, in short, all of the units for which Mr. Saxvik had proxies, were not allowed to

vote on any matters. The minutes reflect that (among other things) Mr. Saxvik

asserted that there was no quorum and the meeting was invalid, and that he also

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took issue with the assertion that units he represented owed strata fees (and

therefore were not permitted to vote).

[137] However, on the evidence before me, I find that there was a quorum as

required, and that strata fees were owing by the units represented by Mr. Saxvik.

The effect of s. 26(4) of the November 2020 Bylaws, which is not challenged in the

Counterclaim, is that units with unpaid strata fees may not exercise a vote except

where a unanimous vote is required. The refusal to allow units represented by Mr.

Saxvik to vote was justified.

[138] I will address the consequences of these matters in the discussion of the

Counterclaim, below.

4.

Comments on the pleadings

[139] The trial proceeded based on the NCC and a response to civil claim (the

“RCC”) filed on behalf of the Defendants (as the group was then constituted) on April

5, 2016. My comments concerning the pleadings will focus on these two

documents. The NCC in particular did little to promote the efficient identification and

resolution of the issues in this action. Rather, its drafting had the opposite effect.

[140] It is the role of pleadings to serve as the frame for an action. Properly drawn,

they precisely define the issues the court will be asked to decide, they advise the

other party of the case to be met, they determine the extent of pre-trial procedures,

and they guide the trial process. The provisions of the Supreme Court Civil Rules

governing pleadings exist to support and facilitate those ends. When pleadings are

disorganized, prolix or confusing, or when they raise irrelevancies, pleadings impede

litigation in contradiction to their mandate. See, for example: The Owners, Strata

Plan LMS3259 v. Sze Hang Holding Inc., 2012 BCCA 196, at para. 1; and Atlantic

Waste Systems Ltd. v. Attorney General of Canada, 2015 BCSC 1324, at para.

25.

[141] Rule 3-1(2) requires that a notice of civil claim must set out “a concise

statement of the material facts giving rise to the claim” and “a concise summary of

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the legal basis for the relief sought” [underlining added], and must otherwise comply

with Rule 3-7.

[142] With respect to a response to civil claim, for any fact set out in Part 1 of the

notice of civil claim that is denied, a defendant must “concisely set out the

defendant’s version of that fact” [underlining added]: Rule 3-3(2)(a)(ii). Further, a

response to civil claim must “set out, in a concise statement, any additional material

facts that the defendant believes relate to the matters raised by the notice of civil

claim” [underlining added]: Rule 3-3(2)(a)(iii). Rule 3-3(2)(c) requires that, if the

defendant opposes any of the relief sought against the defendant, the defendant

must set out a concise summary of the legal basis for that opposition. The response

to civil claim “must otherwise comply with Rule 3-7”: Rule 3-3(2)(d).

[143] The requirements in Rule 3-1(2) and Rule 3-3(2), that the pleading set out a

“concise statement” and “concise summary,” are mandatory and directed to

promoting clarity. The word “concise” is defined in The Oxford English Dictionary

(11th ed. Revised) as “giving information clearly and in a few words.” Thus, both

brevity and clarity are important in a pleading. See Sahyoun v. Ho, 2013 BCSC

1143, at para. 23.

[144] The requirement that the statement of the material facts and the summary of

the legal basis be “concise” emphasizes the importance of stating clearly everything

that is necessary, but not more. Going beyond a concise statement or summary is

not conducive to defining and limiting the issues in the case. It is incompatible with

the goal of the efficient resolution of issues on their merits: see Rule 1-3. The court

or the adverse party should not have to hunt through many sentences and

paragraphs to find the concise statement of the essential elements of a claim or

defence. See Atlantic Waste, at para. 26.

[145] Rule 3-7(1) brings home the point that a material fact is different than

evidence and that evidence must not be pleaded. A material fact is one that is

essential in order to formulate a complete cause of action. If a material fact is

omitted, a cause of action is not sufficiently pleaded, and liable to be struck out. See

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Skybridge Investments Ltd. v. Metro Motors Ltd., 2006 BCCA 500, at para. 9.

The distinction between a material fact and an evidentiary fact is discussed by K.J.

Smith J.A. in Jones v. Donaghey, 2011 BCCA 6. A material fact is a disputed fact

that, when resolved, will have legal consequences as between the parties to the

dispute (para. 9). Mr. Justice Smith continued, at para. 18:

[18]

. . . [A] material fact is the ultimate fact, sometimes called “ultimate

issue”, to the proof of which evidence is directed. It is the last in a series or

progression of facts. It is the fact put “in issue” by the pleadings. Facts that

tend to prove the fact in issue, or to prove another fact that tends to prove the

fact in issue, are evidentiary or “relevant” facts.

[146] As Voith J.A. wrote recently in Mercantile Office Systems Private Limited

v. Worldwide Warranty Life Services Inc., 2021 BCCA 362, beginning at para. 20,

the provisions of the Rules (and the related forms) governing pleadings:

[20]

. . . establish how comprehensive and prescriptive the requirements

for specific categories of pleadings are. These formal and content-based

requirements are neither anachronistic nor technical. Instead, they are

necessary and serve to further the purposes of the Rules. Those purposes

and their importance have been expressed on numerous occasions by both

this Court and by trial judges.

[21]

Pleadings are foundational. They guide the litigation process. This is

true in relation to the discovery of documents, examinations for discovery,

many interlocutory applications and the trial itself.

[22]

Pleadings also give effect to the underlying policy objectives of the

Rules, which are to ensure the litigation process is fair and to promote justice

between the parties: Wong v. Wong, 2006 BCCA 540 at paras. 22–23. They

enable the parties and the court “to ascertain with precision the matters on

which parties differ and the points on which they agree; and thus to arrive at

certain clear issues on which both parties desire a judicial decision”:

[citations omitted].

[23]

For the court, pleadings serve the ultimate function of defining the

issues of fact and law that will be determined by the court. In order for the

court to fairly decide the issues before them, the pleadings must state the

material facts succinctly: [citations omitted]. They must be organized in such

a way that the court can understand what issues the court will be called upon

to decide: [citations omitted].

[147] Later in his reasons, Voith J.A. addressed the idea that a pleading should “tell

a story,” and that narrative and the recital of evidence are acceptable in a pleading.

He wrote, beginning at para. 43:

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[43]

. . . Drafting a pleading is not a mathematical exercise. It involves the

exercise of judgment and it requires some degree of flexibility. . . .

[44]

Nevertheless, none of a notice of claim, a response to civil claim, and

a counterclaim is a story. Each pleading contemplates and requires a

reasonably disciplined exercise that is governed, in many instances in

mandatory terms, by the Rules and the relevant authorities. Each requires

the drafting party to “concisely” set out the “material facts” that give rise to the

claim or that relate to the matters raised by the claim. None of these

pleadings are permitted to contain evidence or argument.

[45]

What constitutes a material fact is well understood. Material facts are

the elements essential to formulate a claim or a defence. . . .

. . .

[49]

The judge’s assertion that a pleading can contain the evidence, as

opposed to the material facts, that a party may be entitled to establish at trial

is an error in principle. In saying this, I recognize that there are times where

the distinction between what constitutes a material fact and what constitutes

evidence may be blurred and difficult to apply. There are also times when, as

a practical matter, some limited evidence may be necessary to make a

pleading more comprehensible. But the distinction between what constitutes

evidence and what constitutes a material fact is important. Furthermore,

what evidence may be relevant at trial and what material facts are relevant to

a pleading are two different things. This distinction is expressly identified in

the Rules and in the relevant case law, and it is central to a proper pleading.

[148] I will begin with the NCC. In my respectful opinion, it did not fulfill the ultimate

function of a pleading. It impeded, rather than facilitated, the identification of the

factual and legal issues the court was being asked to decide, and the efficient

resolution of the issues on their merits. This created difficulties for everyone.

Moreover, it added to the length of the trial, as evidence was called (by both sides)

on matters that were tangential at best.

[149] SWS’s claim is, essentially, one in contract against each Defendant. In that

respect, SWS relies on the Joint Venture Agreements. SWS seeks remedies for

what it asserts is a breach of contract. This is not a novel claim.

[150] Part 1, the Statement of Facts, is 81 paragraphs long. Some length must be

expected given the number of Defendants. However, the NCC is filled with

evidence, making it most unhelpfully prolix. One unfortunate result is that any

material facts are overwhelmed (if not completely lost) in what surrounds them.

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[151] I set out, as an illustration of the basic problem, paras. 20 and 21 from the

NCC. These two paragraphs, which were added when the NCC was amended,

describe events concerning the three other projects that pre-date the Vernon

Project, and about Mr. Zavier’s purchase of a house (at this point in the NCC, the

Joint Venture Agreement has not yet been mentioned) [underlining indicating

amendments omitted]:

[20]

In 2009, Odin Zavier saw the success Rene Gauthier and SWS was

having with some real estate projects including assisting Robert A. Allen in

the spring of 2009 with getting ten homes sold in Clayton Heights, Surrey.

Odin Zavier approached Rene Gauthier to do a similar project with SWS. In

2009, Odin Zavier worked with SWS to assist a distressed builder in selling

four homes in Clayton Heights near the corner of 194 Street and 72 Ave, in

Surrey and then another five homes just a block away on 72nd Ave. SWS

assisted the builder in finding buyers and helping them obtain mortgages.

SWS was the legal entity used by Rene Gauthier and Odin Zavier to enter

into contracts for the Clayton Heights project.

[21]

In January 2010, Odin Zavier and Rene Gauthier through SWS as the

contracting party bought six empty lots in the Cressey area on 2nd Ave in

Surrey. After purchasing the lots, SWS entered into an agreement with

Legendary Construction Ltd, to build the homes whereby a new jointly owned

company LS Projects Ltd was established. Through LS Projects Ltd,

Legendary Construction Ltd would be responsible for the construction of the

houses and SWS would be responsible for contributing the land and selling

the lots. Legendary Construction Ltd and SWS would share the profits or

losses from the sale of the six units. From August 2010 to October 2010, LS

Projects sold four of the six homes to third parties for a sales price excluding

taxes of $749,000 and one of the homes was sold for $715,000 excluding

taxes. Sometime around July 2010, because Odin Zavier had a new baby on

the way and was living in a 2 bedroom condo, Odin Zavier expressed his

desire to purchase the sixth unsold Cressey lot at 17312 2nd Ave., Surrey for

$749,000. As Odin Zavier did not have the down payment of $239,000, using

SWS’s share of proceeds from the sale of the 5 other units, SWS made the

$239,000 down payment (“$239,000 Zavier House Payment") and it became

a receivable from Odin Zavier and Four Elements a company owned by Odin

Zavier. Odin Zavier closed the purchase of 17312 2nd Ave his new home in

December 2010.

[152] These are not facts pleaded in support of some separate claim by SWS

against Mr. Zavier (distinct from the claims made against the other Defendant-

owners). The mass of detail is the opposite of a concise statement. These

paragraphs do not contain material facts pleaded in support of any cause of action

against any Defendant. At best, these paragraphs plead evidence, although even as

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evidence, their relevance is obscure. Court time was taken up in both the plaintiff’s

case and the defence case calling evidence about these other projects, and about

Mr. Zavier’s purchase of his house.

[153] Para. 48 provides another example. This paragraph was also added when

the NCC was amended, and reads [underlining indicating amendments omitted]:

[48]

From 2011 to 2013, SWS managed the 14 units as required in the

SWS JV Agreement. SWS used one bank account to collect rents and pay

all expenditures for the 14 units including the mortgage payments and all

operating and strata expenses. SWS did a lot of repairs on the deck

membranes, repairing leaks, replacing all the heaters with base board

heaters, cleared out the crawl spaces, replaced old insulation and replaced

carpet with laminate in many units. Pursuant to the SWS JV Agreement,

SWS did not charge a management fee and R Gauthier did not charge for

any of his time.

[154] This paragraph should have stopped after the first sentence. Everything else

is evidence.

[155] Counsel for the Defendants argued that an inference should be drawn against

SWS for not including in earlier versions of the notice of civil claim the allegations

concerning the $239,000 loan that now appear in para. 21 of the NCC. However,

since the contents of para. 21 are not material facts at all, no adverse inference can

be drawn from a failure to plead them.

[156] Counsel for the Defendants also argued that an inference should be drawn

against SWS for not pleading the terms of a handwritten note, a copy of which was

marked as Exhibit 8. I discuss this Exhibit below, in the context of Mr. Gauthier’s

credibility. In my view, there is no possibility that material facts could be located in

Exhibit 8. Pleading it would be contrary to the Rules. While there are other

difficulties with Exhibit 8, no adverse inference can be drawn from the fact that it is

not mentioned in the NCC.

[157] Material facts about the Joint Venture Agreements are pleaded in para. 24 of

the NCC (although the para. begins with a lengthy pleading of evidence), and then

in para. 27, paras. 33-36 and paras. 38-41. At least some of these paragraphs are

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redundant. The repetition demonstrates a failure on the part of the drafter to set out

a concise statement of the material facts. The pleading is disorganized and

confusing.

[158] The NCC also suffers from the opposite problem: that material facts

necessary to state a complete cause of action have not been pleaded at all. I give

two examples.

[159] The first concerns Mr. Gauthier. Mr. Gauthier was one of the originally-

named plaintiffs. He remained a plaintiff through to the NCC. Soon after the trial

began, it became apparent that no cause of action had been pleaded on behalf of

Mr. Gauthier and no relief was sought on his behalf. When I raised this problem,

counsel quickly agreed that Mr. Gauthier should be removed as a plaintiff, and an

order was made accordingly. However, an action should not arrive at the first day of

trial with no cause of action pleaded on behalf of a named plaintiff. The extreme

length of the NCC likely obscured the fact that no cause of action had been pleaded

in respect of Mr. Gauthier.

[160] The second example concerns Mr. Lanz. He has been a named defendant

since the original notice of civil claim was filed in November 2013. However, as of

the NCC, no cause of action was pleaded against him. It follows that no relief can

be granted against him. The claim by SWS against him must be dismissed.

[161] I turn then to the RCC. It does not suffer from the basic problem in the NCC

of being filled with evidence. However, it has other problems.

[162] In a response to civil claim, “Part 1: Response to Notice of Civil Claim Facts”

is where one would expect to find the material facts pleaded relevant to the defence:

see Rule 3-3(1) and (2)(a), and Form 2. However, the facts based on which the

Defendants say the Joint Venture Agreements are not enforceable by SWS against

them, and that they are entitled to rescission, are pleaded in “Part 3: Legal Basis.”

There, the Defendants plead [all sic]:

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1.

The plaintiffs SWS and Gauthier were parties in individual joint

venture agreements (the “JVs”) with the defendants Odin Zavier,

Eduardo Soto, Randall Rogiani, Burt Petersen, Charlene Petersen,

Gary Mythen, Gordon Lemon, Fan Jim, Sacha Elez, Joseph Lanz and

Doris Lanz.

. . .

3.

The plaintiffs SWS and Gauthier misrepresented to the defendants

the true source of the down payments to purchase the individual

Strata units, namely that SWS was providing the down payments of

$29,000 and $32,000 when in fact SWS did not invest any money at

all into the purchase of the Strata units.

. . .

5.

The failure of SWS and Gauthier to disclose critical information during

negotiations leading to entering the JVs with each defendant owner

gives rise to the tort of negligent or fraudulent misrepresentation

thereby entitling the respondents to rescission of the JVs.

. . .

[163] However, the Defendants have failed to plead all of the material facts

necessary, in accordance with the authorities and the Rules, to state a complete

cause of action seeking rescission of a contract on the basis of fraudulent or

negligent misrepresentation.

[164] Fraud claims must be strictly pleaded and strictly proved: BG Checo

International Ltd. v. British Columbia (Hydro and Power Authority) (1990), 44

B.C.L.R. (2d) 145 (C.A.), at p. 168. Moreover, the Rules provide, in Rule 3-7(18):

(18) If the party pleading relies on misrepresentation, fraud, breach of

trust, wilful default or undue influence, . . . full particulars, with dates and

items if applicable, must be stated in the pleading.

[165] In Wang v. Shao, 2019 BCCA 130, Newbury J.A. (for the court) set out the

basic elements of a fraud claim, at para. 24:

[24]

. . . It is trite law that fraudulent misrepresentation involves the

following elements that must be proven by the claimant:

(a)

the wrongdoer must make a representation of fact to the

victim;

(b)

the representation must be false in fact;

(c)

the party making the representation must have known the

representation was false at the time it was made;

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(d)

the misrepresentor must have intended the victim act on the

representation; and

(e)

the victim must have been induced to enter into the contract in

reliance upon it.

(Derry v. Peek [1889] UKHL1, 14 App. Cas. 337 (H.L.); see also Islip v.

Coldmatic Refrigeration of Canada Ltd. 2002 BCCA 255 at para. 11.)

[166] In the RCC, full particulars, as required by the Rules are lacking. Moreover,

and assuming for the sake of argument that the first two elements described by

Newbury J.A. can been identified in the RCC, the remaining elements have not been

pleaded as facts. Rather, there is simply a conclusory statement in para. 5 of the

Legal Basis.

[167] Just as inducement is an essential element of a fraudulent misrepresentation

claim, reliance on a false representation is also an essential element of a negligent

misrepresentation claim: see, for example, Queen v. Cognos Inc., [1993] 1 S.C.R.

87, at p. 110; and Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R.

165, at para. 18. Nothing is pleaded in that respect.

[168] These are not simply pleadings points. Proper pleadings, setting out the

elements of a complete cause of action or defence, guide the evidence that must be

adduced at trial. Here, neither inducement nor reliance on a false representation

was pleaded or proved. Without evidence, the defence was doomed to failure.

[169] In addition, in closing argument and in the alternative to their rescission

defence, the Defendants asserted that in September 2013, SWS had repudiated the

Joint Venture Agreements and they had accepted the repudiation, terminating the

Joint Venture Agreements. However, this alternative defence is not pleaded at all.

[170] In summary, pleadings matter. The importance of proper pleadings, in

accordance with requirements described in the authorities and the Rules, cannot be

overstated. Counsel ignore those requirements at their peril.

SWS Marketing Inc. v. Zavier

5. Comments on the witnesses, credibility and reliability

Page 54

[171] The calling of evidence at trial was somewhat unusual. In part, that was to

accommodate evidence being called in SWS’s claim, and then in the Counterclaim.

Mr. Gauthier and Mr. Saxvik, for example, testified twice, once in the plaintiff’s case,

and then again in the Defendants’ case (including the Counterclaim).

[172] In SWS’s case, SWS called Mr. Gauthier, Mr. Elez and Mr. Saxvik, all of

whom gave oral evidence. SWS had also given notice under Rule 12-5(21) that it

wished to call two of the Defendant-owners, Mr. Soto and Mr. Petersen, as adverse

witnesses. Mr. Soto attended and gave evidence in SWS’s case. Mr. Petersen did

not. I will address Mr. Petersen’s circumstances separately below.

[173] With respect to the remaining Defendant-owners, as part of its case, SWS

read in answers to interrogatories and discovery evidence given by Ms. Jin, Mr.

Mythen and Joseph Lanz, and read in discovery evidence only given by Mr. Rogiani

and Mr. Lemon. This evidence was only admissible against the party giving it. None

of these Defendant-owners testified at trial.

[174] In their case (including the Counterclaim), the Defendants called Mr. Lanz,

Mr. Zavier and Mr. Saxvik.

[175] No attack was made on the credibility or reliability of either Mr. Elez or Mr.

Soto. However, credibility is a significant issue in relation to the three main

witnesses: Mr. Gauthier, Mr. Zavier and Mr. Lanz. SWS also attacks Mr. Saxvik’s

credibility.

[176] SWS says that neither Mr. Zavier nor Mr. Lanz was a credible witness. SWS

says that both were evasive, obstructive and dishonest. Moreover, SWS says that

both were motivated to advance their own financial interests in the litigation,

especially through 112. SWS says that the evidence of both Mr. Zavier and Mr.

Lanz should only be accepted on points that are not controversial or are

corroborated by other reliable evidence, or where admissions were made.

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[177] With respect to Mr. Zavier, SWS says that Mr. Zavier’s evidence was

intentionally dishonest and aimed at misleading the court. SWS says that his

evidence that he did not sign a Joint Venture Agreement must be rejected. SWS

says that, contrary to directions given to Mr. Zavier by the court, he chose to argue

and advocate his case rather than answer questions put to him on cross-

examination. SWS argues further that Mr. Zavier sought to evade every question

put to him on cross-examination that, if answered truthfully, would have harmed his

position in the case. SWS says that, when pressed on matters, Mr. Zavier retreated

to positions where he could blame others (in particular, Mr. Gauthier, his “mentor”).

[178] With respect to Mr. Lanz, SWS says that, like Mr. Zavier, he was evasive and

argumentative. Instead of providing responsive answers to questions put to him on

cross-examination, he chose to argue and advocate for the Defendants’ case. SWS

says that Mr. Lanz’s evidence was internally inconsistent, and he demonstrated a

poor memory, except in areas that appeared helpful for the Defendants’ case.

[179] SWS says that, where there is a conflict between the evidence given by Mr.

Gauthier, and the evidence given by either Mr. Zavier or Mr. Lanz, Mr. Gauthier’s

evidence should be preferred.

[180] With respect to Mr. Saxvik, SWS says that his credibility must be questioned.

SWS points to what SWS says are inconsistencies in Mr. Saxvik’s evidence about

when he learned of the Gauthier Council (for example), and SWS says that Mr.

Saxvik’s evidence concerning his mistrust of Mr. Gauthier lacks meaningful details.

[181] On the other hand, the Defendants say that there are serious problems with

Mr. Gauthier’s credibility. They point to a pleading filed on behalf of Mr. Gauthier

and SWS in April 2013 in other litigation involving the Vernon Project, where it was

asserted that SWS did not obtain any direct or indirect benefit from the purchase of

any of the units. However, this is inconsistent with the position taken by SWS in this

action, namely, that it has at least a beneficial interest in each of the Defendants’

units.

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[182] The Defendants say that the explanation now advanced by SWS concerning

the down payments on the units, and that they were related to (among other things)

a loan made to Mr. Zavier to purchase his house, came very late in the day and

cannot be believed. The Defendants say that Mr. Gauthier simply refuses to admit

that the down payments were not payments made by SWS at all, but were paper

profits. The Defendants also point out that, in Mr. Gauthier’s Affidavit No. 1, sworn

for the November 2013 hearing before Sewell J., there is no mention of the

existence of a Joint Venture Agreement with Mr. Zavier. Moreover, at that time, Mr.

Gauthier swore that SWS had “invested $265,000 into the [Vernon Project] via the

Joint Ventures,” in contrast to his later evidence. As of trial, this number had grown

to $415,000.

[183] The Defendants say that the July 26, 2010 note (Exhibit 8) only appeared

shortly before trial, and the original has never been produced. The Defendants say

that Mr. Gauthier’s evidence that he had the original note, lost it, found it again and

then lost it again is not credible.

[184] Both Mr. Palaschuk (for SWS) and Mr. Canofari (for the Defendants and Mr.

Lanz) cite Bradshaw v. Stenner, 2010 BCSC 1398, aff’d 2012 BCCA 296, which is

one of the leading cases describing the basic principles that apply to credibility

assessments.

[185] The assessment of credibility involves examination of various factors such as:

the witness’s ability and opportunity to observe events; the firmness of the witness’s

memory; the witness’s ability to resist the influence of interest to modify his or her

recollection; whether the witness's evidence harmonizes with independent evidence

that has been accepted; whether the witness changes his or her testimony during

direct and cross-examination; whether the witness’s testimony seems unreasonable,

impossible, or unlikely; whether a witness has a motive to lie; and the demeanour of

a witness generally. Moreover, the assessment of a witness’s credibility must

reasonably subject the witness’s story to an examination of its consistency with the

probabilities of the surrounding conditions or circumstances. The real test of the

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truth of the story of a witness in such a case must be its harmony with the

preponderance of the probabilities which a practical and informed person would

readily recognize as reasonable in that place and in those circumstances. See

generally Bradshaw v. Stenner, at paras. 186-187.

[186] It is my role as the trial judge to analyse the testimony of witnesses, and

observing their demeanour is a part of that role. The ability or willingness of a

witness to respond to questions adds to the impression of the capacity of the witness

to recall events and provide accurate testimony. A witness’s credibility may be

adversely affected if the witness is imprecise, evasive, long-winded or argumentative

in response to questions. Of course, as the trial judge, I decide how much weight to

give to any evidence, and I can accept some, all or none of the evidence of a

witness. I am not obliged to reject all of a witness’s evidence simply because I have

concluded that, generally, the witness is neither credible nor reliable.

[187] I have concluded that I must exercise considerable caution in approaching the

evidence of all of Mr. Gauthier, Mr. Zavier and Mr. Lanz. This is especially true in

relation to events in 2010 and 2011.

[188] I begin with Mr. Gauthier. He was SWS’s main witness concerning the events

relating to the origins of the Vernon Project in 2010 and the purchase of units by the

Defendants in 2011.

[189] Mr. Gauthier has sworn and filed a huge number of affidavits (over 70) in

relation to the many pre-trial applications in this action. As a result, he has told a

story, although (as the evolution of the notice of civil claim shows) not necessarily

the same story, over a period of years.

[190] One of the major issues at trial concerned whether SWS had in fact funded,

through cash consideration, the “down payments” on the units or whether (as the

Defendants assert) these amounts represented “paper profits” built into the structure

of the Vernon Project. This was raised as an issue when the parties were before

Sewell J. in November 2013, shortly after the notice of civil claim was filed.

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[191] Thereafter, Mr. Gauthier, on behalf of SWS, endeavoured to create an

accounting of advances and loans to Mr. Zavier and Four Elements, pre-dating the

Vernon Project, that might support the conclusion that SWS had invested real cash

into the Vernon Project, to cover the down payments. This conclusion is necessary

given the claim by SWS for an order that it has a legal, or alternatively, beneficial,

interest in each of the Defendants’ units. It was also necessary to support SWS’s

position that, on a sale, it was entitled to “repayment” of the down payment, before

any profit split under Article IV of the Joint Venture Agreement.

[192] Indeed, in its written closing submissions, SWS argued:

Mr. Gauthier’s evidence is SWS secured the SWS Down Payments on the

Defendant Owners 10 units from unpaid advances to Zavier/Four Elements of

$415,000. Repayment to SWS of the $415,000 was not required as it was

converted into SWS’s 50% equity in the Vernon Project and used to secure

the Defendant Owners $29,000 or $31,000 down payment per unit required in

Article III of the JV Agreement.

[193] As will be seen in the Discussion below, concerning what I term the “SWS

Advances Theory,” I reject this part of SWS’s claim. I do so in large part because I

do not find Mr. Gauthier’s evidence supporting the Theory to be credible. My strong

impression of Mr. Gauthier’s evidence at trial was that it was manufactured after the

fact – that is, after the issue had been flagged by Sewell J. and was then seized on

by the Defendants – in an attempt to justify and explain SWS’s claims. The

evidence, therefore, lacked both credibility and reliability. It was not in harmony with

the preponderance of probabilities that a practical and informed person would readily

recognize as reasonable in the circumstances at the time. Mr. Gauthier’s

explanation came as an afterthought, after this action had been filed.

[194] I have very significant concerns about the reliability of the note marked as

Exhibit 8. Mr. Gauthier identified it as a note he made on July 26, 2010 during a

meeting he said he had with Mr. Zavier and Mr. Lanz (both of whom denied such a

meeting occurred). According to Mr. Gauthier, it was at this meeting that Mr. Zavier

asked SWS to become involved in the Vernon Project. Mr. Gauthier described the

meeting as a meeting of the directors of SWS. He explained that he made the note

SWS Marketing Inc. v. Zavier

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intending later to incorporate it into formal minutes, something that never happened.

In my view, Mr. Gauthier’s evidence about the note made little sense, especially

since, as of July 2010, Mr. Lanz had not been a director of SWS for almost a year.

Moreover, it is inconsistent with other evidence from Mr. Gauthier and Mr. Zavier

about when Mr. Gauthier and SWS were approached to become involved in the

Vernon Project. This included evidence where Mr. Gauthier and Mr. Zavier agreed

with one another that it was later, around September 2010, not July. Mr. Gauthier’s

claim that he lost track of the original of the note twice is also of concern. I have

concluded I cannot treat either this note, or what Mr. Gauthier had to say about it, as

reliable evidence.

[195] However, I accept Mr. Gauthier’s evidence about events in September 2013:

that money was moved from the Old Account to the New Account; and that SWS

continued to pay expenses associated with the Vernon Project from the New

Account while funds were available. Mr. Gauthier’s evidence in that respect is

consistent with, and supported by, a reliable documentary record.

[196] The statements that Mr. Zavier and Mr. Lanz made at the time to the

Defendant-owners – that Mr. Gauthier had stolen money from SWS – were simply

not true.

[197] I have few concerns about the credibility and reliability of Mr. Gauthier’s

evidence regarding SWS’s management of the Vernon Project (during the period it

was allowed to manage), and regarding the affairs of the Gauthier Strata Council

and the Strata Corporation, up until trial. Indeed, with respect to SWS’s

management, there are admissions. In the other areas, there is a reasonable

documentary record, and Mr. Gauthier’s evidence made sense.

[198] I turn then to Mr. Zavier and Mr. Lanz. Both were argumentative and evasive

on cross-examination. Mr. Zavier in particular strongly resisted providing responsive

answers to straight-forward questions. He regularly added commentary designed to

advocate for the Defendants’ case, or his perception of the case, and to cast Mr.

Gauthier in a poor light. When confronted with the lack of evidence that a $25,000

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cheque, on which he relied to challenge Mr. Gauthier’s evidence, had been cashed,

Mr. Zavier created implausible scenarios in a vain attempt to explain what

happened.

[199] Through their answers, both Mr. Zavier and Mr. Lanz demonstrated

considerable antagonism toward Mr. Gauthier. As a result, neither was a reliable

reporter of most events involving Mr. Gauthier.

[200] During Mr. Lanz’s testimony, he was often openly sarcastic and derisive.

Even during his direct-examination, Mr. Lanz would often volunteer complaints about

Mr. Gauthier, going beyond a responsive answer to the questions asked. His

complaints about Mr. Gauthier pre-dated the Vernon Project. My strong impression

was that Mr. Lanz has held a long-standing grudge against Mr. Gauthier, and saw

the trial as an opportunity to settle scores.

[201] Both Mr. Zavier and Mr. Lanz repeated the theme that, in September 2013,

Mr. Gauthier stole money. This was what they communicated to the Defendant-

owners at the time. However, it was simply untrue. Their reluctance to admit to that

fact damages their credibility. Moreover, their communications with the Defendant-

owners were reckless, and aimed at ensuring the Defendant-owners would side with

them against Mr. Gauthier. Their recklessness persuades me that, when either of

them wish to secure a goal, they will say anything – whether or not it is true – they

think might help do that.

[202] I have relatively few concerns about the credibility and reliability of Mr.

Saxvik’s evidence on factual matters. I am, however, much less inclined to place

much weight on Mr. Saxvik’s opinions, especially his opinions about Mr. Gauthier’s

conduct. Such opinions are of little use to me. What the court needs from a witness

is facts, not opinions. In sharp contrast to Mr. Zavier and Mr. Lanz, Mr. Saxvik was

not argumentative or evasive on cross-examination. There were some

inconsistencies in his evidence. However, in my view, they were not on matters of

real consequence. There is mutual antagonism between Mr. Saxvik and Mr.

Gauthier, so neither is a wholly reliable or objective reporter about the other.

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However, Mr. Saxvik’s views about Mr. Gauthier were not based on any objective

assessment of the facts. Rather, they appeared to me to be heavily influenced by

Mr. Zavier and Mr. Lanz and their long-standing position that the Joint Venture

Agreements were no longer in existence. It was in 112’s interest to adopt that

position. In that light, I can give little weight to Mr. Saxvik’s evidence that the

Gauthier Council cannot be trusted and that Mr. Gauthier is using the Gauthier

Council to further his own personal interests. Mr. Saxvik’s evidence in that respect

was lacking in meaningful details.

[203] In addition, I am unable to give Mr. Saxvik’s explanation of 112’s reasons for

not paying strata fees – that he needs an accounting, which only an administrator

can provide – much weight, especially in the light of the June 11 Order and the

absence of any evidence from any Defendant-owner. The possible existence of

errors in the accounting prepared by Mr. Gauthier was simply speculation, and Mr.

Saxvik’s explanation for not paying strata fees lacks any reasonable foundation. Mr.

Saxvik relies on his complaints about strata fees to say that it was not right for Mr.

Gauthier to refuse to let units for which Mr. Saxvik held proxies vote at the annual

general meeting. However, since I cannot give weight to Mr. Saxvik’s complaints

about strata fees, I also cannot give weight to his complaints about not being able to

vote.

6.

SWS’s claims – discussion and analysis

(a)

Introduction

[204] SWS’s claims against the Defendants are based fundamentally on the Joint

Venture Agreements. SWS relies on the Joint Venture Agreements not only to

support its claims to an interest in land (that is, the units) and other relief (for

example, a mandatory injunction), but also in defence of the claims in the

Counterclaim.

[205] As will be seen, certain of the issues require a more detailed discussion.

However, before turning there, I will deal with some matters summarily.

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[206] In its written closing submissions, SWS sought a number of items of relief that

were not in the NCC. For example, SWS sought a declaration, in respect of each of

the Defendants, that “the Joint Venture Agreement signed [by that Defendant] . . . is

a valid contract and valid against [the Defendant and] the title” of the unit owned by

that Defendant. SWS did not seek leave to further amend the NCC to include such

items of relief. In that light, in my view, they are not properly before me, and I will

not be ruling on them. Rather, during oral argument, I asked counsel for SWS to

identify for me the relief being sought, based on the contents of the “NCC Part 2:

Relief Sought” (the “Prayer for Relief”), and he did so.

[207] No cause of action was pleaded against Mr. Lanz and no relief was claimed

against him. The action is, accordingly, dismissed as against Mr. Lanz.

[208] The defendant Charlene Petersen was never a party to a Joint Venture

Agreement. The action is, accordingly, dismissed as against her.

[209] I turn next to “The Tenants,” who are the “Doe” defendants.

[210] No reasonable claim was pleaded against this group. The bald, conclusory

allegations found at para. 19 of Part 1 of the NCC are insufficient. Moreover, no

relief was claimed against this group in the Prayer for Relief. In those

circumstances, the action must be dismissed as against them.

(b)

The claim for a declaration the Joint Venture Agreements have been

breached and for an accounting

[211] During closing submissions, SWS continued to seek a declaration that the

Joint Venture Agreements “have been breached by” each of the Defendants: see

the Prayer for Relief, para. 1. However, a declaration that past conduct was

wrongful is not available as a remedy: see, for example, Warde v. Slatter Holdings

Ltd., 2016 BCCA 63, at para. 48 (citing Rusche v. Insurance Corp. of British

Columbia (1992), 4 C.P.C. (3d) 12 (B.C.S.C.) at 16). The declaration is, therefore,

refused.

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[212] In para. 7 of the Prayer for Relief, SWS sought an order that each of the

Defendants “account for all of the funds received on account of the Joint Venture

Agreements.” When pressed to explain the utility of such an order, and how it could

possibly be appropriate, SWS did not abandon its claim although a convincing

explanation was wanting. In para. 22 of the Prayer for Relief, SWS also sought an

order that the Defendants “deliver possession of the accounting records” of the Joint

Venture Agreements.

[213] In my view, SWS failed to establish that such an order was justified. There

was no suggestion that, somehow, an accounting of funds by the Defendants would

uncover profits to which SWS had some entitlement under the Joint Venture

Agreements. Rather, based on the evidence before me (and I note Mr. Soto’s

evidence in that respect), the reverse – that there were no profits after expenses –

was more likely. There was no indication the matters were pursued by SWS during

pre-trial discovery of any of the Defendants, so as to provide some air of reality to

the idea that profits (something more than de minimus) might turn up if an

accounting were ordered. The request for an accounting struck me as more a

means to oppress the Defendant-owners and punish them for siding with Mr. Zavier

in September 2013, than a remedy necessary to fulfil any legitimate legal interest of

SWS or to compensate it for losses it had actually sustained as a result of a breach

of contract. Finally, in my view, the orders sought and the effort that would be

involved are altogether disproportionate to the amount potentially involved. SWS’s

claim for this relief is dismissed.

(c)

Is Mr. Zavier a party to a Joint Venture Agreement?

[214] As I described in the Factual background, at trial, Mr. Zavier was adamant

that he did not sign a Joint Venture Agreement in respect of his purchase of a unit in

the Vernon Project, and he asserted that, on the copy that was part of Exhibit 16, his

initials and signature were forged. His evidence was contradicted by Mr. Gauthier.

[215] In my view, the conclusion that Mr. Zavier did in fact sign the Joint Venture

Agreement is the one that is more in harmony with the preponderance of

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probabilities that a practical and informed person would recognize as reasonable in

the circumstances.

[216] I recognize that there are some weaknesses in SWS’s evidence on this point.

One of these is Mr. Gauthier’s explanation for why the original notice of civil claim

failed to assert that Mr. Zavier (together with the Defendant-owners) was himself a

party to a Joint Venture Agreement. However, the weight of the evidence as a

whole supports the conclusion that Mr. Zavier signed a Joint Venture Agreement

when he purchased his unit in March 2011.

[217] Control over all of the units in the Vernon Project by SWS was an important

element of the investment and the means by which (ultimately) SWS would earn a

profit, namely, by selling all of the units in the two buildings when the market was

right. The Joint Venture Agreement, binding each of the end-purchasers, was the

mechanism to accomplish this. Mr. Zavier asserted that units purchased by Mr.

Gauthier’s parents were not subject to a Joint Venture Agreement, and Mr. Zavier

implied further that neither he nor individuals close to him, Mr. Gauthier and Mr.

Lanz who purchased units were required to do so. However, there was no reliable

evidence to corroborate Mr. Zavier’s assertion, and, on the contrary, Joseph Lanz

signed a Joint Venture Agreement. Moreover, there would be no obvious business

purpose for SWS to exclude some units from its control. I do not accept Mr. Zaveri’s

evidence.

[218] In addition, the Vendor’s Statement of Adjustments in relation to Mr. Zavier’s

purchase of his unit was initialled and signed by Mr. Zavier (on behalf of Four

Elements). The second debit item on the Statement of Adjustments is $29,000

described as “SWS Marketing Inc. – Joint Venture Agreement.” This shows that, like

all of the other purchases of units in the Vernon Project, Mr. Zavier’s purchase was

structured in the same way, and included a Joint Venture Agreement. Mr. Zavier’s

purchase was the last one to close, and by this time he had signed at least ten

Vendor’s Statements of Adjustments (for the sales that closed on March 18, 2011)

and eight Joint Venture Agreements. The only reasonable conclusion in those

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circumstances is that Mr. Zavier was very well aware of how the purchase of a unit

in the Vernon Project was structured, the reason for that structure, and that every

purchase involved the execution of a Joint Venture Agreement.

[219] I reject Mr. Zavier’s evidence that he signed everything without reading or

understanding anything, and was, essentially, oblivious to the contents of the

documents. It is, in my view, simply not credible and far too convenient. It is also

inconsistent with the evidence of Mr. Soto and Mr. Elez (whose evidence I accept)

about what they were told by Mr. Zavier about the structure of the investment. Mr.

Zavier’s evidence is not, in my view, in harmony with the preponderance of

probabilities that a practical and informed person would readily recognize as

reasonable in the circumstances.

[220] Accordingly, I find that Mr. Zavier signed the Joint Venture Agreement, a copy

of which is part of Exhibit 16, and he is a party to that Joint Venture Agreement.

(d)

Have the Joint Venture Agreements been terminated by an accepted

repudiation?

[221] SWS says that, in September 2013, the Defendants breached and repudiated

their respective Joint Venture Agreements by taking over management of their

respective units and, thereafter, completely excluding SWS and preventing it from

performing its obligations under the Joint Venture Agreements. Some Defendant-

owners have breached and repudiated their Joint Venture Agreements by entering

into Lease-Option Agreements. SWS says that the Defendants have continued up

to trial to breach and repudiate their Joint Venture Agreements. SWS says that it

never accepted the repudiation, and the Joint Venture Agreements have never been

terminated.

[222] On the other hand, the Defendants say that it was SWS who repudiated the

Joint Venture Agreements in September 2013, when Mr. Gauthier removed the

funds from the Old Account and transferred them to the New Account. They say

that, by the end of September, each of them accepted SWS’s repudiation by setting

up their own strata council (the Zavier Council) and taking over handling all of the

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management of their units themselves. The Defendants say that, as a result, the

Joint Venture Agreements were then terminated, and that (among other things) each

of them then had the right (if they so chose) to deal with Mr. Saxvik and enter into a

Lease-Option Agreement with 112.

[223] The law respecting repudiation is conveniently summarized by Cromwell J.

(concurring in the result) in Potter v. New Brunswick Legal Aid Services

Commission, 2015 SCC 10, at paras. 144-145:

[144] The term repudiation refers to the situation in which a breach of

contract by one party gives rise to the right of the other party to terminate the

contract and pursue the available remedies for the breach: [citation omitted].

This occurs when one party actually breaches the contract in some very

important respect and is said to thereby repudiate the contract. If the other

party “accepts” the repudiation, the contract is over. If the other party does

not accept the repudiation, the contract continues (subject to various other

doctrines). In either case, the non-breaching party can pursue the available

remedies which may vary depending on whether that party has accepted the

repudiation or affirmed the contract.

[145] There is a wealth of learning about the types of breach that constitute

repudiation. Without getting into the details, we may say in brief that a

breach is a repudiation of the contract if it is a breach of a contractual

condition or of some other sufficiently important term of the contract so that

there is a substantial failure of performance: [citations omitted].

[224] As Voith J.A. observed in Kaur v. Bajwa, 2020 BCCA 310, at para. 26:

[26]

A repudiation, whether anticipatory or performed, “will not effectively

terminate the contract unless the innocent party does accept the repudiation,

and is prepared to treat the contract as ended”: G.H.L. Fridman, The Law of

Contract in Canada, 6th ed. (Toronto: Carswell, 2011) at 595.

(i)

Did the Defendants repudiate?

[225] There is no doubt on the evidence that, beginning in September 2013, each

of the Defendants took deliberate steps to prevent SWS from continuing to perform

those services that it had performed since April 2011, and specifically, to deal with

ongoing maintenance and management of each unit, as described in the Joint

Venture Agreements. Each of the Defendants took steps to prevent SWS from

collecting rental income, and instead, collected rents themselves and directed

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tenants to stop paying rents to SWS. This had the predictable result that SWS no

longer had rental income available to it to pay for expenses, including monthly

mortgage payments, associated with the ownership of the units. Despite that, while

money was available in the New Account, SWS continued to pay expenses.

[226] I find that, in September 2013, Mr. Zavier and Mr. Lanz persuaded the

Defendant-owners that the Joint Venture Agreements had been terminated, that

SWS no longer had any rights in respect of their units, and that they were free to

deal with them as they pleased. I find further that the Defendant-owners believed

what they were told and acted accordingly. When Defendant-owners (such as Mr.

Rogiani) were struggling, Mr. Saxvik and 112 were then presented by Mr. Zavier as

a convenient solution to a Defendant-owner’s problems. This allowed 112 not only

to step in when a Defendant-owner wanted rid of what had turned out to be a very

troublesome investment, but also to acquire an option to purchase the unit at far less

than market value. The object was to deprive SWS of the ability to share in profits

on the sale of a unit under the terms of the Joint Venture Agreement.

[227] I find that by their actions, including establishing the “Zavier Council,” the

Defendants each repudiated their respective Joint Venture Agreements. I find

further that entering into a Lease-Option Agreement was also a breach of contract

and an act of repudiation of the Joint Venture Agreements. This finding affects Mr.

Rogiani, Mr. Lemon, Mr. Mythen, Mr. Zavier and Mr. Soto. 112 and Mr. Saxvik are

relying on rights that 112 acquired only because these Defendant-owners breached

and repudiated their contracts with SWS.

[228] I find that SWS did not accept these repudiations, and, despite the actions of

the Defendants, never treated the Joint Venture Agreements as terminated. SWS

maintained this position through closing submissions at trial.

(ii)

Did SWS repudiate?

[229] What then of the position advanced by the Defendants that SWS in fact

repudiated the Joint Venture Agreements in September 2013, and that they

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accepted the repudiation by (among other things) thereafter taking over

management of their units, to the exclusion of SWS? The Defendants say that,

since they accepted SWS’s repudiation, the Joint Venture Agreements were

terminated in September 2013.

[230] However, I must reject the Defendants’ position. SWS did nothing that could

qualify as a repudiation.

[231] On the facts, the change from the Old Account to the New Account had no

impact at all on the Defendant-owners or on Mr. Zavier in his capacity as an owner.

It cannot be construed as an act showing an intention on the part of SWS not to be

bound by the Joint Venture Agreements, or as a breach of any Joint Venture

Agreement. As Mr. Gauthier described (and I accept his evidence), he took

deliberate steps to ensure, for example, that the monthly mortgage payments that

had come out of the Old Account would, without interruption, be paid out of the New

Account, and SWS continued to pay expenses while money was available.

[232] Mr. Zavier’s and Mr. Lanz’s antagonism at this time toward Mr. Gauthier

seriously clouded their judgment. Their statements to the Defendant-owners about

what Mr. Gauthier had done – accusing him of stealing – were reckless and not true.

Their advice (which the Defendant-owners followed) to cease dealing with SWS and

take over management of their units on their own has had unhappy consequences

for the Defendant-owners. It led to the “hell” that Mr. Soto described. Their advice

that, going forward, there was “no JV” and that owners were completely free to do

whatever they wanted with their units without consequences was also wrong. Those

who followed that advice and entered into Lease-Option Agreements did so in

breach of the Joint Venture Agreements.

[233] SWS’s inability to continue to pay expenses, in accordance with its

obligations under each of the Joint Venture Agreements, was the result of the

actions of Mr. Zavier and Mr. Lanz, their false statements made to the Defendant-

owners that Mr. Gauthier had stolen money, their encouragement of the Defendant-

owners to cut ties with SWS, and their false claims (which the Defendant-owners

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accepted) that the Joint Venture Agreements were at an end. The Defendants

cannot rely on their own breaches of the Joint Venture Agreements to assert that the

Agreements have been terminated.

(iii) Conclusion: the Joint Venture Agreements have not been

terminated

[234] I find that, although the Defendants repudiated their Joint Venture

Agreements, SWS never accepted the repudiation. The Joint Venture Agreements

have not been terminated. Rather, the non-breaching party – SWS – has affirmed

the Agreements.

[235] As of trial, each of the Defendants was in breach of their respective Joint

Venture Agreement. Accordingly, SWS is entitled to a remedy for breach of

contract.

(e)

Are Defendants entitled to rescission of the Joint Venture Agreements

as a remedy?

[236] As an alternative to their argument that SWS repudiated the Joint Venture

Agreements, the Defendants argue that they are each entitled to an order that the

Joint Venture Agreements are rescinded. As I noted in the discussion of the

Pleadings above, this claim relied on misrepresentation (either fraudulent or

negligent) to provide the grounds.

[237] In closing argument, the Defendants advanced an additional argument to

support rescission. That argument has three aspects. First, the Defendants say that

SWS was in substantial breach of its obligations under the Joint Venture

Agreements because SWS never made the down payments it was obligated to

“secure.” The Defendants say that, as a result, they did not receive the benefit of

the down payments supposedly made for each unit. The second aspect is related to

the first, in that the Defendants argue that the Joint Venture Agreements are

unenforceable because of a failure of consideration, namely, SWS’s failure to make

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the down payments. Finally, the Defendants say that SWS is also guilty of fraud

because SWS falsely represented that the down payments were actually made.

[238] In my view, the Defendants’ alternative arguments must be rejected as the

facts do not support them.

[239] The remedy of rescission is discussed in Guarantee Co. of North America

v. Gordon Capital Corp., [1999] 3 S.C.R. 423, at para. 39:

[39]

. . . Rescission is a remedy available to the representee, inter alia,

when the other party has made a false or misleading representation. A useful

definition of rescission comes from Lord Atkinson in Abram Steamship Co. v.

Westville Shipping Co., [1923] A.C. 773 (H.L.), at p. 781:

Where one party to a contract expresses by word or act in an

unequivocal manner that by reason of fraud or essential error of a

material kind inducing him to enter into the contract he has resolved to

rescind it, and refuses to be bound by it, the expression of his

election, if justified by the facts, terminates the contract, puts the

parties in status quo ante and restores things, as between them, to

the position in which they stood before the contract was entered into.

[240] I find that, as of March 18, 2011, the purchase of units in the Vernon Project

by the Defendant-owners from Four Elements was completed, and title was

transferred to the Defendant-owners. In that regard, each of the Defendant-owners

received a credit against the purchase price in the amount shown on the Vendor’s

Statement of Adjustments and described as “SWS Marketing Inc. – Joint Venture

Agreement,” and that amount was debited from the purchase price. The balance of

the purchase price was paid by the mortgage financing “secured” or obtained by

each Defendant-owner. I find further that Four Elements has never pursued a legal

proceeding against any Defendant-owner on the basis that the portion of the

purchase price represented by the amount shown on the Vendor’s Statement of

Adjustments and described as “SWS Marketing Inc. – Joint Venture Agreement”

remained unpaid, and was due and owing. The only reasonable conclusion is that,

as of completion of each of the transactions, that amount was in fact credited against

the purchase price payable to Four Elements.

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[241] I find further that, as of March 31, 2011, Mr. Zavier became the legal owner of

unit 108. Four Elements has never pursued a legal proceeding against him on the

basis that the portion of the purchase price represented by the amount shown on the

Vendor’s Statement of Adjustments and described as “SWS Marketing Inc. – Joint

Venture Agreement” remained unpaid, and was due and owing. As with the other

Defendant-owners, the only reasonable conclusion is that, as of completion of the

transaction, that amount was in fact credited against the purchase price for unit 108.

[242] In short, there is no dispute that title to their respective units was transferred

to each of the Defendants in March 2011. This would not have happened if some

portion of the purchase price remained unpaid, as Four Elements was not

contractually bound to convey title unless the purchase price was paid. No

Defendant has been sued by Four Elements on the grounds that the Defendant

failed to pay the purchase price. The only reasonable inference to be drawn from

the fact that title was transferred is that the purchase price was paid. The

Defendants did in fact receive the benefit of the down payments that SWS was

responsible for “putting securing,” and SWS performed that part of the bargain

between it and the Defendants under the Joint Venture Agreements. There was no

failure of consideration.

[243] Even if there was some doubt about whether SWS performed its obligation of

“putting securing” the down payments (and in my view, there can be no doubt that it

did), there is no dispute that SWS gave good consideration by its promise to provide

management services under the Joint Venture Agreements. It in fact provided those

services, at least up until the Defendants repudiated the Joint Venture Agreements

and prevented SWS from continuing to manage the units. The provision of those

management services was a significant element of the bargain between SWS and

the Defendants.

[244] There was no representation by SWS in either the Joint Venture Agreement

or the statement of adjustments that down payments were “actually made,” in the

sense of cash actually changing hands. Rather, the obligation of SWS under the

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Joint Venture Agreements was one of “putting securing” the down payments. The

Vendor’s Statements of Adjustments show that Four Elements accepted a credit on

the purchase price for the corresponding amount in the Joint Venture Agreements.

In that way, SWS “secured” – in the sense of obtained – the down payment required

to close each of the purchase transactions.

[245] Finally, in addition to the problems with the pleading of the misrepresentation

claims described above, the elements necessary to establish the cause of action

have not been proved. Thus, the evidence did not support the conclusion that SWS

was liable for either negligent or fraudulent misrepresentation, so as to justify

rescission.

[246] It follows that none of the Defendants is entitled to rescission of the Joint

Venture Agreement.

(f)

SWS’s claims to a legal, or, alternatively, a beneficial, interest in each of

the units and the “SWS Advances Theory”

[247] In paras. 9, 11 and 12 of the Prayer for Relief, SWS seeks the following [all

sic]:

9.

A declaration that the transaction and the Joint Venture Agreements

create a Resulting Trust Relationship in each property, whereby the

property is registered in the names of the Joint Venture Defendants,

whereas the beneficiaries are the Joint Venture Partnerships, all of

which includes SWS Marketing Inc.

. . .

11.

An Order that the Plaintiff SWS is the legal owner of a 50% interest, or

such other interest as the Court may order, in each of the following

lands and premises [the legal descriptions of the Defendants’ units

are then set out].

12.

Further, or in the alternative, an Order that each of the Defendants

holds in trust a 50% ownership, or such other interest as the Court

may order, in each of the following lands in favour of the Plaintiff SWS

[the legal descriptions of the Defendants’ units are then set out].

[248] SWS relies on the Joint Venture Agreements to support the claims to a legal

and equitable interest in the Defendants’ units: see NCC Part 1, para. 81.

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[249] In paras. 13, 15 and 16 of the Prayer for Relief, SWS seeks orders

consequent on the orders sought in paras. 9, 11 and 12 being made. For example,

in para. 13, SWS seeks an order for sale of the units owned by the Defendants, and

that the net sale proceeds be paid into court, subject to further court order. In

closing argument, Mr. Palaschuk advised that this order was being sought under the

Partition of Property Act, R.S.B.C. 1996, c. 347 and specifically s. 6, which

provides:

Sale of property where majority requests it

6

In a proceeding for partition where, if this Act had not been passed, an

order for partition might have been made, and if the party or parties

interested, individually or collectively, to the extent of 1/2 or upwards in the

property involved request the court to direct a sale of the property and a

distribution of the proceeds instead of a division of the property, the court

must, unless it sees good reason to the contrary, order a sale of the property

and may give directions.

[250] The orders sought in paras. 9, 11 and 12 of the Prayer for Relief are premised

on SWS having proved facts alleged in Part 1 of the NCC to the effect that SWS

paid the down payments described in the Joint Venture Agreements, and that the

Joint Venture Agreements create a “legal and equitable interest” in favour of SWS.

[251] For example, in para. 33 of Part 1, SWS alleges [italics added]:

33.

The Defendant Randall Rogiani, entered into a Joint Venture

Agreement with SWS as a joint venture contributing $7,500 as part of

a down payment on units 101, 102 and 106 in the Building. SWS

contributed $87,000 towards the purchase of these units with the right

to manage the properties on a day to day basis, pursuant to the

agreement between these parties signed January 5, 2011 ("Randall

Joint Venture Agreement”).

[252] The same allegations (with the necessary changes) are made concerning the

remaining Defendants in paras. 34-36 and 38-41.

[253] Then, in para. 44, SWS pleads [underlining showing amendments omitted;

italics added]:

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[44]

Collectively, the Randall Joint Venture Agreement, Eduardo Joint

Venture Agreement, Gary Joint Venture Agreement, Sacha Joint Venture

Agreement, Burt Joint Venture Agreement, Fan Joint Venture Agreement,

Lanz Joint Venture Agreement, Zavier Joint Venture Agreement and Gordon

Joint Venture Agreement (the "Joint Venture Defendants”) involved a

payment by SWS of $323,000 towards the purchase price of the 11 Joint

Venture units in the Building. SWS secured the $323,000 payment to Four

Elements Ltd by way of the SWS Advances which included (i) the $239,000

Zavier House Payment, (ii) LS Projects Ltd in or around August 2010 using

SWS’s share of profits to make a payment of approximately $21,000 to the

Canada Revenue Agency to settle Odin Zavier's unpaid outstanding income

taxes so that mortgage financing could be obtained by LS Projects as its

board members were not permitted to have outstanding income taxes: and

(iii) prior to March 31, 2011 SWS had made unpaid advances and payments

to Four Elements/and or Odin Zavier of approximately $240,000. Four

Elements and Odin Zavier were not required to repay any of the SWS

Advances. Instead the cash proceeds already received by Four

Elements/Odin Zavier from the SWS Advances would be applied to the Down

Payments upon Closing of the 14 Contracts of Purchase and Sale signed

with the Owners. In exchange, SWS purchased an interest in the Vernon

Project by applying the SWS Advances to the down payments. The Vendor's

Statement of Adjustments for each of the 14 units which was signed by Odin

Zavier confirms this arrangement. The Buyer’s Statement of Adjustments for

each of the 14 units was signed by the Buyers confirms this arrangement.

Odin Zavier told the Defendant Owners that "SWS provided the down

payment".

[254] Everything in this paragraph after the first sentence is obviously evidence,

and does not belong in a pleading. Despite that, this paragraph shows how SWS

intended to demonstrate that it made “the payment” of $323,000, and “purchased an

interest” in the Vernon Project, so as to justify the orders sought in paras. 9, 11 and

12 of the Prayer for Relief. I note that, although the Vendor’s Statements of

Adjustments were in evidence at trial (as part of Exhibits 9-17), the buyer’s

statements of adjustments referred to in para. 44 was not.

[255] SWS then relies on the analysis in cases such as Cerenzie v. Duff, 2014

BCSC 1345 and Dhaliwal v. Ollek, 2012 BCCA 86 to support its argument that it is

entitled to the orders sought in paras. 9, 11 and 12. In closing submissions, for

example, Mr. Palaschuk relied on Dhaliwal for the proposition that a party who

makes an investment in real property is entitled to an equitable interest in that

property. He argued that here, SWS, through the down payments, made an

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investment and therefore is entitled to an equitable interest in the Defendants’ units

accordingly.

[256] In Cerenzie, the court was asked to address a dispute among family

members concerning the beneficial ownership of a home. There was nothing in

writing, and, at the opening of the Reasons, the trial judge (Davies J.) commented:

[1]

All too often, undocumented or under-documented inter-generational

ventures entered into amongst family members with the best of intentions

result in sorrow, when the opposite to what is intended transpires.

[257] The plaintiffs (the defendant’s daughter and son-in-law) initially asserted that

the purchase of the home was a joint venture. That argument was subsequently

abandoned, and the plaintiffs (who were not on title) claimed an interest in the

property on the basis of a resulting trust and unjust enrichment. As of trial, the

property had been sold, and the court was asked to decide whether the plaintiffs

were entitled to a share of the sale proceeds, based on their alleged contributions to

the purchase of the home, payment of their share of the mortgage by which its

purchase was financed, as well as their share of taxes, insurance and utilities

incurred from the time the home was purchased until it was sold.

[258] After reviewing the evidence in detail, Davies J. began his analysis as follows

[Mrs. Duff is the defendant]:

[76]

Before discussing in detail the principles involved in determining

whether the plaintiffs have established that they are entitled to a share of the

Sale Proceeds, I will repeat those findings of fact that I have found that give

rise to the consideration of those principles.

[77]

Firstly, I have found that the arrangement between Mrs. Duff and Mr.

and Mrs. Cerenzie related to the purchase and occupancy of the Buoy Drive

Home was not one of landlord and tenant as alleged by Mrs. Duff.

[78]

Secondly, I have found that notwithstanding that Mrs. Duff was

registered as the sole holder of title to the Buoy Drive Home, that registration

did not reflect the true intentions of the parties with respect to beneficial

ownership as evidenced by the payment of $5,000 of the purchase price by

Mr. and Mrs. Cerenzie; Mrs. Cerenzie’s guarantee of the $464,000 mortgage

by which the home was purchased (without which it could not have been

purchased); and, the payment by Mr. and Mrs. Cerenzie of $1,064 every two

weeks on that mortgage until the Buoy Drive Home was sold.

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[79]

Thirdly, those arrangements and those contributions by Mr. and Mrs.

Cerenzie were made on the understanding and with the expectation that the

Buoy Drive Home would be jointly occupied by Mrs. Duff and Mr. and Mrs.

Cerenzie’s family in separate suites until all of the Cerenzies’ three children

had completed high school.

[80]

Fourthly, during that time of joint occupation and repayment of the

mortgage by which the home had been purchased, Mr. and Mrs. Cerenzie

would gain equity in the property by their contribution to the reduction of the

amount outstanding on the mortgage and by an anticipated increase in value.

[81] Fifthly, there was no agreement reached concerning when the

contributions of Mr. and Mrs. Cerenzie to the acquisition and maintenance of

the Buoy Drive Home would equal those of Mrs. Duff, so that they would be

equal owners with her. There was also no agreement concerning the transfer

of legal interest to them when that state of equality was eventually reached.

[259] In the result, Davies J. concluded (at para. 107) that the plaintiffs were

entitled to a share of the sale proceeds by application of the equitable doctrine of

unjust enrichment and by imposition of a resulting trust. The sale proceeds were

allocated about 71% to Mrs. Duff and 29% to the plaintiffs.

[260] SWS says that, adopting the analysis found in Dhaliwal and Cerenzie, the

Joint Venture Agreements should be interpreted to create at least an equitable

interest in favour of SWS in each of the units equal to 50%.

[261] However, I do not agree.

[262] I will deal first with the contention by SWS that it in fact made a payment of

the down payments for the Defendants’ units, in the sum of $323,000. SWS relies

on this fact to support its claim for an interest (whether legal or equitable) in the

units, in other words, to support its claim to an interest in land.

[263] SWS does not say that, on closing of the purchases of the units, it in fact

advanced cash in the amount of the down payments. Indeed, there is no evidence it

did.

[264] Instead, SWS says that, prior to the completion of the sales of the units, it had

in fact made advances of $415,000 to Mr. Zavier and Four Elements, and these

advances were the means by which SWS “secured” the down payments, as required

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by Article III of the Joint Venture Agreements. I will describe that scenario as the

“SWS Advances Theory.” At trial, Mr. Gauthier was taken through documents and

explained how these advances had been made and the amounts. When asked

about them during his evidence, Mr. Zavier’s frequent response was that they

related to other projects and had nothing to do with the Vernon Project.

[265] In addition, through Exhibit 45, admissions were made by Mr. Zavier

concerning money paid by SWS.

[266] However, I am unable to draw the inference from this evidence that SWS

urges me to draw. In my opinion, what SWS has presented in the SWS Advances

Theory is a theory developed after-the-fact (and, specifically, after the hearing before

Sewell J.) with a view to providing some foundation for its claim to an interest in

land. I am not persuaded that the SWS Advances Theory describes what in fact

was happening at the time, or that any of SWS’s representatives (Mr. Gauthier in

particular) believed at the time this was the means by which SWS was “putting

securing” the down payments for the units in the Vernon Project.

[267] I have drawn this conclusion for the following reasons.

[268] First, the language used in the Vendor’s Statements of Adjustments does not

support the SWS Advances Theory. It does not say “received from SWS,” or

“advance previously received from SWS.” Instead, there is a reference to the Joint

Venture Agreement, and an amount debited from the purchase price.

[269] Second, the Joint Venture Agreement itself does not support the SWS

Advances Theory. SWS’s obligation in Article III is described in terms of “putting

securing” the down payment amount, not paying it. Provided SWS received a credit

from Four Elements for the amount of the down payment, that satisfied SWS’s

obligation to “secure” the down payment to complete purchase of a unit.

[270] Third, there is no reliable contemporaneous evidence either of the SWS

Advances Theory being discussed with or communicated to anyone, or that SWS

and Mr. Zavier (along with Four Elements) in fact concluded an agreement about the

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SWS Advances in relation to the Vernon Project. There are no contemporaneous

documents (such as an SWS directors’ resolution) or correspondence. Rather, the

SWS Advances Theory (if it existed at all at the relevant time) seemed to be known

to Mr. Gauthier alone.

[271] Finally, there is no reasonable explanation connecting the amounts of the

down payments with the amounts of the SWS Advances, and explaining how the

amounts of the down payments were arrived at in that context. Rather, the amounts

of the down payments are best explained in the context of: the “paper profit,” that is,

the difference between the average price per unit Four Elements was having to pay,

and the price at which it was selling the units to the end-purchasers; the low deposits

(down payments) required from the end-purchasers, something a number of the

Defendant-owners mentioned as an attractive feature of the investment; and the

need for the end-purchasers to qualify for mortgage financing. The amounts of the

down payments “secured” by SWS brought the amounts end-purchasers needed to

finance through a mortgage down to about 75% or 80% of the balance of the

purchase price. Mr. Gauthier explained that he put the Defendant-owners in touch

with a mortgage broker at TD, and in a later e-mail exchange with Mr. Zavier,

explained to Mr. Zavier that “75% for rental properties is the normal rate for big

banks.” This reflects the overall structure of the Vernon Project.

[272] The other fundamental problem for SWS is that this case is distinguishable

from both Dhaliwal and Cerenzie on the facts. The key fact is that here, SWS is a

party to an agreement, namely, the Joint Venture Agreement. That document

expresses the parties’ intentions. This, in my view, makes this case fundamentally

different from Dhaliwal and Cerenzie. SWS must rely on the Joint Venture

Agreement to ground its claim to “a legal and equitable interest” and its argument

based on a resulting trust. SWS recognizes this.

[273] I turn then to the interpretation of the Joint Venture Agreements. Do they,

properly construed, support SWS’s position?

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[274] Basic principles applicable to interpretation of a written agreement are

described, for example, in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC

53. At paras. 47-48, Rothstein J. wrote:

[47]

. . . The overriding concern is to determine “the intent of the parties

and the scope of their understanding” [citations omitted]. To do so, a

decision-maker must read the contract as a whole, giving the words used

their ordinary and grammatical meaning, consistent with the surrounding

circumstances known to the parties at the time of formation of the contract.

Consideration of the surrounding circumstances recognizes that ascertaining

contractual intention can be difficult when looking at words on their own,

because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which

they have to be placed. . . . In a commercial contract it is certainly

right that the court should know the commercial purpose of the

contract and this in turn presupposes knowledge of the genesis of the

transaction, the background, the context, the market in which the

parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[48]

The meaning of words is often derived from a number of contextual

factors, including the purpose of the agreement and the nature of the

relationship created by the agreement . . .

[275] Rothstein J. continued, at para. 57:

[57]

While the surrounding circumstances will be considered in interpreting

the terms of a contract, they must never be allowed to overwhelm the words

of that agreement [citations omitted]. The goal of examining such evidence is

to deepen a decision-maker’s understanding of the mutual and objective

intentions of the parties as expressed in the words of the contract. The

interpretation of a written contractual provision must always be grounded in

the text and read in light of the entire contract [citation omitted]. While the

surrounding circumstances are relied upon in the interpretive process, courts

cannot use them to deviate from the text such that the court effectively

creates a new agreement [citation omitted].

[276] Evidence of a party’s subjective intentions or understanding of terms in a

written contract is irrelevant: Shaw Production Way Holdings Inc. v. Sunvault

Energy, Inc., 2018 BCSC 926, at para. 142. Thus, for example, both Mr. Gauthier’s

and Mr. Elez’s evidence about their understanding of how proceeds of sale of a unit

would be distributed under the Joint Venture Agreement was irrelevant, and cannot

support the SWS Advances Theory.

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[277] In my opinion, the Joint Venture Agreement cannot be interpreted to create a

legal or equitable interest in any unit in favour of SWS. There is no express term to

that effect, and s. 10.03 (the “Integrated Agreement” provision) is also against

SWS’s position. Moreover, the profit-sharing arrangement described in Article IV

does not require that SWS have either a legal or an equitable interest in a unit.

Unlike the plaintiffs in Cerenzie, SWS does not need to establish an interest in land

in order to be entitled to a share of the profits, including on a sale of the unit. SWS’s

rights are spelled out in the Joint Venture Agreement, and do not include an interest

in land. The position SWS advances is not only not supported by the terms of the

Joint Venture Agreement, it is contrary to those terms.

[278] The result is that the orders requested in paras. 9, 11 and 12 of the Prayer for

Relief must be refused. Since the orders sought in paras. 13, 15 and 16 are

dependent on SWS having established an interest in land, they must also be

refused. The CPL, and the later certificate of pending litigation registered against

Mr. Zavier’s unit, must also be cancelled.

[279] However, SWS has established that the Defendants breached the Joint

Venture Agreements. Its failure to establish entitlement to an interest in land does

not mean that it is not entitled to a remedy for breach of contract.

(g)

The claim for judgment against the Defendants for the amounts of the

down payments in the Joint Venture Agreements

[280] In para. 14 of the Prayer for Relief, SWS sought (in the alternative to the

orders requested in paras. 9, 11 and 12) the following:

14.

Judgment against the Joint Venture Defendants in the following

amounts:

a

b

c

d

e

f

$87,000 under the Randall Joint Venture Agreement;

$29,000 under the Eduardo Joint Venture Agreement;

$29,000 under the Gary Joint Venture Agreement;

$29,000 under the Zavier Joint Venture Agreement;

[deleted];

$31,000 under the Burt Joint Venture Agreement;

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g

h

i

$29,000 under the Fan Joint Venture Agreement;

$29,000 under the Gordon Joint Venture Agreement;

$29,000 under the Lanz Joint Venture Agreement

[281] The legal justification to support this claim was never well articulated. The

claim for judgment appeared to be related to a position advanced by Mr. Gauthier in

his evidence-in-chief concerning the manner in which proceeds of sale of a unit

would be distributed between SWS and a Defendant. According to Mr. Gauthier,

any charges (for example, the Defendant’s mortgage) secured against the property

would be paid first out of the gross proceeds of sale. Next, SWS would be paid the

down payment amount. That would then leave the net proceeds – or profits – to be

allocated 50% to the Defendant and 50% to SWS, as described in Article IV.

[282] However, there is no term in the Joint Venture Agreement requiring payment

to SWS of the “down payment” amount before profits are allocated.

[283] This claim cannot succeed. There is nothing in any of the Joint Venture

Agreements that obligates any Defendant to pay SWS the amount of the down

payment SWS was “putting securing,” and the terms of the Joint Venture

Agreements cannot be interpreted to create such an obligation. Rather, the Joint

Venture Agreement provided (in Article IV) that the parties will share the profits and

losses, 50% each. That was what SWS contracted to receive.

[284] I also note the allegation in para. 80 of the “Facts” in the NCC, that these

amounts are included in the “loss, damage and expense” that SWS claims it has

sustained as a result of the Defendants’ breach of the Joint Venture Agreements. In

my view, the request for judgment cannot succeed on that basis either. “Securing”

the down payment was part of the consideration SWS agreed to give under the JV

Agreements. It cannot be converted into “damages” for breach of contract.

[285] Accordingly, the claim for judgment is dismissed.

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(h)

What remedy should be granted for breach of the Joint Venture

Agreements?

[286] I turn then to the question of remedy for breach of the Joint Venture

Agreements.

[287] Generally speaking, the normal remedy for a breach of contract is damages,

with the object of putting the innocent party in the position it would have been in had

the contract been performed: see G.H.L. Fridman, The Law of Contract in Canada,

4th ed. (Toronto: Carswell, 1999) at p. 787.

[288] However, SWS is seeking an order for specific performance of the Joint

Venture Agreements. In closing submissions, SWS’s request was framed in terms

of an order for the sale of the Defendants’ units, with SWS having conduct of sale

and with the net proceeds to be paid into court subject to further court order. To

justify an order for specific performance, SWS says that the location of the Vernon

Project makes it unique so damages will not be an adequate remedy, and an

accurate assessment of damages is not possible. SWS says further that, as a

practical matter, the Defendants would have no way to compensate SWS for

damages without the sale of their units.

[289] In support of its position that specific performance is the appropriate remedy

here, SWS cites the discussion of Semelhago v. Paramadevan, [1996] 2 S.C.R.

415, by Newbury J.A. in Youyi Group Holdings (Canada) Ltd. v. Brentwood

Lanes Canada Ltd., 2014 BCCA 388, at paras. 44 and 56 [underlining in original]:

[44]

The implications of Semelhago were discussed at length in 2004 in

United Gulf [United Gulf Developments Limited v. Iskandar, 2004 NSCA 35],

supra. As noted earlier, it was an appeal from a summary judgment

dismissing the appellant’s claim for specific performance. The Court of

Appeal emphasized that the question of whether damages will be an

adequate remedy in any given case is a largely factual inquiry that is broader

than an assessment of the uniqueness of the land in question:

…. the applicability of the specific performance remedy will not

depend entirely on the issue of uniqueness. As indicated in

Neighbourhoods of Cornell Inc. v. 14401066 Ontario Inc. [(2003) 11

R.P.R. (4th) 294 (Ont. S.C.)], uniqueness is only part of the equation.

The essential question is whether damages are capable of

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compensating the loss and whether accurate assessment of damages

will be possible, or whether the exercise will be chiefly speculative and

conjectural. [At para. 19; emphasis added.]

. . .

[56]

With respect, the determination of whether damages will provide an

adequate or appropriate remedy is largely fact-dependent and should not be

determined by the application of a “presumption of replaceability” of the

property in question. . . .

[290] There was nothing in the evidence that persuaded me that an accurate

assessment of damages is not possible, so as to justify an order for specific

performance. There is a distinction made between cases where the nature of the

damage proven renders an assessment difficult though necessary, and those where

sufficient evidence that could have been adduced to prove the claim has not been

called. Where a plaintiff has failed to prove that it suffered any damages from a

breach of contract, and where the absence of evidence makes it impossible to

assess damages, the plaintiff will be entitled to nominal damages only: see Shaw v.

Sunvault, at para. 211.

[291] SWS cited no authority for the proposition that a defendant’s ability to pay an

award for damages for breach of contract was a relevant factor. In any event, since

SWS did not, in its case, attempt to quantify the amount of its loss, it would be mere

speculation that a particular Defendant would not have an ability to pay. With

respect to an award of damages, the Defendants cannot be treated as a single,

undifferentiated entity. Rather, the liability for, and assessment of, damages is

individual.

[292] More fundamentally, what is the loss that SWS says it has suffered as a result

of the Defendants’ breach and that cannot be compensated by an award of

damages? This question was largely overlooked at trial, both in the presentation of

the evidence and in submissions. Is it a loss of opportunity to receive 50% of the net

profits on a sale of a unit, and, if so, what is that worth? Or is it something else? A

unit, or all of the units sold en bloc, would have a market value as of trial. That could

certainly be measured. What should be done about the Lease-Option Agreements,

given that 112 is not a party to this action?

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[293] SWS tendered no evidence concerning either the market value as of trial of

any Defendant’s unit, or of the two buildings if sold together (assuming, for the sake

of argument, that is something I could order). SWS did not present either evidence

or an argument about how the court might go about assessing damages for a

Defendant’s breach of contract, if I rejected its argument that specific performance

should be ordered, or as an alternative to specific performance. It did not tender

evidence concerning any profits it claims to have lost as a consequence of a

Defendant’s breach of contract. SWS did not tender evidence of the value as of trial

of the opportunity to receive 50% of the profits on the sale of a unit (assuming that

would be the appropriate measure of damages). It did not make an argument for

damages in the alternative, in the event I rejected its position concerning its

entitlement to a legal or equitable interest in the Defendants’ units and to an order

for sale, apart from seeking “judgment” for the amounts of the down payments.

[294] On the other hand, Mr. Canofari began his closing submissions on behalf of

the Defendants by stating that “Everyone wants the units to be sold.” In that respect,

the Defendants agreed with SWS, so that there was consensus on a very important

issue relevant to remedy. The Joint Venture Agreements provide (in para. 1.01) for

the JV and SWS to “jointly decide to sell the property.” Profits would then be shared

as described in para. 4.01.

[295] Otherwise, like SWS, the Defendants did not advance an argument about

how the court should go about assessing SWS’s damages if I rejected their

arguments on repudiation and rescission, or about the appropriate remedy for

breach of the Joint Venture Agreements.

[296] For their parts, Mr. Soto and Mr. Elez expressed a preference for sale of their

units.

[297] Based on the closing submissions, I conclude that SWS and each of the

Defendants have jointly decided to sell that Defendant’s unit. However, I was not

provided with the submissions necessary to make a final order in that respect.

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[298] In those circumstances, I have concluded that I cannot make a final order,

and it would not be just to make such an order, without receiving further

submissions. Accordingly, I direct that, within 30 days of the date of these Reasons,

counsel take the necessary steps to schedule a one-day hearing before me for the

purpose of providing further submissions, based on the evidence tendered at trial,

on the question of the remedy for the breaches of the Joint Venture Agreements that

I have found. Subject to the availability of counsel and the court, the hearing should

be set for a date within 60 days of the date of these Reasons.

(i)

SWS’s claims for orders that all of the rights and duties of the

Defendants that arise under the Strata Property Act be assigned to SWS

“forthwith,” and for a permanent injunction preventing any of the

Defendants from involving themselves in the affairs of the Vernon

Project

[299] In the Prayer for Relief, SWS seeks the following:

5.

An Order that all of the rights and duties of [the Defendants] that arise

under the Strata Property Act, be assigned to SWS forthwith.

6. An injunction enjoining, [the Defendants] from involving themselves in

any of the activities, responsibilities, meetings or any function whatsoever of

the Owners Strata Plan KAS 1886 or the Building.

[300] SWS says that it is entitled to these orders based on the terms of the Joint

Venture Agreements, specifically Article V. SWS says that the orders sought, and

specifically the injunction, are necessary because without them, SWS will suffer

irreparable harm.

[301] In support of its position concerning the granting of a final injunction, SWS

cites Cambie Surgeries Corp. v. British Columbia (Medical Services

Commission), 2010 BCCA 396, as setting out the test. There, Groberman J.A.

wrote, at paras. 27-28:

[27]

Neither the usual nor the modified test discussed in RJR-MacDonald

has application when a court is making a final (as opposed to interlocutory)

determination as to whether an injunction should be granted. The issues of

irreparable harm and balance of convenience are relevant to interlocutory

injunctions precisely because the court does not, on such applications, have

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the ability to finally determine the matter in issue. A court considering an

application for a final injunction, on the other hand, will fully evaluate the legal

rights of the parties.

[28]

In order to obtain final injunctive relief, a party is required to establish

its legal rights. The court must then determine whether an injunction is an

appropriate remedy. Irreparable harm and balance of convenience are not,

per se, relevant to the granting of a final injunction, though some of the

evidence that a court would use to evaluate those issues on an interlocutory

injunction application might also be considered in evaluating whether the

court ought to exercise its discretion to grant final injunctive relief.

[302] The Defendants say that the Joint Venture Agreement, and specifically Article

V, cannot be interpreted in the manner SWS argues. They say that Article V does

not refer to restricting the voting rights of an owner in connection with the affairs of

the Strata Corporation, but refers only to the joint venture and its business. The

Defendants say that there is nothing in the Joint Venture Agreements that would

permit SWS to take over the rights of an owner to vote on matters relating to the

Strata Corporation, or that could be interpreted as the owners relinquishing such

rights. The Defendants say further that no final injunction should be granted.

[303] I have found that the Joint Venture Agreements have not been terminated

and that SWS is entitled to a remedy for breach of contract. In that sense, SWS has

established its legal rights.

[304] The basic principles applicable to the interpretation of a written agreement

have been summarized above. When I apply those principles, I conclude that the

parties to the Joint Venture Agreement intended that SWS was to have full,

exclusive and complete authority and discretion in the management and control of

the business of the joint venture. They stated those intentions expressly in the

words used in Article V. Furthermore, I agree with SWS that the parties intended

that business to include all matters relating to the Strata Corporation. The factual

matrix in which the Joint Venture Agreement was made included that each unit was

strata-titled and part of the Strata Corporation, and participation in the Strata

Corporation was an aspect of the business of the joint venture. In that light, on a

proper interpretation, the parties intended that SWS’s authority in the management

and control of the business extend to matters relating to the Strata Corporation,

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consistent with the commercial and business purpose of the Joint Venture

Agreement. I reject the Defendants’ interpretation of Article V as too narrow, and

one which fails to give full effect to the parties’ intentions as reflected by the express

words used in the Joint Venture Agreement.

[305] However, in my view, the orders sought are neither necessary nor

appropriate. SWS did not cite any authority that would give me the jurisdiction to

“assign” rights and duties. The matter of voting in connection with Strata

Corporation matters has been addressed through s. 27(7) of the November 2020

Bylaws. I will discuss the Defendants’ challenge to its enforceability below, in

connection with the Counterclaim.

[306] While, strictly speaking, SWS does not need to demonstrate irreparable harm,

it did little to demonstrate any particular harm was likely to be suffered unless the

orders requested were made, much less irreparable harm. On the evidence, the

Defendant-owners had been completely satisfied by the management and state of

affairs that existed pre-September 2013. There was little in the evidence to support

a conclusion that, as of trial, any of the Defendant-owners had any inclination at all

to involve themselves in the affairs of the Strata Corporation, or that, without an

injunction being pronounced, the Defendant-owners were likely to do so. Thus, the

facts as of trial do not support the relief requested. That Mr. Saxvik makes inquiries

of the Strata Corporation and the Gauthier Council is not, in my opinion, sufficient to

warrant the orders requested. The antagonism that has existed between Mr.

Gauthier on the one hand, and Mr. Zavier and Mr. Lanz on the other hand, cannot, in

my opinion, justify a permanent injunction to be ordered, in the terms requested,

against the Defendants.

[307] The request for these orders is, accordingly, refused.

(j)

Can judgment be pronounced against the Defendant Burt Petersen, who

has filed a consumer proposal?

[308] Before the trial began, SWS had given the Defendant Burt Petersen notice

under Rule 12-5(21) that it wished to call him as an adverse witness, as part of

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SWS’s case. However, Mr. Petersen did not attend in response to the notice.

Therefore, SWS sought to have orders made and judgment pronounced against Mr.

Petersen, relying on Rule 12-5(25), which provides:

If a person called as a witness in accordance with subrule (21) . . . refuses or

neglects to attend at the trial, to be sworn or to affirm, to answer a proper

question put to the person or to produce a document that the person is

required to produce, the court may do one or more of the following:

(a)

grant judgment in favour of the party who called the witness;

. . .

[309] On the fourth day of trial, counsel for the Defendants advised that Mr.

Petersen had filed a consumer proposal (the “Proposal”) under the Bankruptcy and

Insolvency Act, R.S.C. 1985, c. B-3 (the “BIA”). The Proposal was filed in

November 2021, and a copy is attached as Exhibit “C” to Mr. Gauthier’s Affidavit

No. 76 filed March 1, 2022.

[310] Pursuant to directions I gave during the trial, SWS filed a notice of application

on March 4, 2022, setting out the orders that it was seeking against Mr. Petersen.

Like SWS’s written closing submissions, the orders sought went beyond those that

had been pleaded in the Prayer for Relief. An application response was filed on

behalf of Mr. Petersen on March 7, 2022. Notice of SWS’s application was given

(pursuant to my directions) to the administrator of the Proposal, who took no position

on the application.

[311] I note that, pursuant to Exhibit 38, formal admissions were made on behalf of

Mr. Petersen, namely that: he signed the Joint Venture Agreement which is part of

Exhibit 14; and he complied with the Joint Venture Agreement until September 2013,

when he took the position that SWS had breached the Joint Venture Agreement and

thereafter ceased to comply with the Joint Venture Agreement. The evidence also

showed that TD Bank provided mortgage financing for the purchase of the unit, and

a mortgage in favour of TD Bank is registered on title. Thus, TD Bank is a secured

creditor of Mr. Petersen.

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[312] Submissions concerning Mr. Petersen were made during closing argument at

trial.

[313] In brief, SWS argues that it is entitled to judgment against Mr. Petersen on

the grounds of his failure to respond to the notice given under Rule 12-5(21), and

that the Proposal does not operate as a stay of proceedings. SWS’s notice of

application mentions other complaints about Mr. Petersen (for example, his failure to

attend for examination for discovery). However, counsel confirmed during

submissions that SWS was relying on Mr. Petersen’s failure to respond to the notice

given under Rule 12-5(21) as the grounds on which it was seeking judgment.

[314] With respect to the effect of the Proposal, SWS relies on a February 26, 2002

communication from Mr. Petersen’s administrator, a copy of which is attached as

Exhibit “B” to Mr. Gauthier’s Affidavit No. 76, and which reads in relevant part:

I can advise that as Administrator of Burt Petersen’s consumer proposal we

take no interest in the litigation relating to the Vernon Property. Mr.

Petersen’s proposal specifically stated that the Vernon Property was being

returned to the secured creditors. As you are no doubt aware, no assets vest

in an Administrator of a Consumer Proposal and as such we have no interest

in the Vernon property and are not a party to the action your are undertaking.

[315] SWS argues that, not only does the Proposal specifically exclude Mr.

Petersen’s unit, but SWS is a secured creditor under the BIA by virtue of the CPL.

Therefore, in the submission of SWS, it is entitled to pursue relief in this action

against Mr. Petersen.

[316] One of the reasons Mr. Peterson’s unit is excluded from the Proposal is

because TD Bank has the mortgage secured against it. The administrator’s

comments that the “Vernon Property was being returned to secured creditors” needs

to be read in that context.

[317] Counsel for SWS cited no authority for the proposition that mere registration

of a certificate of pending litigation transformed either a creditor or a person with a

claim to an interest in land into a secured creditor under the BIA. The definition of

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“secured creditor” in s. 2 of the BIA does not support the proposition advanced by

SWS, and I reject it. SWS is not a secured creditor of Mr. Petersen.

[318] On the other hand, counsel for Mr. Petersen argues that no order should be

made under Rule 12-5(25) as SWS has failed to demonstrate that Mr. Petersen

could have provided material evidence beyond the formal admissions made on his

behalf at trial. Counsel argues further that, following the filing of the Proposal, all

proceedings against Mr. Petersen are stayed, pursuant to s. 69.2 of the BIA.

[319] I would not exercise my discretion to grant judgment against Mr. Petersen

under Rule 12-5(25). SWS has failed to show Mr. Petersen could have provided

material evidence beyond the formal admissions made on his behalf. In that light,

his attendance at trial was unnecessary. SWS says that it required Mr. Petersen to

attend so that he could be questioned about the allegations in the RCC concerning

misrepresentations in relation to the Joint Venture Agreement. However, these were

issues on which the Defendants had the burden of proof. Mr. Petersen’s failure to

attend trial did not create any prejudice for SWS. Rather, it meant that there was no

evidence from Mr. Petersen to support the allegations made by him in the RCC.

[320] I turn then to the effect of the filing of the Proposal. This is necessary

because SWS could still seek relief against Mr. Petersen based on the admissions

made, specifically, the admissions made in Exhibit 38.

[321] Section 69.2 of the BIA provides:

69.2 (1) Subject to subsections (2) to (4) and sections 69.4 and 69.5, on the

filing of a consumer proposal under subsection 66.13(2) or of an amendment

to a consumer proposal under subsection 66.37(1) in respect of a consumer

debtor, no creditor has any remedy against the debtor or the debtor's

property, or shall commence or continue any action, execution or other

proceedings, for the recovery of a claim provable in bankruptcy until

(a) the consumer proposal or the amended consumer proposal, as the

case may be, has been withdrawn, refused, annulled or deemed

annulled; or

(b) the administrator has been discharged.

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[322] Section 69.4 of the BIA permits a creditor to apply to set aside the statutory

stay. However, no such application has been made by SWS. Rather, its position

was that the stay did not apply at all.

[323] SWS cannot succeed in a claim to an interest in land respecting Mr.

Petersen’s unit, for the same reasons that it could not succeed against other

Defendants. SWS is left with a personal claim against Mr. Petersen, which is

unliquidated and has not yet been reduced to a judgment. In my view, such a claim

is, at this time, stayed pursuant to s. 69.2 of the BIA.

7.

The Counterclaim: Are the Defendants entitled to a remedy under the

Strata Property Act?

[324] I turn then to the Counterclaim.

[325] The Defendants say that, since February 8, 2021, the Strata Council has

acted in ways and made decisions that are significantly unfair to them. The

Defendants say that the intention of the Branch Reasons was that the Gauthier

Council would continue only until the “free and fair” election of a new council. They

rely in particular on para. 4 of the Branch Reasons, where Branch J. said:

[4]

As is often the case, the issues narrowed over the course of the

hearing. In particular, both sides agreed that it was appropriate that this court

issue an order requiring a strata meeting as soon as possible in order to

finally bring the two camps together in the same room for a “free and fair”

election of a new council. . . .

[326] The Defendants say that, as a result of these comments, they had a

reasonable expectation that, thereafter, they would be entitled to vote at the next

Strata Corporation meeting, including on the election of Strata Council members.

[327] The Defendants say that, at the meeting called and held on March 12, 2021,

only four (out of 14) units were allowed to vote. This is not disputed. At that

meeting, Mr. Gauthier, who was acting as chair, refused to allow units who had

unpaid strata fees to vote, relying on s. 26(4) of the November 2020 Bylaws. As a

result, none of the Defendants’ units were allowed to vote. This is also not disputed.

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[328] The Defendants say that, thereafter, the Gauthier Council has held itself out

as the duly elected Strata Council. It has set a budget and levied strata fees for the

Defendants’ units, without affording the Defendants (or Mr. Saxvik, the

representative of 112 and their proxy) the ability to participate in the affairs of the

Strata Corporation.

[329] The Defendants say further that the inclusion in the November 2020 Bylaws

of s. 27(7) limits their ability to participate in the affairs of the Strata Corporation, and

gives SWS de facto control. The Defendants say that, by including s. 27(7) in the

November 2020 Bylaws, the Gauthier Council wrongfully relied on Article V of the

Joint Venture Agreements and misinterpreted that term of the Agreement.

[330] The Defendants say, in addition, that Bylaw s. 27(7) contravenes sections 31

and 32 of the Strata Property Act. Those sections deal with the standard of care

required of a strata council member and conflicts of interest. They say that the

Gauthier Council has a conflict of interest because of Mr. Gauthier’s interest in SWS,

and Mr. Gauthier and the Gauthier Strata Council have preferred the interests of

SWS over the interests of the Strata Corporation. The Defendants say that Bylaw

s. 27(7) is therefore unenforceable by virtue of Strata Property Act s. 121(1)(a),

which provides that:

A bylaw is not enforceable to the extent that it

(a)

contravenes this Act . . .

[331] The Defendants say next that the Gauthier Council has failed to abide by the

requirements of Strata Property Act s. 48 and the November 2020 Bylaws with

respect to quorum required for a valid meeting. They say for a quorum, five eligible

voters must be in attendance either in person or by proxy, and for meetings called by

the Gauthier Council since February 2021, there have been only four eligible voters

(represented by the two units owned by William and Marlene Gauthier, the SWS unit

and Mr. Elez’s unit).

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[332] In addition, I noted above Mr. Saxvik’s complaints about not receiving

complete information in relation to units where 112 has a Lease-Option Agreement,

the Strata Corporation’s reluctance (or refusal) to recognize powers of attorney he

holds for Defendants, and the Strata Corporation’s response to his requests for

Form Fs.

[333] The Defendants say that by this conduct they have been treated in a manner

that is significantly unfair, and they are therefore entitled to remedies under s. 164

and 165 of the Strata Property Act.

[334] As of closing submissions, the relief sought by the Defendants (in addition to

costs) was as follows:

(a)

a declaration that, since February 8, 2021, Mr. Gauthier, William

Gauthier and Sacha Elez, while acting as the council for the Strata

Corporation, have engaged in or may engage in significantly unfair

actions (Counterclaim Orders, para. 1);

(b)

(c)

a declaration that s. 27(7) of the November 2020 Bylaws is not

enforceable (Counterclaim Orders, para. 3);

an order that, within 30 days, a special general meeting be called and

held, an election will take place and all owners of the Strata

Corporation will be permitted to vote, regardless of bylaws to the

contrary, such meeting to be administered by either Rancho

Management, Strata Management or Pacific Quorum (Counterclaim

Orders, para. 7);

(d)

an order that the new council elected at the special general meeting

will prepare a consolidated set of financial statements for the year

ended December 21, 2020 and the seven months to July 31, 2021, to

incorporate and combine all transactions on behalf of the Strata

Corporation by either the Zavier Council or the Gauthier Council since

January 1, 2013 (Counterclaim Orders, para. 9); and

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(e)

Page 94

the Defendants and SWS will submit within 10 days to the new council

all strata-related accounting information (including, without limitation,

general ledgers, cheques, bank statements, invoices, receipts or other

proof of payment of any Strata Corporation expense and financial

statements) from January 1, 2013 to July 31, 2021 (Counterclaim

Orders, para. 10).

The orders sought in (c), (d) and (e) are dependent on the orders sought in (a) and

(b) being granted.

[335] During closing submissions, the Defendants abandoned their request for an

administrator to be appointed under s. 174 of the Strata Property Act. Among the

problems with this request were: the lack of evidence about the qualifications and

experience of the person(s) being proposed to be appointed as administrator; the

absence of evidence from the person(s) being proposed about their willingness to be

appointed; and the absence of evidence about the probable costs associated with

such an appointment. The latter is a concern because this is a small strata

corporation, with only 14 units. The evidence is undisputed that the Defendants are

not current in terms of payment of strata fees, and Mr. Saxvik was quite candid that

he is not paying them for units where 112 has Lease-Option Agreements. The

Defendants did not present evidence that would have permitted me to assess

whether the anticipated costs of the appointment of an administrator could be

justified by the anticipated benefits. As the request for the appointment of an

administrator was almost certain to fail, the Defendants and counsel made the

appropriate decision to abandon the request.

[336] Sections 164 and 165 of the Strata Property Act address preventing or

remedying unfair acts. These sections provide:

Preventing or remedying unfair acts

164 (1) On application of an owner or tenant, the Supreme Court may make

any interim or final order it considers necessary to prevent or remedy a

significantly unfair

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(a) action or threatened action by, or decision of, the strata

Page 95

corporation, including the council, in relation to the owner or tenant, or

(b) exercise of voting rights by a person who holds 50% or more of the

votes, including proxies, at an annual or special general meeting.

(2) For the purposes of subsection (1), the court may

(a) direct or prohibit an act of the strata corporation, the council, or the

person who holds 50% or more of the votes,

(b) vary a transaction or resolution, and

(c) regulate the conduct of the strata corporation's future affairs.

Other court remedies

165 On application of an owner, tenant, mortgagee of a strata lot or

interested person, the Supreme Court may do one or more of the following:

(a) order the strata corporation to perform a duty it is required to

perform under this Act, the bylaws or the rules;

(b) order the strata corporation to stop contravening this Act, the

regulations, the bylaws or the rules;

(c) make any other orders it considers necessary to give effect to an

order under paragraph (a) or (b).

[337] The term “significantly unfair” in s. 164 encompasses conduct that is

oppressive or unfairly prejudicial. “Oppressive conduct” has been interpreted to

mean conduct that is burdensome, harsh, wrongful, lacking in probity or fair dealing,

or has been done in bad faith. “Unfairly prejudicial” conduct has been interpreted to

mean conduct that is unjust and inequitable. See Omnicare Pharmacy Ltd. v. The

Owners, Strata Plan LMS 2854, 2017 BCSC 256, at para. 147 (citing Reid v. The

Owners, Strata Plan LMS 2503, 2001 BCSC 1578, at paras. 11-13; aff’d 2003

BCCA 126).

[338] More recently, in King Day Holdings Ltd. v. The Owners, Strata Plan LMS

3851, 2020 BCCA 342, Dickson J.A. (for the court) wrote, at paras. 88-89:

[88]

As is apparent from the foregoing, the correct test for significantly

unfair conduct in s. 164 is uncontroversial. It is as stated in Reid and fully

endorsed in Dollan [Dollan v. The Owners, Strata Plan BCS 1569, 2012

BCCA 44], namely, conduct that is oppressive in that it is burdensome, harsh,

wrongful, lacking in probity or fair dealing, or done in bad faith, or conduct

that is unfairly prejudicial in that it is unjust or inequitable. As I read Justice

Garson’s reasons in Dollan, in her view where the significant unfairness in

question involves allegedly oppressive conduct, a modified reasonable

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expectations test should form part of the inquiry into whether the impugned

conduct meets the s. 164 definition. I agree with this approach, . . .

[89]

That being said, I also agree with Justice D. Smith’s view [in Dollan]

that application of a modified reasonable expectations test should not be

permitted to complicate unduly a significant unfairness inquiry or misdirect its

focus. However, I do not share her concern that application of the modified

test would have these effects. In my view, consideration of the reasonable

expectations of a petitioner, assessed in the manner described by Justice

Garson, is simply one relevant factor to be taken into account in the conduct

of an inquiry under s. 164.

[339] In Kunzler v. The Owners, Strata Plan EPS 1433, 2021 BCCA 173, Grauer

J.A. observed, at para. 79:

[79]

As the cases make clear, the analysis is heavily context-dependent

and turns on the individual facts of each case. But it begins with the question

of what, in law, constitutes significant unfairness.

[340] Before turning to the specific complaints raised by the Defendants, I note that,

although s. 165 of the Strata Property Act was mentioned, the focus of the

arguments was on s. 164. This was not surprising given the outcome of the Appeal.

The request for an order that, within 30 days, a special general meeting be called

and held might be an order that could be made under s. 165(a), if the Strata

Property Act, bylaws or rules required such a meeting and it was not being called.

However, that is not the case here. Section 165 is more tightly focused, and

empowers the court to make what may be described as a mandatory injunction

compelling the strata corporation to perform duties required of it by the Act, bylaw or

rules (s-s. (a)), or a simple injunction enjoining the strata corporation from

contravening the Act, bylaws or rules (s-s. (b)): see Appeal Reasons, at para. 37

(citing Jiwan Dhillon & Co. Inc. v. Gosal, 2010 BCCA 324, at para. 19).

[341] Later in the Appeal Reasons, Saunders J.A. said [underlining added]:

[41]

In my view, neither ss. 165(a) or (c) allow for an order calling a special

general meeting in the circumstances presented. Section 165(a) does not do

so because it requires that the order made by the judge relate to a duty the

strata corporation is required to perform under the Act. There is no provision

in the Act imposing a duty to call this special general meeting. Section 42

allows the strata corporation to hold a special general meeting, it does not

require one. Section 43 provides that persons holding at least 20% of votes

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may demand a special general meeting, but such a demand was not made in

this case. In my view, it simply cannot be said that the Gauthier Council had

a duty to call a special general meeting.

[342] In my view, the Defendants have failed to identify either a duty the Strata

Corporation is required to perform under the Strata Property Act, the bylaws or

rules (s. 165(a)) that it has refused or neglected to perform, or acts where the Strata

Corporation is contravening the Act, the regulations, the bylaw or rules (s. 165(b)),

so as to give the court jurisdiction to make an order under s. 165.

[343] I turn then to the matters raised under s. 164.

[344] I will deal first with the Defendants’ argument concerning quorum. The

argument must be rejected as the facts do not support it. It appears to be based on

a misreading of Strata Property Act s. 48 and overlooking s. 27(1) of the November

2020 Bylaws. Section 27(1) describes the quorum for a valid meeting if, within 1/2

hour from the time appointed for an annual or special general meeting, a quorum of

eligible voters holding 1/3 of the strata corporations votes is not present in person or

by proxy. Mr. Gauthier described how the quorum was determined for meetings

held after February 8, 2021, and I accept his evidence in that regard. Accordingly, I

find that a quorum was present for the meetings held after February 8, 2021.

[345] I will next deal with the Defendants’ argument that they are being treated in a

manner that is significantly unfair because reasonable expectations created by the

comments in para. 4 of the Branch Reasons of bringing the two camps together for

“a ‘free and fair election’ of a new strata council” have been frustrated and ignored.

[346] I note first that I had no evidence from any Defendant apart from Mr. Zavier

about what that Defendant’s expectations were. I had some evidence from Mr. Lanz

(who holds a power of attorney for Joseph Lanz) and also from Mr. Saxvik about

what they expected, based on the Branch Reasons. However, the majority of the

Defendants were silent.

[347] More importantly, the term of the February 8 Order that required the holding

of the meeting for the “free and fair election” was set aside on the Appeal. I cannot

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conclude that what occurred in relation to a meeting that the Court of Appeal found

should not have been ordered amounts to a frustration of reasonable expectations

that would support a finding of conduct that is significantly unfair.

[348] I find that there has been no wrongful refusal to provide Form Fs in response

to Mr. Saxvik’s requests. In the absence of reliable evidence, Mr. Saxvik’s

disagreement with the Gauthier Council’s accounting does not create a significantly

unfair action by the Strata Corporation.

[349] What then of Bylaw s. 27(7), the complaints that it contravenes sections 31

and 32 of the Strata Property Act, and is, itself, significantly unfair?

[350] I repeat Bylaw s. 27(7) here for convenience:

For any property that SWS Marketing Inc. has a Joint Venture Agreement

with the owner on title, unless the two parties agree, the vote by SWS

Marketing Inc. carries.

[351] On the evidence, since February 2021, s. 27(7) has not been invoked to

deprive a unit from voting at a Strata Corporation meeting. Rather, the problem has

been that strata fees are outstanding. That is the reason units represented by Mr.

Saxvik have not been allowed to vote. Such a provision, depriving units who had

unpaid strata fees of a right to vote, was a feature of s. 31(7) of the Zavier Bylaws. It

cannot be the subject of a legitimate complaint of significantly unfair conduct. Apart

from expressing his distrust for Mr. Gauthier, Mr. Saxvik had nothing concrete to

offer in terms of errors or omissions in the statements of strata fees prepared and

marked as Exhibit 61. The suggestion put to Mr. Gauthier on cross-examination that

he might have made an error somewhere in calculating the outstanding strata fees

owed by the Defendants was nothing more than speculation. As I have noted

above, no Defendant produced evidence of his or her own calculation of strata fees

paid, showing the statements produced by Mr. Gauthier to be in error and by how

much.

[352] There is no dispute that a strata corporation’s enactment or amendment of a

bylaw may constitute “significantly unfair” conduct within the meaning of s. 164.

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However, is the enactment of s. 27(7) significantly unfair, so as to justify a

declaration that it is unenforceable?

[353] In my view, the Defendants have failed to show that the enactment of s. 27(7)

is either significantly unfair or that it contravenes the Strata Property Act.

[354] The Defendants assert that, if given the opportunity, SWS will exercise its

voting rights under s. 27(7) in a manner contrary to the interests of the Strata

Corporation. However, there was no reliable evidence to support this conclusion, or

the conclusion that, in respect of any particular decision, the Gauthier Council has in

fact preferred the interests of SWS over the interests of the Strata Corporation.

[355] As I noted above, there is no occasion as yet when SWS has exercised its

voting rights under s. 27(7). The rights can be invoked by SWS only where SWS

and the unit-owner disagree. When that might possibly happen is a matter of

speculation. It cannot be assumed that SWS will exercise its rights in a manner that

is oppressive or unfairly prejudicial to a unit-owner. As a party to the Joint Venture

Agreements, SWS’s interests are in ensuring that the Strata Corporation is properly

run, that strata fees necessary to pay reasonable expenses of the Strata Corporation

are in fact paid, and that the market value of the units is preserved. In that light,

there is no conflict between the interests of the Defendant-Owners on the one hand,

and SWS or the Gauthier Council on the other.

[356] I find that the Defendants have failed to establish grounds for orders under

either s. 164 or s. 165 of the Strata Property Act. The Counterclaim must,

accordingly, be dismissed.

8.

[357] In summary:

(a)

Summary and disposition

with respect to the claims of SWS and the relief sought in the Prayer

for Relief:

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(i)

SWS is entitled to a remedy against each of the Defendant-

owners (excluding Mr. Petersen) and Mr. Zavier for their

breaches of the Joint Venture Agreements. However, the

submissions I received at trial were insufficient for me to make a

final ruling with respect to the appropriate remedy. This affects

the orders sought in para. 13 (in that it requests an order that

the units be sold and the proceeds of sale be paid into court)

and para. 20 (requesting damages in the alternative) of the

Prayer for Relief. I direct that, within 30 days of the date of

these Reasons, counsel take the necessary steps to schedule a

one-day hearing before me for the purpose of providing further

submissions, based on the evidence tendered at trial, on the

question of the remedy for the breaches of the Joint Venture

Agreements that I have found. Subject to the availability of

counsel and the court, the hearing should be set for a date

within 60 days of the date of these Reasons;

(ii)

the orders sought in paras. 1, 5, 6, 7, 8, 9, 11, 12, 13 (but only

to the extent that it relies on the Partition of Property Act) 14,

15, 16, 19, 21 and 22 of the Prayer for Relief are refused;

(iii)

(iv)

the action is dismissed as against Charlene Petersen, Thane

Lanz and the Tenants;

the action is stayed as against Burt Petersen;

(b)

the Counterclaim is dismissed.

[358] Finally, with respect to costs, the summary shows I have made some final

orders. Costs would normally follow the event. However, I have not finally

determined the remedy for breach of the Joint Venture Agreements. Moreover, Mr.

Lanz and Charlene Petersen did not have legal representation separate from the

other Defendants. It may also be appropriate to consider SWS’s claims and the

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Counterclaim together for costs purposes. In that light, I have concluded that costs,

and submissions on costs, should await final disposition of the remedy for breach of

the Joint Venture Agreements.

“Adair J.”