IN THE SUPREME COURT OF BRITISH COLUMBIA  
Citation:  
Linten Developments Ltd. v. Kirschner  
Mountain Estates Ltd.,  
2022 BCSC 1470  
Date: 20220824  
Docket: S124136  
Registry: Kelowna  
Between:  
And  
Linten Developments Ltd. and 1993404 Alberta Ltd.  
Plaintiffs  
Kirschner Mountain Estates Ltd., Donald Joseph Kirschner,  
Amy Ellen Kirschner, Allen Charles Kirschner, Benson Law LLP,  
Garry Frederick Benson, The City of Kelowna, Catherine Alexandra Axsen,  
Lake Okanagan Realty Ltd., Three Forks Sand & Gravel Ltd. and Kevin Bird  
Defendants  
Before: The Honourable Madam Justice Beames  
Reasons for Judgment  
Counsel for the Plaintiffs:  
G. Allen  
N. Kamoosi  
Counsel for the Defendants Kirschner  
Mountain Estates Ltd., D.J. Kirschner,  
A.E. Kirschner and A.C. Kirschner:  
C. Elkin  
Counsel for the Defendants Benson Law  
LLP and G.F. Benson:  
J.G. Dives, Q.C.  
Counsel for the Defendants C.A. Axsen and  
Lake Okanagan Realty Ltd.:  
S.B. Twining  
S. Gladders  
Counsel for the Defendants Three Forks  
Sand & Gravel Ltd. and K. Bird:  
T.T. Brown  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 2  
Place and Dates of Trial/Hearing:  
Kelowna, B.C.  
November 22-26, 29-30,  
December 1-3, 6-10, 13-17, 2021  
January 4-7, 10-14, 2022  
Place and Date of Judgment:  
Kelowna, B.C.  
August 24, 2022  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 3  
Introduction  
[1]  
In October 2017, the plaintiff, Linten Developments Ltd. (“Linten”), became  
the registered owner of property municipally described as 1261 Kloppenburg Road  
and 2045 Loseth Road, Kelowna, British Columbia and legally described as PID: 30-  
265-291, Lot 3, Section 13, Township 26, ODYD Plan EPP64321 (“the Property”). In  
May 2018, following reports of tension cracks and bulging of the soils on the  
Property, the City of Kelowna (the “City”) retained consultants to design and  
supervise remediation work on the Property.  
[2]  
On June 28, 2019, the plaintiffs commenced this action, naming as  
defendants the owners of the properties which were subdivided to create the  
Property, the principal of one of the owners, the plaintiffs’ lawyer and law firm who  
were retained with respect to the purchase of the Property, the plaintiffs’ realtor and  
real estate brokerage with respect to the transaction, the vendor and principal of the  
vendor who sold the plaintiff an option to purchase the Property, a geotechnical  
engineer and his company which had been retained to, and had, provided  
geotechnical services to the original owners and others with respect to the Property  
and the City of Kelowna.  
[3]  
No relief was sought against the City of Kelowna and the City was not  
represented at trial. The claims made against the geotechnical engineer and his  
company were settled and discontinued shortly before trial. Near the end of the trial,  
the claims against the principal of the vendor were discontinued.  
Background Facts  
The Parties (and Former Parties)  
[4]  
The plaintiffs in this case are two corporations. 1993404 Alberta Ltd. (“199”)  
was incorporated in Alberta. Linten Developments Ltd. (“Linten”) was incorporated  
as a numbered company in Alberta in April 2017 and its name was changed to  
Linten on April 6, 2017. The only director of each company is Linguo (Frank) Zhang.  
He is the only shareholder of Linten and he and his wife are the only shareholders of  
199. Although the positions of the two plaintiffs are not legally identical, both the  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
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plaintiffs and the defendants referred to throughout to “the plaintiffs” collectively and I  
will generally do the same.  
[5]  
Mr. Zhang graduated with a two-year diploma in geomatics engineering from  
Lethbridge College in 2011. He worked as a surveyor assistant for approximately  
two years after graduation. In 2013 he became involved in property investment,  
looking for properties for himself or other investors. Most of his property investment  
activities were for his father-in-law, but he also looked for real estate investment  
opportunities for other people. He had not personally invested in development  
property prior to 2017.  
[6]  
Kirschner Mountain Estates Ltd. (“KME”) is a land development company  
incorporated in the early 2000s. It is owned by three brothers, Allen, Donald and  
Gordon Kirschner, and their three wives. I will refer to them as the Kirschners  
collectively, and when individual identification is necessary, I will refer to the  
individual by his or her first name. KME owned part of the land which became the  
Property. Donald and his wife Amy owned the other part of the land which became  
the Property. Allen is one of the directors of KME and an authorized signatory for  
KME.  
[7]  
Garry Benson is a lawyer in Kelowna and a partner in Benson Law LLP (the  
“law firm”). Mr. Benson was called to the bar in 1992 and since the mid- to  
late-1990s has been a solicitor with a practice focussed primarily on real estate  
development, corporate commercial matters, and wills and estates. The partnership  
was created in approximately 2000. Mr. Benson and the law firm had acted for KME  
and the Kirschners for years prior to 2017, and Mr. Benson was responsible for and  
supervised the subdivision work that created the Property. Mr. Benson was retained  
by the plaintiffs to act on the conveyance of the Property.  
[8]  
Catherine Alexandra Axsen (“Alexandra” or “Alex”) is a managing real estate  
broker. She opened Lake Okanagan Realty Ltd. (“Lake Okanagan”) in 2011. In  
addition to her various duties as the managing broker, she also acted as a realtor for  
residential, development and commercial properties. She became licenced to be a  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 5  
realtor in 2006 and a managing broker in 2009. She was the realtor for the plaintiffs  
in the acquisition of the Property.  
[9]  
Three Forks Sand & Gravel Ltd. (“Three Forks”) is a company incorporated in  
approximately 2008 to run a gravel business. Kevin Bird is a director of Three Forks.  
Mr. Bird is in the residential real estate development business, primarily through  
another company he owns, which company owns the shares of Three Forks. In  
2015, Three Forks entered into a contract with KME, Donald and Amy for an option  
to purchase the Property. The law firm acted for the Kirschners in that transaction.  
Thereafter, Three Forks did some work on the Property in preparation for  
development. Three Forks sold its option to purchase the Property to 199, which  
subsequently assigned its interest to Linten.  
[10] Interior Testing Services Ltd. (“ITS”) is a geotechnical engineering company.  
Peter Hanenburg, a geotechnical engineer who graduated in 1999 and got his  
professional designation in 2003, is a director and shareholder of ITS. ITS provided  
geotechnical services to various parties with respect to the Property up to and  
including 2015, when it monitored work being performed on the Property by an earth  
moving contractor retained by Three Forks.  
The General Background with Respect to Kirschner Mountain and the  
Property  
[11] In the 1950s, approximately 640 acres of undeveloped land on what is now  
known as Kirschner Mountain in Kelowna was a purchased by the father of Allen,  
Donald and Gordon. Approximately 150 acres was sold in 1965. Rezoning of the  
remaining land commenced in about 1969. In 1971, the remaining land was, as  
described by Allen, “turned over” to the three sons. In 2002 or 2003, KME was  
incorporated to be a land development company and some of the land owned by the  
three Kirschner sons and their wives was transferred to it. The business of KME was  
and has continued to be to develop residential lots and then sell them to building  
contractors and home builders.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 6  
[12] In the early to mid-2000s, ITS was retained by KME and the Kirschners to dig  
test pits and prepare reports for the City in various locations around the land which  
was planned to be developed. On what became the Property, trees were removed,  
top soil stripped and other pre-development took place. An earthmoving contractor,  
Wiltech Developments Inc. (“Wiltech”), was hired to do the clearing and to place and  
compact fill on the Property to grades designed by a civil engineer, Dale Pilling. ITS  
monitored that work. That work was completed in approximately 2006. That same  
year a pump station was constructed on a part of that land, to the specifications of  
the Black Mountain Irrigation District. ITS was the geotechnical engineer for that  
construction. The pump station was constructed on one corner, effectively, of what  
became the Property.  
[13] Between 2006 and 2011, materials were brought to the Property and  
materials were removed from the Property. Allen testified that when building lots  
were being created or worked on in other areas on Kirschner Mountain, excess  
material would sometimes be placed on the Property and when material was needed  
for backfill in other areas, contractors would come and pick up the excess material.  
[14] In 2010, discussions took place about a joint venture between KME and  
another Kelowna based company, referred to as the Mission Group, to develop the  
Property into a multi-family residential project. A formal agreement, entitled  
Acquisition Agreement, was entered into on September 7, 2010 between a company  
incorporated by the Mission Group and KME, Donald and Amy. The plan was for  
KME, Amy and Donald to enter into a Limited Partnership Agreement with the  
Mission Group company. KME, Amy and Donald were to contribute the land outlined  
on a preliminary subdivision plan and Mission Group was to contribute the capital.  
Mission Group was responsible for designing the project and for obtaining a  
development permit. Mission Group planned a 35-townhouse project and had an  
architect create a design for the project. The land on which the project was to be  
built was essentially the same land which became the Property.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
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[15] By April 2011, Mission Group applied to the City of Kelowna for a  
development permit and variance permit for a 35-unit townhouse development for  
the Property. The variance permit related to the height of retaining walls.  
[16] Mission Group engaged ITS to do the required geotechnical work on the  
proposed site. ITS prepared geotechnical reports dated September 28, 2010 and  
May 13, 2011, both addressed to Mission Group.  
[17] The September 28 report indicated that ITS had carried out a geotechnical  
investigation, including test pits. In the “Introduction”, ITS said:  
We have specific experience on the site as it has been structurally filled  
during initial phases of development of Kirschner Mountain Estates. We  
anticipate the existing FILLS to consist of blasted ROCK occasionally mixed  
with silty SAND and GRAVEL. We have reviewed the proposed site grading  
plans provided by D.E. Pilling and Associates (Pilling) which indicate as much  
as 5 meters of additional structural FILL will be required to achieve the  
proposed site grades.  
[18] Under the heading “Site Description”, ITS reported:  
… As noted above, this site has been previously structurally filled to create a  
roughly level building area along the southeast side of the site. To that end, a  
large fill slope exists along the north side of the proposed townhome  
development, as much as roughly 30 meters high at the east side.  
Currently, large stockpiles of blasted rock material exist at the east side of the  
proposed building area, transitioning to underdeveloped lands at the west  
side. …  
[19] In the recommendations with respect to site preparations and foundation  
design, ITS reported:  
2.  
The proposed site profiles were further reviewed with respect to global  
stability concerns. We generally recommend residential foundations  
be placed below and behind a 2 Horizontal to 1 Vertical (2H:1V) plane  
projected up from the toe a steep slope. In general this appears  
satisfactory for the majority of the proposed development, however for  
the northeast portion of the site, rock sockets, dropped foundations, or  
similar are recommended in order to bear the foundations below and  
behind a 2H:1V. Additional guidance to this respect can be provided  
at the time of construction on a building-by-building basis. However  
based on the sections provided, it appears that additional allowance  
should be considered for at least the five buildings proposed at the  
northeast area of the site.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 8  
3.  
…
It is noted that even well compacted FILLS (in excess of 95% MPD)  
may experience some settlement on the order of 0.3% to 0.5% of the  
total FILL thickness. This settlement typically occurs during  
construction, however, in the event that the FILLS become saturated,  
in the order of 100 mm or more of movement may occur as post  
construction settlement. We anticipate that you are tolerable of this  
settlement potential for the overall site, but obviously for the buildings  
some additional foundation preparation will be required to attempt to  
reduce potential settlement to more tolerable values on the order of  
25 mm.  
[20] In its conclusions, the reported stated:  
3. It is recommended that ITSL review the final proposed foundation  
designs prior to construction. This is to confirm our assumptions with  
respect to building elevations and slope conditions. In addition, where  
additional structural FILLS are required, ITSL should carry out field  
density testing to confirm adequate compaction has been achieved.  
[21] The May 13 report was entitled “Geotechnical Hazard Review”, and was  
apparently provided in response to a request from the Mission Group for a  
“Landslide Assurance Statement” as required by the City of Kelowna as part of the  
development permit application. ITS reported:  
… Based on test holes advanced on the site in September 2010, the existing  
fills appears to consist of blasted ROCK in a compact condition. The FILLS  
were unbounded to roughly 4 meters below grade in our test holes at the east  
side of the north slope, where the fills are anticipated to be deepest, appear  
to tapper to roughly 1 to 2 meters near the middle of the slope crest, and then  
run out to nominal thicknesses to the southwest.  
… As noted above, the blasted ROCK FILLS were placed roughly in 2005,  
and no significant signs of movement or slip were noted on the fill slope  
during the subsequent roughly 5 years.  
[Reproduced as written.]  
[22] ITS concluded:  
We have reviewed the global stability of the site slope profiles with respect  
the existing natural and fill slopes as well as the proposed development and  
building loading conditions. Subject to our comments and recommendations  
provided above and in our geotechnical report, ITSL estimates the likelihood  
of a landslide occurring and causing detrimental effects to the proposed  
development and property below to be low, which is defined as having a  
probability of than 10% in 50 years. We understand that the City of Kelowna  
has adopted a 10% probability of 50 years of a landslide affecting a building  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 9  
as is level of landslide safety. In addition, with respect to seismic slope  
stability, it appears reasonable, in our opinion, to conclude that there is less  
than 2% probability of failure in a 50 year period, as required by the 2006 BC  
Building Code. Based on the two safety levels adopted by the governing  
bodies, it is reasonable, in our opinion, to conclude that the land may be used  
safely subject to our recommendations regarding fill placement and  
foundation design.  
[Reproduced as written.]  
[23] Attached to the report was a Landslide Assessment Assurance Statement  
dated May 13, 2011, addressed to the City of Kelowna, care of the Mission Group,  
and signed and sealed by Mr. Hanenburg.  
[24] According to Allen, a home warranty company had taken issue with reports  
prepared by ITS on other projects and was raising issues about ITS with Mission  
Group. On June 17, 2011, a geotechnical firm called Geoteknik wrote a one-page  
letter to the home warranty company recommending against development of the  
Property. On July 5, 2011, another geotechnical firm named Levelton provided  
Mission Group with a report titled “Preliminary Geotechnical Engineering Comment  
Proposed Townhome Development Loseth Road, Kelowna, B.C.” That report  
provided “guidelines” for proceeding with development of the site, and indicated that  
in order to provide detailed design options, it would be necessary to assess existing  
fill and conduct a detailed stability analysis.  
[25] On July 11, 2011, Allen received an email, following up on a telephone  
conversation, from the Mission Group, saying, in part:  
… Mission Group is still keenly interested in continuing our partnership with  
the Kirschner family. We have formed a good relationship with you and  
invested much time and resources and would like to see our joint efforts  
come to fruition.  
The current bump in the road can be dealt with by site remediation and  
market timing …  
[26] In response to a request from the Kirschners for a “summation”, another email  
from Mission Group was sent to Allen, stating, in part:  
… Mission Group is still very interested in continuing our partnership with the  
Kirschner Family. One of the issues we discussed was the challenge of  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 10  
obtaining construction financing with the high cost of phase 1 site work. Also,  
the recent discovery of a major geotechnical issue on the fill portion of the  
site has added unexpected costs and caused financial issues which can be  
resolved on of two ways. Either by waiting for house prices to increase by  
about 10% so that revenue covers the extra costs and improves profitability  
of to have additional equity (in the form of site work) provided by KM so that  
these costs are not borne by the project and profitability is maintained …  
[Reproduced as written.]  
[27] On July 18, 2011, ITS issued another report, addressed to Allen, commencing  
with the following introduction:  
We have received information that suggests other engineers in the Okanagan  
have expressed concerns or doubts regarding slope stability of the above  
site. To that end, we are providing you with a brief review to confirm why the  
slope can be considered satisfactorily stable using conventional and simple  
engineering procedures.  
[28] The conclusions set out in that report were as follows:  
Conclusions  
1.  
Based on conventional slope stability analysis, and friction angles  
appropriate for the material types, a safety factor of 1.5 is expected for  
the completed fill slope, given the maximum slope angle of roughly  
38.5° (1.25H:1V) and soil or rock friction angles of 50° or more. Based  
on recent slope measurements and the attached slope sections it  
appears that the slopes have generally been constructed to +/-  
1.25H:1V.  
2.  
3.  
This is consistent with observations of the slope, which show no  
evidence of any instability, and it has become well vegetated in the  
past 6 years since construction.  
While it is easy to demonstrate why the slope is stable based on  
conventional engineering procedures, it is also steep enough to  
present some challenges for suitable development. Our previous  
reports addressed to others should be referred for foundation design  
considerations.  
Generally, the slope is steep enough that public access is not  
desirable, and it is also appropriate to take additional precautions with  
respect to building setbacks and foundations for other reasons.  
Additional engineering input for foundation procedures as they relate  
to control of settlement, drainage disposal, and similar considerations  
are appropriate for this site when construction is proposed.  
These would typically include conventional crest setbacks and or  
dropped foundations as has previously been recommended. Given  
the more stringent requirements that are needed for foundation  
support, we would typically recommend that you consider locating the  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 11  
access roadway nearest the slope crest, with foundations behind the  
road area.  
[29] I pause to note that the Mission Group 35-townhouse plan was not designed  
to have the access roadway nearest the slope crest, with foundations behind the  
road area.  
[30] In later July, the City of Kelowna approved the development variance permit  
application which had been submitted by Mission Group related to retaining walls.  
Preliminary pre-approval of the development permit was also granted.  
[31] In December 2011, Mission Group sent an email to the Kirschners attaching  
the geotechnical reports from ITS to Mission Group and the Geoteknik and Levelton  
reports. On December 19, 2011, ITS prepared a report addressed to KME, which  
KME provided to Mission Group. The stated purpose of the report was set out:  
… to summarize structural fill placement and provide clarification with respect  
to our recommendations for residential development on the property,  
specifically with respect to foundation support on fill soils and stability of the  
steep fill slopes.  
[32] The report contained a review of the Geoteknik and Levelton reports. Under  
the heading “Additional Considerations”, the report stated:  
Moving forward, it appears that additional conversations should be carried out  
between the property owner, developer, and your geotechnical engineering  
consultant to determine the goals of the project and develop building layouts  
and foundations designs to meet those specifications.  
…
We anticipate redesign of the proposed building layouts may be required as  
based on the proposed slope crest setback, which may reduce the number of  
units possible as confined by the ‘developable’ area. While we understand  
reducing the number of units would decrease the potential profits realized  
from real estate sales, we speculate that this figure would be far less than the  
cost of carrying out significant additional earthworks to reinforce the fill slope  
or providing unconventional foundation systems, so that this option is  
anticipated to be economical.  
Further options, such as some of those provided in the Levelton report, could  
also be considered. Clearly, while there appear to be many available  
options/scenarios to allow this development to proceed, it appears that  
discussions between the entire design team in conjunction with  
budget/costing exercises are warranted.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 12  
[33] Mr. Hanenburg described the December report as being “basically a summary  
and clarification” of the opinions he had already provided. He testified that  
fundamentally, his opinion and conclusions did not differ from his earlier reports.  
[34] In early 2012, discussions continued between the Kirschners and Mission  
Group. The Mission Group continued to deal with the City of Kelowna about its  
development permit application. Allen testified, and the exhibits support, that the  
Mission Group wished to continue with the development of the lands, once the real  
estate market improved. Allen summarized the Mission Group’s position as being  
that Mission Group wanted KME to pay some of the geotechnical costs, which KME  
was not prepared to do, and that Mission Group sought an extension of the  
agreement to 2020, with no adjustment to the price for the land and KME was not  
prepared to agree. Eventually, the agreement with Mission Group was allowed to  
lapse.  
[35] Between the end of the relationship between Mission Group and KME, in  
early 2012, and 2015, very little of significance occurred on the Property, although  
some material was brought to the Property from time to time. Mr. Hanenburg  
testified that he recalled some material being brought to the Property to “relevel” the  
site, which material was not placed structurally.  
[36] On June 2, 2013, he wrote to Allen:  
As requested I have viewed the material being transported from your Phase  
3B to the multifamily site for stockpile. The material is predominantly blasted  
rock, with some silty SAND and GRAVEL (till-like) soils that appear suitable  
for re-use in the future as structural fills. The till-like soils and the blasted rock  
could be mixed together (which will happen during transportation) at roughly  
30% till to a max blend of 50/50.  
In the event that unsuitable materials are encountered within the stockpile at  
the multifamily site, they can easily be removed during ultimate placement as  
structural fill. We would provide that guidance in the field at the time of  
construction if this is ever observed.  
The only caution I raise at this stage is that the depth of the loose fill stockpile  
at the multifamily site and the area that it is covering is becoming less  
obvious and identifiable. This isn’t a big problem as long as we all remember  
that we need to remove all loose fills within the multifamily site when  
construction eventually commences.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 13  
[37] In October 2015, Three Forks entered into an option to purchase the Property  
from KME and Donald and Amy for $1,200,000, with $150,000 payable up front,  
minimum annual payments of $300,000, and annual interest at 6% on the balance.  
Three Forks had the option to pay out the full purchase price earlier, but was  
required to complete the purchase by 2020. Upon execution of the agreement,  
Three Forks had the right to occupy, use and enjoy the Property. Subdivision costs  
were to be shared between the purchaser and the vendors, with the vendors paying  
two thirds. Three Forks was responsible for the costs of applications for rezoning  
and development permits and for design costs. KME and Donald and Amy signed a  
permit for soil deposit and removal so that Three Forks could commence earth  
moving.  
[38] Three Forks started working on the Property immediately. Mr. Bird testified  
that he was aware of the Mission Group’s plan to build 35 townhouses on the  
Property, but he was interested in building six-plexes similar to ones he had built at  
Big White. He hired a land surveyor and a civil engineer to layout a design. Wiltech,  
the same earth moving company that had worked on the Property in the mid-2000s,  
was engaged to do cuts and fills to bring the Property to the grades designed by the  
civil engineer, Mr. Pilling.  
[39] Mr. Bird reached out to ITS to get its geotechnical reports on the Property  
from 2010 and 2011. On October 28, 2015, ITS contacted Allen to obtain his  
permission to release the reports, which permission was given that same day. ITS  
then sent Three Forks all four of its 2010 and 2011 reports.  
[40] ITS was retained to monitor the work done by the earth moving contractor. In  
the course of its work, ITS created field reports and other documents. One of those  
reports, dated November 17, 2015, and addressed to Mr. Bird, stated:  
4.  
We understand that you have been provided copies of our previous  
report dated December 19, 2011 which included recommendations  
regarding the proposed multifamily development.  
Specifically, we recommend residential foundations to be set below  
and behind a 2 Horizontal to 1 Vertical plane projected up from the toe  
of the steep fill slopes. In order to confirm the proposed building  
layouts in relation to the slope, we recommend survey sections be  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 14  
produced by your general contractor, particularly with respect to the  
proposed buildings at the upper northeast side of the site.  
[41] The earthmoving and site balancing work ceased in late 2015, at which time  
Mr. Bird said Three Forks had essentially run out of onsite material and material  
from a gravel pit Three Forks had been operating. Mr. Bird testified that work  
stopped on the Property because Three Forks needed to find more material that  
would be cost effective.  
[42] In 2016, Mr. Bird retained his civil engineer to do a layout for six-plexes on the  
Property. He then provided a site plan, with five six-plexes, one three-plex and one  
duplex, to the City to get initial feedback. He was advised by a City planner that  
six-plexes would require rezoning. The City planner, according to Mr. Bird, was not  
encouraging about the prospects of rezoning. Given the apparent need for rezoning  
and his involvement in other large projects at the time, Mr. Bird decided to sell Three  
Forks’ interest in the Property. He signed a listing agreement agreeing to list the  
Property until April 30, 2016, for $1.6 million.  
[43] In April of 2016, Three Forks gave notice that it was exercising its option to  
purchase the Property. In May 2016, an amendment was made to the option to  
purchase, making a small change to the boundaries of the Property to accommodate  
the sale of a small piece of the Property, which had yet to be created, to a third  
party.  
[44] KME and the Kirschners continued to take the steps necessary to achieve the  
subdivision. The City provided an acknowledgement that a subdivision plan was filed  
in February 2017. Mr. Benson wrote to counsel for Three Forks on March 29, 2017,  
advising him that the subdivision was in circulation with the City.  
The Purchase of the Property by Linten  
[45] Mr. Zhang, who was then living in Calgary, became interested in real estate in  
Kelowna in early 2017. He travelled to Kelowna to look for real estate investment  
opportunities. He found and made an offer on a vineyard property for an investor.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 15  
The listing agent for the vineyard property referred him to Mr. Benson. Mr. Zhang  
had a lawyer in Calgary, Darren Taylor. Mr. Zhang testified that Mr. Taylor told him  
he could not practice in British Columbia and could not help with real estate  
transactions in this province.  
[46] Mr. Benson met with Mr. Zhang in connection with the vineyard property in  
March or April 2017. Mr. Zhang then decided to look for an investment opportunity  
for himself. He testified that he had a budget of between $1.5 and $2 million and he  
wanted a multi-family development property. He had no previous experience  
developing property. He called Mr. Benson, who referred him to Ms. Axsen as a  
possible realtor who might be able to assist him in his search for property.  
[47] Mr. Zhang testified that Mr. Benson told him that if Mr. Zhang got an accepted  
offer, he could send the contract to Mr. Benson.  
[48] Mr. Zhang emailed Ms. Axsen on May 10 to introduce himself and to advise  
he was looking for investment opportunities and had received her name from  
Mr. Benson.  
[49] On May 11, Ms. Axsen met with Mr. Zhang at a coffee shop. Mr. Zhang’s  
wife, Karen He, and their two very young children were also in attendance.  
Ms. Axsen had gathered together some real estate listing sheets to discuss with  
Mr. Zhang. One of the listing sheets was the expired Three Forks listing for the  
Property. After reviewing the listing sheets, Ms. Axsen and the Zhang family drove in  
separate vehicles to view some of the land shown on the listing sheets, including the  
Property.  
[50] Mr. Zhang testified that the only land he was interested in was the Property,  
which had nice views and fit within his budget. Ms. Axsen testified that Mr. Zhang  
expressed interest in one other property, but when she called about it, there was  
already an accepted offer on that property.  
[51] Mr. Zhang testified that Ms. Axsen told him there was a plan for 35  
townhouses which had already been approved, that there had been a development  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 16  
permit which might be expired but would not be hard to renew, and that some work  
had been done on the Property, which Mr. Zhang admitted was obvious to him from  
the number of stockpiles of material which were visible on the site.  
[52] Ms. Axsen called Mr. Bird to ask if the Property was still available and then,  
on his direction, called the listing agent. She was told the Property was still available  
and was given some further information. She relayed that information to Mr. Zhang.  
She sent him the registered option to purchase, drawings from the Mission Group  
plan, and documents with respect to the Mission Group application in 2011 for a  
development variance permit. In the cover email, she said:  
Hi Frank,  
Attached is information on the 35 townhouses on Black mountain with  
renderings of what the current buyer was planning on building. The  
Development Permit has expired but it should not be hard to get a new one. I  
can talk to Paul McVey at the City tomorrow in regards to that. The current  
owner already has geotechnical drawings and plans.  
Sincerely,  
Alexandra  
[53] On instructions from Mr. Zhang, Ms. Axsen prepared an offer, entitled  
“Assignment of Option to Purchase” in the amount of $1.4 million, including a  
number of conditions or subjects for the benefit of the purchaser, with a subject  
removal date of June 5, to correspond to the information she had been given by the  
listing realtor that the next payment under the option to purchase was due June 5.  
The option to purchase between Three Forks and the Kirschners, which had already  
been executed, was attached. The offer provided that a deposit of $500,000 would  
be paid upon removal of all conditions.  
[54] Mr. Zhang testified that he makes lots of offers, which are not important to  
him other than that accepted offers set the price. What really matters, Mr. Zhang  
testified, is the conditions or subjects that he includes in offers to allow him to do due  
diligence before he decides whether to actually purchase real estate. The conditions  
in the offer for this Property included:  
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Page 17  
Subject to the buyer on or before June 5, 2017, conducting his due diligence  
with a civil and geotechnical engineer to determine if any geotechnical  
elements of the land may reasonable adversely effect its use or value. This  
condition is for the sole benefit of the Buyer.  
Subject to the Buyer obtaining and approving satisfactory financing for the  
subject property on or before June 5, 2017. This condition is for the sole  
benefit of the Buyer.  
…
Subject to the Buyer reviewing and approving the site profile on or before  
June 5, 2017. This condition is for the sole benefit of the Buyer.  
…
Subject to the Buyer confirming on or before June 5, 2017, that zoning for the  
Property will allow for at least 35 residential townhouse units. This condition  
is for the sole benefit of the Buyer.  
Subject to the Buyer, on or before June 5, 2017, searching and approving title  
to the property against the presence of any charge or other feature, whether  
registered or pending, that reasonably may affect the property’s use or value.  
This condition is for the sole benefit of the Buyer. Subject to the Buyer, at the  
Buyer’s expense, conducting and approving a feasibility study on or before  
June 5, 2017. This condition is for the sole benefit of the Buyer.  
Subject to the Buyer, on or before June 5, 2017, conducting and approving a  
cost pro forma on the property. This condition is for the sole benefit of the  
Buyer.  
…
The Vendor, and it’s lawyer reviewing and approving the terms of this  
contract on or before 5 business days following acceptance of this  
Assignment of Option to Purchase.  
…
[55] Ms. Axsen testified that she suggested the condition with respect to a  
feasibility study, as she understood Mr. Zhang was a builder from Calgary and she  
wanted him to understand the costs of hillside construction, given the sloped nature  
of the Property. Mr. Zhang testified that it was his idea to add that condition, so that  
he could satisfy himself of what he was getting. He planned to do market research  
and research about building costs and to make sure that he could make the profit he  
was expecting.  
[56] After the offer was discussed with Mr. Zhang and approved by him, it was  
submitted to Three Forks’ realtor. A counteroffer was received, and accepted, for  
$1.51 million, which counteroffer also shortened the time for removal of subjects  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 18  
from June 5 to May 30. Mr. Zhang electronically signed his acceptance of the  
counteroffer on May 12, which was a Friday. That same date, he emailed the  
accepted offer to Mr. Benson.  
[57] Mr. Benson responded that same evening, saying:  
That is really funny. It is my good friends property. I think this is an option that  
was not fully exercised on Kirschner mountain.  
[Reproduced as written.]  
[58] Ms. Axsen advised Mr. Zhang, when she sent him the accepted offer, that  
she would set up a meeting for him with the City planner who had been working on  
“this file” for Monday, May 15, and that she “would speak with the civil engineer so  
we can start doing all of our research and due diligence”.  
[59] Ms. Axsen testified that she and Mr. Zhang met with a City planner,  
Mr. McVey, on May 15. She says they discussed what was going to be required to  
get a development permit and a building permit. She testified that Mr. Zhang wanted  
to do 60 units. Mr. McVey told them that an owner could do 45 units without  
rezoning, and that rezoning would be difficult. Ms. Axsen said that Mr. McVey told  
them there was no development permit for the Property, but that it should be easy to  
get a new one. I note that her evidence is consistent with information provided by  
Mr. McVey to Ms. Axsen on approximately April 25, 2018, when Mr. Zhang started  
moving forward with his plans to develop the Property.  
[60] On May 14, Mr. Zhang forwarded the documents he had received from  
Ms. Axsen on May 11, together with photographs he had taken of the Property, to a  
geotechnical engineer in Calgary he had been working with for approximately two  
years, Bartek Ryczywolski. He told Mr. Ryczywolski that he would send the “other  
detail documents” when he received them, “probably Monday”. In his evidence,  
Mr. Zhang described Mr. Ryczywolski as the expert for him for geotechnical aspects,  
and the person he would have had prepare a geotechnical report if he needed one.  
He said that if he had geotechnical concerns, Mr. Ryczywolski is the person he  
would ask to address them.  
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Page 19  
[61] On May 15, just before noon, Ms. Axsen sent Allen the few documents she  
had received from the listing realtor at that point, and advised him that was all she  
had received. She did so, she testified, because she was trying to get more  
information for Mr. Zhang as part of due diligence. She knew Allen because she had  
had a client looking at “the whole mountain from across the road” for $30 million,  
earlier that year, which deal had not “come together”.  
[62] On May 15, Mr. Zhang met with Mr. Benson in Mr. Benson’s office. He  
attended with Ms. He and their children. Allen was at the law firm to meet with  
someone else and happened to be in Mr. Benson’s office when Mr. Zhang and his  
family arrived. A recording of some but not all of the meeting said to have been  
made by Ms. He was produced in the litigation and played at trial. During the  
meeting, Allen asked Mr. Zhang if he was looking to do 24 units, and Mr. Zhang  
replied 35. Allen told him “you got to get the engineer to look at that”, to which  
Mr. Zhang replied “Yes. Yes. I will.” There was then discussion about KME being  
interested in selling the remaining land at Kirschner Mountain. Later, Mr. Zhang told  
Allen that he only had two weeks to do due diligence, and there was discussion  
about finding out who did the engineering for the work previously done on the  
Property. This conversation then took place:  
GARRY BENSON: I don’t know who’s engineering.  
ALLEN KIRSCHNER: Yeah.  
FRANK ZHANG: Maybe I can ask Alex.  
GARRY BENSON: Alex can find all that out for you.  
FRANK ZHANG: Yeah, she can find that out. So I should go talk to the  
engineer who did the work for [indiscernible].  
ALLEN KIRSCHNER: See, Pilling originally did the work. Actually  
[indiscernible] did the work. Pilling took over and then they were  
working with the Mission Group. And I don’t know if Kevin took over  
[indiscernible] or not. I don’t know. [indiscernible] really good guy. Don  
Pondo [phonetic] he’s just a small one-man operation engineer. But all  
of them are so busy right now, eh. Like –  
GARRY BENSON: I mean, if they’ve already – whoever Bird’s got already is  
who you’ll probably want to use, you know, unless they’re somebody  
– but he usually uses pretty good people, because you want to – don’t  
want to do the same thing all over again.  
ALLEN KIRSCHNER: Oh, no. No. No.  
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Page 20  
FRANK ZHANG: Yes. Plus I love to work with the people who get referred to  
me.  
ALLEN KIRSCHNER: Yeah.  
FRANK ZHANG: Because that’s saves me time to check.  
ALLEN KIRSCHNER: Yeah. You should find out if he’s got any architectural  
plans.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: That way you – if he’s got the, you want them.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: Maybe I’ll phone Alexandra.  
FRANK ZHANG: Yes.  
GARRY BENSON: Yeah. I did a – could call her too, but you should – yeah,  
maybe have a chat with her.  
ALLEN KIRSCHNER: Yeah. Because you want the architectural plans from  
whoever his planner is.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: And that way, if – where they are with them, whether  
it’s complete or not –  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: – and whether the – what has to be done with grading.  
He may need to get some fill material, eh.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: I know he was talking to me about getting more fill  
material.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: So that would cost you, eh. [Indiscernible] he’ll sell you  
fill material.  
FRANK ZHANG: M’mm-hmm.  
ALLEN KIRSCHNER: Good price.  
[63] Later in the meeting, there was discussion about the pending subdivision to  
create the Property:  
FRANK ZHANG: So sorry, what did you mean that you haven’t subdivide this  
one? Or registered –  
ALLEN KIRSCHNER: Well, it’s a bigger piece of property right now and then  
there’s a piece of property that belongs to my brother that has to be  
added to it. So that’s all got to go through city council, eh.  
FRANK ZHANG: M’mm-hmm.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 21  
ALLEN KIRSCHNER: So you have to get a re-zoning application in there,  
or…  
FRANK ZHANG: And this is one I’m buying –  
ALLEN KIRSCHNER: Yeah, and this has all been in there for months.  
FRANK ZHANG: But, you know, the gentlemen subs means it’s not – he only  
give me two weeks to do the due diligence, and after that two months  
to close. Do you think that’s enough time for you guys to do that?  
Because I’m not – I haven’t talked to Garry about this.  
GARRY BENSON: Yeah, I think that’s not enough time to do diligence.  
ALLEN KIRSCHNER: Yeah, we’ll find out, especially once you know which  
engineering firm you’re with, you know.  
FRANK ZHANG: But if we do wave condition within two weeks, then we – we  
finish everything in two months? That – we have no problem with –  
someone – sell – so – the owner to me – sell the owner to me?  
ALLEN KIRSCHNER: Yeah, two months should be good.  
FRANK ZHANG: Two months is –  
ALLEN KIRSCHNER: Hopefully, yeah. It’s supposed to be in front of city  
council on the 13th of June for a second reading.  
FRANK ZHANG: And there’s further reading too.  
ALLEN KIRSCHNER: Huh?  
FRANK ZHANG: There’s another reading after that.  
ALLEN KIRSCHNER: Yeah, the second and third or the third and fourth. But  
if you get second in, usually they’ll probably just do it all the same  
night.  
GARRY BENSON: So I don’t like this. This is an assignment. You’re buying  
the assignment of the contract?  
FRANK ZHANG: Yes.  
GARRY BENSEN: I don’t think you should buy it until it’s registered.  
FRANK ZHANG: Yes.  
ALLEN KIRSCHNER: Yeah, Yeah, for sure.  
GARRY BENSON: It’s got to be registered before you can close this deal.  
ALLEN KIRSCHNER: If we run into a stumbling block of some sort, whatever  
it may be, hey, because you don’t know, then – yeah.  
FRANK ZHANG: That’s why I said I will put my first big deposit to Garry  
Benson in trust, no matter what.  
ALLEN KIRSCHNER: Yeah.  
FRANK ZHANG: So [indiscernible] but I will give it to my lawyer in trust.  
GARRY BENSON: Yeah, we’ll – we’ll take care of that. I’ll talk to Alexandra  
once I read this thing really carefully.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 22  
FRANK ZHANG: Yes. Yes.  
[64] Of note, for reasons I will set out later, there was no recorded discussion at  
this meeting of whether Mr. Benson was in a conflict of interest by representing the  
plaintiffs in this transaction as a result of his personal and professional relationship  
with Allen or KME.  
[65] After the meeting, at the request of Mr. Zhang, Mr. Zhang and Allen met at  
the Property on Kirschner Mountain. Allen gave Mr. Zhang and his family a tour of  
the other developments on Kirschner Mountain. During the site visit, Mr. Zhang  
asked Allen if he could have “his documents” on the Property or if he should get his  
own. Allen told him that ITS had done the geotechnical work and had all the  
information, so Mr. Zhang would have to go to ITS.  
[66] Also, on May 15, Ms. Axsen forwarded to Mr. Zhang a link to a file containing  
documents provided by Three Forks, referred to as the F96 link. She had received  
the F96 link from the listing realtor. Amongst other things, the F96 link included three  
geotechnical reports from ITS concerning the Property, dated May 13, 2010,  
September 28, 2010 and July 28, 2011. Ms. Axsen also included Mr. Benson in the  
email and attempted to include Allen, but she mistyped his email address and Allen  
did not ever receive the F96 link.  
[67] Mr. Zhang promptly forwarded the F96 link to Mr. Ryczywolski.  
Mr. Ryczywolski replied to Mr. Zhang on May 16, saying he had “had a look at the  
geotechnical reports and a number of the old civil drawings from the old  
development permit package”. He described the Property as “an unusual site due to  
some steep slopes and deep fills”, presenting “some significant challenges”. He  
provided Mr. Zhang with a number of questions to ask in his meetings with  
engineers, including:  
Has any fill been brought to the site between the time that the DP  
package was submitted and now? If so, what type of fill, was it  
compacted, was the fill approved by the geotechnical engineer, was  
the compaction tested by the geotechnical engineer?  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 23  
What is the expected cost of the proposed Keystone retaining walls at  
the site? The proposed wall is up to 9 m in one location. This is a very  
big retaining wall.  
What is the expected cost of the foundations for the buildings on the  
north side of the site that will require piled foundations as per the  
geotechnical report?  
[68] Mr. Ryczywolski recommended that he and Mr. Zhang have a meeting with  
the geotechnical engineer and that Mr. Zhang should hire ITS “within the next two  
weeks” to inspect the slope again and to state, under seal or stamp, the summary of  
the inspection and a statement that their geotechnical reports done over five years  
earlier still applied.  
[69] Both Mr. Zhang and Mr. Ryczywolski testified that the ITS report of December  
19, 2011 was not on the link. Although Mr. Zhang had the ability to access the F96  
link after he had retained his first counsel in this matter, and videotaped his  
accessing of the link, that videotape was not produced, on the basis of a privilege  
claim. The only record produced at trial is of a screen shot which shows the contents  
of the shared file as:  
20823-SURVEY DATA.ASC  
20823-TOPO-OCTOBER 25 2016.pdf  
20823-TOPO.dwg  
Item 7.3 – DVP11-0047 Mission Group Creations Ltd.  
ITS Geotech Hazard Review.pdf  
ITS Geotech Report.pdf  
ITS Slope Stabilty.pdf  
The F96 link has since expired, and cannot be accessed.  
[70] In the early morning hours of May 16, Allen emailed Ms. Axsen, saying:  
We need to talk ,I sold Kevin the property based on 12 duplex units. The  
mission Group had proposed to build 17 units that where the problem starts.  
The walls just get to costly and it puts to many units on that steep hillside. At  
the right price one can build 12 nice units. You need to talk to Dail Piling  
he worked on the site with the Mission Group. I dont know if he was still  
working on it with Kevin or not.  
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Page 24  
We can talk in the morning.  
Al  
[Reproduced as written.]  
[71] Ms. Axsen received the email in the morning and immediately called  
Mr. Pilling, as her concern, based on the email, was the issue of retaining walls.  
Ms. Axsen did not forward to Mr. Zhang the email she had received from Allen, nor  
tell him she had received an email from him. Instead, after speaking to Mr. Pilling,  
she emailed Mr. Zhang, saying:  
Hi Frank,  
I have been reviewing all of the plans. It looks to me like you are going to  
need to add some serious retaining walls to be able to build 35 townhouses.  
We need to run the numbers and figure out what is the most economical  
option moving forward.  
Are you still in Kelowna?  
Dale Pilling, civil engineer with D.E. Pilling & Associates, has worked on the  
plans in the past. He is available to meet tomorrow. I unfortunately have to go  
to Vancouver … will not be back until Thursday afternoon. Dale will be out of  
town this Thursday until next Wednesday so tomorrow is the only time he has  
to meet. Would you want to meet with him and I can email you a list of  
everything you will need to ask him? If you can meet Dale tomorrow, what  
time would work best for you? His office is located at 200-540 Groves Ave.  
Do you know who you would like to hire to build the townhouses? We will  
need to tender quotes and figure out numbers ASAP to make sure you are  
comfortable moving forward before we have to remove all subjects.  
…
[72] Ms. Axsen arranged a meeting for Mr. Zhang with Mr. Pilling. She sent an  
email to Mr. Pilling and Mr. Zhang in advance of their meeting, forwarding the F96  
link. She said:  
Dale – Frank is looking for a rough estimate of cost to construct the 35 units  
the Mission Group originally proposed. Kevin Bird brought in close to  
$150,000 worth of fill. Interior Testing monitored that (reports are on the link).  
It looks like retaining walls will be needed.  
…
*there were plans for 12 duplex units. We need to figure out the most  
economical approach. With the market going up I think the 35 units might be  
better but that will add costs.  
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Page 25  
[73] Mr. Zhang agreed that as a result of that email, he was aware that Three  
Forks had brought approximately $150,000 of fill to the site in 2015, and that ITS  
had monitored that work. He agreed that the email told him that the monitoring  
reports would be on the link. However, he maintained he had never seen the  
monitoring reports.  
[74] One of those monitoring reports was the report of November 17, 2015, quoted  
above, which expressly referred to the December 19, 2011 ITS report.  
[75] Mr. Ryczywolski testified that he does not think that Mr. Zhang told him that  
Three Forks had brought approximately $150,000 of fill to the site. He was definitive  
that he was not told that ITS had monitored the work. He testified that if ITS was  
monitoring work, there would be, or at least he would expect there would be, reports  
of the monitoring.  
[76] The meeting between Mr. Zhang and Mr. Pilling took place on May 17.  
Ms. He attended and again recorded part of the meeting. Mr. Zhang asked about  
retaining walls based on the 35-townhouse design, and mentioned his realtor had  
talked about six duplexes or 12 duplexes. He asked Mr. Pilling what that was, and  
Mr. Pilling responded that what Mr. Bird had planned was six-plexes, for which  
Mr. Pilling had a site plan. He explained to Mr. Zhang that the Property was not  
zoned for six-plexes and that rezoning would involve a significant delay. He told  
Mr. Zhang that six-plexes would be less expensive to build, because it would  
eliminate the need for most of the retaining walls. There was then discussion of  
geotechnical reports and the following exchange took place:  
KAREN ZHANG: But do you need a new geotechnical report to support  
anything?  
DALE PILLING: Oh yeah. The geotechs have been all over it. We got lots of  
reports.  
FEMALE SPEAKER: We don’t need a new one, though.  
KAREN ZHANG: Don’t need a new one?  
DALE PILLING: No. No. No.  
FRANK ZHANG: But my company want to ask you one question, because  
this has gone on five years ago.  
DALE PILLING: Yes.  
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Page 26  
FRANK ZHANG: Do we have to ask the geotechnical company to come to  
check, make sure there’s nothing change or you guys are okay with  
that?  
DALE PILLING: No. The geotechnical company would be just fine. Okay?  
Nothing’s changed, it’s just time –  
FRANK ZHANG: Okay.  
DALE PILLING: - not – not work.  
FRANK ZHANG: Okay.  
DALE PILLING: And what happens here is even that fill that Kevin put in –  
FRANK ZHANG: M’mm-hmm.  
DALE PILLING: -- they were involved in that.  
FRANK ZHANG: Oh, okay.  
DALE PILLING: Okay. So it wasn’t just dumped there. No. It was put in  
properly.  
FRANK KHANG: Okay.  
DALE PILLING: Okay.  
[77] Mr. Zhang asked Mr. Pilling for an estimate of the civil engineering costs to  
prepare the site for building and explained that he only had two weeks to do his due  
diligence. Mr. Pilling agreed to provide an estimate, and did so on May 19.  
Mr. Zhang forwarded the estimates of cost to Mr. Ryczywolski, who responded on  
May 22 and noted that the costs did not reflect the special foundations that would be  
required for some of the buildings according to the geotechnical reports of ITS.  
Mr. Ryczywolski told Mr. Zhang that he thought it important that Mr. Zhang speak to  
the geotechnical engineer who stamped the various reports, Peter Hanenburg.  
[78] Mr. Zhang met with Mr. Hanenburg on May 24, in what was a brief meeting.  
Ms. Axsen was also in attendance. Mr. Zhang testified that he asked Mr. Hanenburg  
if he could rely on the ITS reports and Mr. Hanenburg said yes. Mr. Zhang did not  
ask Mr. Hanenburg how many reports had been written by ITS about the Property,  
he did not provide Mr. Hanenburg with a list of the ITS reports he had received, and  
he did not ask Mr. Hanenburg whether there were any reports prepared since July  
2011, the date of the most recent report Mr. Zhang says he had. Mr. Hanenburg  
testified that his meeting with Mr. Zhang was a brief meeting, which he would  
describe as being like an interview process. He does not recall being asked if  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 27  
Mr. Zhang could use his reports. Mr. Hanenburg testified that if Mr. Zhang had  
asked, he would have had to touch base with Mr. Kirschner and the Mission Group  
to get approval. He was not asked for any reports and understood Mr. Zhang already  
had reports. Ms. Axsen described the meeting as being very short and said that she  
and Mr. Zhang did not even get any information at the meeting.  
[79] Mr. Zhang felt that the meeting had been rushed and that he had not been  
able to ask all of his questions of Mr. Hanenburg. Consequently, he asked  
Mr. Ryczywolski to call Mr. Hanenburg. Mr. Ryczywolski called Mr. Hanenburg on  
May 24. Mr. Ryczywolski testified that he recalled telling Mr. Hanenburg that he had  
seen his reports, but he did not specify to Mr. Hanenburg which reports, because he  
assumed he had everything. He did not ask if there were other reports because he  
assumed Mr. Zhang had everything through his due diligence. He recalled asking  
Mr. Hanenburg about a recommendation that Mr. Hanenburg had made that the  
foundations of six of the townhouse buildings be constructed using micropiles, which  
Mr. Ryczywolski said were a little unusual and can be very expensive.  
Mr. Ryczywolski also recalled asking Mr. Hanenburg to do a stamped report for  
Mr. Zhang and to advise if there were any changes to the Property since his reports.  
He testified that Mr. Hanenburg said he could not do a report at that time, that he  
had been working on the mountain for years, that he had never found any stability  
issues and that the site had not changed. Mr. Ryczywolski conveyed that information  
to Mr. Zhang. Mr. Hanenburg testified that he had a vague recollection of the call,  
but did not recall discussing his reports, the slopes or whether he could do a report.  
[80] Mr. Ryczywolski was not available to do a full geotechnical report on the  
Property prior to the condition removal date. He told Mr. Zhang that he should have  
Mr. Hanenburg do a new inspection, but was aware by May 24 that Mr. Hanenburg  
would not be doing that. He told Mr. Zhang that he could likely rely on the ITS  
reports. He did not know for sure whether Mr. Zhang had anyone else do a  
geotechnical inspection or investigation prior to May 30.  
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Page 28  
[81] After his telephone call with Mr. Hanenburg, Mr. Ryczywolski emailed  
Mr. Zhang to tell him that based on his conversation with Mr. Hanenburg and the  
geotechnical report, six of the duplex buildings would need to be constructed on  
micropile foundations systems “which can be very expensive”, and he advised  
Mr. Zhang that he had requested quotes from three different micropiling contractors  
for him. He also told Mr. Zhang that he “should not take ITS off of the project yet”.  
[82] After the meeting with Mr. Hanenburg, Ms. Axsen emailed Mr. Hanenburg as  
follows:  
Thank-you for meeting with us this morning, Frank has asked if he could pay  
you to do an updated report on the fill dirt/stability of the site. …  
Frank is looking for reassurance that the fill dirt that was placed there 6-7  
years ago has not slide off the property and is still stable.  
[83] Mr. Hanenburg responded:  
We can get more involved if necessary, but we are currently very busy and  
wouldn't be able to take on even the review for the next couple of weeks.  
I would suggest two things in the interim … have Frank review, sign and  
return a copy of our attached, standard "terms of engagement".  
Once we have a contract in place, … then I will be able to provide a budget  
estimate for the work you are requesting.  
…
[84] Mr. Hanenburg understood that he was being asked if he could provide an  
opinion. He testified that he would have needed to do some field investigation or  
inspection and that it would take six to eight weeks total to provide a report. In any  
event, Mr. Zhang did not sign the terms of engagement.  
[85] In addition to the meeting with Mr. Hanenburg, Mr. Zhang and his wife also  
met with Mr. Benson on May 24. Again, a portion of that meeting was recorded by  
Ms. He. There were several exchanges of significance during that meeting,  
including:  
GARRY BENSON: It’s, it’s, there’s a risk, only in that, you know, if something  
happened where the City wouldn’t allow it, you know, ummm, allow  
the subdivision. But I’ve, we’ve, been working on it for, you know, for a  
long time; I don’t see any problems at this point, okay?  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 29  
FRANK ZHANG: Okay, but there, my question is like this, you know, I  
understand you are doing that for them, that’s good, but you know it’s  
not fair for me to pay the money and get a risk, I mean what is happen  
I cannot get the land, I pay for the land, and what happen …  
GARRY BENSON: Yes, that’s the problem. You’re buying the contract. The  
best way that you can do that is, we put in here, just a second, I just  
want to check something. (pause) Ok just…Yah, “the vendor, assignor  
and assignee agree that the completion, adjustment and possession  
(upon registration) dates will be August 30, at this time the option  
purchase will be paid out in full by the assignee.” So, that means that  
we have to have registration by the 31st.  
…
FRANK ZHANG: Yes, then when you guys finish with the registration, then I  
pay rest at closing. If not, then I don’t pay anything at all.  
GARRY BENSON: That’s right. It has to be completion, registration.  
…
KAREN ZHANG: But my question is we can always walk, even if you tell me,  
like the good thing’s Gary work on that, right?  
GARRY BENSON: Yup.  
FRANK ZHANG: You can tell me what’s going on … but I want to have the  
right to, you know, make sure if something happen I cannot get the  
land I can walk away. I’m not going to lose, right?  
GARRY BENSON: Yes  
…
FRANK ZHANG: Hm hm. So, … then you guys work on the registration.  
When you’re finished then I pay the money to close the deal. If you  
don’t finish then I don’t have to pay the money, I can walk away and  
get my own money back.  
GARRY BENSON: Yah, right. So it’s my job to get it done between now and  
August 31st.  
…
FRANK ZHANG: So, other than that, is there anything except that subdivision  
fee, there’s nothing else?  
GARRY BENSON: That’s right.  
…
GARRY BENSON: Well, no, that’s nothing to do with, yah, there’s some  
things he has to do, to make the lots, you know, more useable but the,  
um, it’s more what the City says. When I get the final letter from the  
City approving this lot being made, then I can do steps.  
…
FRANK ZHANG: So I’m buying the contract, so I want to get all of my rights  
from the contract too, right?  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 30  
GARRY BENSON: So you’re buying the contract that Bird has with Al right  
now.  
…
GARRY BENSON: Okay, um, okay, you have to … once a lot is created, it  
will be up to you to apply for the building permit, rezoning and other  
stuff, right?  
…
FRANK ZHANG: Yah. Ok. No. … so, the only thing from the contract I have  
to pay, roughly, around $5000 for the subdivision fees.  
GARRY BENSON: Yah, I don’t know what they are; I’ll ask Al. …  
FRANK ZHANG: And also Allen has to subdivide?  
GARRY BENSON: Yup. And I have to do all that before August 31st.  
…
GARRY BENSON: Um, listen, I think what we need, what you’re missing  
here, it’s been bugging me, and I just figured it out. All of the  
contracts, all of the plans, all of the stuff that the seller has, he should  
give it to you, free.  
FRANK ZHANG: Yes.  
GARRY BENSON: But that’s not in the contract.  
FRANK ZHANG: That’s what I wanna ask. I forgot. Yes. Can you put that  
onto there?  
GARRY BENSON: I’ll phone Alexandra.  
(Mr. Benson then called Ms. Axsen and left a message asking to have 2  
clauses added to the contract – one that Mr. Bird will give all contracts, plans,  
drawings, work done by any engineers, copies of any correspondence with  
the City of Kelowna to his clients and the other that 199 have the right to  
assign the contract.)  
FRANK ZHANG: And also thanks for bringing that up. I was going to ask, you  
know, when [indiscernible] commission, I don’t care how much he  
actually spends, I’m not going to ask for [indiscernible], I also want  
[indiscernible] take any other invoice he want for the people who do  
the work in that way I can learn in the future.  
Yup, yup. I’ve asked for everything. Every document he has.  
…
(Discussion about a builder Mr. Benson was recommending)  
FRANK ZHANG: We pretty much get a sense of how much it costs, but you  
know at this point … there’s a big huge question right now. ... I got my  
understanding based only on Dale Pilling’s report, so how could is his  
company?  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 31  
GARRY BENSON: Oh, Pilling is good.  
…
FRANK ZHANG: Okay good. ‘Cause I will call him today to make sure  
because everything is based on five years ago. I need maybe to do  
update. Because I want to make sure… that’s five years ago,  
something’s changed or happened … I talked to Dale he said  
everything is based on five years report.  
…
FRANK ZHANG: You know I’m really happy where I am right now and so I  
expect no surprises.  
GARRY BENSON: There’s always surprises in subdivisions. Anytime you do  
a subdivision there are surprises.  
…
KAREN HE: One more question, so I know you and Allen are friends for  
many, many years. Are there any issues of conflict?  
GARRY BENSON: No, because you’re not buying from Allen, you’re buying  
this from Kevin Bird. Right? From his company. So Allen’s out of the  
picture on this other than to give you numbers.  
KAREN HE: oh, okay.  
GARRY BENSON: Allen has no say on what you do here, because you’re  
buying this contract.  
KAREN HE: oh, okay.  
GARRY BENSON: So I’m not concerned about that. I thought about it  
already. … But yah, because this is separate. Once you buy the  
option, it’s just a matter of closing the deal. Al has no say about your  
deal. Right? He has no influence over this.  
FRANK ZHANG: So, as long as you make sure, you know, if I pay the money  
I get the land; if I cannot get the land even if I waive the conditions I  
still get my money back?  
GARRY BENSON: Yah, sure. It’s on registration.  
(Mr. Benson called Ms. Axsen again)  
GARRY BENSON: Okay, just, there’s three things that should be on the  
contract. I only mentioned two in the other message. One is that we  
need clarification that is says ‘upon registration’ in the agreement.  
…
ALEXANDRA AXSEN: Yup.  
GARRY BENSON: Page 6 of 6. It should say ‘upon registration of the  
subdivision’.  
ALEXANDRA AXSEN: Okay.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 32  
GARRY BENSON: It should say, and we want Kevin to give him, for free, all  
plans, invoices, documents, emails, correspondence that he has in his  
possession.  
ALEXANDRA AXSEN: Okay, that would be great, yah. ... So you’re just  
wanting to send over an addendum for that?  
GARRY BENSON: Yah, on subject to removal he will, you know, within five  
days give all that information up to them.  
ALEXANDRA AXSEN: Do I need that Kirschners to sign that first?  
GARRY BENSON: No, no no, the Kirschners are not parties to this contract.  
ALEXANDRA AXSEN: Okay.  
GARRY BENSON: This is just all of Kevin’s documents. So, we need to  
change that to ‘upon registration of subdivision; that he will provide all  
documents in his possession relating to this matter, and also the third  
thing was … [he asks his clients: what was the third thing? Client  
answers] Oh, that he has a right to, they have the right to assign this  
to a non-arms length company, because they may make a new  
company to do this.  
(Ms. Axsen asked Mr. Benson to send her an email with the wording, and he  
agreed and proceeded to type the email.)  
GARRY BENSON: There you go, done. I sent you a copy. Okay, now let’s  
just do a check. Okay, I think we’re good my friend.  
[86] The email Mr. Benson sent Ms. Axsen was as follows:  
1.  
2.  
Page 6 of 6 should be changed from upon registration to “Upon  
registration of the sub-division  
Assignor to provide the Assignee with all documentation relating to  
the property including plans, engineers reports or analysis, invoices  
for work to date, estimates and plans/drawing of the project  
3.  
Assignee has the right to assign the contract to a non-arms length  
company  
[87] Ms. Axsen prepared an addendum on May 26, which included the following  
condition:  
The Assignor hereby irrevocably agree to provide the Assignee with all  
documentation relating to the property including plans, engineer reports or  
analysis, summary of invoices for work to date, estimates and plans/drawings  
of the project by May 31, 2017.  
[Reproduced as written.]  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 33  
[88] The proposed addendum was subsequently modified by the insertion, in  
handwriting, of “in its possession” as it related to the obligation of the assignor to  
provide documents to the assignee. Mr. Zhang initialled his acceptance of that  
addition and the addendum was fully signed on May 30. The documents were  
required to be provided by May 31. On May 30, Ms. Axsen sent Mr. Zhang a  
document received from Three Forks, itemizing costs incurred on or for the Property  
in 2015 and 2016, including site preparation and the cost of gravel. It does not  
appear that any additional documents were sent by Three Forks or the listing agent.  
[89] At the request of Mr. Taylor, Mr. Benson also requested, on May 30, that an  
additional condition be added to the contract which related to the deposit being  
returned if clear title could not be delivered. That addendum was prepared and  
executed by both parties.  
[90] Later on May 30, the conditions were removed and the deposit paid into trust.  
The deposit was sent by Mr. Zhang to Mr. Benson from a bank account in the name  
of 199.  
[91] In June 2017, Mr. Hanenburg attended the Property in the area of the pump  
station as he had been notified by the Black Mountain Irrigation District that there  
were some tension cracks below the pump station at the crest of the slope. He did  
not realize the pump station was on the Property. He did not notify Mr. Bird or the  
Kirschners, partly because of ownership and partly because he did not perceive the  
tension cracks in that area as a big issue.  
[92] Mr. Zhang took some unsuccessful steps over the summer to try to secure  
construction funding. Ms. Axsen continued to follow up and report to Mr. Zhang  
about the pending closing. On June 22, she forwarded information to Mr. Zhang as  
follows:  
For 1261 Kloppenburg the Kirschner need to subdivide the property before  
you can close. I followed up to make sure they are on top of it. It sounds like  
everything is one schedule right now:  
The subdivision application required an OCP amendment and rezoning for  
parts of the site, and that is going to Council for initial consideration Monday,  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 34  
with Public Hearing expected in mid-July. The only condition of adoption is  
Ministry signoff, and they’ve given preliminary approval.  
Following that, the Kirschners can submit for final subdivision approval  
provide they’ve met all the conditions of the PLR, including signoff from other  
servicing agencies.  
[93] As the initial closing date of August 31 approached, it was clear that the  
subdivision would not be registered by August 31. Mr. Benson’s assistant was in  
communication with the City on August 21 and 22, still trying to satisfy the City’s  
requirements for approval of the subdivision plan. Mr. Benson spoke to a City  
planner on August 22 as well. New and revised documents were sent to the City on  
August 25 by Mr. Benson’s assistant, and she was advised that she would hear that  
afternoon if anything else was needed. Mr. Benson acknowledges that he would  
have been given that information, and that the closing date was just around the  
corner.  
[94]  
On August 29, Mr. Benson’s legal assistant emailed the assistant for the  
lawyer for Three Forks and advised:  
… I have asked GFB [Mr. Benson] to try to extend that conveyance to close  
10 days after registration of the subdivision…just to let you know…but he’s  
still going to “work on it” and call TTB [the lawyer for Three Forks] …  
[95] On August 30, Mr. Benson received a message asking him to call Ms. He  
about the conveyance. He called and spoke to Mr. Zhang. His handwritten notes  
indicate that Mr. Zhang would email with instructions, but Mr. Benson clearly had  
little if any recall of the conversation. He did ask his articled student to speak to  
Mr. Zhang and obtain his instructions. His articled student emailed him as follows:  
(1)  
He agrees to the extension of one month on the condition of (a) he  
can terminate the contract anytime, (b) he can get the deposit back  
anytime 100%, and (c) reserve the right to sue for further damages.  
(2)  
Otherwise, he wishes to terminate the contract now and get his  
deposit back tomorrow.  
[96] Mr. Benson emailed Mr. Zhang approximately 1 hour later, saying:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 35  
Frank,  
As I said earlier on the phone it is easier to communicate via email as we are  
in Month end. I have read Danas email and spoken with her.  
First of all you have to understand that it does not matter to Al Kirschner or I if  
you close. He still has his deal with Kevin Birds company. If you choose to  
complete this deal it does not affect my dealings with you and Kirschner.  
What I need to know is will you extend for a month with the intention of  
completion. To offer anything else to the other side is of little value as they  
will complete tomorrow or have to get an extension from Kirschner.  
[Reproduced as written.]  
[97] Mr. Zhang emailed back almost immediately, saying:  
Sounds good Garry,  
First of all, it is not my fault causing the delay of the Pruchase, and it totally  
changes our business plan, so If the deal falls, Kevin will have to take the  
responsibility for me.  
Second, I will agree extent one month for the extension ,but please make  
sure: If any thing happens, and we can not close the deal (a) I can get the  
deposit back anytime 100% + the interest ( prime+3)of the deposit , and (c)  
reserve the right to sue for further damages.  
[Reproduced as written.]  
[98] Mr. Benson replied:  
You will not have a legal right to sue if the deal collapses as there will not be  
any “damages” at law under the contract. I cannot see them agreeing to pay  
you interest. I cannot see how any of this would work other than the 30 day  
extension after which time the deal would fail. Please advise.  
[99] Mr. Zhang sent the email chain to Mr. Taylor, asking Mr. Taylor to “call  
ASAP”. Mr. Taylor then emailed Mr. Benson:  
Garry I am meeting with Frank Zhang and Karen He and they have provided  
me with the email string below.  
They are concerned that the instructions conveyed by Dana are not clear and  
do not property reflect their wishes. They have asked me to clarify their  
intentions by sending this email and to assure that you have proper  
instructions to proceed. They have indicated that they still want to purchase  
this property.  
They have indicated that they are willing to grant A 30 day extension of the  
closing date. I have spoken with Cheryl of your office and she has indicated  
that it could be approximately three weeks before subdivision is completed,  
but that it is now in the process and is with the city of Kelowna for approval.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 36  
Please confirm that our Mutual clients deposit money remains in trust and is  
not at risk. Please also confirm receipt of this email at earliest convenience.  
[Reproduced as written.]  
[100] Accordingly, the closing date was extended to September 30. Mr. Benson  
wrote to the Three Forks’ lawyer, confirming the new closing date and saying “We  
also confirm that the deposit funds placed by our client will be released to our clients  
unconditionally should the transaction not complete on September 30, 2017.” That  
email was copied to Mr. Taylor.  
[101] On September 25, Ms. Axsen emailed Mr. Zhang to forward an update from  
Mr. Benson, namely “its a matter of the Land Titles approval know [sic]. We will keep  
you updated.” That same date, Mr. Taylor wrote to Mr. Benson:  
Frank has spoken with his realtor who has advised him that the subdivision is  
not yet complete. He is mindful of the approaching September 30, 2017  
deadline for the transaction to conclude. Can you please provide Frank and I  
with an update about the status of the transaction including the status of the  
subdivision and any other issues Frank should be aware of?  
Also, can you advise if the deposit provided by Frank was invested? Thanks,  
[102] Mr. Benson’s response was:  
The documents are in with the Land Title for registration. We will have to wait  
for the examiner to approve the documents. I cannot say for certain if we will  
have registration by the 30th. The money in trust is not invested. It costs  
more to invest in an interest bearing account for the client than the value of  
return. Plus there are law society rules on the trust. At this point any interest  
earned goes to the law society.  
[103] Mr. Taylor suggested they discuss a further extension and inquired how much  
time would be appropriate. Mr. Benson’s reply, copied to Mr. Zhang, suggested that  
an extension may be prudent, that he was away until October 10, and asking,  
“Frank, are you ok with an extension?” Mr. Taylor replied asking for Mr. Benson’s  
best guess with respect to timing, and how quickly closing could occur after  
registration of the subdivision, and Mr. Benson said he could close within 24 hours of  
registration, and suggested October 10 as a “safe extension”. It was Mr. Taylor who  
provided Mr. Zhang’s instructions:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 37  
I have discussed it with Frank and he agrees that we should extend to the  
10th. If the subdivision is completed and there is a chance to close earlier  
then he would like to do so, but I don’t think that will change the extension.  
His first concern is to complete the transaction and his second concern is to  
make sure that his substantial deposit remains safe, but I understand that it  
remains in your trust account.  
Thanks,  
[104] The next day, Mr. Benson’s assistant emailed Ms. Axsen advising that the  
pending date for registration of the subdivision was October 10, and that Mr. Benson  
suggested the extension be to October 16. Ms. Axsen replied, copying in Mr. Taylor  
and Mr. Zhang to both the email she received and the reply, saying she would send  
an amendment to Mr. Zhang for signature.  
[105] Mr. Zhang, through the DocuSign process, initialled the contract amendment,  
extending the closing date to October 16.  
[106] In fact, the subdivision registration did not occur until October 13, which was a  
Friday. A further brief extension was requested to allow for preparation of the closing  
documents. On October 13, Mr. Taylor emailed Mr. Benson, asking for an update  
and noting that Mr. Zhang had not received any information about the closing which  
was supposed to occur on October 16. Ms. Axsen, that same date, emailed  
Mr. Benson’s assistant, asking if there was any chance of closing on Monday (the  
16), because: “I know Frank is going to hit the roof with having to do another  
extension. He was super upset with the last one.”  
[107] Mr. Benson’s response to Ms. Axsen’s request to close on October 16 was  
that he could not see closing by Monday, and that he could not bring staff in for the  
weekend. He suggested a closing on October 18 or 19 was realistic.  
[108] Ms. Axsen relayed that information and received instructions from Mr. Zhang:  
Frank is upset but said he will sign the Amendment to close on the 20th. He  
asked if you would be able to send the transfer documents and Statement of  
Adjustments to his Calgary lawyer on Monday so he can sign and then  
arrange for the funds to be transferred for closing? Would that be possible?  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 38  
[109] Mr. Zhang signed a further contract amendment, extending the closing date to  
October 20. Although there was discussion of a further extension, at the request of  
Mr. Zhang as a result of a potential bank delay due to exchanging currency from US  
dollars to Canadian dollars and Mr. Zhang signed a further amendment, extending  
the closing to October 27, in fact the funding issue was resolved and the transaction  
closed on October 20.  
[110] Mr. Benson, as requested, sent the closing documents to Mr. Taylor’s office.  
Mr. Zhang attended at Mr. Taylor’s office to sign the documents. While Mr. Zhang  
was at Mr. Taylor’s office, Mr. Taylor called Mr. Benson and there was a discussion  
between Mr. Taylor, Mr. Benson, Mr. Zhang and Ms. He before the documents were  
signed.  
[111] The closing completed, with a direct transfer of the Property by KME to  
Linten. The statements of adjustment showed the funds paid by Linten being  
credited to Three Forks, and then Three Forks paid the Kirschners what was then  
outstanding on its original option to purchase.  
Events after Closing  
[112] After closing, nothing occurred with respect to the Property for almost six  
months. Mr. Zhang testified that he did not want to start working on the project in the  
winter, so he travelled to China.  
[113] On his return, Ms. Axsen made referrals and set up some meetings for  
Mr. Zhang. On April 25, 2017, she copied an email she had received from the City  
and sent it to Mr. Zhang. The email from the City said:  
The original development was approved under form and character  
Development Permit DP11-0046, and environmental Development Permit  
DP11-046. It does seem that both of these permits were never issued, and  
have long since lapsed. There had also been an application made for an  
overheight retaining wall.  
…
In order to get permission to develop the site again, new applications will  
have to be made for Development Permit and possibly Development  
Variance Permit if the retaining walls are overheight. … As well, please note  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 39  
that this zone is very specific in that it only allows for a maximum density of  
17 dwellings per Hectare. Base on the size of the lot at approximately 2.68ha,  
the maximum number of dwellings that the zone would permit is  
approximately 45 units, and that is not taking anything into consideration for  
topography of the site. There are large areas that are steeply sloped that  
would not support development.  
[Reproduced as written.]  
[114] In the early spring of 2108, Allen received a call from a local reporter about  
cracking along Loseth Road. He attended the Property and found that a transformer  
box on or beside the Property had shifted and some top soil was separating out from  
a rock pile in the vicinity. The gate to the pump station and the fence around it was  
shifting.  
[115] Between April 25 and June 4, Mr. Zhang corresponded with several people  
and firms about development of the Property.  
[116] On June 5, Mr. Zhang was amongst many recipients of an email from the  
City, forwarding a “technical memorandum” prepared by Westrek Geotechnical  
Services (“Westrek”) dated June 3, 2018, with respect to a slope stability  
assessment in the area of the pump station. The email from the City stated:  
The City of Kelowna is rather concerned with this issue given the conditions  
and recommendation stated in the report. The implications associated with a  
failure are significant.  
The City will be convening a meeting to discuss; risk, mitigation options, roles  
and responsibilities, communications (if necessary), etc. Please have  
someone available for the meeting.  
Invitees will include; BMID, the master developer, CTQ, the current land  
owner, the City, and Fortis.  
[117] Mr. Zhang sent the email and memorandum to Mr. Ryczywolski for his review  
and thoughts and put his steps with respect to development on hold. On June 6,  
there was a meeting convened by the City which Mr. Zhang attended by phone.  
[118] In June or July 2018, Mr. Zhang asked Mr. Pilling’s office to talk to the City. In  
July, emails were exchanged between Pilling’s office and the City. Mr. Zhang  
understood that the City was inviting Linten to participate in the upcoming  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 40  
geotechnical investigation by having the scope of Linten’s geotechnical investigation  
added to that being done by the City. Linten declined the invitation. Mr. Zhang did  
continue to seek input from Mr. Ryczywolski with respect to the Property. He asked  
Mr. Ryczywolski to attend and inspect the Property, which Mr. Ryczywolski did.  
[119] On January 21, 2019, Mr. Zhang wrote to the City noting that no information  
had been provided as to cause or proposed remediation measures, and suggesting  
that the City had received a technical report which had not been shared with Linten.  
He advised that Linten had asked a slope consultant (Mr. Ryczywolski) to assist and  
advised that Mr. Ryczywolski would be in Kelowna and seeking a meeting. He  
requested “immediate disclosure” of what the City had determined about the  
technical issues.  
[120] On January 24, 2019, Westrek provided a report entitled “Geotechnical  
Investigation” to the City, which was provided in turn to Mr. Zhang on January 25,  
under cover of an email from the City advising that the City would like to work with  
Linten “and the adjacent owners to devise an appropriate solution and help facilitate  
the fair assessment of responsibilities”. Linten’s then litigation counsel set up a  
without prejudice meeting for January 31.  
[121] In the “Background Documents” section of the Westrek report, Westrek listed  
the December 19, 2011 report prepared by ITS. Mr. Zhang and Mr. Ryczywolski  
testified they had not seen that report, nor known of that report, prior to receipt of  
that Westrek report.  
[122] Mr. Zhang obtained a copy of the December 19, 2011 report and he  
forwarded that to Mr. Ryczywolski on February 14.  
[123] On February 21, counsel for the City wrote to Linten’s then litigation counsel  
in Calgary, as follows:  
We are writing further to James Kay’s February 14th email advising that City  
staff would be bringing forward a recommendation to Council at the February  
25, 2019 meeting that Council impose remedial action requirements on the  
owners of the properties with identified slope instability hazards. Please find  
enclosed the Report to Council prepared in support of the recommendation.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 41  
…
While there is case law that procedural fairness to the owners to whom a  
remedial action requirement has been directed is met through the  
reconsideration process, staff appreciate the significance of these  
requirements for the owners and should you or your clients wish to attend the  
Council meeting on February 25, 2019 to make submissions with respect to  
the recommendation resolutions, Council will be asked to accommodate that  
request. That would not preclude your clients from requesting reconsideration  
by Council at a subsequent date.  
[124] The City, at the meeting of February 25, 2019, made a determination that the  
fill slopes on the Property, described in the City documents as the Loseth Property,  
were hazardous or unsafe, and imposed a remedial action requirement on Linten, as  
well as on the owner of land below the Property, located on Kloppenberg Ct. and  
described as the Kloppenberg Ct. Property. The remedial action required of Linten  
was:  
a.  
prepare and present to the City’s Manager, Development  
Engineering a remediation plan based on the January 24,  
2019 Geotechnical Investigation Report of Westrek  
Geotechnical Services Ltd. (the “Westrek Report”) that will  
achieve a factor of safety of 1.3 for the fill slopes;  
b.  
c.  
provide the remediation plan to the City’s Manager,  
Development Engineering (the “Manager”) no later than March  
11, 2019;  
the remediation plan must be prepared or approved by a  
professional engineer or professional geoscientist with  
experience or training in geotechnical study and geohazard  
assessments (the “Qualified Professional”);  
d.  
e.  
complete the work in accordance with the approved  
remediation plan by March 30, 2019;  
provide a report by the Qualified Professional to the Manager  
within two weeks of completion of the work, certifying the safe  
condition of the fill slopes.  
[125] Mr. Zhang testified that nothing was done in relation to the requirement, as  
there was no money in the company. In fact, the plaintiffs have never done a  
geotechnical investigation and assessment of the Property, prior to closing and right  
up to the date of trial.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 42  
[126] On March 11, 2019, a Report to Council was sent to the City Manager,  
recommending that the City design and construct emergency works at the Property  
and the Kloppenberg Ct. Property. The report went to City council and was  
discussed at a meeting that same date. Mr. Zhang was aware of the discussion and  
understood that the outcome was that the City was going to be doing what it called  
remediation work.  
[127] The City did perform, with the assistance of contractors and professionals,  
remediation work. A final report was prepared by Westrek, entitled Slope  
Stabilization – 2045 Loseth Road – Completed Works, dated September 13, 2019.  
[128] While the City was performing its work, Mr. Zhang asked Mr. Ryczywolski to  
obtain some quotes for removing fill. On April 26, 2019, Mr. Ryczywolski wrote to an  
earthwork contractor, Wilco, and said:  
Hi Todd,  
I am assisting a client of mine with a property that he is trying to develop for a  
residential subdivision in Kelowna. The address of the property is 2045  
Loseth Road. I was hoping that you might be able to assist me with a cost  
estimate for some earthworks that needs to be done at the site before any  
development can proceed.  
The property has some history. A portion of the property was raised  
significantly in the past to create a flat area at the top of a slope. The problem  
is that the upper 2.5m of fill thickness over this 6500m2 (approx.) flat area  
was end dumped and leveled with no compaction whatsoever. The end  
dumped material consists of a bit of everything (sandy silt, silty sand, and  
sandy gravel).  
I am hoping to get a cost estimate from you for the removal and replacement  
of 2.5 m of fill over this 6500 m2 (approx.) area. The fill that would be  
removed would be reused to raise the grade back up in 200 mm thick heavily  
compacted lifts (98% of SMPDD). You can assume that no new material will  
need to be imported to the site. Access into the site from Loseth Road is  
good. Do not include any allowance for compaction testing in your estimate.  
Is this something that you could provide a cost estimate for??? If so, could  
you also give me an idea of how long you think this would take. No need for a  
detailed proposal for now. Just an email with a cost estimate, number of  
days, and your assumptions would be great.  
I kindly request that you keep this request confidential. Thanks very much,  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 43  
[129] Wilco reported back and provided an estimate of $125,000 for the work, with  
a project duration of five days.  
[130] In December 2019, the City invoiced Linten for $574,121.45 of the total  
claimed expenses incurred of $850,700.94. The invoice was accompanied by a  
description of work costs, and percentage allocation of each of those costs to Linten.  
The balance of the expenses was allocated to the owner of the lot below the  
Property. The invoice to Linten has not been paid.  
[131] No steps have been taken with the Property since. Mr. Zhang says he has  
made no effort to move forward with development of the Property and that he has  
chosen not to retain a geotechnical expert other than retaining Mr. Ryczywolski for  
initial advice in early 2019 and subsequently for litigation purposes. Linten has made  
no effort to sell the Property. Although Linten initially sought rescission, its present  
position is that it seeks to retain the Property and advance damage claims.  
Credibility  
[132] Although there are some facts which are not in dispute in this case, many of  
the material facts are the subject of significant dispute. Consequently, it is necessary  
that I make credibility findings.  
[133] I will start with Mr. Zhang. I found much of Mr. Zhang’s evidence to be  
incapable of belief. He was frequently emotional, argumentative or non-responsive  
during cross-examination.  
[134] He gave some evidence which was demonstrably false, including evidence  
which contradicted his own words, as recorded by his wife. Just one example of that  
will suffice. Mr. Zhang was adamant at trial that he did not know until just before  
closing that Mr. Benson, or Mr. Benson’s firm, was involved with the subdivision  
which was required in order to create the Property.  
[135] In re-examination, Mr. Zhang testified that if he had learned Mr. Benson was  
doing the subdivision, that would have impacted his willingness to “proceed with the  
deal”.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 44  
[136] At the May 24, 2017 in-person meeting with Mr. Benson about this  
transaction, with his wife and children in attendance, and as set out above,  
Mr. Benson’s involvement in the subdivision work was clearly discussed:  
GARRY BENSON: It’s, it’s, there’s a risk, only in that, you know, if something  
happened where the City wouldn’t allow it, you know, ummm, allow  
the subdivision. But I’ve, we’ve, been working on it for, you know, for a  
long time; I don’t see any problems at this point, okay?  
FRANK ZHANG: Okay, but there, my question is like this, you know, I  
understand you are doing that for them, that’s good, but you know it’s  
not fair for me to pay the money and get a risk, I mean what is happen  
I cannot get the land, I pay for the land, and what happen …  
…
FRANK ZHANG: Yes, then when you guys finish with the registration, then I  
pay rest at closing. If not, then I don’t pay anything at all.  
GARRY BENSON: That’s right. It has to be completion, registration.  
…
FRANK ZHANG: You can tell me what’s going on … but I want to have the  
right to, you know, make sure if something happen I cannot get the  
land I can walk away. I’m not going to lose, right?  
GARRY BENSON: Yes  
…
FRANK ZHANG: Hm hm. So, … then you guys work on the registration.  
When you’re finished then I pay the money to close the deal. If you  
don’t finish then I don’t have to pay the money, I can walk away and  
get my own money back.  
GARRY BENSON: Yah, right. So it’s my job to get it done between now and  
August 31st.  
…
FRANK ZHANG: And also Allen has to subdivide?  
GARRY BENSON: Yup. And I have to do all that before August 31st.  
…
FRANK ZHANG: You know I’m really happy where I am right now and so I  
expect no surprises.  
GARRY BENSON: There’s always surprises in subdivisions. Anytime you do  
a subdivision there are surprises.  
…
[137] Clearly Mr. Zhang was well aware, before the subject removal date and  
months before closing, that Mr. Benson was in fact doing the subdivision work.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 45  
[138] Further, Mr. Zhang phoned Allen on May 29, 2017 and recorded the  
conversation. He asked Allen questions about the Three Forks option before  
removing the conditions and confirmed that Allen had no problem selling the  
Property to Mr. Zhang. In the conversation, Allen told Mr. Zhang that “Gary has all  
the contracts … and the dates”.  
[139] Related to that evidence, when Mr. Zhang was asked about the consent to  
act for both parties he was asked to sign as part of a package of the closing  
documents, he said he discussed it with Mr. Benson and he understood that it  
related to a possible sale of the whole of Kirschner Mountain, and not to this  
transaction. The only evidence I have of any discussion of a sale of the whole  
mountain was some discussion on May 15, 2017. Mr. Zhang was in Mr. Taylor’s  
office when he received the closing documents, and Mr. Taylor and Mr. Zhang had a  
telephone call with Mr. Benson during the signing, which call was recorded by either  
Mr. Zhang or Ms. He. There is nothing in the recording of that call with respect to the  
consent. I reject his evidence as being concocted by Mr. Zhang to explain away the  
consent while attempting to maintain his evidence that he was completely unaware  
of Mr. Benson doing any work for the Kirschners.  
[140] Mr. Zhang also gave evidence which was improbable, at best, and conflicts  
with the common-sense inferences to be drawn from the circumstances and other  
documents. One example is the meeting he had with Ms. Axsen on May 11. She had  
the expired listing sheet for this Property with her, and had shown it, if not given it, to  
Mr. Zhang at the time. Notwithstanding the fact that the listing sheet said “estimated  
Developer’s profit to exceed $3 million”, Mr. Zhang was adamant that Ms. Axsen  
performed calculations, while they were standing on the Property, and said that the  
profit would be $3 million. Ms. Axsen testified that she did not perform any  
calculations and that she simply reviewed the listing sheet with Mr. Zhang. I find,  
without any hesitation, that Ms. Axsen did not perform any calculations or advise  
Mr. Zhang that she had performed any calculations with respect to possible profit.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 46  
[141] Another example is his evidence that Ms. Axsen told him that once the deal  
closed, he could start building and he would have a show home by the time he got  
the development permit. That evidence simply beggar’s belief.  
[142] There were many, many, other examples of evidence given by Mr. Zhang  
which were incapable of belief. I will provide just a couple of additional examples of  
his evidence that was problematic. He was adamant that his intention, from the time  
he first made an offer on this Property, was to commence work on the project  
immediately upon closing. Despite that stated intention, he admitted that he would  
have needed a couple of months of lead time prior to construction and he also said  
he did not want to start work in the winter. Further, he did nothing between closing in  
October 2017 and April 17, 2018 to advance the project. He made no effort to deal  
with the City about a permit, no effort to find contractors, no effort to obtain financing.  
He did nothing. He stated at times that his inaction was because he did not want to  
start in the winter, despite the fact that he would have been unable to immediately  
start physical work in any event due to the need to obtain approvals and financing, at  
least; at other times, he said that his business plan totally changed as a result of the  
delay in closing, which delay was approximately seven weeks, without explaining  
how; and finally he offered the explanation essentially that he was superstitious  
about when to start working on the project.  
[143] Mr. Zhang was adamant that his lawyer in Calgary, Mr. Taylor, was not acting  
as a lawyer on this transaction and that his only lawyer was Mr. Benson. He testified  
that Mr. Taylor was just his friend, albeit a friend who he reluctantly agreed billed him  
for services on this transaction. He continued to maintain that Mr. Taylor was not his  
lawyer on this case, even when confronted with a list of documents which listed as  
privileged a number of documents generated during the time between offer and  
closing; despite correspondence in which Mr. Zhang was identified as the client of  
Mr. Taylor; and despite extensive correspondence and telephone calls directly  
between Mr. Benson and Mr. Taylor that suggest (at least) the opposite.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 47  
[144] It was not at all uncommon for Mr. Zhang to testify one moment that he  
thought “something” happened, only to have him testify, shortly after, definitively that  
that “something” had happened, or the reverse. A good example of that came at the  
beginning of his cross-examination by counsel for Mr. Benson. Mr. Zhang testified  
that he recalled a conversation he had with Mr. Benson about the insertion of the  
words “in its possession” into the addendum. He said he did not remember where he  
was when the conversation took place, or whether the conversation was by phone or  
in person. He did not take the addendum to Mr. Benson’s office and did not email it  
to Mr. Benson. He said he thinks or he assumes he asked Ms. Axsen to email it to  
Mr. Benson. He then testified that he remembered Mr. Benson explained something.  
By the end of the cross-examination on the issue of the insertion, he said “he thinks”  
he called Mr. Benson and asked why the words were there, and that “he thinks” he  
was comfortable with what he was told.  
[145] He directly contradicted himself from time to time. Just one example is that he  
was asked what steps he took after removal of the subjects to renew the  
development permit. He initially responded that he met with “relevant parties”, clearly  
implying that he had taken some steps. When asked again, he responded with his  
own question, asking why he would do anything before closing. He finally agreed  
that he took no steps before closing, and indeed no steps in the several months after  
closing, in relation to a development permit.  
[146] I was also troubled by Mr. Zhang’s evidence concerning the recordings made  
of meetings and about documents he claimed he created during the due diligence  
period but has since lost. There is no explanation for why some meetings or calls  
were recorded and others were not, nor for why some recordings appear to start mid  
meeting or call. When pressed about recordings, he suggested that his wife should  
be asked about the recordings, as she is the one who made them, yet he did not call  
his wife as a witness in this case. I also do not accept that he lost his calendar, his  
handwritten notes of meetings and his feasibility study or business case he says he  
conducted and documented in handwriting. Nor do I accept his explanation about  
having lost various computer-based files and USB sticks.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 48  
[147] The final example I will refer to of concerning evidence given by Mr. Zhang  
relates to his evidence that he borrowed $1,600,000 from his father-in-law in order to  
make an investment in real estate. He produced a promissory note dated April 1,  
2017, with his signature affixed the same date. The borrower is said to be LinTen  
Developments Ltd. There was no such registered entity until April 6, 2017, and the  
numbered company which became Linten was not incorporated until April 4, 2017.  
After repeated requests before trial, Mr. Zhang produced a bank statement in the  
name of 199 showing $1,000,000 being transferred in on April 6. Mr. Zhang was  
unable, or unwilling, to disclose the source of the transfer. Another $1,000,000 was  
transferred into that account on May 31. Mr. Zhang agreed that none of that money  
was transferred to Linten. That money was the source of the $500,000 paid into trust  
on the date of subject removal. The funds to close, approximately $1,000,000 came  
from Mr. Zhang’s personal account. Mr. Zhang said he knew the source of the funds  
was the money he borrowed, then changed his answer to the thought the source of  
the money was the money he borrowed.  
[148] These are but a few examples of the many issues arising from the evidence  
of Mr. Zhang. Overall, I have grave concerns about his credibility. I have concluded  
that I must treat his evidence with extreme caution and I have had to weigh his  
evidence carefully in the context of other evidence, including documents, in order to  
determine whether I can accept his evidence on any given point or not.  
[149] I turn next to Mr. Ryczywolski. He was called as a fact witness as well and as  
an expert. Although I qualified him as an expert, over defence objections based on  
his alleged inability to provide the court with fair, objective and impartial evidence, I  
am nonetheless very aware of his personal involvement, particularly during the due  
diligence period, with the eventual purchase of the Property by the plaintiffs and as a  
member of at least the first litigation team retained by the plaintiffs.  
[150] Having now heard his evidence, I have concerns about, at least, his reliability  
as a witness and some concerns about his credibility. I will provide four of many  
examples of the issues which have given rise to my concerns.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 49  
[151] First, Mr. Ryczywolski effectively denied that he was asked to or did provide  
geotechnical advice to Mr. Zhang during the due diligence period. Rather, he  
described his role as being to review the geotechnical reports obtained by Mr. Zhang  
and to explain what the information in the reports meant and to raise any issues or  
concerns. This is in contrast to Mr. Zhang’s view, namely that Mr. Ryczywolski was  
essentially his geotechnical engineer and that he relied on the advice he received  
from Mr. Ryczywolski. It is also inconsistent, I find, with the correspondence between  
Mr. Zhang and Mr. Ryczywolski during the due diligence period.  
[152] Next, Mr. Ryczywolski testified that if he had seen the December 19, 2011,  
ITS report, he would have told Mr. Zhang to “walk away” or to “run away”. This is the  
type of phrasing used by Mr. Zhang as to what he would have done if he had seen  
the report. It is odd, to say the least, that an engineer would use that language in  
providing professional assistance and advice to a client, and also points to  
Mr. Ryczywolski giving evidence as something far closer to an advocate or  
interested party than to an independent witness. This is particularly the case when  
the contents of the earlier reports are compared to the December 19 report.  
[153] Next, contrary to Mr. Ryczywolski’s evidence that he would have advised  
Mr. Zhang to “walk away”, in April 2019, after receipt of the December report,  
Mr. Ryczywolski was obtaining quotes for work to be done prior to site development.  
He received a project quote of $125,000 for five days of work. Yet, before that  
evidence had been put before the court, Mr. Ryczywolski he sought to justify his  
“walk away” evidence by testifying that the cost of removing uncompacted fill at the  
“problematic” portion of the site, in preparation for development, was “enormous”  
and volunteering that it would cost $10 million. The quote of $125,000 was for a  
larger area than Mr. Ryczywolski testified was “problematic” from the perspective of  
being developable.  
[154] Finally, Mr. Ryczywolski testified that Mr. Zhang did not tell him that Three  
Forks had brought significant volumes of material to the site in 2015, which was  
disclosed to the plaintiffs during the due diligence period. When asked when he  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 50  
learned of that work, he testified that he learned of it when he visited the site in  
January 2019, prior to remediation work being done, and saw “two huge stockpiles”  
on the Property. In fact, Mr. Ryczywolski had been sent photographs of the site,  
taken by Mr. Zhang, in May 2017, before his receipt of the F96 link, which clearly  
showed the stockpiles. Further, he had been provided with a Three Forks document  
showing a significant expenditure in 2016 on site preparation work. He would not  
agree that the document showed that significant work had been done in 2016. He  
first said he did not know if the document related to a quote or work done. Then he  
said that it did not come to his mind. Finally, he said it was not “very clear” to him  
because he is not an expert in quotes or construction.  
[155] I turn next to Mr. Bird. I find that his evidence must also be treated with  
caution. Mr. Bird was caught in many inconsistencies between his evidence at trial  
and his evidence given on discovery. While he was forced to acknowledge some of  
the inconsistencies, he attempted to explain them by saying he essentially was  
confused during discovery as a result of a problem he was having with his blood  
sugars. The face of the transcript from discovery, to the extent it was referred to at  
trial, does not support his assertion that he was confused.  
[156] Mr. Bird’s evidence about his record keeping, or more accurately his lack of  
record keeping, was improbable. Most of the specific evidence in this regard related  
to the geotechnical reports he had, including at the time of the contract addendum  
which required Three Forks to disclose documents in its possession. His explanation  
for not producing the December 19, 2011 ITS report, which the evidence clearly  
establishes was sent to him by Mr. Hanenburg, was that he only glanced at it on his  
cell phone after he received it, that he then would have deleted it and that the only  
documents he saved, by forwarding them to his assistant for printing and filing, were  
documents addressed to his other company, not to Three Forks. That beggar’s belief  
and is inconsistent with the fact that the F96 link included other geotechnical reports.  
His evidence about having had a phone crash which caused a loss of his records  
was convoluted and inconsistent.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 51  
[157] It was clear to me from Mr. Bird’s evidence that Mr. Bird had a casual attitude  
toward his litigation obligations, including his obligation to produce relevant  
documents.  
[158] Overall, his carelessness and casualness, together with the contradictions in  
his evidence, give rise to concerns about both his reliability and his credibility. He is  
another witness whose evidence I treat with caution.  
[159] I found the balance of the witnesses to be generally credible.  
[160] I will address one specific additional matter on the issue of credibility. The  
plaintiffs have urged me to find that Allen attempted to “cover up” the Geoteknik and  
Levelton reports, from a home warranty provider in and around the date of the  
December 19, 2011 report, and further, that having done so, “there is no reason why  
Mr. Kirschner would not have also attempted to keep knowledge of these reports  
from Mr. Zhang”. The submission is based on an email Mr. Hanenburg sent to Allen,  
apparently following up on a discussion between them. In that email, Mr. Hanenburg  
stated that he was not against removing references to warranty providers but would  
rather leave the second opinion responses in the body of the report. Allen adamantly  
denied that he ever attempted to cover up, or urge Mr. Hanenburg to cover up, the  
Geoteknik and Levelton reports. Mr. Hanenburg testified that he had no recollection  
of the email, but based on the reading of his email, he essentially speculated that  
Allen “likely” asked him to change the report. I am not prepared to conclude that.  
Mission Group was still interested in pursuing development of the Property at that  
time, and already had all of the reports in its possession. Mission Group, according  
to the evidence at trial, wished to delay the project until the market improved. There  
would have been no reason for Allen to attempt a “cover up” and any suggestion that  
he might have wanted to do so is completely negated by the disclosure made to  
Three Forks and his suggestion to Mr. Zhang that he get all of the reports on the  
Property by going to ITS to get them.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 52  
Analysis  
The Claim Against KME, Donald and Amy  
[161] The plaintiffs’ claim against KME, Donald Kirschner and Amy Kirschner is  
based on an alleged breach of contract. Specifically, the plaintiffs allege that these  
three defendants breached the duty of good faith or honesty in contractual  
performance. The plaintiffs say these three defendants knowingly mislead the  
plaintiffs through omission, in that they were aware the Property had significant  
geotechnical issues and failed to disclose those issues. It was argued by the  
plaintiffs, in closing, that these three defendants “concealed” the Geoteknik and  
Levelton reports and that they “knew or ought to have known that the plaintiffs did  
not have all of the ITS reports, nor had they been provided with the Geoteknik and  
Levelton reports, and that the plaintiffs would be proceeding with their purchase  
based on a misapprehension”.  
[162] This claim, I am satisfied, is completely without merit, both legally and  
factually.  
[163] In Bhasin v. Hrynew, 2014 SCC 71, Cromwell J. for the court said:  
33  
In my view, it is time to take two incremental steps in order to make  
the common law less unsettled and piecemeal, more coherent and more just.  
The first step is to acknowledge that good faith contractual performance is a  
general organizing principle of the common law of contract which underpins  
and informs the various rules in which the common law, in various situations  
and types of relationships, recognizes obligations of good faith contractual  
performance. The second is to recognize, as a further manifestation of this  
organizing principle of good faith, that there is a common law duty which  
applies to all contracts to act honestly in the performance of contractual  
obligations.  
[164] Any consideration of the nature of the contractual duty of good faith or honest  
performance requires reference to the contract between the parties.  
[165] Three Forks had an option to purchase the Property, which was to be created  
by lot consolidation and subdivision, on certain terms. Three Forks exercised that  
option in 2016. Three Forks had until 2020 to complete the purchase, with terms as  
to interim payments and interest.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 53  
[166] The plaintiffs contracted with Three Forks, not with KME or the Kirschners, to  
assume Three Forks’ contract to purchase the Property. The terms of the contract  
between the plaintiffs and Three Forks differed in many material ways from the  
contract between the Kirschners and Three Forks. The price was different, the  
payment terms were different, and there were numerous conditions in the plaintiffs’  
agreement with Three Forks. There were amendments to the plaintiffs’ agreement  
with Three Forks, including with respect to refund of the plaintiffs’ deposit and most  
significantly with respect to disclosure of documents in the possession of Three  
Forks, which were unrelated to the contract between the Kirschners and Three  
Forks.  
[167] Apparently in order to facilitate the purchase of the Property by the plaintiffs, a  
document was created to be signed by KME. It referred to the contract dated  
October 29, 2015, acknowledged the assignment, confirmed the contract was in  
good standing, and set out that the vendor agreed to a closing date of August 31,  
2017. The evidence does not establish who prepared the document, but it was  
signed by Allen on behalf of KME and was docusigned by Mr. Zhang.  
[168] The actual contract between the plaintiffs and Three Forks was not seen by  
any of the Kirschner defendants, and the terms were not known by them, until after  
the litigation commenced. At no time did the plaintiffs have any direct contact with  
Donald or Amy.  
[169] Throughout the time from when the plaintiffs and Three Forks entered into  
their contract to the time of closing, the transaction between the plaintiffs and Three  
Forks was dealt with separately from the transaction between Three Forks and the  
Kirschners. There were separate statements of adjustments for the transaction  
between Three Forks and the Kirschners and the transaction between Three Forks  
and the plaintiffs. The only document executed directly between any Kirschner party  
and the plaintiffs was the Form A transfer, transferring the land directly into Linten’s  
name. The Kirschner defendants were only credited, from the purchase funds, the  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 54  
amount for which the Property was sold to Three Forks, with the balance paid or  
credited to Three Forks.  
[170] I am satisfied there was no assignment of the Three Forks obligations under  
its agreement with the plaintiffs to the Kirschner defendants. Certainly the Kirschner  
defendants were never party to, nor even aware, of any of the terms of the contract,  
between Three Forks and the plaintiffs and specifically were never aware of, nor  
bound by, the obligation imposed on Three Forks to provide documents by virtue of  
the contract addendum signed on May 30.  
[171] I conclude that the plaintiffs took the position of Three Forks in the purchase  
of the Property, and that the only contractual obligations owed by the Kirschners to  
the plaintiffs were those found in the agreement they made with Three Forks in  
2015.  
[172] The plaintiffs did not ever seek to contractually impose a disclosure obligation  
on KME or the Kirschners. I have said earlier, I reject the submission that Allen, in  
particular, and the Kirschners, generally, concealed the existence of the Geoteknik  
and Levelton reports. I also reject the submission that the Kirschners knew or out to  
have know what information or reports the plaintiffs had about the Property. The  
Kirschners made full disclosure to Three Forks in 2015, Three Forks took  
possession of the Property and undertook work, the specific details of which were  
not known by the Kirschners, and which work involved monitoring by ITS. The  
Kirschners were not sent the F96 link. The plaintiffs did not ever put the Kirschners,  
including Allen, in a position to know what documents or information the plaintiffs  
had about the Property, whether through their own investigations or from Three  
Forks. Allen expressly directed Mr. Zhang to ITS to get reports. The plaintiffs fall well  
short of establishing that the plaintiffs knew, or ought to have know, what information  
the plaintiffs had or did not have.  
[173] The plaintiffs’ claims against KME, Donald Kirschner and Amy Kirschner are  
dismissed.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 55  
The Claim Against Allen Kirschner  
[174] The claim against Allen, who was not an owner of the Property, is based on  
alleged negligent misrepresentation. The specific misrepresentations alleged to have  
been made by Allen, set out in paragraph 254 of the plaintiffs’ submissions are as  
follows:  
a) There was nothing wrong with the land;  
b) The development permit had been approved;  
c) The development permit had expired but would be easy to renew;  
d) The property was a solid property, one of the best ones;  
e) Kirschner Mountain was “solid as a rock”’;  
f) The property was suitable for the (Mission Group) 35-townhouse plan.  
[175] In order to establish the tort of negligent misrepresentation, the plaintiffs must  
prove:  
a) A duty of care based on a “special relationship” between the representor  
and the representee;  
b) The representation in question must be untrue, inaccurate, or misleading;  
c) The representor must have acted negligently in making said  
misrepresentation;  
d) The representee must have relied, in a reasonable manner, on said  
negligence misrepresentation; and  
e) The reliance must have been detrimental to the representee in the sense  
that damages resulted.  
(Queen v. Cognos Inc., [1993] S.C.R. 87 at 110)  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 56  
[176] I need not deal with each of the elements of the tort in order to deal with the  
plaintiffs’ claims against Allen. It is sufficient that I address the issue of reliance,  
although in doing so I will touch on some of the other elements of the tort.  
[177] I will deal first with the development permit. I find that Allen expressly told  
Mr. Zhang that he did not know the status of the development permit with the City,  
as can be heard in the recording of part of the meeting at Mr. Benson’s office on  
May 15. Allen told Mr. Zhang that he needed to go in to the City to get a  
development permit and Mr. Zhang told Allen there already was a development  
permit. Ms. Axsen in fact arranged for and attended a meeting with Mr. Zhang at the  
City planning department. Mr. Zhang went to that meeting with the planner,  
Mr. McVey, to inquire about the process of getting a permit, or renewing a permit,  
and took notes of the meeting. He also apparently inquired about zoning. To suggest  
that Mr. Zhang reasonably relied on any comments made by Allen as to  
development permits or the process for obtaining development permits or renewals,  
to the detriment of the plaintiffs, is unsustainable.  
[178] With respect to the land, or the quality of the land, if the statements attributed  
to him were made by Allen, and if Mr. Zhang in fact relied upon them, neither of  
which I find as a fact in this case, that reliance would not be reasonable. Allen told  
Mr. Zhang at their chance meeting at Mr. Benson’s office that Mr. Zhang needed to  
go to the engineers. He told him during the meeting at Kirschner Mountain that  
Mr. Zhang should go to ITS and that ITS had all the reports. The plaintiffs read in  
parts of Allen’s discovery evidence as part of their evidence at trial, including  
specifically that Allen told Mr. Zhang to go to ITS to find out about the geotechnical  
status of the Property, because ITS had done the geotechnical work on the Property,  
including in the fall of 2015.  
[179] The plaintiffs expressly included conditions in the contract with Three Forks  
with respect to performing their own due diligence concerning geotechnical  
“elements of the land”. Mr. Zhang in fact went to ITS for a meeting with  
Mr. Hanenburg and also had his own geotechnical consultant speak to  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 57  
Mr. Hanenburg at ITS. Mr. Zhang relied on the advice of his own geotechnical  
consultant. Mr. Zhang met with and retained Dale Pilling, who advised him that he  
did not need a new geotechnical report. Even if Allen expressed opinions about the  
Property, at the only meetings Mr. Zhang and Allen had, which both occurred on  
May 15, 2017, Mr. Zhang could not possibly have reasonably have relied on such  
statements, given his subsequent meetings with and advice from various  
professionals during the due diligence period. Both Mr. Ryczywolski and  
Mr. Hanenburg were prepared to provide Mr. Zhang with a geotechnical assessment  
of the Property, but were not able to do so within the due diligence period. Mr. Zhang  
was aware of that, but chose not to seek an extension of the due diligence period to  
enable an assessment to be done and instead, removed all of the conditions.  
[180] I will add that I find that Allen would have authorized the release of all of the  
reports in the possession of ITS upon request from Mr. Zhang, had he been asked to  
do so, as in fact he had done for Three Forks. I reject the submission that Allen, or  
any of the Kirschner defendants, were attempting to hide information or conceal  
defects. As I said earlier, I reject the submission that Allen attempted to have  
Mr. Hanenburg change his December 19, 2011 report to delete reference to the  
Levelton report and Geoteknik letter to attempt to conceal that the Property was  
unsafe or had substantial geotechnical issues.  
[181] Mr. Zhang also knew that work had been done on the Property since 2011.  
He knew specifically that Three Forks had had possession of the Property since  
2015 and had done extensive work on it. He knew that ITS had been involved in that  
work.  
[182] Given all of that, if Allen made the comments attributed to him by Mr. Zhang  
about the quality of the land, I cannot and do not find that Mr. Zhang relied on them  
and even if he did rely on them, such reliance would not have been reasonable.  
[183] Finally, with respect to the alleged misrepresentation about the Mission Group  
plan, Allen referred Mr. Zhang to the engineers with respect to development and the  
number of units that could be built. He emailed Mr. Zhang’s agent, Ms. Axsen, to  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 58  
caution about the economics of certain aspects of the Mission Group plan, as a  
result of which Ms. Axsen arranged a meeting between Mr. Zhang and the civil  
engineer, Mr. Pilling. Mr. Pilling spoke extensively to Mr. Zhang about the costs of  
the Mission Group plan.  
[184] It is also of note that Mission Group did not ever abandon its plan for a 35-  
townhouse project. Mission Group wanted to proceed with the project and wanted to  
continue with it when the market improved. Mission Group in fact wrote to the City in  
February 2012 about “their DP application for 35 townhouses”, expressly saying that  
“the project [was] on hold due to financial feasibility”, and seeking to keep the  
application alive.  
[185] More importantly, I do not have evidence that the Property was not suitable  
for that plan as of 2017, although construction of it would have required extensive  
and expensive retaining walls and the use of non-conventional building foundations,  
as noted by Mr. Ryczywolski and brought to Mr. Zhang’s attention by him. As  
Mr. Hanenburg told Mr. Zhang, and confirmed in his evidence he often says, you can  
build anything if you have enough money.  
[186] With respect to this alleged misrepresentation, it would not have been  
reasonable for Mr. Zhang to rely on anything said to him by Allen about the suitability  
of the Property and more importantly, I am not satisfied such a statement, if made,  
was false at the time it was made.  
[187] The plaintiffs’ claim against Allen is dismissed.  
The Claim Against the Benson Defendants  
[188] The plaintiffs claim against Mr. Benson and the law firm in both breach of  
fiduciary duty and negligence.  
[189] I will deal first with fiduciary duty. It is beyond controversy that a lawyer owes  
a fiduciary duty to a client. In Canadian National Railway Co. v. McKercher LLP,  
2013 SCC 39, the court said:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
[19] A lawyer, and by extension a law firm, owes a duty of loyalty to  
Page 59  
clients. This duty has three salient dimensions: (1) a duty to avoid conflicting  
interests; (2) a duty of commitment to the client’s cause; and (3) a duty of  
candour: Neil, at para. 19. I will consider each in turn.  
…
[23]  
The law of conflicts is mainly concerned with two types of prejudice:  
prejudice as a result of the lawyer’s misuse of confidential information  
obtained from a client; and prejudice arising where the lawyer “soft peddles”  
his representation of a client in order to serve his own interests, those of  
another client, or those of a third person.  
…
[25]  
The second main concern, which arises with respect to current clients,  
is that the lawyer be an effective representative — that he serve as a zealous  
advocate for the interests of his client. The lawyer must refrain “from being in  
a position where it will be systematically unclear whether he performed his  
fiduciary duty to act in what he perceived to be the best interests” of his client:  
D. W. M. Waters, M. R. Gillen and L. D. Smith, eds., Waters’ Law of Trusts in  
Canada (4th ed. 2012), at p. 968. As the oft-cited Lord Brougham said, “an  
advocate, in the discharge of his duty, knows but one person in all the world,  
and that person is his client”: Trial of Queen Caroline (1821), by  
J. Nightingale, vol. II, The Defence, Part I, at p. 8.  
[26]  
Effective representation may be threatened in situations where the  
lawyer is tempted to prefer other interests over those of his client: the  
lawyer’s own interests, those of a current client, of a former client, or of a third  
person: Neil, at para. 31. This appeal concerns the risk to effective  
representation that arises when a lawyer acts concurrently in different matters  
for clients whose immediate interests in those matters are directly adverse.  
This Court has held that concurrent representation of clients directly adverse  
in interest attracts a clear prohibition: the bright line rule.  
[27]  
In Neil, this Court (per Binnie J.) stated that a lawyer may not  
represent a client in one matter while representing that client’s adversary in  
another matter, unless both clients provide their informed consent. Binnie J.  
articulated the rule thus:  
The bright line is provided by the general rule that a lawyer may not  
represent one client whose interests are directly adverse to the  
immediate interests of another current client — even if the two  
mandates are unrelated — unless both clients consent after receiving  
full disclosure (and preferably independent legal advice), and the  
lawyer reasonably believes that he or she is able to represent each  
client without adversely affecting the other. [Emphasis in original;  
para. 29]  
…
[43]  
The duty of commitment is closely related to the duty to avoid  
conflicting interests. In fact, the lawyer must avoid conflicting interests  
precisely so that he can remain committed to the client. Together, these  
duties ensure “that a divided loyalty does not cause the lawyer to ‘soft peddle’  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 60  
his or her [representation] of a client out of concern for another client”: Neil, at  
para. 19.  
…
[45]  
A lawyer or law firm owes a duty of candour to the client. This requires  
the law firm to disclose any factors relevant to the lawyer’s ability to provide  
effective representation. As Binnie J. stated in Strother, at para. 55: “The  
thing the lawyer must not do is keep the client in the dark about matters he or  
she knows to be relevant to the retainer” (emphasis deleted).  
[190] In this case, it is clear that Mr. Zhang knew full well that Mr. Benson was  
acting for the Kirschners, at the very least on the subdivision of the land which  
created the Property. He in fact approved of Mr. Benson’s involvement in the  
subdivision work. As quoted above, Mr. Benson told him he had been working on it  
for a long time, and Mr. Zhang’s responses included “I understand you are doing that  
for them, that’s good” and “like the good thing’s Gary work on that, right. … You can  
tell me what’s going on … then you guys work on the registration.”  
[191] Mr. Zhang also knew full well that there was a potential that the subdivision  
would not be registered by August 31, and that the purchase would not close until  
the registration was complete. Mr. Benson expressly told him that “there are always  
surprises in subdivisions”. I reject his evidence that there was any sort of  
“guarantee” as to the date when registration would occur.  
[192] I find that Mr. Zhang knew that the closing of the transaction between the  
plaintiffs and Three Forks and the transfer of the Property was dependent on the  
registration of the subdivision, any delay in which would or could result in either a  
termination of the agreement or a necessary amendment with respect to closing  
date. Mr. Benson, or the law firm, by acting on the subdivision, were potential  
causes of a delay and therefore could be in a position of conflict in that regard as  
well. I also do not lose sight of the fact that Mr. Zhang had another lawyer providing  
advice to him throughout his dealings with Mr. Benson and that was Mr. Taylor.  
[193] Although there was a potential for conflicting interests between the Kirschners  
and the plaintiffs, and for that matter between the plaintiffs and Mr. Benson and the  
law firm, as a result of the subdivision work, which became obvious when the  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 61  
subdivision did not get registered in time for the original closing date of August 31,  
2017, I am satisfied that Mr. Zhang, on behalf of the plaintiffs, consented to  
Mr. Benson working for the Kirschners on the subdivision.  
[194] Can the same be said with respect to the overall transaction? Mr. Benson  
took a very simplistic view of the option to purchase and the assignment of that  
option to the plaintiffs. This is well illustrated by his response to Ms. He when she  
asked him if he was in a conflict on that and he replied that he was not, because the  
plaintiffs’ contract was with Three Forks and not the Kirschners. While that is true, it  
ignores that the transaction as contemplated involved not just the assignment of the  
Three Forks option to the plaintiffs, but then also the immediate transfer of the land  
by the Kirschners to the plaintiffs, either directly or through Three Forks, on the basis  
of the executed option. Not only did Mr. Benson act for the plaintiffs and apparently  
the Kirschners with respect to the option agreement, but he acted for both in the final  
closing of the sale of the Property. It also ignores the fact that the transaction did not  
close on August 31, but rather had to be extended and the extension accepted or  
agreed upon by both the plaintiffs and the Kirschners. A closer examination of those  
issues is required.  
[195] In R. v. Neil, 2002 SCC 70, the court said:  
31  
… I adopt, in this respect, the notion of a “conflict” in § 121 of the  
Restatement Third, The Law Governing Lawyers (2000), vol. 2, at pp. 244-45,  
as a “substantial risk that the lawyer’s representation of the client would be  
materially and adversely affected by the lawyer’s own interests or by the  
lawyer’s duties to another current client, a former client, or a third person”.  
[196] With respect to a lawyer’s personal relationship with another giving rise to a  
conflict in dealings with a client, the court, in Salomon v. Matte-Thompson, 2019  
SCC 14, said:  
[71]  
As mandataries, lawyers have a duty to avoid placing themselves in  
situations in which their personal interests are in conflict with those of their  
clients (art. 2138 para. 2 C.C.Q.). The duty to avoid conflicts of interest is a  
salient aspect of the duty of loyalty they owe to their clients (Canadian  
National Railway Co. v. McKercher LLP, 2013 SCC 39, [2013] 2 S.C.R. 649,  
at para. 19, citing R. v. Neil, 2002 SCC 70, [2002] 3 S.C.R. 631, at para. 19;  
see also C.A. reasons, at para. 94). In conjunction with the duty of  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 62  
commitment to the client’s cause, the duty to avoid conflicting interests  
ensures that “divided loyalt[ies] d[o] not cause the lawyer to ‘soft peddle’ his  
or her [representation] of a client out of concern for [other interests]”  
(McKercher, at para. 43, quoting Neil, at para. 19). In the same manner, the  
duty of loyalty shields the performance of the lawyer’s duty to advise clients  
from the taint of undue interference.  
[197] The plaintiffs rely on Waxman v. Waxman (2004), 44 B.L.R. (3d) 165  
(Ont. CA), the court in making the submission that a mere potential for conflict is that  
which must be considered:  
[646] Ennis acknowledges that he had a fiduciary duty to Morris in  
connection with the share sale. At the heart of the fiduciary duty lies the duty  
of loyalty, which includes the duty to avoid conflicting interests: see R. v. Neil,  
[2002] 3 S.C.R. 631 and Davey v. Woolley, Hames, Dale & Dingwall (1982),  
35 O.R. (2d) 599 (C.A.), leave to appeal to S.C.C. refused (1982), 37 O.R.  
(2d) 499n. Ordinarily a lawyer should not act on both sides of a transaction  
where the interests of one client potentially conflict with the interests of the  
other. If there are some simple or routine transactions where a lawyer can act  
for both parties, the share sale is not one of them. In a transaction of this  
magnitude Ennis simply could not act for Chester and Morris. By doing so he  
put himself into a hopeless conflict of interest, and, as the trial judge found,  
he severely compromised his representation of Morris. The trial judge was  
unquestionably correct in concluding that merely by acting on the sale, Ennis  
breached his fiduciary duty to Morris.  
[198] It is noteworthy, however, that the conflict addressed in Waxman was not  
merely a potential one. The trial judge found that the lawyer should not have acted  
for both shareholders/brothers on the sale of shares “because of the inevitable  
conflict in acting for both” (para. 641, emphasis added). In the Court of Appeal, the  
lawyer’s counsel conceded that if the trial judge’s findings of fact were upheld, then  
the lawyer’s appeal against liability could not succeed. The trial judge’s findings of  
fact were upheld.  
[199] That something more than a potential conflict is required is also supported by  
the Code of Professional Conduct for British Columbia, Rule 3.4-1 Commentary [1],  
which repeat the definition of conflict from Neil, and add:  
… The risk must be more than a mere possibility; there must be a genuine,  
serious risk to the duty of loyalty or to client representation arising from the  
retainer. …  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 63  
[200] I agree with counsel for Mr. Benson and the law firm that it is useful to  
consider three separate time periods during the representation. Certainly between  
the date 199 entered into the contract with Three Forks and the subject removal  
date, there was no substantial risk of a conflict. Three Forks had a binding  
agreement with the Kirschners to purchase the Property. The Kirschners were  
obligated to complete the subdivision and then transfer the Property once  
subdivided. The then non-binding agreement between Three Forks and 199 was  
both legally and factually irrelevant to the Kirschners. Mr. Benson’s advice to  
Mr. Zhang during the due diligence period, namely that there should be a longer due  
diligence period, that there should be a disclosure obligation imposed on Three  
Forks, and that 199 should not have to complete unless and until the subdivision  
was registered reflect only loyalty to the plaintiffs and suggest no favouring of the  
Kirschners to the detriment or possible detriment of the plaintiffs.  
[201] Between subject removal and eventual registration, the only matters which  
arose were the extensions to which I referred earlier. There is no evidence that the  
extensions had any impact on the Kirschners. The contractual duties the Kirschners  
had related to the contract with Three Forks. Three Forks, in the contract addendum  
dated May 26, 2017, between Three Forks and 199, agreed to ensure that all terms  
under the agreement between Three Forks and the Kirschners were fulfilled, but  
there is no evidence of a contract, or contractual obligation, between Three Forks  
and the Kirschners, and certainly not between the Kirschners and the plaintiffs.  
[202] There was a document, entitled “To Whom it May Concern” signed by Allen  
on behalf of KME, confirming the assignment of the Kirschners’ contract with Three  
Forks and stating, “The Vendors agree to a closing date of August 31, 2017”, but it is  
not alleged and I do not find that that document was a contract nor an amendment to  
an existing contract, nor that it created contractual obligations for the Kirschners.  
[203] I am not satisfied that there was a conflict of interest during the period  
between the end of May and subdivision registration.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 64  
[204] The last period is between subdivision registration, October 13, and the  
closing, October 20. Upon registration of the subdivision, the Kirschners had  
completed their only remaining obligation to Three Forks, aside from transfer of the  
Property. All that was outstanding was receipt of the funds to close in exchange for  
the transfer documents. The closing date already agreed upon between Three Forks  
and the plaintiffs was October 16.  
[205] While a form of consent to act for both parties was included in the closing  
documents sent to Mr. Taylor’s office for signing by Mr. Zhang, I conclude that was  
likely included as a “standard” form, due to the plan to transfer the land directly from  
the Kirschners to Linten, rather than through Three Forks. Mr. Zhang signed that  
consent while in Mr. Taylor’s office. I have already concluded that Mr. Taylor was  
providing the plaintiffs and Mr. Zhang with legal assistance and advice, along side  
that provided by Mr. Benson. Once the subdivision was registered, this was in effect  
a “simple or routine” transaction of the sort referred to in the paragraph quoted  
above from Waxman, in which a lawyer could act for two parties.  
[206] I find the plaintiffs have not proved a breach of fiduciary duty on the part of  
Mr. Benson.  
[207] With respect to negligence, there is no issue as to the law. A lawyer is  
required to exercise the care and skill of a reasonably competent lawyer, in  
accordance with the standards of the profession. The obligations of a lawyer were  
set out in Tiffin Holdings Ltd. v. Millican (1964), 49 D.L.R. (2d) 216, aff’d (1967), 60  
D.L.R. (2d) 469, [1967] S.C.R. 183 (S.C.C.) and quoted in Zink v. Adrian, 2005  
BCCA 93 at para. 23:  
(1)  
(2)  
To be skilful and careful.  
To advise his client on all matters relevant to his retainer, so  
far as may be reasonably necessary.  
(3)  
(4)  
(5)  
To protect the interests of his client.  
To carry out his instructions by all proper means.  
To consult with his client on all questions of doubt which do  
not fall within the express or implied discretion left to him.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 65  
(6)  
To keep his client informed to such an extent as may be  
reasonably necessary, according to the same criteria.  
[208] The particulars of the negligence alleged against Mr. Benson are as follows:  
(a)  
(b)  
Mr. Benson failed to give meaningful advice to Mr. Zhang about the  
requested extensions;  
Mr. Benson failed to zealously advance Linten’s interests, including  
refusing to take Linten’s instructions on a proposal for concessions  
from Three Forks;  
(c)  
(d)  
(e)  
Mr. Benson failed to advise Linten that it could seek concessions from  
the Kirschner Parties for the first two requested extensions, given the  
risk faced by the Kirshner Parties;  
The advice that Mr. Benson did give on the extensions was largely  
erroneous, and was designed to convince Mr. Zhang to agree to an  
extension that he did not want;  
Mr. Benson failed to advise Linten that his firm’s inability to prepare  
closing documents in a timely manner was the reason behind the third  
extension request;  
(f)  
Mr. Benson gave erroneous advice about whether he had a conflict of  
interest;  
(g)  
(h)  
Mr. Benson gave no advice at all on the section 219 covenant, which  
was material to Linten and its development plans;  
Mr. Benson took no steps to determine what information his firm may  
have that may be relevant to Linten on the transaction, even after  
Linten had signed the consent document which required Mr. Benson  
to disclose all relevant information received from either Linten or the  
Kirschner Parties; and  
(i)  
Mr. Benson repeatedly failed to refer to Linten for independent legal  
advice.  
[209] Particulars (a) through (e) relate to the extensions. When the first request for  
an extension was made as a result of the fact that the subdivision had not be  
registered as of August 31, Mr. Benson advised Mr. Zhang that he did not have to  
grant the extension, but could walk away and get his deposit back. That advice was  
correct. Mr. Zhang instructions were:  
I will agree extent one month for the extension, but please make sure: If any  
thing happens and we can not close the deal (a) I can get the deposit back  
anytime 100% + the interest (prime +3) of the deposit, and (c) reserve the  
right to sue for further damages.  
[Reproduced as written.]  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 66  
[210] Mr. Benson’s advice was that there would be no right to sue if the deal  
collapsed, as there would be no “damages” at law under the contract, and that he  
could not see Three Forks agreeing to pay interest. He told Mr. Zhang that he could  
not see how “any of this would work” other than the 30-day extension after which  
time the deal would fail. When he provided that advice, Mr. Zhang agreed to the  
extension. There is no evidence before me that Mr. Benson’s advice was wrong.  
There is also no evidence that Mr. Benson’s evidence was “designed to convince  
Mr. Zhang to agree to an extension he did not want”. Mr. Zhang was told he could  
walk away from the deal, and he was told the subdivision, which was a necessary  
condition of completion, was not complete. Both of those things were correct.  
[211] With respect to the specific allegation that Mr. Benson should have told  
Mr. Zhang that he could seek concessions from the Kirschners, I reject that. There  
was no contractual relationship between the plaintiffs and the Kirschners. The  
Kirschners had a contract with Three Forks and Three Forks had already paid  
significant non-refundable deposits as well as interest and other costs, and were  
contractually obligated to continue to pay interest and other costs. They also had the  
land. There is no foundation in the evidence, or in logic, to support an argument that  
the Kirschners would have been open to make any kind of “concessions” on a  
contract to which they were not parties and from which they were not receiving a  
benefit.  
[212] With respect to the specific allegation in (e), it is that Mr. Benson failed to tell  
Mr. Zhang that the reason for the last (very short) extension was his firm’s inability to  
bring in staff to complete the closing documents over the weekend. Both Ms. Axsen,  
who received and relayed Mr. Zhang’s instructions about the last extension, and  
Mr. Taylor were expressly told that Mr. Benson’s office could not have the closing  
documents ready for Monday. I find that Mr. Zhang would have been well aware of  
the reason for the last extension.  
[213] Particular (g) above relates to what is referred to as the s. 219 covenant,  
which was registered on title by the City of Kelowna as a condition to the  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 67  
subdivision. That covenant was the subject of discussion between Mr. Benson,  
Mr. Taylor and Mr. Zhang, when Mr. Zhang was in Mr. Taylor’s office to sign the  
closing documents. Mr. Benson told Mr. Zhang and Mr. Taylor that the covenant was  
a standard covenant required by the City, that it did not require the plaintiffs to give  
up anything the City did not already have and that it meant that the plaintiffs could  
not build anything without a development permit. The plaintiffs have not called any  
evidence to suggest that advice was not correct.  
[214] I have already addressed the conflict issue ((f) above) and I find no evidence  
to support (h) above. I will add, as it relates to particular (8) above, that in all of the  
circumstances of the relationship between Mr. Benson, Mr. Zhang and Mr. Taylor,  
including all of their communications and correspondence, Mr. Benson was entitled  
to conclude, as I conclude, that Mr. Zhang was getting legal advice from Mr. Taylor,  
which was independent of the advice Mr. Zhang was getting from Mr. Benson.  
[215] I find there was no breach of fiduciary duty and no negligence on the part of  
Mr. Benson or the law firm.  
[216] Although it is not necessary that I do so, I will also say that even had I found a  
breach or negligence, I would not have found, on the facts as I have found them,  
that the plaintiffs had proved that any losses they may have suffered had been  
caused by Mr. Benson.  
The Claim Against Ms. Axsen and Lake Okanagan Realty  
[217] The claim against Ms. Axsen is framed in negligent misrepresentation and in  
negligence as a realtor. The claim against her brokerage, Lake Okanagan, is a  
vicarious liability claim. Ms. Axsen opened Lake Okanagan in 2011. She was the  
managing broker in 2017 and still is. In addition to her own work as a realtor, she  
was in charge of the other agents (there were four in 2017), reviewing their files,  
monitoring trust commissions and bank accounts, conducting monthly audits and  
ensuring compliance with the Real Estate Council rules. It is clear on the evidence in  
this case that the relationship between Ms. Axsen and Lake Okanagan is such that if  
liability is found against Ms. Axsen, Lake Okanagan will be vicariously liable.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 68  
[218] I will deal first with the misrepresentations alleged to have been made by  
Ms. Axsen to Mr. Zhang. The misrepresentations alleged are as follows:  
a) The Property had an existing but expired development permit, which  
should be easy to renew;  
b) That it should be easy to make a profit of $3 million by developing the  
Property.  
[219] I set out earlier the elements of negligent misrepresentation. The first element  
has been proved. There clearly was a duty of care based on the “special  
relationship” between Ms. Axsen and the plaintiffs, as a result of her role as real  
estate agent in this transaction.  
[220] Both of the alleged misrepresentations are said to have occurred during the  
conversation between Ms. Axsen and Mr. Zhang on May 11, when they first met at  
the coffee shop and then at the Property. I reject, as I said earlier, Mr. Zhang’s  
evidence that Ms. Axsen performed calculations while they were at the Property and  
then told Mr. Zhang that he could make a profit of $3 million. I find that Ms. Axsen  
provided the listing sheet to Mr. Zhang and discussed it with him, and that she did  
not, as alleged, make some “quick calculations” and arrive at the potential profit  
figure referred to. With respect to the development permit, the initial information from  
the listing sheet was conveyed to, and I find read by or reviewed with Mr. Zhang.  
Ms. Axsen then went further and contacted the listing agent to check the status of  
the development permit. The information received by Mr. Zhang clearly, and without  
a doubt in my mind, came from the listing sheet, which referred to both the expired  
development permit and the potential profit.  
[221] When Mr. Zhang expressed an interest in the Property and asked Ms. Axsen  
to prepare an offer to purchase the Property, she took steps to ensure that the offer  
was conditional, so that Mr. Zhang could perform his own due diligence. Indeed,  
Mr. Zhang’s own evidence is that he frequently made offers with extensive  
conditions so that he could perform due diligence. As he said, offers are not  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 69  
important to him, he can easily make offers. An offer is not important until he does  
his due diligence. It simply sets a price, following which he does his due diligence to  
find out exactly what he is buying. Only after that will he decide whether to remove  
conditions.  
[222] Ms. Axsen, as I said, arranged for and attended a meeting with Mr. Zhang at  
the City planning department. That meeting took place on the next week day  
following the acceptance of the offer. Mr. Zhang had every opportunity to ask  
questions and he took notes. Ms. Axsen testified that Mr. McVey discussed with  
them the need to get a new development permit. I prefer her evidence to that of  
Mr. Zhang, who said that Mr. McVey said the permit had to be renewed. It is  
nonsensical, in my view, to suggest that before or after that meeting, with a person  
who had direct knowledge of the issue, Ms. Axsen should have gone a step further  
and searched the City’s websites to attempt to ascertain whether a development  
permit had been formally approved in 2011 and subsequently expired rather than  
pre-approved but not yet issued.  
[223] Mr. Zhang was told by others, during the due diligence period, that he needed  
to check and confirm with the City the status of the development permit, including by  
Mr. Benson and by Allen at the meeting of May 15 and by Mr. Pilling at the meeting  
of May 24.  
[224] Further, the package of information forwarded by the listing agent to  
Mr. Zhang, through Ms. Axsen, with respect to the Mission Group plan confirmed  
that what had existed in 2011 was a pre-approval for development, not a permit,  
likely because the Property had not yet been registered as a separate lot, given the  
subdivision process was in its early stages. I find that when Mr. Zhang had his  
meeting with the City planning department, any reliance Mr. Zhang placed on the  
information Ms. Axsen relayed from the listing sheet and the listing agent, rather  
than on the City planners, was not reasonable. At most, the information relayed  
played a role in causing 199 to make an offer, but no role in Mr. Zhang’s decision to  
remove conditions.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 70  
[225] Finally, I heard absolutely no evidence to with respect to there being a  
difference in time or cost for the two processes, namely the process for renewing an  
expired development permit and the process for applying for a development permit  
after it has been pre-approved (for a property not yet created). I did not hear any  
evidence as to whether there is or was any difference in time or cost for the two  
processes. Even if I had found a reasonable reliance, I have no evidence that  
satisfies me that the reliance was or would have been detrimental to the plaintiffs or  
caused the plaintiffs any damages.  
[226] With respect to the alleged misrepresentation concerning profit, that  
information came from the listing sheet and not directly from Ms. Axsen. It would  
have been impossible for Ms. Axsen to calculate potential profit, particularly  
essentially “off the cuff” while standing on the Property on May 11, given the  
variables that inevitably would exist with respect to costs of development and  
construction and potential sale prices once construction completed. In any event,  
Mr. Zhang was protected by conditions he says he wanted, including the subjects  
with respect to his feasibility study and his cost pro forma. Ms. Axsen assisted him in  
performing his due diligence by setting up meetings with engineers, architects and  
builders. It was Mr. Zhang’s responsibility to make those determinations about  
development and costs and to determine potential profitability. He testified that he  
did so before removing the subjects and making a binding contract. That he  
removed the subjects is some evidence that the representation in the listing sheet  
was true and, in any event, is clearly evidence that he did not reasonably, or at all,  
rely on Ms. Axsen with respect to potential profit.  
[227] In summary, although there was a duty of care owed by Ms. Axsen, the  
plaintiffs have not proved that Ms. Axsen made the representation concerning profit.  
Even if she did, the plaintiffs have not proved any reliance, let alone reasonable  
reliance, nor have they proved that reliance would have been detrimental. With  
respect to the building permit, Ms. Axsen did make the representation, but she then  
took steps to confirm the representation by arranging for a meeting with the City  
Planning Department for herself and Mr. Zhang. Once that meeting occurred, any  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 71  
reliance Mr. Zhang says he placed on what Ms. Axsen had told him, from the listing  
sheet, was not reasonable. Further, the plaintiffs have led no evidence to prove any  
reliance (if proved) was detrimental, in the sense that damages resulted.  
[228] I turn now to the allegations of negligence against Ms. Axsen. The elements  
of negligence are set out in Mustapha v. Culligan of Canada Ltd., 2008 SCC 27 at  
para. 3:  
[3]  
A successful action in negligence requires that the plaintiff  
demonstrate (1) that the defendant owed him a duty of care; (2) that the  
defendant’s behaviour breached the standard of care; (3) that the plaintiff  
sustained damage; and (4) that the damage was caused, in fact and in law,  
by the defendant’s breach.  
[229] I have already found that Ms. Axsen owed the plaintiffs a duty of care.  
Counsel have agreed that the applicable standard of care is that a realtor has a duty  
to disclose material information relating to the transaction to her client.  
[230] The allegations of negligence include the same allegations with respect to the  
development permit and the potential profit, and for the reasons set out above, I  
reject the plaintiffs’ negligence claims against Ms. Axsen on those allegations. The  
remaining allegations of negligence are that Ms. Axsen provided advice that was  
outside of her expertise and that she failed to disclose to Mr. Zhang the May 16  
email she received from Allen.  
[231] The foundation for those claims is the email from Allen to Ms. Axsen on May  
16 and Ms. Axsen’s email to Mr. Zhang that same date. I will reproduce the relevant  
portions of each of the emails:  
Allen to Ms. Axsen:  
We need to talk, I sold Kevin the property based on 12 duplex units. The  
mission Group had proposed to build 17 units that where the problem starts.  
The walls just get to costly and it puts to many units on that steep hillside. At  
the right price one can build 12 nice units. You need to talk to Dail Piling.  
he worked on the unit site with the Mission Group. I don’t know if he was still  
working on it with Kevin or not.  
…
[Reproduced as written.]  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 72  
Ms. Axsen to Mr. Zhang:  
I have been reviewing all of the plans. It looks to me like you are going to  
need to add some serious retaining walls to be able to build 35 townhouses.  
We need to run the numbers and figure out what is the most economical  
option moving forward.  
…
Dale Pilling, civil engineer with D.E. Pilling & Associates, has worked on the  
plans in the past. He is available to meet tomorrow. …  
Do you know who you would like to hire to build the townhouses? We will  
need to tender quotes and figure out numbers ASAP to make sure you are  
comfortable moving forward before we have to remove all subjects.  
…
[232] As I set out earlier, prior to the meeting between Mr. Pilling and Mr. Zhang,  
Ms. Axsen sent the following email to both Mr. Pilling and Mr. Zhang on May 17,  
which I reproduce for ease of reference:  
Hi Dale and Frank,  
Here is the link with complete files [forwarding the F96 link]  
Dale – Frank is looking for a rough estimate of cost to construct the 35 units  
the Mission Group originally proposed. Kevin Bird brought in close to  
$150,000 worth of fill. Interior Testing monitored that (reports are on the link)  
It looks like retaining walls will be needed.  
…
*there were plans for 12 duplex units. We need to figure out the most  
economical approach. With the market going up I think the 35 units might be  
better but that will add costs.  
…
[233] Allen testified that when he sent the email to Ms. Axsen, he was attempting to  
raise economic concerns he had about the Mission Group plan for 35 townhouses.  
He testified that he mentioned 24 units to Mr. Zhang, who did not appear interested,  
and he passed the information on to Ms. Axsen because building 17 townhouses  
would be expensive. He agreed that part of the economic concern was removing  
loose fill, but that was a small part of his concerns. He testified that the need for  
retaining walls, for the 35-townhouse plan, would have been a far bigger cost.  
Although he felt it was far more economic, in 2017, to build 35 units than it would  
have been in 2011, he had no idea of construction costs at the time, which is why he  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 73  
sent the email. He expected Ms. Axsen would take Mr. Zhang to Mr. Pilling, who  
knew about retaining walls and costs. In fact, that is exactly what Ms. Axsen did. I  
accept Allen’s evidence.  
[234] Ms. Axsen testified that when she read the email from Allen, the main  
takeaway was that she needed to call Mr. Pilling as she did not have expertise in  
retaining walls. She did not read the email as saying that 35 units could not be  
profitable, as determining profitability would require the preparation of a feasibility  
study. With respect to the reference to selling the Property to Three Forks based on  
24 units, that of course was not a term of the option agreement Three Forks had  
purchased, and Ms. Axsen testified that that statement by Allen in the email was not  
necessarily a concern, as Mr. Bird also had a plan to build 35 or 36 units. She also  
noted that Allen was not a builder and would not be aware of costs, which is why she  
went directly to Mr. Pilling and then arranged for him to meet with Mr. Zhang.  
[235] The plaintiffs say that by summarizing the email from Allen, as she  
understood it, rather than simply forwarding the email to Mr. Zhang, Ms. Axsen  
provided, in essence, geotechnical and project feasibility advice, as well as advice  
about residential density, all of which were outside of her expertise.  
[236] I do not accept that Ms. Axsen provided information outside of her expertise.  
A plain reading of her emails to Mr. Zhang on May 16 and May 17 show that she  
was raising questions and referring Mr. Zhang to an expert, Mr. Pilling, who could  
assist with costs, design, density and feasibility, all of which were obvious  
components of the feasibility study that Mr. Zhang wanted to, and says he did,  
complete prior to removal of subjects.  
[237] The plaintiffs’ authorities, including 1234389 Alberta Ltd. v. 606935 Alberta  
Ltd., 2020 ABQB 28 and Krawchuk v. Scherbak, 2011 ONCA 352, as well as the  
Real Estate Council of British Columbia Rules, demonstrate that where a realtor is  
alerted to an issue outside the expertise of the realtor, the realtor is to advise the  
client to seek independent professional advice. That is exactly what Ms. Axsen did.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 74  
[238] Further, Mr. Zhang testified that Ms. Axsen was a realtor and that he did not  
rely on Ms. Axsen for opinions outside of her expertise as a realtor, including with  
respect to geotechnical engineering or civil engineering.  
[239] The plaintiffs also say that the information she did relay was incomplete,  
including most particularly that the source of the information she was relaying was  
Allen, a person whose opinion the plaintiffs say would carry great weight to any  
prospective purchaser, given his years of knowledge of the Property and his  
experience as a developer.  
[240] There is no dispute between the parties that a realtor has a duty to disclose  
material information to her client. There are two lines of authority with respect to  
common law test for materiality.  
[241] In Sharbern v. Vancouver Airport Centre Ltd., 2011 SCC 23, the test for  
materiality was held to be an objective test, from the perspective of a reasonable  
purchaser. As the court said at para. 61:  
[61]  
In sum, the important aspects of the test for materiality are as follows:  
i.  
Materiality is a question of mixed law and fact, determined  
objectively, from the perspective of a reasonable investor;  
ii.  
An omitted fact is material if there is a substantial likelihood  
that it would have been considered important by a reasonable  
investor in making his or her decision, rather than if the fact  
merely might have been considered important. In other words,  
an omitted fact is material if there is a substantial likelihood  
that its disclosure would have been viewed by the reasonable  
investor as having significantly altered the total mix of  
information made available;  
iii.  
iv.  
The proof required is not that the material fact would have  
changed the decision, but that there was a substantial  
likelihood it would have assumed actual significance in a  
reasonable investor’s deliberations;  
Materiality involves the application of a legal standard to  
particular facts. It is a fact-specific inquiry, to be determined on  
a case-by-case basis in light of all of the relevant  
considerations and from the surrounding circumstances  
forming the total mix of information made available to  
investors; and  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 75  
v.  
The materiality of a fact, statement or omission must be  
proven through evidence by the party alleging materiality,  
except in those cases where common sense inferences are  
sufficient. A court must first look at the disclosed information  
and the omitted information. A court may also consider  
contextual evidence which helps to explain, interpret, or place  
the omitted information in a broader factual setting, provided it  
is viewed in the context of the disclosed information. As well,  
evidence of concurrent or subsequent conduct or events that  
would shed light on potential or actual behaviour of persons in  
the same or similar situations is relevant to the materiality  
assessment. However, the predominant focus must be on a  
contextual consideration of what information was disclosed,  
and what facts or information were omitted from the disclosure  
documents provided by the issuer.  
[242] In Wang v. Laura W. Zhao Personal Real Estate Corporation, 2021 BCCA 97,  
the test was framed as being an objective test, but based on “what a reasonable  
person in the position of the agent would consider in all the circumstances would be  
likely to influence the conduct of a principle” (para. 26).  
[243] On either test, I am unable to conclude that the source of information which  
led to Ms. Axsen emailing Mr. Zhang and then Mr. Pilling and Mr. Zhang, could be  
found to be material.  
[244] The two emails sent by Ms. Axsen to Mr. Zhang on May 16 and 17, I find,  
fairly conveyed the information she had received from Allen. The only piece of  
information not conveyed was that she had received the email from Allen, which lead  
to her emails to Mr. Zhang and the setting up of a meeting between Mr. Zhang and  
Mr. Pilling. Although Mr. Zhang testified that if he had known that Allen had sent the  
email he would have hired a third-party geotechnical engineer and asked for more  
time, I reject that evidence. Mr. Zhang, in the face of far more compelling reasons to  
have a geotechnical investigation conducted, including the advice from his own  
geotechnical consultant, decided not to undertake such an investigation. I cannot  
and do not accept that the identity of Allen as the person whose email led to  
Ms. Axsen’s emails and the meeting with Mr. Pilling, was a material fact which  
Ms. Axsen was duty bound to relay to Mr. Zhang.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 76  
[245] In sum, I do not find that Ms. Axsen breached her standard of care by failing  
to meet the required standard of care, either by providing advice outside of her  
expertise or by failing to that she had received an email from Allen.  
[246] Although it is not strictly necessary that I do so, I will also say that even if I  
had found that Ms. Axsen had breached her duty of care, I would have found that  
the plaintiffs did not prove that they sustained damage caused, in fact or in law, by  
that breach.  
[247] The plaintiffs’ claims against Ms. Axsen and Lake Okanagan are dismissed.  
The Claim Against Three Forks  
[248] The plaintiffs’ claim against Three Forks is brought in breach of contract and  
concealment of a material latent defect in the Property.  
[249] The breach of contract claim is based on the non-disclosure of the December  
19, 2011 ITS report and the addendum to the contract, dated May 30, which  
required Three Forks:  
to provide the Assignee with all documentation in its possession relating to  
the property including plans, engineer reports or analysis, summary of  
invoices for work to date, estimates and plans/drawings of the project by May  
31, 2017.  
[250] In order to prove the breach of contract claim, the plaintiffs must prove that  
the report had not been disclosed prior to the addendum and must establish that the  
report was in the possession of Three Forks as of the date of the addendum.  
[251] With respect to the disclosure made prior to the date of the addendum, the  
evidence is that Three Forks, through its realtor, provided the F96 link to the  
plaintiffs, through Ms. Axsen. The F96 link, as I said earlier, is no longer available to  
be accessed. As I understand it, the link used a shared folder website or application  
and the link has now expired. Despite my concerns about the evidence of Mr. Zhang  
and Mr. Ryczywolski, and given the admissions made by Mr. Bird at his  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 77  
examinations for discovery, I am prepared to conclude that the report was not on the  
link.  
[252] I do find that the existence of the report could have been discovered by a  
reasonable review of other documents contained on the link, or at least through the  
description of the documents on the link. However, that the report could have been  
discovered is not a defence to the breach of contract claim.  
[253] The evidence clearly shows that Three Forks received the report from ITS in  
2015, with the permission of Allen. Three Forks also received the earlier ITS reports,  
which were made available and put on the F96 link. I have been offered no  
explanation as to why the earlier reports were available and the December report  
was not. I reject Mr. Bird’s evidence that he received the December report on his cell  
phone and then deleted it, without keeping a copy. I find that the report was in the  
possession of Three Forks in May 2017, and that the failure to produce it after the  
disclosure addendum was signed, which I conclude was the result of carelessness  
and not the result of a deliberate decision by Mr. Bird, was a breach of contract.  
[254] With respect to the plaintiffs’ claim based on a concealment of a latent defect,  
the law is clear, in British Columbia, that the doctrine of caveat emptor in contracts  
for the sale of land continues to apply. In Nixon v. MacIver, 2016 BCCA 8, the court  
said as follows:  
[31]  
The doctrine of caveat emptor was colourfully summarized by  
Professor Laskin (as he then was) in “Defects of Title and Quality: caveat  
emptor and the Vendor’s Duty of Disclosure” in Law Society of Upper  
Canada, Contracts for the sale of land (Toronto: De Boo, 1960) at 403:  
Absent fraud, mistake or misrepresentation, a purchaser takes  
existing property as he finds it, whether it be dilapidated, bug-infested  
or otherwise uninhabitable or deficient in expected amenities, unless  
he protects himself by contract terms.  
[32]  
The leading decision on the maxim is Fraser-Reid v. Droumtsekas  
(1979), [1980] 1. S.C.R. 720 at 723, in which Mr. Justice Dickson (as he then  
was) recognized the continuing application of the doctrine of caveat emptor to  
the sale of land:  
Although the common law doctrine of caveat emptor has long since  
ceased to play any significant part in the sale of goods, it has lost little  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 78  
of its pristine force in the sale of land. In 1931, a breach was created  
in the doctrine that the buyer must beware, with recognition by an  
English court of an implied warranty of fitness for habitation in the sale  
of an uncompleted house. The breach has since been opened a little  
wider in some of the states of the United States by extending the  
warranty to completed houses when the seller is the builder and the  
defect is latent. Otherwise, notwithstanding new methods of house  
merchandising and, in general, increased concern for consumer  
protection, caveat emptor remains a force to be reckoned with by the  
credulous or indolent purchaser of housing property. Lacking express  
warranties, he may be in difficulty because there is no implied  
warranty of fitness for human habitation upon the purchase of a house  
already completed at the time of sale. The rationale stems from the  
laissez-faire attitudes of the eighteenth and nineteenth centuries and  
the notion that a purchaser must fend for himself, seeking protection  
by express warranty or by independent examination of the premises.  
If he fails to do either, he is without remedy either at law or in equity,  
in the absence of fraud or fundamental difference between that which  
was bargained for and that obtained.  
[33]  
The doctrine continues to apply to real estate transactions in this  
province, subject to certain exceptions: fraud, non-innocent  
misrepresentation, an implied warranty of habitability for newly-constructed  
homes, and a duty to disclose latent defects.  
[34]  
A vendor has an obligation to disclose a material latent defect to  
prospective buyers if the defect renders a property dangerous or unfit for  
habitation. A latent defect is one that is not discoverable by a purchaser  
through reasonable inspection inquiries. See McCluskie v. Reynolds (1998),  
65 B.C.L.R. (3d) 191 (S.C.), and Cardwell et al v. Perthen et al, 2006 BCSC  
333 [Cardwell SC], aff’d 2007 BCCA 313 [Cardwell CA].  
[255] In Cardwell et al v. Perthen et al, 2006 BCSC 333 (aff’d 2007 BCCA 313),  
referred to in Nixon, Ballance J. said:  
[127] Latent defects ─ being ones which are not discoverable by  
observation and reasonable inquiry ─ are treated differently. A vendor who is  
aware of and fails to disclose and/or conceals or makes non-innocent  
misrepresentations with regard to a latent defect may well become liable to  
the purchaser for damages suffered as a result of that latent defect. This  
principle is sound because, unlike a patent defect, a latent defect is not  
discoverable by a purchaser on appropriate inquiries and inspection and thus,  
as a matter of fairness in the commercial transaction, the obligation to  
disclose and to not misrepresent will rest with the party who knows about the  
deficiency.  
[128] Every imperfection or deficiency which a reasonably careful inspection  
and inquiry will not reveal cannot amount to a latent defect of the kind  
capable of displacing the doctrine of caveat emptor. In order to qualify as  
such, the defect must carry with it a consequence of substance; that is, it  
must be of such a nature as to render the house uninhabitable or dangerous:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 79  
McCluskie. Beyond that, the vendor has no obligation to disparage his own  
property.  
[129] It is clear that subjective knowledge of an undisclosed latent defect  
which may be dangerous or make the property uninhabitable is sufficient to  
negate a vendor’s defence of caveat emptor. In McCluskie at para. 54,  
Bennett J. suggests that something less than actual knowledge may be  
sufficient to ground liability:  
In conclusion, I find that although the law of vendor and purchaser has  
long relied on the principal of caveat emptor to distribute losses in real  
estate cases, the rule is not without exception. Two major exceptions  
are in the case of fraud, and in cases where the vendor is aware of  
latent defects which he does not disclose. The law also supports the  
imposition of a duty to disclose latent defects on the vendor where he  
is not subjectively aware of those defects, but where he is reckless as  
to whether or not they exist. It is up to the plaintiff to prove this degree  
of knowledge or recklessness.  
…
[256] In Motkoski Holdings Ltd. v. Yellowhead (County), 2010 ABCA 72, the court  
said:  
[59]  
In the law of vendor and purchaser “concealment” is a term of art.  
There is a distinction between “concealment” and non-disclosure, or mere  
silence, even though in ordinary speech those terms might sometimes be  
synonymous. Concealment requires a positive step to hide a defect in the  
land, coupled with an intention to withhold knowledge of the defect from the  
purchaser. If a defect is concealed, it is treated the same way as a  
representation that the defect does not exist; concealment therefore often  
amounts to fraud.  
…
[61]  
“Concealment” was defined in Leeson v. Darlow, 1926 407  
(ON CA), [1926] 4 D.L.R. 415 at p. 432 (Ont. C.A.), a case dealing with  
alleged fraud and misrepresentation regarding a real estate transaction, as  
follows:  
Active concealment of a fact is equivalent to a positive statement that  
the fact does not exist. By active concealment is meant any act done  
with intent to prevent a fact from being discovered; for example, to  
cover over the defects of an article sold with intent that they shall not  
be discovered by the buyer has the same effect in law as a statement  
in words that those defects do not exist.  
In Peek v. Gurney (1873), L.R. 6 H.L. 377 at p. 391 (H.L.) it was noted:  
. . . mere concealment will not be sufficient to give a right of action to  
a person who, if the real facts had been known to him, would never  
have entered into a contract, but that there must be something  
actively done to deceive him and draw him in to deal with the person  
withholding the truth from him. . . .  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 80  
The requirement that there be an active step to support a finding of  
concealment has been confirmed in other cases.  
[257] To succeed on the claim for concealment, the plaintiffs must prove that there  
was a latent defect, that Three Forks knew or was reckless as to whether there was  
a latent defect and that Three Forks concealed that latent defect.  
[258] What is alleged here is that the Property had a potential for slope instability,  
and that was the material latent defect. I agree that a potential for slope instability, if  
it existed and was not known by or reasonably discoverable by a purchaser, would  
amount to a latent defect.  
[259] However, the plaintiffs have not proved that any such material latent defect  
was known by Three Forks. ITS, and particularly Mr. Hanenburg, had been involved  
with geotechnical matters related to the Property since at least 2004. Mr. Hanenburg  
had written a report dealing expressly with slope stability on July 18, 2011. In that  
report and indeed in the opening paragraph, he said:  
… we are providing you with a brief review to confirm why the slope can be  
considered satisfactorily stable using conventional and simple engineering  
procedures.  
[260] In his conclusion, he stated:  
1.  
2.  
3.  
Based on conventional slope stability analysis, and friction angles  
appropriate for the material types, a safety factor of 1.5 is expected for  
the completed fill slope, …  
This is consistent with observations of the slope, which show no  
evidence of any instability, and it has become well vegetated in the  
past 6 years since construction.  
While it is easy to demonstrate why the slope is stable based on  
conventional engineering procedures, it is also steep enough to  
present some challenges for suitable development. Our previous  
reports addressed to others should be referred for foundation design  
considerations.  
Generally, the slope is steel enough that public access is not  
desirable, and it is also appropriate to take additional precautions with  
respect to building setbacks and foundations for other reasons.  
Additional engineering input for foundation procedures as they relate  
to control of settlement, drainage disposal, and similar considerations  
are appropriate for this site when construction is proposed.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 81  
…
[261] Mr. Ryczywolski, who had read this report, emailed Mr. Zhang after the City  
had sent out the Westrek report in June 2018, following the discovery of the cracks  
on the Property. His email, dated June 5, said:  
This is an very unfortunate situation given the detailed slope stability  
assessment done by Interior Testing in which they assessed the slope as  
being stable and suitable to build on. The recommendation in the recent letter  
from Westrek is quite the opposite to what Interior Testing had in their report  
and letter.  
[Reproduced as written.]  
[262] Mr. Hanenburg testified that the ITS report of December 2011 did not provide  
different opinions than found in the July report. Paragraph 2 of the conclusions  
section of the December report says:  
Comments are also provided in a previous section of this report regarding  
stability of the existing steep fill slope. We note that since its construction in  
2004/5, the slope has been periodically observed by ITSL with no significant  
signs of creep or movement noted. Furthermore, analysis of the slope  
indicates a minimum factor of safety of 1/5, which is generally acceptable  
within geotechnical design.  
[263] Both Mission Group and Three Forks had the December 2011 report (as well  
as the earlier ITS reports) and both planned to build residential structures on the  
Property. There is simply no foundation for alleging that Three Forks knew of a  
material latent defect in the Property, which it concealed from the purchasers by  
failing to deliver the December 2011 report.  
[264] Even if I had concluded that Three Forks knew of a material latent defect and  
that the knowledge came from the December 2011 report, which was intentionally or  
recklessly withheld from the plaintiffs, I would have concluded that the plaintiffs could  
reasonably have discovered the December 2011 report.  
[265] With respect to the claims against Three Forks, I find the plaintiffs have  
proved a breach of contract, but I dismiss the claim based on material latent defect.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 82  
Causation and Damages  
[266] I have dismissed all of the plaintiffs’ claims against all of the defendants save  
one. I have found that Three Forks breached its contract with the plaintiffs by failing  
to provide all of the documents with respect to the Property which were in its  
possession, and specifically, that the ITS report of December 2011 was in the  
possession of Three Forks and was not provided to the plaintiffs.  
[267] In the notice of civil claim filed in this matter on June 28, 2019, the plaintiffs  
sought rescission, with a return of the land to the Kirschners and a return of the  
purchase price to the plaintiffs, plus judgment for the costs of remediation charged to  
the plaintiffs by the City and incidental or consequential losses, costs and expenses.  
The second amended notice of civil claim withdraws the claim for rescission and  
instead claims general and special damages.  
[268] The issue, then, is what damages have been suffered by the plaintiffs as a  
result of the failure by Three Forks to disclose, by May 31, 2017, the December  
2011 ITS report.  
[269] The plaintiffs say that their damages are the remediation cost as charged by  
the City, including interest, and which have now been added to the property taxes  
owed on the Property; the diminution in value of the Property; financing costs  
incurred by Linten to the date of trial; and costs thrown away by the plaintiffs in  
pursuing the development of the 35-townhouse project. It was their position that the  
damages sought are the same as against all defendants and on all causes of action.  
[270] All of the defendants took the position in closing submissions that the plaintiffs  
have not proved any losses, and that if the plaintiffs have suffered any losses, such  
losses were not causally related to any liability alleged against any of them, and that  
the plaintiffs failed to take reasonable steps to mitigate.  
[271] In Richter v. Simpson, 1982 766 (BCSC), McLachlin J. (as she then  
was, said at para. 4:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
[4] The fundamental principle in assessing damages for breach of  
Page 83  
contract is that the plaintiff is to be placed in the same position he would have  
been had the contract been performed. A qualification on this principle is that  
he is not entitled to recover losses which he could have avoided by taking  
reasonable steps; that is, he is obligated to mitigate his loss. While damages  
are most often assessed as of the date of breach, this is not an absolute rule;  
the court has power to fix such other date as may be appropriate in the  
circumstances: Johnson v. Agnew, [1980] A.C. 367, [1979] 1 All E.R. 883,  
[1979] 2 W.L.R. 487 at 489(H.L.).  
[272] Mr. Zhang said that had he had the December report, the plaintiffs would  
have “run away” and not completed the contract. Mr. Ryczywolski testified that he  
would have advised Mr. Zhang to walk away and not complete the contract. Earlier, I  
addressed the significant credibility issues with both Mr. Zhang and Mr. Ryczywolski.  
I do not accept the evidence of either on this issue. Mr. Zhang in particular was not  
credible. His evidence was self-serving. To quote from the decision in Arndt v.  
Smith, [1997] 2 S.C.R. 539 (in addressing whether a subjective test should be  
applied when determining whether a patient would have chosen to decline surgery if  
properly informed of risks):  
4
Laskin C.J. shared the authors’ concerns about the subjective test,  
and rejected the pure subjective approach to causation. He explained at  
p. 898 that the plaintiff’s testimony as to what he or she would have done,  
had the doctor given an adequate warning, is of little value:  
It could hardly be expected that the patient who is suing would admit  
that he would have agreed to have the surgery, even knowing all the  
accompanying risks. His suit would indicate that, having suffered  
serious disablement because of the surgery, he is convinced that he  
would not have permitted it if there had been proper disclosure of the  
risks, balanced by the risks of refusing the surgery. Yet, to apply a  
subjective test to causation would, correlatively, put a premium on  
hindsight, even more of a premium than would be put on medical  
evidence in assessing causation by an objective standard.  
In other words, the plaintiff would always testify that the failure to warn was  
the determining factor in his or her decision to take the harmful course of  
action. Accordingly the subjective test would necessarily cause the trier of  
fact to place too much weight on inherently unreliable testimony.  
[273] Similarly, in Fong v. Lew, 2015 BCSC 436, Adair J. said:  
[35]  
The causation issues in this case are often based on the assertion  
that the client would have behaved differently (and avoided a loss) if only the  
client had received proper legal advice. In that respect, I have found the  
following observation of Neilson J. (as she then was) in Newton to be helpful:  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 84  
[761] . . . I adopt the view of Groberman J. in Sports Pool  
Distributors Inc. v. Dangerfield, 2008 BCSC 9 at para. 97, that in  
cases of professional negligence a bare assertion that a client would  
have behaved differently if he or she had received proper advice  
should be viewed with some scepticism. Like Mr. Justice Groberman,  
I endorse this observation of Southin J.A. in Hong Kong Bank of  
Canada v. Touche Ross & Co. (1989), 36 B.C.L.R. (2d) 381 at 392  
(C.A.):  
It is always easy for a witness to say what he would have done  
and for a judge to say he accepts that assertion. But such  
evidence is, in truth, not evidence of a fact but evidence of  
opinion. It should be tested in the crucible of reason.  
[274] The plaintiffs had a binding agreement with Three Forks when conditions  
were removed on May 30, 2017. By that date, Mr. Zhang had the three earlier ITS  
reports. As was submitted by counsel for Mr. Benson, in closing submissions, the  
earlier reports clearly put the plaintiffs on notice that there were loose materials on  
the Property which would have to be removed, that as much as five meters of  
additional fill needed to be structurally placed, that although the existing fill appeared  
to be compact, the developer should expect that excess settlement (for residential  
buildings) could occur, that Mission Group layout of buildings may need to be altered  
having regard to the significant cost of unusual but foundation systems for some of  
the buildings, and that additional geotechnical work would be required. The  
September 2010 report stated that the slope of the Property was “steep enough to  
present some challenges for suitable development”.  
[275] I find that the December report did not set out opinions different than those  
contained in the earlier ITS reports. The earlier reports showed that the Property  
represented a challenge for construction, which Mr. Ryczywolski knew and  
conveyed to Mr. Zhang, by describing the Property (based on a read of the three  
earlier ITS reports) as being “an unusual site due to some steep slopes and deep  
fills”, presenting “some significant challenges”. The consistency in the opinions set  
out in the reports is further confirmed by Mr. Zhang instructing Mr. Ryczywolski to  
get quotes for removal of fill on the Property in April 2019, well after Mr. Zhang  
testified he had received the December report.  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 85  
[276] Consequently, while the plaintiffs would have had an opportunity to back out  
of the purchase when the subdivision was not registered by August 31, and while the  
failure to disclose the report amounted to a breach of contract, the plaintiffs have not  
proved that they would have taken the opportunity to terminate the contract as a  
result of the non-disclosure. In other words, the plaintiffs are in no different position  
as a result of the breach of contract by Three Forks.  
[277] Even had I found that the plaintiffs had proved that they would not have  
completed the contract, the plaintiffs have not satisfied me that they have suffered  
any loss. The purchase price for the land, taking into account the site conditions  
which may have necessitated special foundations and large retaining walls  
depending on final design, was $1.51 million. There is no evidence that that price  
was anything other than market value. The closing costs were $26,765.78.  
[278] The appraisal reports filed in this case provide opinions that the current  
market value of the Property can be determined based on a per acre of developable  
land. The appraiser called by the plaintiffs estimated the value per developable acre  
to be between $900,000 and $1,000,000. The appraiser called by the Kirschners  
estimated the value per developable acre to be $650,000. I accept the evidence of  
the defence expert, Dr. Tannant, a geotechnical engineer, that the Property, at  
present, has 4.5 acres of developable land. Consequently, on the evidence before  
me, the value of the land as at the date of trial is between $2,925,000 and  
$4,500,000.  
[279] Even taking into account the interest claimed to be owed by Linten pursuant  
to the promissory note, about which I have considerable skepticism, the plaintiffs  
have established no loss.  
[280] The plaintiffs also claim the remediation charges imposed by the City. I am  
unable to find that the slope failure, most significantly in the area of the pump station  
and not in the area upon which construction was expected to occur, was  
foreseeable. As I said earlier, I only heard from two geotechnical engineers and I  
prefer the evidence of Dr. Tannant. His evidence does not establish that a slide of fill  
Linten Developments Ltd. v. Kirschner Mountain Estates Ltd.  
Page 86  
material was likely, nor that the slide that did occur was foreseeable. He opined that  
the slide which did occur was most likely of surface materials and not deep seated  
and that a factor in the slide was the construction of a pond by third parties at the toe  
of the slope below or at the bottom of the Property. Mr. Ryczywolski offered no  
opinion as to the cause of the slide.  
[281] Further, the plaintiffs, if they suffered any loss, have made no effort to  
mitigate. They declined to participate or have any involvement with the City as to the  
nature of work performed after the tension cracks were first located. They have  
made no efforts to sell the Property nor have they taken anything other than trivial  
and inconsequential steps to develop the Property.  
[282] Finally, I will note that the plaintiffs did not plead nor lead any evidence of loss  
of opportunity with respect to the purchase of other property had this transaction not  
closed and no evidence to support that the development envisioned at the time of  
purchase could or would have been profitable.  
Summary  
[283] I have concluded that the plaintiffs have not proved their claims against the  
Kirschners, the Benson defendants or the realtor defendants. With respect to Three  
Forks, I accept that there was a breach of contract, but am unable to find that the  
plaintiffs have proved any damages.  
[284] Consequently, the plaintiffs’ claims are dismissed.  
[285] In the event any parties wish to make submissions as to costs, they have 30  
days to contact the Kelowna Supreme Court schedulers to make arrangements,  
failing which the defendants will be entitled to costs on Scale B against the plaintiffs.  
“Beames J.”  


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