Devin P. Lucas

After approximately six years of delay, the Plaintiff in this putative class action sought to significantly amend its claim to expand the class definition, add new claims of negligence claiming damages for pure economic loss resulting from dangerous defects, and to add a number of new parties. Many of the claims were duplicative of other actions commenced at the instruction of the proposed representative plaintiff, and therefore the court found the amendments to be an abuse of process.  The court also went on to find that had the proposed amendments not amounted to an abuse of process, certification would have been denied because the Plaintiff had failed to show that there was any “basis in fact” to meet the requirements under sections 4(1) (b) to (e) of the Class Proceedings Act.

Our client is the developer of a large luxury mixed-use building located in Vancouver.   For the past number of years it has been a defendant in a complex multi-party construction dispute, part of which has been proceeding as a class action.  The client had a wrap-up liability insurance policy in place for the development that required the insurer to defend any actions alleging damage to property.  The insurer denied coverage relying on an exclusion referred to as the “your work” exclusion.  Shane and Devin successfully argued that the insurer had not met its burden to demonstrate to the court that this exclusion clearly applied to oust coverage.  Justice Millman found that the duty to defend had been triggered and ordered the insurer to reimburse our client for all costs incurred to date to defend those actions and to prospectively cover all defence costs going forward as they are incurred.

Cadillac Fairview Limited and its property, Pacific Centre mall, were unsuccessful in their efforts to stop a massive redevelopment of 720 Beatty St., site of the Creative Energy steam heat plant which serves the energy needs of over 200 commercial and residential buildings throughout downtown Vancouver.  Our clients, Creative Energy and Westbank Projects Corp., are teaming up to build an architecturally novel office tower and entertainment facilities bridging Vancouver’s Yaletown district with BC Place Stadium, along with two state-of-the-art steam generation plants designed to help the City to significantly improve compliance with its greenhouse gas emissions targets.

Pacific Centre, Vancouver’s largest shopping mall, brought legal proceedings against Creative Energy, Westbank Projects and others to halt the project and to instead force Creative Energy to offer the property to Cadillac Fairview’s subsidiary at a price alleged to be more than $100 million below fair market value.   Pacific Centre claimed this right to purchase based on a 1970 covenant registered against the land.   That covenant was expressed to be triggered should Creative Energy decide to sell the whole of its property, assets, business and undertaking or such part of it as is required to generate and deliver steam to Pacific Centre mall.

The Supreme Court of British Columbia found that the main purpose of the covenant was to ensure a continuous supply of steam heat to the Pacific Centre Mall.  If Creative Energy were to decide to offer its utility assets for sale, thereby posing a threat to Pacific Centre’s security of supply, the mall would have the right to match an existing offer.   In this case, however, the Court agreed with Kornfeld litigators Dan Parlow’s and Shane Coblin’s submission that the right of purchase had not been triggered by either the proposed corporate reorganization or any element of the proposed project, the deal having been structured so that Creative Energy maintains ownership over the steam generation assets and undertaking.  Accordingly, the Court dismissed the Plaintiff’s action.

Dan and Shane were supported by litigators Devin Lucas and Susan Smith.

This exciting new Creative Energy / Westbank project at 720 Beatty Street and 701 Expo Blvd, together with the new steam plant at BC Place Stadium, have received regulatory approval from the British Columbia Utilities Commission and are the subject of a rezoning application before the City of Vancouver.

Our clients sought to rescind a $28,800,000 contract for the sale of a large redevelopment site in the heart of a Vancouver suburb. The case is exceptional as rescission was sought, and ultimately ordered by the Court, based on a rarely used legal doctrine of ex turpi causa non oritur actio (“from a dishonourable cause an action does not arise”).

The Kornfeld team of Dan Parlow, Shane Coblin and Nils Preshaw took the position that the sale was unenforceable due to various alleged wrongdoings by the purchaser, including an alleged conspiracy with the real estate agent to suppress zoning information from the vendor, as well as numerous alleged frauds perpetrated on potential lenders and joint venture partners. The trial included 78 court days, making it the second longest commercial trial in the province during that time.

The majority of the evidence of wrongdoing perpetrated by the purchaser on his own lenders, joint venture partners, appraisers and others was entirely outside the knowledge of our clients and had to be extracted from the reluctant purchaser using a wide variety of methods over years of pre-trial proceedings. The methods used included a successful but rarely-used motion to compel documents by the purchaser’s own lawyers on the ground that he had used his lawyers as unwitting pawns perpetrating frauds.

The Youyi Group Holdings (Canada) Ltd. v. Brentwood Lanes Canada Ltd. trial was exceptional in a number of ways. The court found several witnesses to have engaged in a “festival of deceit”. The purchaser’s realtor, when confronted with unanticipated video evidence, was found to have confessed to giving false evidence on two occasions. Both the purchaser and his realtor were found to have concocted an elaborate false story to cover up the true history of a false contract they had come up with, both falsely testifying at trial that the false contract reflected a negotiation which never took place.

Ultimately, the Court ruled the contract to be unenforceable because it was conceived and used by the purchaser for illegal purposes. Our client was successful in retaining the property of which the agreed value at trial had increased to $76,000,000, or nearly $50,000,000 over the purchase price.

Dan, Shane and Nils were supported by the legal research and drafting skills of Kornfeld lawyers Susan Smith and Devin Lucas.

The Plaintiff purchaser appealed the judgment to the British Columbia Court of Appeal. On January 21, 2021, the Supreme Court of Canada refused leave to appeal.

The British Columbia Court of Appeal agreed with the judge at trial that a $28.8 million contract of purchase and sale should not be enforced, being tainted by the illegality of the purchasers’ fraudulent conduct.

The Court considered the following conclusions at trial which remained unchallenged on appeal:

• That a “rent reduction schedule” and a companion “lease addendum” had been prepared as separate documents to allow the purchaser to conceal them and thereby artificially inflate the revenue for the property in the minds of lenders; and that these documents had, in fact, been deliberately withheld from lenders for this purpose;
• That the purchaser had, for fraudulent purposes, provided a false purchase and sale agreement, referencing a false deposit and a purchase price falsely inflated by $10 million, to a potential financier as well as a developer;
• That the realtor, acting on the purchaser’s instructions, proposed what the trial judge characterized as a False Deposit Scheme which was intended to mislead lenders into believing that he had contributed $8 million more in equity towards the purchase of the Brentwood property than he in fact had.   The scheme “was intended to work as follows: the Purchasers would provide a $4 million payment to the Vendors; the Vendors would provide a “receipt’ for $4 million and then return the $4 million amount to the Purchasers; using the funds they had just received back, the Purchasers would pay the Vendors another $4 million in exchange for another $4 million receipt; the Vendors would again return the $4 million back to the Purchasers; and, after the Purchasers obtained financing to purchase the Brentwood property by relying in part on the fictitious additional $8 million in equity, the Vendor would be provided with $8 million in mortgage security over other properties…” The vendor “refused to cooperate with the False Deposit Scheme”.

After considering the law of ex turpi causa,, the Court of Appeal found it unnecessary to look beyond the false “rent reduction schedule” and “lease addendum”.    The case fell into the class of contract that “may be unenforceable in circumstances where it is not per se illegal, but was entered into at least in part, with the object of committing an illegal act. Enforcement of such a contract may be so tainted with illegality that a court is entitled to refuse to enforce it.”