Western Canada Business Litigation Blog

B.C. Supreme Court Rejects Certification of Proposed REDMA Class Action

Posted in Class Actions, Construction, Real Estate
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In June 2012, my colleague, Craig Ferris wrote about the B.C. Court of Appeal decision in 229 Burrard Residential Limited Partnership v. Essolat where the Court endorsed a strict application of the terms of the B.C. Real Estate Development Marketing Act (“REDMA”).  There, the Court set aside a pre-construction sales contract and ordered the return of the purchase deposit by reason of the developer’s failure to file an Amended Disclosure Statement advising of a delay in the anticipated completion of the project. 

Building on that decision, the Plaintiff in Lee v. Georgia Properties Partnership, 2012 BCSC 1484 applied to certify an action as a class proceeding under the B.C. Class Proceedings Act on behalf of all persons who purchased a pre-construction unit in the private residences at the Hotel Georgia prior to May 22, 2012.  As in the 229 Burrard case, the action is based on a failure of the developer to file an Amended Disclosure Statement.  The Defendant began marketing strata lots in the Hotel Georgia project in September 2007.  The original Disclosure Statement for the development indicated a construction completion date of December 2011.  Construction of the development did not in fact complete in December 2011 and the Defendant did not file an Amendment to the Disclosure Statement until May 22, 2012, one business day after the Plaintiff commenced the proceeding.  Construction is anticipated to complete on October 31, 2012. 

The Plaintiff argued that the case was appropriate for a class proceeding in that there is a single common issue based upon a statutory scheme (REDMA) that is determinative of the parties’ rights.  Moreover, he argued that there is a clearly identifiable class comprised of all persons who signed purchase agreements prior to the date on which the Amended Disclosure Statement was filed.  The evidence indicated that there are 96 purchasers in the proposed class.

The test for certifying a proposed class proceeding is set out in section 4(1) of the Class Proceeding Act as follows:

(a)       The pleadings must disclose a cause of action;

(b)       There must be an identifiable class of two or more persons;

(c)        The claims of the class members must raise common issues;

(d)       A class proceeding is the preferable procedure for the fair and efficient resolution of the common issues; and

(e)       There is an appropriate representative plaintiff.

The Judge, Mr. Justice Savage, assessed the Plaintiff’s claim in light of these factors and declined to certify the proceeding.  He accepted that the Plaintiff had advanced a proper cause of action based upon a breach of REDMA however he rejected the argument that there was an identifiable class of two or more persons.  He did so because there was no evidence before the Court of any other purchaser that had complained about the failure of the developer to file an Amended Disclosure Statement or that had come forward and indicated a desire to get out of the purchase contract based upon the delay in completion.  In his view, the only claim that had been advanced was that of the Plaintiff and there were no other claims that would support the certification of the action as a class proceeding.  For similar reasons, he held that there were no common issues raised as between class members and that a class proceeding is not the preferable procedure. 

One other factor relevant to the Judge’s finding was the fact that there was evidence that units in the development were in short supply and the developer had produced a purchaser who apparently was willing to take an assignment of the Plaintiff’s contract.  It was therefore not apparent to the Judge that the Plaintiff had suffered any loss or that he would even proceed with the action.

The decision in Lee suggests that while REDMA generally may favour the position of purchasers, as found by the Court of Appeal in 229 Burrard, a class action may not be the most effective vehicle for advancing claims based upon delayed completion unless there is compelling evidence that a significant number of purchasers desire relief from their contractual obligations.  Absent such evidence, it will be left to individual purchasers to pursue their remedies on their won.