Summary

Keywords

Contracts - Formation - Pre-incorporation contracts - Post-incorporation contracts - Strata corporations - Whether exception to the rule in Austerberry allows pre-incorporation contract law principles to apply to land interests - Whether Court of Appeal improperly established new test for formation of post-incorporation contracts - Whether law of pre-incorporation contracts applies to strata corporations.

Summary

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Crystal Square is a mixed-use retail complex, office tower, residential tower and hotel complex in Burnaby, B.C. It was developed by Crystal Square Development Corp., Tyba Crystal Investments Corp., Dong Ah Canada Development Corp. and the Crystal Square Parking Corporation (“CSPC”) (collectively, the “Developers”). The Developers and the City of Burnaby entered into an agreement that contains easements for access to parking facility and covenants to pay for that access (the “ASP Agreement”) in March 1999. The ASP Agreement, which was registered as an easement in the Land Titles Office on March 17, 1999, contained covenants to pay money and covenants that successors of the Developers were to assume.

Strata Plan LMS 3905 was deposited on May 26, 1999, bringing the applicant, a strata corporation comprised of 64 strata lots in Air Space Parcel 2 (the “Owners”) into existence. The Owners never signed an assumption agreement adopting the terms of the ASP Agreement, as required by clause 16.3, and there was no evidence that they adopted custom bylaws. The respondent, Crystal Square Parking Corporation (“CSPC”), owns Air Space Parcel 5, the parking facility within Crystal Square. CSPC purchased the parking facility, took an assignment of the ASP Agreement on June 28, 2002.

Although the Owners generally abided by the ASP Agreement, they took issue with certain matters under that agreement. Those disputes eventually led the Owners to seek an order that the positive covenants, and, in particular, the promises to pay the annual base rate and a percentage of operating expenses related to the parking facility, were unenforceable against them.

The trial judge found that the payment provisions were not binding on or enforceable against the owners, allowed the claim against CSPC, dismissed CSPC’s counterclaim, and dismissed the claims against Crystal Square Development Corp., Tyba Crystal Investments Corp. and Dong Ah Canada Development Corp. because those claims had not been pursued. The Court of Appeal allowed CSPC’s appeal.

Lower Court Rulings