Condominium No. 822 2630 v. Danray Alberta Ltd. (Alberta Court of Appeal)

The Trial Court decision (see Condo Cases Across Canada, Issue No.11, August 2005) was reversed by the Alberta Court of Appeal.  The Court of Appeal found that there was no breach of fiduciary duty by Danray Alberta Limited or Danny Taran.  The Court’s reasons were as follows:

• Neither Danray nor Taran could be considered owner-developers, and therefore they did not owe the fiduciary duties that come with such a role.
• There was, in any event, no statutory duty to establish a reserve fund.  In the absence of a statutory requirement, an owner/developer does not owe a fiduciary obligation to establish a reserve fund sufficient to pay future capital replacements.
• The individual purchasers had bought on an “as it stands” basis.  They were advised of the correct amount in the reserve fund and there was no basis for any understanding that Danray or Taran would act on their behalf in ensuring that the reserve fund was adequate.
• Taran did not breach his fiduciary obligations to the corporation as a director.  He acted honestly and in good faith, while on the board, and there was no statutory obligation on him to maintain a reserve fund.  Furthermore, Taran was not in a conflict of interest. 
• Newco was the beneficial owner of the property and was the party actually selling the condominiums to the public.  If any fiduciary duty could be owed, it was owed by Newco.