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Commercial Law - Consumer agreements - Interpretation - Time share agreements

Thursday, February 23, 2017 @ 7:00 PM  

Appeal by the plaintiff, JEKE Enterprises, from dismissal of its breach of contract claim against the defendant, Northmont Resort Properties. The plaintiff was the lessee of two time share units in a hot spring resort. The defendant acquired the ownership interests of the resort’s developer in 2010 following foreclosure proceedings. Time share interests were governed by Vacation Interval Agreements (VIAs), which assigned responsibility for all costs incurred in the operation, continuing maintenance and repair of the resort to unit owners and lessees. In 2012, the defendant determined that significant funds were required for extensive renovations, repairs, and to resolve financial deficits. The defendant levied a Renovation Project Fee (RPF) upon owners and lessees. Some responded by paying the fee or surrendering their interests to the defendant. The plaintiff was among a group of approximately 25 per cent of lessees or owners who took no action. The plaintiff refused to pay annual maintenance fees. It commenced litigation alleging the defendant breached the VIAs by requiring payment of the RPF or cancellation fee. The plaintiff sought a declaration that the defendant’s fundamental breaches of the VIAs constituted a repudiation that relieved it from any further obligations thereunder. The trial judge dismissed the claim. The trial judge found that the RPF was within the scope of costs encompassed by the VIAs, and that the defendant’s conduct in assessing and calculating the RPF did not constitute a fundamental breach of the VIAs. The plaintiff appealed.

HELD: Appeal dismissed. The trial judge’s interpretation of the VIAs was reviewable on the palpable and overriding error standard. No such error was established, as the trial judge’s interpretation was correct. The distinction between capital costs and operating costs sought by the plaintiff was not supportable on the plain wording of the VIAs. There was nothing in the VIAs to support the plaintiff’s contention that the defendant had a duty to pay capital costs associated with maintaining the resort to a particular standard of usability. To the contrary, the VIAs expressly contemplated all ongoing costs were the responsibility of lessees and owners. The invariable conclusion was that the plaintiff was responsible for its proportionate share of capital costs included in the RPF. In addition, the defendant was entitled to indemnification for legal costs associated with a default of a lessee’s obligations under the VIAs.