Photo: City of Kelowna
A Calgary-based developer has lost a lawsuit stemming from his failed development on Kirschner Mountain, and he’s yet to pay back the City of Kelowna for more than a half a million dollars for slope mitigation work the city was forced to complete in 2019.
In a lawsuit filed in 2019, Linten Developments Ltd, run by Linguo (Frank) Zhang, allegedly Kirschner Mountain Estates and Three Forks Sand & Gravel breached their contract in their sale of 4.5 acres of land near Kelowna’s Black Mountain area by not fully disclosing the property’s stability issues.
About a year after Zhang purchased the property for $1.51 million in the spring of 2017, with plans to build 35 townhomes, tension cracks and bulging soil began appearing on the property.
In response to the stability issues concerning, in February 2019 the City of Kelowna ordered Linten, and a property owner on nearby Kloppenberg Court, to take steps to remediate the property at their own expense.
Zhang testified he had no money in the company, so the city took the matter into its own hands that March, carrying out emergency works on the two properties. That work was completed by September 2019 and then in December, the City billed Linten for $574,121.45. The city said the total expenses for the job came to $850,700.94.
But according to Justice Alison Beames’ recent decision, Linten has not paid the City back, and Linten has taken no further steps to develop the property or sell it.
While Zhang had sued for the claimed decrease in value of the property, financing costs incurred by Linten, other costs associated with their pursuit of the development and the cost of the City’s billed remediation work, Justice Beames recently dismissed his claim entirely.
The property is part of 640 acres bought by the father of Allen, Donald and Gordon Kirschner back in the 1950s. In 1971, about 490 acres were “turned over” to the three sons. Kirschner Mountain Estates was incorporated as a land development company in the early 2000s, developing residential lots and selling them to contractors and home builders.
In the mid-2000s, KME began preparing the property in question for development, clearing the land and compacting fill on the site. KME retained Interior Testing Services to monitor the work and prepare reports for the city.
Between 2006 and 2011, materials from other projects in the Kirschner Mountain area would be placed on the property, and when material was needed for other projects, it would sometimes be taken from the property.
In 2010, KME entered into an agreement with the Mission Group to develop the property into 35 townhomes, and ITS prepared geotechnical reports for the site for Mission Group in 2010 and 2011.
The company concluded it’s 2011 report saying: “the likelihood of a landslide occurring and causing detrimental effects to the proposed development and property below to be low, which is defined as having a probability of [less] than 10% in 50 years … Based on the two safety levels adopted by the governing bodies, it is reasonable, in our opinion, to conclude that the land may be used safely subject to our recommendations regarding fill placement and foundation design.”
But a home warranty company had concerns about ITS’ work, and in June 2011, a geotechnical firm called Geoteknik wrote to the home warranty company recommending against developing the property, while another geotechnical firm, Levelton, outlined the additional steps Mission Group would have to take given the concerns.
Despite the “bump in the road,” Mission Group told KME they were still interested in developing the property.
“The recent discovery of a major geotechnical issue on the fill portion of the site has added unexpected costs and caused financial issues,” Mission Group said in a letter to KME, adding they could wait until home prices rose by 10% to accommodate the increased development costs.
But ultimately, Mission Group opted not to develop the site, and little work occurred at the property through to 2015, when Three Forks Sand & Gravel entered into an option to purchase it from KME for $1.2 million. But then a year later, Three Forks listed the property for sale for $1.6 million.
Zhang became interested in Kelowna real estate in early 2017. Despite having no prior experience in developing property, he bought the property from Three Forks for $1.51 million in 2017, with plans to build 35 townhomes.
Not much occurred at the site for six months, but Justice Beames noted Zhang first became aware of a potential issue when a reporter reached out to him in the spring of 2018 about cracking on the property.
After Westrek Geotechnical Services prepared a report on the property for the City of Kelowna, the City reached out to Zhang in an email on June 5, 2018: “The City of Kelowna is rather concerned with this issue given the conditions and recommendation stated in the report. The implications associated with a failure are significant.”
In July 2018, Zhang declined the city’s invite to participate in further geotechnical investigation, but the city carried on without him. In February 2019, the city “imposed a remedial action requirement” on Linten, as well as the owner of the property below on Kloppenberg Ct.
But Zhang carried out no remediation work, forcing the city to take matters into its own hands. The City stuck Linten with the $574,000 bill.
In his lawsuit, Zhang claimed KME and Three Forks breached their contract with him.
“The plaintiffs say these three defendants knowingly mislead the plaintiffs through omission, in that they were aware the Property had significant geotechnical issues and failed to disclose those issues,” Justice Beames wrote in her decision.
“It was argued by the plaintiffs, in closing, that these three defendants ‘concealed’ the Geoteknik and Levelton reports and that they ‘knew or ought to have known that the plaintiffs did not have all of the ITS reports, nor had they been provided with the Geoteknik and Levelton reports, and that the plaintiffs would be proceeding with their purchase based on a misapprehension.’”
Justice Beames ultimately ruled that Zhang’s claim against KME was “completely without merit, both legally and factually.” But she ruled Three Forks did breach their contract by not disclosing a December 2011 report from ITS prior to purchase. Zhang claimed he would have “run away” from the sale had he been aware of the report.
But while Zhang proved Three Forks’ breach of contract, Justice Beames said a prior report from ITS that was disclosed to Zhang said similar things about the property as the the December 2011 report, and the report did not show Three Forks had knowledge of a “ defect” in the property.”
“Both Mission Group and Three Forks had the December 2011 report (as well as the earlier ITS reports) and both planned to build residential structures on the Property,” she said. “There is simply no foundation for alleging that Three Forks knew of a material latent defect in the Property, which it concealed from the purchasers by failing to deliver the December 2011 report.”
Ultimately, Justice Beames said even if Zhang could prove he wouldn’t have completed the sale had he had the December 2011 report, Zhang appears to not have suffered any loss. After purchasing the property for $1.51 million with an additional $26,765.78 in closing costs, Justice Beames found the value of the land now sits between $2.925 and $4.5 million.
As a result, Justice Beames dismissed Zhang’s claims.
