A Calgary-based developer has lost a lawsuit over his failed Kirschner Mountain development and has yet to pay the city of Kelowna more than 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, alleged that Kirschner Mountain Estates and Three Forks Sand & Gravel breached their contract to sell 4.5 acres of land near Black Mountain area of Kelowna, not fully disclosing the stability issues the property had. About a year after Zhang bought the property for $1.51 million in spring 2017, with plans to build 35 townhouses, stress cracks and heaving soil began to appear on the property. In response to the associated stability issues, in February 2019 the City of Kelowna ordered Linten, and a property owner on nearby Kloppenberg Court, to take steps to restore the property at their own expense. Zhang testified that he had no money in the company, so the city took matters into its own hands in March, performing emergency work on the two properties. That project was completed by September 2019, and then in December, the city billed Linten for $574,121.45. The city said total costs for the job came to $850,700.94. But according to a recent ruling by Judge Alison Beames, 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 alleged diminution in property value, Linten’s financing costs, other costs associated with pursuing 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 purchased by Allen’s father, Donald and Gordon Kirschner in the 1950s. In 1971, approximately 490 acres were “delivered” 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 homebuilders. In the mid-2000s, KME began preparing the property in question for development by clearing the land and compacting the fill on the site. KME retained Internal 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 Mission Group to develop the property into 35 townhouses and ITS prepared geotechnical reports on the site for Mission Group in 2010 and 2011. The company concluded the 2011 report saying: “the probability of a landslide occurring and causing detrimental effects on the proposed development and the property below is low, defined as having a probability greater than 10% in 50 years… Based on the two levels of safety adopted by governing bodies, it is reasonable, in our opinion, to conclude that the land can be used safely, subject to our recommendations on fill placement and foundation design.” However, a home warranty company had concerns about ITS’ work and in June 2011 a geotechnical company called Geoteknik wrote to the home warranty company recommending against developing the property, while another geotechnical company, Levelton, outlined the additional steps which the Mission Group should do. I receive given the concerns. Despite the “bump in the road”, Mission Group told KME they are still interested in developing the property. “The recent discovery of a significant geotechnical issue in the fill section of the site has added unexpected costs and caused financial problems,” Mission Group said in a letter to KME, adding that they could wait until house prices rise by 10% to cope with increased development costs. But ultimately, Mission Group chose not to develop the site, and little work was done on the property until 2015, when Three Forks Sand & Gravel entered into an option to buy it from KME for $1.2 million. But 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 real estate development, he purchased the property from Three Forks for $1.51 million in 2017, with plans to build 35 townhouses. Not much happened at the site for six months, but Justice Beames noted that Zhang first became aware of a potential issue when a reporter contacted him in spring 2018 about cracking at the property. After Westrek Geotechnical Services prepared a report on the property for the City of Kelowna, the city contacted Zhang in an email on June 5, 2018: “The City of Kelowna is rather interested in this matter given the conditions and recommendation stated I am reporting you. The consequences associated with a failure are significant.” In July 2018, Zhang declined the city’s invitation to participate in further geotechnical investigation, but the city continued without him. In February 2019, the city “imposed a corrective action requirement” on Linten, as well as the owner of the property below, on Kloppenberg Ct. But Zhang did no remedial work, forcing the city to take matters into its own hands. The City stuck Linten with the $574,000 bill. In his lawsuit, Zhang alleged that KME and Three Forks breached their contract with him. “Plaintiffs say these three defendants knowingly misled plaintiffs by omission in that they knew the property had significant geotechnical issues and failed to disclose those issues,” Justice Beames wrote in her decision. “Plaintiffs argued, in closing, that these three defendants “concealed” the Geoteknik and Levelton reports and that they “knew or should have known that plaintiffs did not have all of the ITS reports, nor were they provided with the Geoteknik and Levelton reports, and that the plaintiffs would proceed with their purchase on the basis of a misunderstanding.’ Justice Beames ultimately ruled that Zhang’s claim against KME was “completely unfounded, both in law and fact”. However, it ruled that Three Forks breached its contract by failing to disclose a December 2011 report from ITS prior to the purchase. Zhang claimed he would have “walked away” from the sale if he had known about the report However, while Zhang proved Three Forks’ breach of contract, Justice Beames said an earlier report from ITS disclosed to Zhang said similar things about the property as in the December 2011 report and the report did not show that the Three Forks had knowledge of a ‘defect’ in the property.” “Both Mission Group and Three Forks had the December 2011 report (as well as previous ITS reports) and both planned to build residential structures on the Property,” he said. “There is simply no basis to claim that Three Forks knew of a latent defect in the property that it concealed from the buyers by failing to deliver the December 2011 report.” Ultimately, Justice Beames said that even if Zhang could prove that he would not have completed the sale if he had the December 2011 report, Zhang appeared to have suffered no loss. After purchasing the property for $1.51 million with an additional $26,765.78 in closing costs, Justice Beams found the land is now worth between $2.925 and $4.5 million. As a result, Justice Beames dismissed Zhang’s claims.
