Executive Summary: Key Legal and Evidentiary Issues

• Condominium Corporation No. 0313512 (Mountains Reach) sought a permanent injunction to prohibit the Owners from operating their condo unit for a commercial purpose and/or as short-term rentals (STR) under its Original and Amended Bylaws.

• Substantial factual disputes existed regarding the validity of the Amended Bylaw, the enforceability of a prior Consent Order against the Owners, and allegations of improper conduct and oppression by the Condo Corp's Board members.

• The Owners challenged the originating application process as unsuitable given the scope, complexity, and substantial factual disputes involved, arguing it should proceed as a statement of claim action under rule 3.2(6) of the Alberta Rules of Court.

• Consolidation of the Injunction Action and the Claim Action was sought by the Owners on the basis of common questions of law and fact, overlapping parties, risk of inconsistent verdicts, and duplicative litigation processes.

• Material conflicting evidence and credibility concerns were identified by the Court, including the Condo Corp's fining scheme, grandfathered STR exemptions alleged to have created two classes of owners, and alleged Board member animosity against the Owners.

• Equitable defences including clean hands, oppression, and the mandate to do equity were engaged by the Condo Corp's request for permanent injunctive relief, requiring a full contextual and holistic assessment of all parties' positions.

Background and the parties involved
This case arises from a dispute within Mountains Reach, a bare land condominium corporation located in Canmore, Alberta near the Silvertip resort, comprising 62 bare land condo units owned by individual owners with common property consisting of the roadway, sidewalks, streetlights, small areas of common landscaping, and the sanitary sewer systems. There are no common property buildings. On May 29, 2024, the Condominium Corporation No. 0313512 commenced the Injunction Action (Action No. 2401-07482) by originating application against 2526646 Alberta Ltd., Adam K. Muzychuk, and Andrea M. Muzychuk (collectively, the "Owners"), seeking a permanent injunction restraining and prohibiting the Owners from operating their condo for a commercial purpose and/or as an STR. The Condo Corp also sought to register the injunction as a restrictive covenant on the Owners' title to run with the land and bind successors in title. The Condo Corp relied on section 59 of its Original Bylaw, which claims to prohibit commercial use, and section 49 of its Amended Bylaw, which claims to prohibit the use of the condo unit as short-term rentals.

The Owners' response and the Claim Action
In response, the Owners commenced the Claim Action (Action No. 2501-01997) on February 6, 2025, by statement of claim against the Condo Corp and its individual current and former Board of Directors, including Andrew Stephens, John Haslett, Beverly Wittmack, Linda Black, and an unnamed "John Doe." The Claim Action sought, among other things, a declaration that the Amended Bylaw was invalid and of no force and effect, that the associated Consent Order was unenforceable as against the Owners, an injunction prohibiting the Condo Corp from enforcing the Amended Bylaw until lawfully amended, and damages arising from the Condo Corp's alleged improper conduct through its Board members in relation to the Amended Bylaw and the Commercial-Use enforcement against the Owners. The Owners also brought a Cross-Application seeking to convert the Condo Corp's Injunction Action to a statement of claim action and to consolidate the Owners' Claim Action with the converted Injunction Action.

The purchase of the condo and the STR history
The Owners purchased their condo unit from foreclosure proceedings, during which the property was represented as "an income-generating property through short-term rentals." At the time of purchase, the Owners were aware of the multi-year history of STR in the community and in the condo they purchased, that the Bylaw STR prohibition was not being enforced and its validity was in question, and that the section 59 commercial use restriction was not enforced and had never been used to prohibit STRs. The Owners denied complaints or nuisance from their condo.

The Amended Bylaw and the Consent Order
The dispute is rooted in the Condo Corp's 2018 Amended Bylaw, which included an explicit prohibition on short-term rentals while grandfathering a certain class of condo owners. In May 2020, three groups of owners (the "Previous Plaintiffs") challenged the validity of the Amended Bylaw and sought permission of continued STR in their condos, resulting in a 2023 Consent Order that declared the Amended Bylaw to be valid, acknowledged the prohibition of STR, and permitted the Previous Plaintiffs to continue STR in their condos under a grandfathered exception. The subsequent STR exemption of additional condo owners from the STR Bylaw provision in the 2023 Consent Order was alleged by the Owners to have created two classes of condo owners. The Owners further alleged a lack of notice or information to them prior to the Consent Order and its STR exemption for some owners.

The Condo Corp's fining scheme and enforcement
The Condo Corp issued notices and fines to the Owners to discontinue STR in their condo and instructed its Property Manager to send similar fines and notices to the Owners each week their condo "is being advertised as a Short-Term Rental." The Property Manager continued to do so. The Condo Corp asserted that the Owners were "advertising" and "renting" out their condo as STR on online forums such as Airbnb and VRBO in direct violation of the Amended Bylaw. The Owners characterized this as a "Fining Scheme" and alleged improper administration and enforcement of bylaws, arbitrary and high-handed application of fines by the Condo Corp, extreme animosity by the Condo Corp Board against the Owners, misuse of powers of the Condo Corp to effect Board member wishes, unreasonable intrusion and interference by Board members into the Owners' privacy and quiet enjoyment, and unreasonable and extensive monitoring of the Owners by the Respondents.

Issue 1: conversion of the Injunction Action
Justice C.B. Thompson found that the Injunction Action was not a straightforward case of bylaw enforcement and that the scope and complexity of the Injunction Action went far beyond the Respondents' description. The Court disagreed with the Respondents that there was no substantial factual dispute in the Injunction Action, contrary to their characterization of the matter as raising a "narrow legal issue." The Court found that issues of Amended Bylaw validity, enforceability as against the Owners through the Consent Order, and improper conduct and oppression in relation thereto were inextricable. Material conflicting evidence and credibility issues existed on key issues raised in the Condo Corp's Originating Application and in the Owners' Response Affidavit, including whether the Amended Bylaw prohibits "advertising" for STRs, the implication of the Canmore Bylaws and the classification and/or alleged taxation of the Owners' condo as "Tourist Home" on the Condo Corp's enforcement, and the enforceability of the Amended Bylaw against the Owners by virtue of alleged representations made to the Owners in respect of STR at all material times including prior to and at the time of purchase of their condo, and prior to their entering into agreement with the Condo Corp by signing the Bylaw. The Court held that the originating application summary process prejudiced the Owners because, given the lack of formal pleadings and no formal discovery process, the Condo Corp controlled the records and its affiants, chose the nature and pace of disclosure, and the Owners were limited to disclosure afforded through cross-examination of the Condo Corp's selected affiants and the undertakings the Condo Corp chose to accept. The Court found that it was not possible to fairly and justly resolve the Injunction Action on a summary basis and exercised its discretion under rule 3.2(6) of the Alberta Rules of Court to convert the Injunction Action to a statement of claim action.

Issue 2: consolidation of the two Actions
Applying the consolidation principle from Altex Energy v Meyer, 2020 ABCA 368 and the Mikisew factors, the Court assessed common claims, the impact of consolidation and non-consolidation on scarce resources, the risk of inconsistent verdicts, and potential prejudice to the parties. The Court found a heavy overlap in the factual and legal foundations of the two Actions, concluding that the Injunction Action was wholly encompassed in the Claim Action and that the same factual matrix and series of transactions and occurrences gave rise to the claims and defences in both Actions, which were inextricably connected. Consolidation would save time and resources by ensuring that the common evidence needed in both Actions would only need be produced, discovered, and presented once instead of twice. The risk of inconsistent verdicts was real because the parties in the two Actions were not identical, making issue estoppel uncertain, and separate trials would place the court in the "awkward, unenviable and untenable position of potentially deciding differently on the same facts, or on expanded facts that were unavailable to the first trial judge." The Court found that any delay to the Injunction Action attributable to consolidation would be offset by the savings from duplicative processes in two parallel Actions and other factors that enhance the administration of justice, and that no serious prejudice to the Condo Corp from consolidation had been made out.

Procedural directions and the ruling
The Court granted the Cross-Application, varying paragraph 1 of the Order of the Honourable Justice Malik issued and filed April 24, 2025, and paragraph 2 of the Order of the Honourable Justice Malik issued May 30, 2025, and filed June 2, 2025. The Special Chambers hearing scheduled for the Injunction Action was vacated. The Court ordered that, if the Condo Corp wished to continue its Injunction Action, the Originating Application would be converted to a Statement of Claim and the Injunction Action would be continued as a statement of claim action under the Rules. The Converted Injunction Action and the Claim Action were consolidated to continue as a single statement of claim action under Action No. 2401-07482. A detailed procedural order was issued setting specific timelines for the filing of pleadings, exchange of Affidavits of Records, and preparation of a Litigation Plan to move the consolidated action to trial as quickly as possible. All disclosure in the Originating Application process was to be imported into the Affidavits of Records in the Consolidated Action, and all transcripts of cross-examination in the Originating Application process were to be imported into the Consolidated Action and treated as Part 5 questioning transcripts. The Owners (2526646 Alberta Ltd., Adam K. Muzychuk, and Andrea M. Muzychuk) were the successful party on the Cross-Application. No exact monetary amount was awarded or ordered at this procedural stage; the Court directed that if the parties could not agree on costs, they may make written submissions of no more than 3 pages (excluding authorities), the Owners within 30 days, and the Respondents within 60 days, of the date of these Reasons. The decision was heard on the 6th day of February 2026 and dated at the City of Calgary, Alberta on the 2nd day of March 2026.