Summaries Sunday: OnPoint Legal Research

One Sunday each month OnPoint Legal Research provides Slaw with an extended summary of, and counsel’s commentary on, an important case from the British Columbia, Alberta, or Ontario court of appeal.

BOSWORTH V. JUROCK, 2013 BCCA 4

1. CASE SUMMARY

Areas of Law: Class Actions; Real Estate Development; Condominiums

Description: Class actions by individual strata lot owners were permitted under the Class Proceedings Act, despite representative action provisions of the Strata Property Act.

Background: The Appellants were Oswald Jurock, David Barnes, Ralph Case, Standard Apartments Ltd., Proper Tee Investments Ltd., and Greenwich Holdings Ltd. The Respondent was Gregory Bosworth. The Appellants were joint venture participants and principals of a developer corporation that marketed strata lots in the Roosevelt Apartments, a converted rental building in Prince Rupert. The Respondent purchased a unit in the Roosevelt Apartments, and subsequently the strata council of the building confirmed deficiencies to the common property exterior cladding, which required repairs estimated at $35,109 per strata lot. The developer had provided a disclosure statement under the Real Estate Development and Marketing Act, S.B.C. 2004, c. 41 (“REDMA”), which included a statement that an engineer’s report had confirmed that the building was ‘free from material defect’. The Respondent argued that the disclosure statement was inadequate as it failed to disclose a number of deficiencies and problems with the buildings. The Respondent brought an action for misrepresentation, and sought to have it certified as a class action on behalf of all purchasers of strata lots in the Roosevelt Apartments. In chambers, the judge certified the class action.

Appellate Decision: The Court dismissed the appeal and upheld the certification order. The pleadings met the requirements of section 4(1) of the Class Proceedings Act, R.S.B.C. 1996, c. 50, setting out a cause of action, an identifiable class of two or more persons, common issues to be determined in the claims of the class members, and a representative plaintiff who fairly and adequately represented the proposed class. The only question arose out of section 41(a) of the Class Proceedings Act, which provided that it did not apply to proceedings “that may be brought in a representative capacity under another Act”. Sections 171 and 172 of the Strata Property Act, S.B.C. 1998, c. 43, permitted a strata corporation to bring an action on behalf of and as a representative of owners. The Court held that section 41 of the Class Proceedings Act barred certification only if another Act authorised the plaintiff, and not another party, to bring the action in a representative capacity: Knight v. Imperial Tobacco Canada Ltd., 2006 BCCA 235, and Seidel v. TELUS Communications Inc., 2011 SCC 15. In this case, the Strata Property Act permitted only the strata corporation to bring a representative action. The Respondent, as an individual owner, could not bring such an action and was therefore not barred under section 41(a) of the Class Proceedings Act. The Court also noted that it was unclear whether the strata corporation could bring a representative action for misrepresentation in a disclosure statement. In Strata Plan LMS 1564 v. Lark Odyssey Project Ltd., 2008 BCCA 509, this question had been described as “arguable”. However, given the decision regarding the class proceeding, the Court found no need to settle the issue.

2. OnPoint COMMENT by Ellen Vandergrift

This decision accords with decisions of courts in other provinces on this issue. In Crawford v. London (City), 2000 CanLII 22350 (ON SC), (2000), 47 OR (3d) 784 (S.C.J.), leave to appeal ref’d, [2000] O.J. No. 2088 (S.C.J.), referred to in the decision, a class action was permitted because an individual unit owner could not maintain a representative action under any act in Ontario on behalf of current or former owners of any of the units in a condominium corporation. A similar class action was permitted to proceed in Condominium Plan No. 0020701 v. Investplan Properties Inc., 2006 ABQB 224 (CanLII), although the equivalent provision of the Alberta legislation was raised by the judge but not argued by the parties.

It also accords with other decisions of the British Columbia and Ontario Courts of Appeal which have determined that a strata or condominium corporation does not have exclusive jurisdiction to pursue claims involving common elements. The recent decision of the Ontario Court of Appeal in 1420041 Ontario Inc. v. 1 King West Inc., 2012 ONCA 249 (CanLII) contains an interesting examination of the history and purpose of the representative action provisions, and concludes, relying on Hamilton v. Ball, 2006 BCCA 243 (CanLII), that they are complimentary to the rights of individual unit-owners.

3. COMMENT BY RESPONDENT’S COUNSEL Jon Goheen and Roy Millen

The Court of Appeal decision in Bosworth clarifies the operation of the statutory bar found in section 41(a) of the Class Proceedings Act (“CPA”). It also helps to establish another procedural route for claims brought in relation to strata units.

Bosworth endorsed and applied the existing law that for the section 41(a) bar to apply, the plaintiff for both proceedings must be the same person – it is not sufficient if the same action can be brought on a representative basis by someone other than the proposed class plaintiff. Prior jurisprudence focussed almost exclusively on the Business Practices and Consumer Protection Act and the predecessor Trade Practices Act.^[i] As such, the main question in Bosworth was whether the same judicial interpretation would apply to a different statutory context, in this case, the Strata Property Act (“SPA”). In affirming that interpretation, the Court of Appeal has, in our view, established that section 41(a) of the CPA will be interpreted similarly in future cases, including in connection with different statutes.

The case also raised the question whether a strata corporation has standing to pursue a misrepresentation claim under REDMA or the common law on behalf of affected owners. Although the court did not need to answer the question, the fact that it remains unresolved leaves a shadow on the right of a strata corporation to bring such a claim. In that regard, last year the Supreme Court (in obiter) expressed that it had a “great deal of difficulty in accepting” that such claims could properly be brought by the strata corporation (See Stachniak v. Jurock, 2012 BCSC 601 at para. 61). To address the standing concern, owners have been added as plaintiffs to existing strata corporation actions (See Strata Plan LMS 1564 v. Lark Odyssey Project Ltd., 2008 BCSC 316, appeal dismissed, 2008 BCCA 509; 2009 BCSC 1024).

The Court of Appeal’s decision confirms that strata owners can pursue strata-related claims as a class action. There are a number of benefits to proceeding in that fashion. There is no question as to standing (see Hamilton v. Ball, 2006 BCCA 243). Neither is the ¾ vote authorization process under either section 171 or 172 of the SPA necessary. In some circumstances, that authorization could pose a problem. Affected owners might vote against the resolution because they would be obliged to contribute to the action. Even if only a smaller group of owners is affected, the supermajority vote is still required. While non-affected owners are not required to contribute to the cost of the litigation, it is reasonable to expect that litigation-averse individuals would vote against the resolution regardless, so as to minimize the litigation pursed by the strata.

Those issues aside, a significant factor in pursuing a class proceeding, as opposed to a multi-plaintiff or strata corporation action, is to minimize discovery costs. Past strata cases have held that all members of a strata are potentially subject to both document and oral discovery (see Strata Plan No. VR 368 v. Marathon Realty Co., [1982] B.C.J. No. 30, 41 B.C.L.R. 155 (C.A.)). Depending on the number of units, discovery could become disproportionately cumbersome and expensive. By pursuing a class action in which only one individual is subject to documentary and oral discovery, costs can be substantially reduced.

Similarly, another difference that could lead to lower litigation costs is the characterization of the damages claim. The damages suffered by strata owners may include consequential damages, i.e., the amounts assessed on individual unit owners by the strata corporation to fund the cost to repair, restore or remediate the deficiencies to the common property. This is not the same as a damages claim by the strata for the actual expenses incurred, which would also include an analysis of the reasonableness of those expense. In most cases, the class action will serve to reduce discovery on the damages aspect of the claim.

We do not see Bosworth as changing the existing law. However, the decision does provide guidance as to the operation of section 41(a) of the CPA for other cases, and its endorsement of the class proceeding process for strata-related claims could well lead to more such actions being filed in the future.

[i] The main exception is the decision of our Court of Appeal in Jellema v. American Bullion Minerals Ltd., 2010 BCCA 495. However, Jellema considered whether an oppression proceeding was a “representative” proceeding within the meaning of section 41(a) of the CPA. It did not raise the same question as in Bosworth and the other cases under the TPA and the BCPCA as to whether the same individual must be capable of being the plaintiff in both proceedings.