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.

THE OWNERS, STRATA PLAN BCS 3699 v. 299 BURRARD DEVELOPMENT INC., 2013 BCCA 356

1. CASE SUMMARY

Areas of Law: Real Property; Allocation of Shared Expenses; Disclosure of Documents

~No obligation of owner developer for continuing disclosure under Strata Property Act, S.B.C. 1998, c. 43~

Background: The Fairmont Pacific Rim Hotel and Residences (the “Fairmont”) is a mixed commercial, hotel and residential condominium complex on Vancouver’s downtown waterfront. The Appellants are related companies involved in the building, development, ownership and marketing of the Fairmont. The Respondent is a strata corporation representing the owners of the residential strata units in the Fairmont. Development of the Fairmont and the residential sales completed in January 2010 and the first annual general meeting of the strata corporation took place in April 2010 where control was passed from the Appellant owner developer, 299 Burrard Management Ltd. (“Burrard Management”), to the newly elected strata council. Due to the mixed-use nature of the Fairmont, some operating expenses were common to both the hotel and residential portions of the development and had to be shared between the hotel and strata unit owners accordingly. This was explained to each strata unit purchaser in the Disclosure Statement advising that one or more easements may be registered on title to the strata lots regarding the integration of the hotel and residential components and that related costs would be shared. A Reciprocal Easement Agreement (the “REA”) became a registered charge on the title for each strata unit setting out the details of the costs and expenses to be shared between unit owners and the hotel. Shortly after the strata council was formed in the spring of 2010, a dispute arose between the strata owners and the Appellants over the allocation of shared expenses, with the Respondent claiming that the residential owners were bearing a disproportionate amount. Despite the Respondent receiving less than a ¾ vote of the strata owners, it brought this petition seeking disclosure of the documents that set out the basis for the allocation of the shared expenses and refused to pay close to $600,000 of the shared expenses claimed by the Appellants. The Appellants refused to disclose such documents, argued that the Respondent required a ¾ vote to bring their petition and demanded payment of the balance of shared expenses alleged owing. The chambers judge found in favour of the Respondents by ordering production of some of the documents sought on the basis that a ¾ vote of the strata owners was not necessary as s. 173 of the Strata Property Act, S.B.C. 1998, c. 43 (“Act”) provided an alternative method to commence a “suit” and that a continuing disclosure was required of the owner developers under ss. 20 and 35 of the Act.

Appellate Decision: The appeal was allowed. The chambers judge erred in finding that a ¾ vote was not required. S. 171(2) applies to any court proceeding and thus requires authorization by the strata owners by a ¾ vote whereas s. 173 is purely remedial. However, despite this error of the chambers judge, the outcome was not affected as it was saved by s. 173.1, which was first brought to the Court’s attention at the appeal and conceded to by the Appellants. S. 173.1(1) operates to maintain a representative action that would otherwise be a nullity due to a failure to comply with s. 171(2), thus prohibiting the Appellants from using the Respondent’s failure to obtain a ¾ vote as an objection to their petition. The chambers judge also erred in ordering disclosure of certain documents under ss. 20 and 35 of the Act. The documents sought by the Respondents do not relate to the parties’ rights and obligations and there is little concurrence between the documents sought and those listed in ss. 20 and 35. Further, the documents listed in s. 20(2) were all initially produced by Burrard Management and there is no continuing disclosure obligation under the Act. The issue in dispute is really contractual in nature going to the terms of the REA and ought to be pursued accordingly.

2 . COMMENT BY COUNSEL FOR THE APPELLANT, Shane Coblin:

This dispute involved the Residences at the Fairmont Pacific Rim in downtown Vancouver. It contains separately owned commercial, hotel and residential components all integrated into one high rise tower. In order to properly integrate these differently owned components, a reciprocal easement agreement was registered as a charge against title to each, which set out their rights and obligations with respect to the one another in relation to access, egress and cost sharing for common assets and expenses. At the heart of this dispute, was the residential strata corporation’s unhappiness with the way in which costs were being shared.

This appeal dealt with two questions: 1) did section 173 of the Strata Property Act create a stand-alone procedure by which a strata corporation can access the courts; and 2) does the wording of sections 20 and 35 serve to create an ongoing disclosure obligation on an “owner developer” that continues past the date of the first annual general meeting, and includes documents that did not exist and were not in the possession of the “owner developer” at the time.

A strata corporation is a creature of statute. It comes into existence when a strata plan is deposited in the Land Title Office, and its powers, rights and abilities, including its right to access the courts, are expressly set out in the Strata Property Act.

Section 20 of the Act sets out an exhaustive list of documents that an “owner developer” is required to deliver to a Strata Corporation at its first Annual General Meeting, when control is transferred to the newly elected Strata council. The documents sought by the strata corporation in this case, however, were not documents of the nature listed in sections 20 and 35, but were documents that related to the reciprocal easement agreement, and specifically how the costs sharing ratios had been arrived at, and how they had been applied over the years following the first AGM. The request was broad enough to cover documents that had come into existence in the months and years after the first AGM had taken place, and documents that had not yet even come into existence. At the hearing of the Petition, the strata corporation argued that if sections 20 and 35 were given the “broad and purposive” interpretation that it said the Legislature had intended, then they ought to be entitled to an order for production. Our position was straightforward. The documents being sought did not fall within the class of documents specifically enumerated in sections 20 and 35, and the Petitioner was simply using this process as a way to circumvent the normal discovery process, and obtain documents and information without having to first commence an action and define the scope of the dispute through pleadings.

Despite the express wording of these sections, the Learned Chambers Judge agreed with the Petitioner and expanded the scope of section 20 to create a continuing disclosure obligation on “owner developers” that continued past the transfer of at the first annual general meeting, and included documents that did not exist, and were not in the control or possession of the owner developer at the time.

As a preliminary matter, we had raised the fact that the strata corporation had not complied with its statutory obligation to obtain a ¾ vote of its owners authorizing it to bring this Petition. Our argument was that the Strata Property Act sets out only three distinct ways in which a strata corporation can access the courts. One is section 117, which deals with the collection of unpaid strata fees from an owner, the second is section 174 that deals with the appointment of an administrator, and the last is the catchall section, 171, which allows a Strata Corporation to commence proceedings on behalf of its owners in respect of any matter, provided it first obtains a ¾ majority vote of its owners authorizing the proceeding. This not being a matter involving unpaid strata fees or the appointment of an auditor, we argued that the strata corporation was required to obtain a ¾ majority vote, but failed to do so. The strata corporation argued that section 173 created a fourth stand-alone procedure through which it had the right to bring this Petition. The Chamber’s Judge agreed with the Petitioner that applications brought pursuant to section 173 did not require a ¾ majority vote to authorize it.

The court of appeal found that the Chamber’s judge had misapprehended the law, and erred in her interpretation of sections 20 and 35, and 173. The court agreed with our position that the Strata Corporation was simply trying to use this as a means to obtain discovery in anticipation of a claim it thought it had in respect of the reciprocal easement agreement, without having to first having to commence proper proceedings. This decision also clarifies for the profession, that section 173 does not create a stand-alone procedure for a strata corporation to access the courts, and that a ¾ majority vote is still required authorizing it.