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 VR2122 v. Bradbury, 2018 BCCA 280

AREAS OF LAW: Strata corporations; Winding up; Strata Property Act; Liquidators

~In the winding up of a strata corporation, a judge cannot appoint a liquidator, vest property in him, and make orders ancillary to his role when the liquidator has not applied for that relief under the Strata Property Act.~

BACKGROUND:

The Respondents, The Owners, Strata Plan VR2122, et al, decided through their strata council and a vote of the strata owners to sell their four-storey residential building in Vancouver’s West End to a developer. The building, called the Hampstead, is facing increasing capital expenditures to maintain its physical infrastructure, with anticipated costs for 2018 alone coming to around $20,000 for each of the 33 units. Four of the strata owners, the Appellants Gloria Bradbury et al, opposed the sale. More than 80% of the owners voted in favour of winding up the strata corporation and appointing a liquidator to complete the sale of the property. They applied in court to have the resolution and the purchase and sale agreement approved. Following a three-day petition hearing, a chambers judge approved the Respondents’ winding up resolution. The judge appointed a liquidator and approved a purchase and sale agreement between the Respondents and a purchaser, in the amount of $45.25 million. The judge also made a number of ancillary orders. The judge considered the adamant opposition of the Appellants but concluded the winding-up was in the best interests of a majority of the owners.

APPELLATE DECISION:

The appeal was allowed in part. The Appellants argued that the chambers judge erred in granting the order in the form she did, because it did not comply with the mandatory process for a voluntary winding-up under the Strata Property Act and because it contained terms not authorized by the Act. The relevant sections of the Act to consider in the case of a voluntary winding-up of a strata corporation with a liquidator are at Division 2, ss. 276-283. Prior to July 2016, a voluntary winding-up under Division 2 required the owners to pass a unanimous resolution to wind up the strata and appoint a liquidator. Under the “unanimity regime”, the liquidator was to obtain court approval of their appointment, effect the sale of the property, pay creditors, pay each owner their share of the proceeds of disposition, and obtain approval of his or her final accounts. The process was relatively straight forward once unanimity was achieved. The court’s role was limited to confirming appointment and vesting the land in the liquidator. The July 2016 amendments to the Act were relatively minor, although their effects were significant. The Legislature replaced “a unanimous vote” with “an 80% vote”, added s. 278.1, and amended s. 279. Under the amended provisions, court approval of the liquidator is still required, but the court may grant the order only if satisfied that s. 277, regarding the owners’ appointment of a liquidator, and s. 278.1, regarding the liquidator’s confirmation, are met. In this case, it was open to the judge to approve the resolution to wind up the strata and appoint a liquidator, but it was an error to confirm the liquidator’s appointment and vest the property in him. The Court held that the Act requires the liquidator to apply for approval of his appointment and vesting order. The liquidator can bring the application at the same time the strata corporation applies for approval of the winding up resolution. Section 282 of the Act also requires the liquidator to obtain a three-quarter vote approving the disposition of any property, including that property subject to a purchase and sale agreement.

COUNSEL COMMENTS:

Provided by Camille Chisholm and Peter Roberts, Counsel for the Respondents

In July 2016, the Strata Property Act was amended to permit a strata to be wound up if 80% of the owners voted in favour. Prior to this change, 100% of owners had to vote in favour of winding up giving every owner an effective veto power, as the Court notes in Bradbury. Since the Act was amended, a number of strata wind-ups have proceeded. Because the Act remained difficult to interpret, until the Bradbury decision wind-ups proceeded via a process that counsel and the courts were, to some extent, making up as they went. The Bradbury decision addresses that and provides guidance for the strata wind-up process.

The Bradbury case is the first time the B.C. Court of Appeal has considered the interpretation and application of the voluntary wind-up provisions since the Act was amended. In its decision, the Court confirmed the practice and procedure that has developed for strata wind-ups in the two years since the Act was amended, rejecting a strict and technical interpretation of the Act in favour of a practical approach to the wind-up process.

As stated in Bradbury, the effect of the amendments to the Act was significant, but the changes to the wording of the legislation were relatively minor. The voting threshold was revised while the rest of the wind-up procedure remained unchanged. As a result, a process that previously proceeded with the agreement of 100% of owners must now accommodate a minority of dissenting owners, the super majority that supports the wind-up and a liquidator who is appointed to affect the sale of the strata.

In Bradbury, the appellants, a group of dissenting owners, sought to overturn the trial judge’s approval of the strata wind-up based on a number of technical arguments which strictly interpreted Part 16 of the Act. Instead, the Court took a more purposive approach, interpreting the Act in a manner that is consistent with the wording of the statue but flexible enough to permit wind-ups to occur in an efficient manner. For example, the Court agreed with the appellants that the wording of the Act requires the liquidator to apply to the court for an order approving his or her appointment and vesting of the property. However, the Court also held that there was nothing in the Act that prevented the liquidator from bringing that application at the same time the strata corporation applies for approval of the winding-up resolution, with the preliminary issue of the adequacy of the resolution to be determined first. This avoids the need to hold two separate SGMs at different times to vote on the same issues (whether to sell) with different voting thresholds.

The decision provides helpful guidance on how the complex process of winding-up a strata can be achieved in British Columbia. In this case, the Court validated a practical approach, which remains consistent with the express wording of the Act, to achieving a strata wind-up where a super majority of owners are in favour of that result. Ultimately, provided the process of a wind-up is done properly and fairly, the courts have established that they will not interfere to prevent the will of the majority of owners on merely technical grounds.