Lawsuits

The Strata Property Act specifically permits a strata corporation to sue or be sued. So too, under the Act, an individual may sue or be sued for certain matters, whether in the capacity of a strata council member, an owner or a tenant. Over and above claims at common law, the Act creates helpful remedies for all these persons and establishes certain procedural requirements.

This chapter describes the way the Strata Property Act regulates lawsuits.

 

Choice of Court

Although the Strata Property Act defines sue to mean the act of bringing any kind of court proceeding, 1 some lawsuits may only be brought in the Supreme Court of British Columbia, and not in the Provincial Court of British Columbia, Small Claims Division (often informally called the “Provincial Court” or “Small Claims court”).

Under the Strata Property Act, a claim may be brought in the Provincial Court of British Columbia, Small Claims Division, unless the Act restricts the claim to the Supreme Court of British Columbia, or the claim is otherwise outside the jurisdiction of the Small Claims court. 2 For example, only the Supreme Court may make an order to remedy a significantly unfair act or exercise of voting rights, or to order the strata corporation or an owner, as the case may be, to comply with the statute, as explained below.

The Small Claims Act gives the Provincial Court of British Columbia jurisdiction if the amount claimed or the value of the personal property or services in question is $25,000 or less, excluding interest and costs, and where the claim is for: 3

  • debt or damages,
  • recovery of personal property,
  • specific performance of an agreement relating to personal property or services, or
  • relief from opposing claims to personal property.

The Provincial Court of British Columbia does not have jurisdiction in a claim for libel, slander or malicious prosecution.

Similarly, the Provincial Court of British Columbia lacks jurisdiction in a dispute that questions a strata corporation’s governance. In Armanowski v. Strata Corp., Strata Plan LMS 2151, the Provincial Court said,  4

Thus not all disputes between unit owners and their strata corporation must be heard in the Supreme Court of British Columbia. It depends upon the nature of the unit owner’s claim and whether it falls within the … (Supreme Court of British Columbia’s jurisdiction under) Section 164 [preventing or remedying unfair acts] or 165 [other court remedies] of the Strata Property Act.

Only the Supreme Court of British Columbia has authority to determine a claim for relief from a significantly unfair act or exercise of voting rights  5 or a request to compel a strata corporation to comply with the Strata Property Act. 6  So, for example, the Provincial Court of British Columbia had no authority to decide the matter where:

  • An owner ‘s Provincial Court law suit amounted to a claim that the strata corporation negligently carried out repairs to the common property balcony located outside the owner’s strata lot. In substance, the owner alleged that the strata corporation’s actions were significantly unfair to the owner, contrary to section 164 of the Strata Property Act; 7
  • An owner ‘s Provincial Court law suit amounted to a request for an order requiring the strata corporation to carry out its duty to repair under the bylaws, which brought the matter within section 165 of the Strata Property Act8
  • The owners’ Provincial Court law suit amounted to a claim for damages because the strata corporation had allocated certain expenses in a significantly unfair way, contrary to section 164 of the Strata Property Act9
  • An owner sued in Provincial Court to recover his share of a special levy for engineering services which the owner claimed were never provided or unnecessary. 10 Since the claim apparently questioned the strata council’s actions and the standard to which council was held, the law suit raised questions of governance under both sections 164 and 165 of the Strata Property Act; and where

An owner ‘s Provincial Court law suit claimed reimbursement for certain repairs that were the strata corporation’s responsibility. 11 The strata corporation refused to reimburse the owner for the entire amount claimed, taking the position that the owner spent more than was reasonably necessary to solve the problem. In essence, the owner sought a remedy for what she considered to be an unfair decision, bringing the matter within section 164 of the Strata Property Act. To the degree the owner alleged that the strata corporation failed to carry out its duty to repair, she also raised questions about the corporation’s duty and the repair standard to which it must adhere, all of which brought the matter within section 165 of the Strata Property Act.

In October 2009 the province passed amendments 12 to the Strata Property Act which, at the date of this writing, are not yet in force. If the province brings these amendments into force, the changes will permit either the Supreme Court of British Columbia or the Provincial Court of British Columbia to determine most disputes under the Strata Property Act. The Supreme Court, however, will retain the sole jurisdiction to appoint an administrator. A regulation is necessary to bring these amendments into force. 13

Lawsuit By the Strata Corporation

A strata corporation may, on its own behalf, sue a person against whom the corporation has a claim, including an owner. 14In addition, in certain cases, a strata corporation may sue as a representative of the owners. Before a strata corporation sues as a representative on behalf of the owners, the Strata Property Act requires the corporation to first obtain prior authorization from the eligible voters at a general meeting. The requirement for prior authorization is explained later in this chapter.

To Enforce Compliance

Under section 173 of the Strata Property Act, a strata corporation may apply to the Supreme Court of British Columbia for an order to compel an owner, tenant or other person to:

  • perform a duty he or she is required to perform under the Act, the regulations, bylaws or rules, or to
  • stop contravening the Act, regulations, bylaws or rules.

For instance, a strata corporation successfully applied to the court for an order requiring two owners to comply with a flooring bylaw. 15The strata corporation’s bylaws required wall-to-wall carpeting in the owners’ strata lot, except only in a kitchen, bathroom or the first five feet of an entryway. The purpose of the bylaw was to reduce the noise experienced by persons in units below those with hard flooring. Contrary to the bylaw, the owners installed laminate flooring throughout their suite. The owners claimed that when they purchased their strata lot, they did not know about the bylaw. The court ordered the owners to remove the laminate flooring and replace it with carpet in accordance with the bylaw at the owners’ expense.

A strata corporation may resort to legal proceedings under section 173 of the Strata Property Act as a way to deal with a scofflaw owner who repeatedly contravenes the Act, the regulations, or a bylaw or rule, despite frequent warnings or fines. A court order requiring the owner to comply with the relevant requirement will carry more weight than a strata corporation’s demand that the owner conform. The owner who ignores a court order risks proceedings for contempt.

It is true that a strata corporation, as a corporate entity, may sue in its own name, 16 and that section 173 of the Strata Property Act does not expressly require a 3/4 vote of the eligible voters at a general meeting to first authorize such proceedings. Nevertheless, it is safest to obtain prior authorization for a section 173 lawsuit with an appropriate 3/4 vote resolution. Since, in many cases, the strata corporation likely takes these proceedings as a representative of all the owners, the 3/4 vote removes any concerns about compliance with the prior authorization requirement for representative proceedings, discussed immediately below.

In October 2009 the province passed amendments 17 to the Strata Property Act which, at the date of this writing, are not yet in force. If the province brings these amendments into force, a strata corporation may apply to either the Supreme Court of British Columbia or to the Provincial Court of British Columbia to compel an owner, tenant or other person to comply with the statute. A regulation is necessary to bring these amendments into force. 18

A Representative Suit on Behalf of All Owners

Section 171 of the Strata Property Act specifically permits a strata corporation, as a representative of all the owners (except any who are being sued), to sue an owner with respect to any matter affecting the corporation, including:

  • the interpretation or application of the Act, regulations, bylaws or rules,
  • the common property or common assets,
  • the use or enjoyment of a strata lot, or
  • money, including fines.

This is called a representative lawsuit (or sometimes called a “representative proceeding”). In particular, since the strata corporation does not own the common property, 19 and to the extent that the strata corporation does not itself own any strata lots, the corporation does not have its own claim for defects in, or damage to, common property or strata lots. In these circumstances, the strata corporation may only make a representative claim on behalf of the owners. 20

Before starting a representative lawsuit against an owner, the strata corporation must authorize the suit by a resolution passed by a 3/4 vote at a general meeting. In these circumstances, the owner who is being sued is not an eligible voter. 21 Despite this requirement for prior authorization, the failure to obtain such authorization is not fatal, as explained in more detail below.

Except for any owner who is being sued, in respect of each strata lot every owner must share the expense of the representative lawsuit proportionately, each according to their unit entitlement. However, the unit entitlement of a strata lot owned by an owner who is being sued is not used in the calculations. 22

A Representative Suit on Behalf of Some Owners

Section 172 of the Strata Property Act permits a strata corporation to sue, as a representative of one or more, but not all, of the owners about matters affecting only their strata lots. Before the strata corporation begins the representative lawsuit:

1. The strata corporation must obtain the written consent of the owners on whose behalf the corporation wishes to bring the lawsuit, and

2. The strata corporation must authorize the suit by a resolution passed by a 3/4 vote at a general meeting.

Despite these requirements, the failure to obtain written consent or the strata corporation’s prior authorization is not fatal, as explained in more detail below.

Only those owners on whose behalf the representative lawsuit is brought must contribute to its expense. Each of those owners, in respect of his or her strata lot, must contribute a proportionate share of the expense of bringing the lawsuit according to their unit entitlement. 23 In effect, the owners in question share the legal expense on the same basis used to allocate strata fees.

Lack of Prior Authorization or Written Consent is Not Fatal

While the Strata Property Act requires a strata corporation to obtain prior authorization and, in some cases, written consent before launching a representative lawsuit for the matters described above, a corporation’s failure to comply with these requirements is not fatal to the validity of the legal proceedings. The lack of prior authorization, however, may have consequences internally within the strata corporation.

History

In similar fashion, the former Condominium Act required a strata corporation to obtain authorization to commence certain proceedings on behalf of owners, but the wording was different. In particular, the Condominium Act allowed a strata corporation to sue on its own behalf and on behalf of one or more owners for matters affecting individual strata lots if the affected owners consented in writing and the corporation authorized the proceedings by special resolution. 24 In contrast to the Strata Property Act, the Condominium Act did not explicitly say whether the strata corporation required the authorization and consents before the lawsuit began. 25 The courts characterized these Condominium Act provisions as procedural, allowing a corporation to cure a lack of prior authorization or written consent by obtaining them later, after the legal proceedings began. 26

Initially, when the courts first encountered the Strata Property Act’s requirements for prior authorization and written consents as described above, the courts appeared to follow the same approach they took previously under the Condominium Act. The courts tended to regard the Strata Property Act requirements as merely procedural. This approach suggested that the failure to obtain a requisite authorization or written consent before commencing representative proceedings did not justify dismissing a lawsuit, and the error could be rectified by obtaining the authorization or consent later, after a proceeding is underway. 27

The Coquitlam Case

On June 17, 2003, the Supreme Court of British Columbia handed down judgment in Strata Plan LMS 888 v. Coquitlam (City). 28 In that case, to recover costs of fixing water ingress problems, a strata corporation sued Polygon Construction Ltd. (“Polygon”) and various others for negligence. Later, after the lawsuit was underway, the strata corporation passed two 3/4 vote resolutions authorizing the strata corporation’s legal proceedings. Polygon applied to dismiss the lawsuit because the strata corporation commenced its lawsuit without first obtaining a resolution authorizing the lawsuit by 3/4 vote. The court agreed and declared the proceedings a nullity. In the Coquitlam case, the court found that the strata corporation had no right to sue without first obtaining prior authorization.

Strata Property Act Amendment

In response to the Coquitlam decision, the Province of British Columbia amended the Strata Property Act to override the effect of the Coquitlam case. 29 The amendment removes the ability of any other party in a lawsuit or arbitration to raise as a defence, or to object to, a strata corporation’s failure to first obtain a required 3/4 authorization or written consent. The Strata Property Act was amended by adding section 173.1, which says:

This amendment is retroactive. The requirements for prior authorization and consent in sections 171 and 172 of the Strata Property Act remain, as described above, but a strata corporation’s failure to comply with these requirements is not fatal to the validity of the corporation’s legal proceedings. In a lawsuit or arbitration, this amendment eliminates another party’s ability to object to a strata corporation’s lack of prior authorization or consent, or to raise it as a defence. For instance, in one case where a strata corporation sued a design company, the design company defended, in part, on the basis that the eligible voters did not properly authorize the strata corporation’s lawsuit. The design company claimed that the strata corporation failed to give proper notice for the general meeting where its eligible voters authorized the strata corporation to sue. Section 173.1 was a complete answer to the design company’s contention and the court struck out that portion of the company’s defence. 30

The section 173.1 amendment preserves a strata corporation’s ability to take legal proceedings, even where the corporation incorrectly uses the contingency reserve fund (“CRF”) to pay for the proceedings. In Coupal v. Strata Plan LMS 2503, a strata corporation launched an appeal without first obtaining prior authorization by 3/4 vote. 31 The strata corporation paid for the appeal with funds from its CRF. Contrary to the CRF spending requirements in the Strata Property Act, 32 the strata corporation did not first obtain a 3/4 vote approval for the CRF expenditure.

According to the saving provisions in the section 173.1 amendment, the failure to obtain prior authorization to certain legal proceedings “does not affect the strata corporation’s capacity to commence a suit or arbitration that is otherwise undertaken in accordance with this Act. . . .” (Emphasis added). Despite the section 173.1 amendment, several owners argued that the strata corporation did not properly bring its appeal. They claimed that because the strata corporation failed to comply with the statute’s CRF spending requirements, the appeal was not “otherwise undertaken in accordance with this Act.” . . .

The British Columbia Court of Appeal rejected that argument. The court noted that the strata corporation did not require any prior approval to defend against a lawsuit, or to launch an appeal. The court found that even if prior approval was necessary to appeal, section 173.1 of the Strata Property Act would apply to validate the appeal. The manner in which the strata corporation obtained funding for the appeal did not affect its capacity to commence the appeal, and did not mean that the corporation failed to ensure the appeal was otherwise undertaken in accordance with the Act. 33

Despite the section 173.1 amendment, it appears that any other party in a lawsuit may still compel a strata corporation to show whether, before launching the proceedings, the corporation met the statutory requirements for prior authorization, and where necessary consent, so long as this information is relevant. Information about these matters is not privileged. 34

Arbitration

According to section 176 of the Strata Property Act, the requirements and procedures for authorizing a representative lawsuit, and liability for expenses and judgments in a suit involving a strata corporation, apply with appropriate changes to an arbitration in which the strata corporation is a party. This means, for instance, that if a strata corporation wishes to start an arbitration as a representative of all of the owners, or on behalf of only some of the owners, as the case may be, the relevant lawsuit provisions apply, subject only to changes appropriate to an arbitration. 35

Recall also that the saving provisions of the amendment in section 173.1 of the Strata Property Act extend to arbitration, as explained earlier in this chapter. In an arbitration, this amendment removes the ability of any other party to raise as a defence, or to object to, a strata corporation’s failure to first obtain a required 3/4 authorization or written consent.

For information about arbitrations, see Chapter 28, Arbitration.

Consequences Within a Strata Corporation if There is No Prior Authorization

Despite the section 173.1 amendment described above, the internal management of the strata corporation still requires a prior 3/4 vote or written consent, as the case may be, to launch a representative lawsuit or certain arbitrations. When the province amended the Strata Property Act to override the effect of the Coquitlam case, the government did not alter sections 171 and 172, which require an authorizing resolution and, in the case of section 172, written consents, before commencing a representative proceeding. 36

Within a strata corporation, an owner may still challenge the corporation’s decision to start such a lawsuit or arbitration without first obtaining a 3/4 vote authorization or a necessary written consent.

In some circumstances, the passage of an authorizing resolution or the acquisition of necessary written consents, as the case may be, may also clarify whether, and to what extent, the start of a limitation period is, or was, postponed under the province’s Limitation Act. 37 The Limitation Act establishes the period of time in which a person may bring a lawsuit (called a limitation period), and in some cases, postpones the start of a limitation period.

For instance, the Limitation Act sets a two-year limitation period for bringing a lawsuit for damages for injury to a person or to property, including economic loss arising from the injury. The Limitation Act, however, postpones the start of the two-year limitation period for damage to property until the identity of the wrongdoer is known, and the facts known to the claimant are such that a reasonable person, knowing those facts and having taken appropriate advice, would regard those facts as showing that legal proceedings have a reasonable prospect of success. 38

The British Columbia Court of Appeal has held that a strata corporation ought to be given a reasonable time to bring a representative lawsuit before a limitation period begins, given the requirement for an authorizing resolution, and in addition, in the case of section 172, written consents. In one case, where a strata corporation started a representative lawsuit for property damage one day beyond the two-year limitation period, the court held the suit was brought in time. 39 The court found that the start of the two-year period must be postponed for a reasonable time to allow the strata corporation to investigate its claim, and then give notice of a general meeting and obtain an authorizing resolution. A delay of one day is well within any reasonable postponement of time to complete these tasks before the limitation period begins.

In some situations, a strata council member may also be personally liable to reimburse the strata corporation for its legal expenses if the council member causes the corporation to commence legal proceedings without the necessary prior approval. If the council member has a personal interest in the legal proceedings in question, the risk of personal liability likely increases. For example, in Dockside Brewing Co. v. Strata Plan LMS 3837, the Supreme Court of British Columbia ordered certain strata council members to personally reimburse the strata corporation for approximately $190,399 in legal expenses incurred by the corporation. 40 To pursue their own business goals, the council members in question caused the strata corporation to launch legal proceedings in the corporation’s name without the necessary 3/4 authorization of the eligible voters and contrary to the clear objections of other owners. When participating in council decisions concerning the litigation, the same council members failed to disclose their individual conflicts of interest in accordance with the Strata Property Act. 41 The British Columbia Court of Appeal upheld the decision requiring the council members to personally reimburse their strata corporation.

Where a strata corporation commences a representative lawsuit or certain arbitrations without a requisite prior 3/4 authorization or written consent, as the case may be, the corporation should as soon as reasonably practical rectify the situation by seeking the necessary resolution or written consent.

Exceptions Where Prior Authorization is Not Required

Prior authorization by 3/4 vote is not required every time the strata corporation commences legal proceedings. There are, in effect, exceptions, including:

1. Enforcing a Strata Corporation’s Lien

The Strata Property Act creates a separate regime for suing to enforce a strata corporation lien. Where a strata corporation has filed a lien against an owner’s strata lot for money owing to the corporation, the corporation does not first require a vote to be taken to apply to the Supreme Court of British Columbia for the sale of the strata lot. 42

2. Small Claims

A prior resolution is not required if the strata corporation intends to proceed under the Small Claims Act (that is, in Small Claims court), and there is a bylaw dispensing with the need for prior authorization. Only in the case of proceedings in the Provincial Court of British Columbia, a strata corporation may pass a bylaw that dispenses with the need for prior authorization by the owners. The jurisdiction of the Provincial Court is described at the beginning of this chapter.23

3. Administrator

A prior 3/4 resolution of the eligible voters is not required where a strata corporation wishes to apply to the Supreme Court of British Columbia to appoint an administrator. A majority of strata council may authorize the strata corporation’s application for an administrator. 43 The provision of the Strata Property Act that normally requires the corporation to first obtain a 3/4 vote before commencing representative proceedings does not apply to an application for an administrator.

4. To Defend a Lawsuit

Where someone sues a strata corporation, the corporation does not need a 3/4 vote resolution to authorize the corporation to defend a lawsuit.