Case Studies, Pendrell Place: "The AXA Pacific Puzzle", by Richard Oldaker; March 2002


(Note: Mr. Oldaker has also written "The Coleman Caper". This document discusses the financial irregularities of Ms. Coleman, former co-chair of the Strata Council. It also examines similar issues of repairs and invoices for repairs that is discussed in "The AXA Pacific Puzzle".)


The analysis set out below details some of the irregularities in the affairs of the strata corporation that led to the appointment of an Administrator by the Court, and to the commencement of British Columbia Supreme Court Action Number S012351. Despite the contents of the document, the Administrator did not deem the matter worthy of further investigation and apparently chose, instead, to enter into an as yet undisclosed agreement with the owners’ insurer, AXA Pacific, which the administrator apparently did without the owner’s consent.

Mr. Oldaker's document reveals that two sets of invoices were submitted by The Maintenance Company. One set went to AXA Pacific Insurance (via Hogan and Cox, adjusters) while the other went to Vancap/Ascent. Mr. Oldaker analyzes the amounts charged on both sets of invoices and seeks to explain the discrepancy between the two sets.



The Axa Pacific Puzzle
Strata Plan VR1008


It can be fairly easily concluded that:

The invoices submitted by The Maintenance Company [company owned by Randy Kautzman] to Hogan and Cox (insurance adjusters) on 23/Jan/99 are duplicates of those submitted [by The Maintenance Company] to Vancap/Ascent at approximately the same time. If one assumes that payment was also made for those submitted to Vancap/Ascent then The Maintenance Company received double payment. What emerges as a "scheme" was quite intricate.

The difference between the content of the invoices submitted to H&C is notably different when compared to those submitted to Vancap/Ascent in that the material cost is set out in greater detail on the former. This can best be illustrated by the ratio of labour to materials. That ratio is 3.1 for the H&C invoices and 15.6 for Vancap/Ascent. The explanation is that H&C required back up for the invoices submitted to them in the form of original supplier's invoices, whereas the Vancap/Ascent files do not contain such backup. One is left to conclude it was not required. The result was material costs were transformed into labour, since time sheets were also not required.

Using a standard costing criterion, the amount charged to install twenty-five sheets of drywall was absurd (Invoice #107). A "rule of thumb" is $20/sheet, primed and ready to paint. To that must be added the cost of insulation, which is twice that of the drywall. The cost to insulate and install twenty-five sheets should not have exceeded $1,200.00 in comparison to $5,630.00. If one were to double the $20.00 "rule of thumb" to allow for removal, it should not have exceeded $1,700.00. If one were to double that to allow for multiple sites it is still difficult to achieve the $5,630.00. The difference is, of course, the $52/hr labour rate charged vs. $20-$25/hr standard charge.

There are two troubling issues that were noted. The FIRST of those related to repairs of Apt. #303. There does not exist in the correspondence any indication that a problem existed with the unit. It changed hands on 14/Mar/99 when Mr. Durlacher purchased it. The invoice appears to have originally been related to Apt. #304 (Campos) which WAS mentioned in a 29/Dec/98 memorandum as having had water damage in the bedroom, but that motion did not give rise to any recommendation for repairs. It is not known who took them. I understand AXA Pacific, or H&C, have photographs of the sites before the repairs. It seems unlikely such an error would have slipped past but Invoice #121 is unique in that there does not appear to have been a double billing for the unit.

The SECOND major question continues to surround Apt. #103. The H&C invoices (#119 and #120) total $1,389 (plus taxes) compared to #104 and #105 (re-issued #152) for a total of $5,137.00 (plus taxes). The material component of those two latter invoices is only $196.00, rental $389.00 compared to labour $4,552.00. A part of the work that was "purported" to have been done was to remove and replace a deck for which there was not any material purchases. Sullivan Construction replaced the same deck only eight months later (although that invoice is also missing) and The Maintenance Company charged for doing the same patio in September 1998. It is difficult to draw any conclusions other than the work invoiced in September 1998 and January 1999 was never done.

CONCLUSIONS

 (More)

Vancouver, Maximillian: Court finds Strata Corporation acted signifcantly unfairly against strata lot owner; orders change to unit entitlement; cuts leaky condo repair bill in half

Citation:

The Owners, Strata Plan VR1767 v. Seven Estate Ltd. et al. and Seven Estate Ltd. v. The Owners, Strata Plan VR1767

Date:

20020313

 

2002 BCSC 381

Docket:

S063877

Registry: New Westminster

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

THE OWNERS, STRATA PLAN VR1767

PETITIONER

AND:

SEVEN ESTATE LTD. AND
THE IMPERIAL LIFE ASSURANCE COMPANY OF CANADA

RESPONDENTS


AND

 

 

Docket:

S066458

Registry: New Westminster

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

SEVEN ESTATE LTD.

PETITIONER

AND:

THE OWNERS, STRATA PLAN VR1767

RESPONDENT

 

REASONS FOR JUDGMENT
OF THE
HONOURABLE MADAM JUSTICE MARTINSON

 

Counsel for the Owners

G. S. Hamilton

Counsel for Seven Estates

J. H. Rosner

The Imperial Life Assurance Company did not participate

 

Date and Place of Hearing:

24 and 25 January 2002

 

New Westminster and Vancouver, B.C., respectively

INTRODUCTION

[1]   This is a "leaky condo" case. The condominium complex in question, the Maximillian, consists of 25 residential strata lots, two commercial strata lots and a parking lot. The parking lot, Strata Lot 3, is located underneath the building envelope.

[2]   Repairs to the building envelope of over $700,000 were required and the Owners passed four special levies to cover the cost of those repairs. Though the parking lot is only one of 28 strata units, the Owners say that Seven Estate Ltd., the owners of the parking lot, should pay $126,912.18, or approximately one-sixth of the cost of the repairs, because the law requires them to do so. The highest assessment for any other lot is $35,127.43.

[3]   Seven Estate originally owned the land upon which the complex was built, and used it as a parking lot to provide parking for tenants in a nearby office building it also owned. It sold the land on the condition that it could purchase a lot and use it for parking. It says that the law does not require it to pay for repairs to the building envelope, and that doing so is both unfair and inconsistent with a 1989 resolution passed by the Owners lowering its Unit Entitlement by half and reducing the number of votes it is entitled to exercise from five to two. It says it should not be required to contribute based either on the "oppression" remedies found in the legislation that applies, or on the basis that the Owners are "estopped" or prevented from claiming contribution because of the 1989 resolution and the actions of the Owners since then.

[4]   Both the Owners and Seven Estate have filed Petitions seeking relief. The Imperial Life Assurance Company of Canada (the other party named in the Owners' Petition) did not participate in these proceedings.

THE OWNERS' POSITION

[5]   The Owners say that both the Condominium Act, R.S.B.C. 1996, c. 64 and the Strata Property Act, S.B.C. 1998, c. 43, which replaced the Condominium Act on July 1, 2000, require them to assess the costs of the building envelope repair based on Unit Entitlement ("UE"). UE is an amount based on square footage, approved by the Superintendent of Real Estate and registered in the Strata Plan for the complex at the Land Titles Office. They say that the Condominium Act applies to the special levies passed before July 1, 2000 and the Strata Property Act applies to the special levies passed after July 1, 2000.

[6]   The UE for the parking lot is 4030. The Owners agree that of the 28 strata lots, the second highest UE, 1025, applies to one of the two commercial stratas. The UE for the other commercial strata is 736. The UE for the largest residential strata lot is 937 and the UE for the smallest is 437. The parking lot was purchased for $120,000. Five of the other strata lots were purchased for less than that amount, the lowest being $83,800. The most expensive strata lot was $205,000.

[7]   The Owners acknowledge that right from the start Seven Estate said that the UE assessment was a mistake and complained about the inequities caused by it because of the nature of a parking lot. The Owners agree that in 1989, after a lengthy dispute that included the filing of a law suit, the then owners passed a resolution at the annual general meeting saying that the UE for the parking lot should be 2015. The resolution also said that the voting rights for the parking lot should be reduced from five to two.

[8]   It is common ground that the Strata Plan was never amended to reflect this resolution. However, the Owners agree that both parties acted upon the resolution in any case. In fact, the UE for the parking lot used to make the original building envelope repair assessment was 2015, not 4030. The original claim in this lawsuit was based on 2015. The petition was later amended to include a claim based on 4030.

[9]   Nevertheless, the Owners say that the 1989 resolution was enacted without legal authority as there is no authority under either the Condominium Act or the Strata Property Act to amend the UE in this circumstance. They say that both pieces of legislation required them, when passing special levies, to assess the individual owners on the basis of UE: s. 35(d) and s. 128 of the Condominium Act and ss. 99 and 100 of the Strata Property Act and s. 6.4(2) and (3) of the regulations. Bylaw 5000, passed in 1996, specifically provides that owners must contribute to special levies based on UE.

[10]  The Owners rely on Royal Bank v. Holden (1996) 7 R.P.R. (3d) 80 (B.C.S.C.), where Mr. Justice Bauman stated, at para. 17, that:

The strata corporation has certain essential duties under the Act to maintain common property, common facilities and assets of the strata corporation. These are fundamental duties, and, I perceive, their execution by the strata corporation is critical to the realization of the condominium concept - that is people living together in individually owned units within a common shell. The mix of personal fee simple title and co-operative living necessitates a vehicle by which maintenance and repairs of the common property will be undertaken and payment shared and forthcoming from the individual owners. The vehicle created by the Act is, of course, the strata corporation.

[11]  They say that there is an exception to the general rule that owners must contribute to special levies based on UE, but they argue that it does not apply in this case. That is, under s. 128 of the Condominium Act, there can be a variation if the repairs are not attributable or partially attributable to the parking lot. Under regulation 6.4(2) of the Strata Property Act, there can be a variation if the repairs do not relate to or benefit the parking lot.

[12]  They argue that the repairs in this case are either attributable to, or relate to or benefit the parking lot. Failure to maintain and repair the building envelope would result in a complete failure of the building, which would directly affect the parking lot. The envelope protects the roof and sides of the complex and prevents the penetration of water. If the repair had not been made, the building would become dilapidated and unusable as a parking lot. The resale value of the parking lot would be affected. The expert report obtained by the Owners shows that there was water ingress into the garage. The Owners say that this conclusion is supported by a decision of this court in Strata Corp LMS 509 v. Andresen, 2001 BCSC 201.

[13]  The Owners respond to the "oppression" and estoppel remedies in a similar way. In addition to the factors just mentioned they say that a contribution based on full UE is not inconsistent with the arrangements reached in 1989. They never did consider how Seven Estate would contribute towards a significant building envelope repair. The arrangements were focused on ordinary operating expenses and the monthly strata fees. They advised the Court that Seven Estate will continue to contribute to monthly strata fees based on a reduced UE of 2015, which operates as a convenient formula to apportion operating expenses in recognition of Strata Lot 3's unique characteristics. They say they have authority to use such a formula under s. 99 of the Strata Property Act and regulation 6.4.

[14]  The Owners also point out that when Seven Estate sought assistance from the Superintendent in 1987, that assistance was not granted. Some of the reasons for doing so were stated by the office of the Superintendent this way:

One factor in the approval was that strata lot 3 appeared likely to be resubdivided in the future, as evidenced by two large areas of limited common property specifically set aside for the use of strata lot 3. But perhaps more importantly, strata lot 3 is a commercial unit and it seemed reasonable to approve the most general method of calculating unit entitlement and allow any business concern contemplating purchasing the strata lot to determine for itself whether the unit entitlement as disclosed in the disclosure statement would be suitable for its circumstances.

[15]  The Owners note that the parking lot is, in fact, rented out and is a business investment for Seven Estate. Seven Estate had the chance to assess the viability of the business investment at the time it purchased the strata lot. It may have made an unhappy investment. That may be unfortunate, but it is not unfair. The Owners say that with respect to the bargain made in 1989, the only thing Seven Estate has lost is that if they had the amendment they would have been able to take advantage of it with respect to a matter that was not anticipated by anyone. While this may be disappointing for Seven Estate, it does not operate unfairly.

[16]  The Owners argue that no prejudice has been shown with respect to the reduction in voting rights. The vote to approve $600,000 of the repair costs was unanimous. They point out that while a mistake may have been made in the Disclosure Statements, the Disclosure Statements themselves contain a disclaimer.

[17]  In the result, the Owners say that there is no unfairness or prejudice of the kind required to support an oppression remedy under the Condominium Act or the Strata Property Act, or on the basis of estoppel.

SEVEN ESTATES' POSITION

[18]  Seven Estate says that the problems arose because of a mistake by the developer. It says that in the Disclosure Statements it received Strata Lot 3, which included 17 parking spaces on one floor, and seven other parking spaces that were contained in Strata Lot 3. The seven are on a different floor.

[19]  Seven Estate argues that a mistake was made originally with respect to the square footage. In the original Disclosure Statements UE was to be assessed based on habitable square footage. Yet, when the strata plan as approved by the Superintendent of Real Estate was registered at Land Titles, UE was based on the square footage of the parking lot. Seven Estate also notes that the amended Disclosure Statements refers to parking as a class distinct from commercial and residential.

[20]  Therefore, it says that there was a fundamental mistake in the initial assessment of UE. The Superintendent should have seen that in the Disclosure Statements UE was based on habitable square footage.

[21]  Seven Estate says that it raised the inequities involved in allocating expenses based on that UE from the start. The inequities are said to be that, notwithstanding the fact that it only used and can only use the premises for parking, which is totally underground, the Owners were charging it for water, sewer and insurance on the total building. Using the UE approach with respect to maintenance meant that it was paying a disproportionate amount for management. They paid for items that are of no concern or benefit to the lot, such as exterior and elevator maintenance, and all other matters associated with the use of the property by residential and commercial owners.

[22]  Seven Estate also notes that it does not have access to the building itself. There are 32 steps down to the parking lot. It says that the condominium complex is a wooden structure on the top of a concrete garage. It uses the analogy of the parking lot underneath the two court houses and the Art Gallery in downtown Vancouver. The lot is separate from each. (More)

North Vancouver, 141 E. 21st St.: Leaking decks frequently discussed; Court dismisses claim because purchaser failed to prove vendor knew deck was leaking

Citation:

Lieberman & Balfe v. Lee

Date:

20020312

2002 BCPC 0087

File No:

0112975

 

Registry:

North Vancouver

 

 

IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

 

 

 

BETWEEN:

AUDREY LIEBERMAN and JOE BALFE

CLAIMANTS

 

AND:

MARIE LEE

DEFENDANT

 

 

 

REASONS FOR JUDGMENT

OF THE

HONOURABLE JUDGE W. J. RODGERS

 

 

 

 

 

 

 

 

Appearing in person:

A. Lieberman

Appearing in person:

M. Lee

Place of Hearing:

North Vancouver, B.C.

Date of Hearing:

January 24, February 27, 2002

Date of Judgment:

March 12, 2002

             

 

 

[1]        This Claim is brought by Ms. Lieberman and Mr. Balfe for an award of damages for the cost to repair a leaking deck in a condominium which was purchased from Ms. Lee.

[2]        The Claim of Ms. Lieberman and Mr. Balfe is based on three allegations: (a) that on the date the property was sold the deck of the condominium was damaged; (b) that Ms. Lee knew of the damage to the deck; (c) alternatively, that Ms. Lee ought to have known the deck was damaged.

[3]        On December 14, 1998 Ms. Lee entered into a written contract with Ms. Lieberman and Mr. Balfe for the sale of her condominium at suite 304 - 141 E. 21st St., North Vancouver, B.C.

[4]        A Property Disclosure Statement was attached to, and forms part of, the contract for the sale of the condominium. At paragraph 26 the following question was posed: "Are you aware of any leakage or unrepaired damage?" Ms. Lee answered this question: "No".

[5]        Ms. Lieberman and Mr. Balfe took possession of suite 304 on the 31st of March 1999. In April or June, Ms. Lieberman noticed that the minutes of the strata council meeting of April 1999 recorded a complaint by another tenant that water was leaking from the Lieberman-Balfe apartment. Ms. Lieberman began to investigate by speaking to the person who complained, Ms. Loverock, who lived in suite 204.

[6]        Ms. Loverock told Ms. Lieberman that she had spoken to Ms. Lee prior to the sale of the condominium about water leaking from the deck of suite 304 onto the deck of Ms. Loverock's apartment, suite 204. Ms. Loverock has recently moved from the Vancouver area so her evidence was introduced by letters from her to Ms. Lieberman. Ms. Loverock wrote of an incident where a bucket of water had been spilled while Ms. Lee's husband was cleaning the deck. This clearly had nothing to do with a deteriorating deck surface. The second incident referred to by Ms. Loverock occurred when water dripped from Ms. Lee's bathroom into the bathroom of Ms. Loverock. This leakage was caused by the shower curtain not being placed inside the tub and had nothing to do with a deteriorating deck.

[7]        Ms. Lieberman received a letter dated August 4, 1999 from the property manager, Ms. Thompson, advising her to correct the problems of the leaking deck in suite 304. Ms. Lieberman wrote to Ms. Lee in October of 1999 about the water leakage. Ms. Lee wrote to Ms. Lieberman stating that she had no knowledge of any leakage problems.

[8]        Ms. Lieberman obtained a number of estimates to repair the deck. The lowest bidder was unable to schedule a time to perform the work and eventually Ms. Lieberman hired Deck Doctor to repair her deck in August 2000 at a cost of $1400.

[9]        Ms. Loverock also complained about damage to her deck carpet caused by water leaking from the deck of suite 304. Ms. Lieberman agreed to pay for the cost of

replacing the carpet. The cost for new carpet installed by Lonsdale Carpet on the deck of suite 204 was $292.35.

[10]      Ms. Loverock wrote that she spoke to Ms. Lee about damage caused by water leaking through Ms. Lee's deck. This is denied by Ms. Lee who testified that the only complaints she received from Ms. Loverock concerned the spilled bucket of water and the leak from her shower. The letters from Ms. Loverock describe these two incidents, which are not related to any damage to the deck of suite 304, but her other complaints are vague and uncertain. I cannot give a great deal of weight to Ms. Loverock's evidence where it conflicts with the evidence of Ms. Lee.

[11]      I further note Ms. Loverock and Ms. Lee were members of the strata council. The minutes of the strata council showed that leaking decks were frequently a topic of discussion. There is no mention in the minutes of a complaint by Ms. Loverock against Ms. Lee. If such a problem existed, I find it likely that Ms. Loverock's complaint would have been noted in the strata council minutes.

[12]      Ms. Lee and her husband testified the deck was in good repair at the time of the sale and there is no evidence which could lead the Court to conclude their testimony was inaccurate or untruthful.

[13]      Ms. Lieberman and Mr. Balfe must first prove, on a balance of probabilities, that, at the time of the sale, the deck of suite 304 was damaged. However, there is no

evidence as to the extent of the damage, if any, to the deck of the suite. No employee of the Deck Doctor testified; not even photographs of the repair work were introduced. The invoice from The Deck Doctor did not explain the scope of the repair or any description of damage.

[14]      Since Ms. Lieberman and Mr. Balfe have failed to prove that the deck of suite 304 was in need of repair at the time of the sale, it follows that they have not proven Ms. Lee knew the deck was damaged and thereby made a false statement in the Property Disclosure Statement.

[15]      Ms. Lieberman and Mr. Balfe submit that Ms. Lee ought to have known of the damaged deck. Even if the deck was damaged, which fact has not been proven, there was no obligation on the part of Ms. Lee to investigate the condition of the deck. The obligation to investigate is upon the purchaser provided that any defect is not knowingly concealed by the seller.

[16]      The Claim for damages to repair the deck of suite 304 is dismissed

[17]      I also find there is no evidence that water leaking from the deck of suite 304 caused damage to the deck covering of suite 204. There is no evidence of the damage to the carpet on the deck of suite 204 beyond the assertions of Ms. Loverock. The invoice from Lonsdale Carpets did not specify the damage; no one from that business testified; there were no photographs entered as exhibits at trial. This part of the Claim is also dismissed.

[18]      The Claim is dismissed and Costs are awarded to Ms. Lee in the amount of $300 to compensate Ms. Lee for Court Registry fees, attending at Court for all appearances and for out-of-pocket expenses such as photocopying. The Award of Costs is payable within 30 days from today's date jointly and severally by Ms. Lieberman and Mr. Balfe. Payment may be made directly to Ms. Lee or through the Clerk of the Court.

 

The Honourable Judge W. J. Rodgers