West Vancouver, The Tides: Group of owners must sue in Supreme Court, not Provincial Court, for relief from unfair treatment by strata council

Citation:

Hatch et al v. Quadra Plex Development Corp. et al

Date:

20021128

2002 BCPC 0502

File Nos:

0214054, 0214056,
0214072, 0214073,
0214074, 0214075
0214157.

 

Registry:

North Vancouver

 

IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

 

 

BETWEEN:


DEREK HOCKING HATCH and PEGGY JAMES HATCH (0214054)
HARVEY RICHARD PUDWELL and DOREEN PUDWELL (0214056)
HOUSHANG SAATCHI and AZAM SAATCHI (0214072)
GEORGE ALFRED SHARP and DOLLIE LEVINA SHARP (0214073)
ALES BADKE and DOREEN BADKE (0214074)
TRUDY ANN ADAIR (0214075) and ANNA ALGARD (0214157)

CLAIMANTS

 

AND:

QUADRA PLEX DEVELOPMENT CORPORATION
A.A.P. WINDOWS LTD. d.b.a. ALLIED WINDOWS
(and the said A.A.P. WINDOWS LTD.)
and MUNICIPAL DISTRICT OF WEST VANCOUVER

DEFENDANTS

 

 

REASONS FOR JUDGMENT

OF THE

HONOURABLE JUDGE R. D. GRANDISON

 

 

 

Appearing on their own behalf:

All Claimants

Counsel for Municipal District of West Vancouver:

Lamour L. Krebs

Appearing for Other Defendants:

Defendants acted on their own behalf

Place of Hearing:

North Vancouver, B.C.

Date of Hearing:

October 17, 2002

Date of Judgment:

November 28, 2002

 

[1] The defendant, the Municipal District of West Vancouver, has filed an application to this Court to dismiss the claimants' actions against it. The grounds submitted are:

a) There has been an abuse of process.

b) The individual unit owners cannot bring an action in relation to common property.

  1.  
    1. The claims are too complex for Small Claims Court.

 

[2] The first issue that the claimants are abusing judicial process is without merit. Firstly, there is no prohibition against commencing an action in the Supreme Court, abandoning the claim there before the matter has been heard on its merits, then commencing the matter in Small Claim Court, as long as the claim falls within the jurisdiction of this Court.

[3] Secondly, the claimant in the Supreme Court action was the Strata Corporation LMS 2508 and here the actions are commenced by seven individual owners. The issue is whether individual strata owners have standing to sue on their own behalf a third party for damage to the common property of the strata corporation.

[4] On February 7, 2001 the owners, Strata Plan LMS 2508 filed a claim in the Supreme Court of British Columbia against the defendants for damages caused by deficiencies in work, materials, design and inspection in the construction of their condominium. The subject property is a 21-unit condominium apartment block identified here as "The Tides".

[5] The Writ of Summons was not served on the defendants and the limitation period for service expired. Instructions were given to the claimants' solicitor that the claimants did not wish to proceed. Therefore, there is no claim before the Supreme Court. The action, although initiated, was never before that Court to be heard on its merits. The claim in Supreme Court was abandoned. The defendants were never called upon to answer the claim. They were not put to any prejudice, cost or inconvenience. Thus, there was no abuse of the Court process nor were any of the defendants' rights or interests.

[6] The claimants have a right to revive their claim within the statutory time limitations before either the Provincial Court or the Supreme Court, subject to the monetary jurisdiction of the respective Courts and the issues in dispute are not otherwise reserved to the jurisdiction of the superior court

[7] In considering this application, albeit, the claim as indicated is the same as that filed in the Supreme Court. It is not filed specifically by the same party. Individuals, it is trite to say, are at liberty to commence an action in this Court on their own behalf, but the question becomes one of whether that individual has a right to be heard as an individual. That issue will be dealt with after addressing the third issue raised by the applicant.

[8] That, "the claims are too complex for Small Claims Court". The submission on this point is that pursuant to the Small Claims Act, R.S.B.C. 1996 c 430 Section 2(1), this Court is to hear matters in a just, speedy, inexpensive and simple manner. Somehow, counsel equates this with this Court being qualified to only hearing simple matters. That is not the case. There are innumerable cases that are heard in this Court and this division of the Court that are lengthy, have a multitude of witnesses, sundry expert witnesses, copious exhibits, technical and otherwise, as well as hearing questions of law, evidence and procedure, including constitutional questions. My recollection of the history of this Court is that it has yet to be overwhelmed by a case that is more than simple case. The mandate of this Court is to provide for a system of justice that is just, speedy within the circumstances of the case, with Court procedure designed to facilitate lay litigants to resolve disputes without professional help administered and adjudicated in a manner that is understood by litigants without the aid of counsel. That is the goal, that is the object. Sometimes, that of itself is not a simple exercise but it does not exceed the mandate of this Court. The challenge that this claim is too complex to be heard by this Court, to put it very kindly, is without merit.

[9] Back to the issue of the claimants standing before this Court. There is no issue that the property in question is the common property of the strata corporation.

[10] No individual unit holder has an exclusive right to represent the interest of the other unit owners who have a common interest in common property. Sections 3 and 4 of the Strata Property Act provides that is the responsibility of the strata corporation.

Responsibilities of strata corporation

3. Except as otherwise provided in this Act, the strata corporation is responsible for managing and maintaining the common property and common assets of the strata corporation for the benefit of the owners.

Strata corporation functions through council

4. The powers and duties of the strata corporation must be exercised and performed by a council, unless this Act, the regulations or the bylaws provide otherwise.

Excising the germane words relevant to the issue here under sec. 164 are:

"The strata corporation is responsible for managing and maintaining the common property."

"And, the powers and duties of the strata corporation must be exercised and performed by a council except as may otherwise be provided for."

[11] The claimants, the respondents in this application, submit that: Section 163 sets out the right of an individual owner to sue with respect to common property. It states:

(1) The strata corporation may be sued as representative of the owners with respect to any matter relating to the common property, common assets, bylaws or rules,

(2) An owner may sue the strata corporation.

Section 163(1) and (2) does not refer to the right of an individual to sue a third party. Subsection (1) says that the strata corporation may be sued. Subsection (2) says that an owner may also sue the strata corporation. That section says, yes, the individual owner may sue, but may sue the corporation, it does not speak of any other party.

[12] Section 172(1) reads:

The strata corporation may sue on behalf of one or more owners about matters affecting only their strata lots if, before beginning suit, ...

[13] This does not expand the right of an individual to sue, it does state that it may sue on behalf of an individual about matters affecting only their strata lots, subject to the consent of others. It does not permit an individual owner to sue a third party about matters concerning common property. There is no implication in that section that suggests otherwise.

[14] With respect to Section 177 of Division 4, the Arbitration Division of the act it refers to, which disputes, can be arbitrated. It states as follows:

(1) The strata corporation may refer a dispute with an owner or tenant to arbitration if the dispute concerns a matter set out in subsection (3). [my emphasis]

(2) An owner or tenant may refer a dispute with the strata corporation or with another owner or tenant to arbitration if the dispute concerns a matter set out in subsection (3). [my emphasis]

This section refers to a dispute between a strata corporation and an owner or one owner and another owner. It does not confer the independence of an owner to sue anyone else about the matters of common property. And, it is conceded that the property in issue here is in fact common property.

[15] The Act does not contemplate the responsibility of maintaining and managing common property being within the right of an individual owner to independently undertake. See Section 3, above.

[16] The respondent submits that unless there is a statute in force which takes away a right of an individual to sue, then that right is not extinguished. The Strata Act, in fact,

is such a statute that assigns that right to a strata corporation. See Section 2:

(1) From the time the strata plan is deposited in a land title office,

(a) a strata corporation is established, and

(b) the owners of the strata lots in the strata plan are members of the strata corporation under the name "The Owners, Strata Plan [the registration number of the strata plan]".

(2) Subject to any limitation under this Act or the regulations, a strata corporation has the power and capacity of a natural person of full capacity.

[17] The owners are members of the strata corporation and it is the strata corporation that has the power and capacity ... Further, the respondent calls upon Section 44 of the Law & Equity Act. R.S. Chap. 253... to confirm their right to independently sue another on their own behalf and on behalf of others., without their consent or approval. Section 44 reads:

Generally in all matters not particularly mentioned in this Act in which there is any conflict or variance between the rules of equity and the rules of the common law with reference to the same matter, the rules of equity prevail.

[18] Distilled to its utmost "equity" is the matter of fairness in law. It can hardly be said that acting for another or other common property owners against their wishes is fair, as in the facts of this case indicate. The Strata Act applies equally to all owners. No one owner has any greater right than any other, but fairness does dictate that the majority of a body of persons with a common interest can prevail over an individual or a minority and regard must be had for sec. 2 of the Law and Equity Act which reads:

Subject to section 3, the Civil and Criminal Laws of England, as they existed on November 19, 1858, so far as they are not from local circumstances inapplicable, are in force in British Columbia, but those laws must be held to be modified and altered by all legislation that has the force of law in British Columbia or in any former Colony comprised within its geographical limits.

[19] The Strata Act is in fact legislation that has the force of law in British Columbia.

[20] In the Strata Act a safeguard has been incorporated to implement certain actions, by an owner, a law suit being one. If in all the circumstances the respondent(s) still believes he has been treated unfairly by the strata council by not taking any action on their behalf or permitting the owner(s) to pursue an action, then this remedy is to be found in Sections 163 and 164, as follows:

163 (1) The strata corporation may be sued as representative of the owners with respect to any matter relating to the common property, common assets, bylaws or rules, or involving an act or omission of the strata corporation.

(2) An owner may sue the strata corporation.

Preventing or remedying unfair acts

164 (1) On application of an owner or tenant, the Supreme Court may make an interim or final order it considers necessary to prevent or remedy a significantly unfair

(a) action or threatened action by, or decision of, the strata corporation, including the council, in relation to the owner or tenant, or

(b) exercise of voting rights by a person who holds 50% or more of the votes, including proxies, at an annual or special general meeting.

(2) For the purposes of subsection (1), the court may

(a) direct or prohibit an act of the strata corporation, the council, or the person who holds 50% or more of the votes,

(b) vary a transaction or resolution, and

(c) regulate the conduct of the strata corporation's future affairs.

[21] The respondent owners, urge that the strata corporation has made a significantly unfair decision as it relates to their interests. Therefore, it is for the Supreme Court, by law, to provide any remedy not the Small Claims Court.

[22] The individuals as claimants in the above listed actions have no standing before this Court unless otherwise ordered by the Supreme Court. This Application is therefore granted.

 

 

The Honourable Judge R.D. Grandison

Provincial Court of British Columbia

Court denies certification of proposed leaky condo class action; no cause of action

Citation:

Kimpton v. Canada (Attorney General) et al

Date:

20021128

 

2002 BCSC 1645

Docket:

01/1447

Registry:  Victoria

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

MARY LOUISE KIMPTON

PLAINTIFF

AND:

 

ATTORNEY GENERAL OF CANADA,

CANADA MORTGAGE AND HOUSING CORPORATION AND

HER MAJESTY THE QUEEN IN RIGHT OF THE

PROVINCE OF BRITISH COLUMBIA

 

DEFENDANTS

 

 

REASONS FOR JUDGMENT

 

OF THE

 

HONOURABLE MR. JUSTICE MACAULAY

 

 

Counsel for the Plaintiff:

P. Guy

Counsel for the Defendant:

  Attorney General of Canada

A.D. Louie and

D.P. Prosser

 

Counsel for the Defendant:

  Her Majesty the Queen in Right of the Province of British Columbia

 

T.H. MacLachlan, Q.C. and

C. Owen

Counsel for the Defendant:

  Canada Mortgage and Housing Corporation

 

J. Sullivan

Date and Place of Hearing:

September 3-6, 2002 and

September 9-13, 2002

 

Victoria, BC

 

[1]            The plaintiff, Ms. Kimpton, owns a residential strata unit in a condominium complex known as the Willows, constructed in Saanich in 1990.  She seeks an order certifying this action as a class proceeding pursuant to sections 2 and 4 of the Class Proceedings Act, R.S.B.C. 1996, c. 50 (the "Act").

[2]            In the action, Ms. Kimpton seeks to raise the question of whether the defendants, the Attorney General of Canada ("Canada") and Her Majesty the Queen in right of the Province of British Columbia (the "Province") were negligent in drafting the National Building Code (the "NBC") and the British Columbia Building Code (the "BCBC”), respectively (collectively, the “codes").  As to the remaining defendant, the Canada Mortgage and Housing Corporation ("CMHC"), Ms. Kimpton raises the question of whether CMHC, by granting mortgage insurance for construction and conventional loans in Canada, made misrepresentations as to the suitability of the NBC.

[3]            I will set out the particular causes of action alleged by Ms. Kimpton when I address what I consider to be a fundamental flaw in her application, namely the failure to plead underlying causes of action as required by s. 4(1)(a) of the Act.  In short, I have concluded that it is plain and obvious that all the causes of action, or claims, as set out in the pleadings, are bound to fail.  It is not the novelty of the claims that prevents them from proceeding; it is because it is plain and obvious that they cannot succeed.  I reach this conclusion in spite of the plaintiff’s attempts to shoehorn them into ordinarily recognizable categories of claim such as negligence, negligent misrepresentation and failure to warn.

[4]            My reasons for denying certification follow.

SECTION 4(1)(A) OF THE ACT

[5]            Section 4 of the Act requires the Court to certify a proceeding as a class proceeding where all of the requirements of the section are met.  Section 4(1)(a) requires that the pleadings disclose a cause of action.

[6]            The threshold is low.  Ms. Kimpton is not required to pass a preliminary merits test.  While some cases have suggested that the plaintiff bears a burden to show a cause of action, that is potentially misleading, as burdens are generally evidentiary in nature.  I prefer to say that the plaintiff must demonstrate on the pleadings, or the pleadings as they might reasonably be amended, that there is a cause of action.  I should only refuse to certify where Ms. Kimpton plainly and obviously cannot succeed.

[7]            I agree with counsel for Ms. Kimpton that the correct approach to the issue is set out in a number of cases, including Hollick v. Toronto (City), [2001] S.C.J. No. 67 (Q.L.) (S.C.C.) at para. 16.  In Endean v. Canadian Red Cross Society (1998), 48 B.C.L.R. (3d) 90 at 92-93, Braidwood J.A. said:

Any challenge by a defendant that a plaintiff has not presented a cause of action as required by s. 4(1)(a) of the Class Proceedings Act is, in essence, an application under R. 19(24) of the British Columbia Rules of Court that the pleading discloses no reasonable cause of action.

 

The test for determining such an issue in this Court is clearly expressed in the case of Hunt v. T & N plc, [1990] 2 S.C.R. 959, 49 B.C.L.R. (2d) 273 (S.C.C.), at 980 [S.C.R.], where Wilson J., writing for the Court, set out the test as follows:

 

            Thus, the test in Canada governing the application of provisions like R. 19(24)(a) of the British Columbia Rules of Court is the same as in one that governs an application under R.S.C.O. 18, r. 19:  assuming that the facts as stated in the Statement of Claim can be proved, is it "plain and obvious” that the plaintiff’s statement of claim discloses no reasonable cause of action?  As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should not be “driven from the judgement seat".  Neither the length and complexity of the issues, the novelty of the cause of the action, nor the potential for the defendant to present a strong defence, should prevent the plaintiff from proceeding with his or her case.  Only if the action is certain to fail because it contains a radical defect ranking with the others listed in Rule 19(24) of the British Columbia Rules of Court, should the relevant provisions of the Plaintiff’s Statement of Claim be struck out under Rule 19(24)(a).

 

      The question to be decided, then, is whether it is "plain and obvious" that the plaintiff’s statement of claim discloses no reasonable cause of action.  Is there some radical defect which would amount to an abuse of process of the court such that the claim should be struck?  The fact that the point is a novel one would not prevent the issue proceeding to trial.

 

At this stage, I have followed the same practice as I did in Collette v. Great Pacific Management Co., [2001] B.C.J. No. 253 (Q.L.)(S.C.) at paras. 52, 57 and 59, of reading the statement of claim as generously as possible with a view to accommodating any inadequacies due solely to drafting deficiencies.

[8]            The Province argued, in part, that the test under s. 4(1)(a) is not predicated on the assumption that the pleadings may be amended.  I disagree.  I am not aware of any authority to support a more restrictive approach than traditionally taken when analysing pleadings under Rule 19(24).

[9]            While the threshold is low, it does not follow that it is sufficient for the plaintiff to merely label her claim as one in negligence.  While not in the context of a class proceeding, the comments of Taylor J.A. in Kripps v. Touche Ross & Co. (1992), 69 B.C.L.R. (2d) 62 (C.A.) at para. 86, regarding the Court's role in a Rule 19(24) application, are instructive:

A court may be tempted, at the present point in the development of the Canadian law of negligence, to permit every negligence claim to proceed to trial.  But that would lead to a long and costly period of uncertainty, one particularly costly in the commercial world where certainty in the law is of considerable importance.  It seems to me that the courts would fail in their duty to community were they to decline to exercise jurisdiction under R. 19(24) simply because of the current state of the jurisprudence in this area of the law.  It is, I think, important in some cases that the court make a decision at this stage concerning the extent to which recovery in negligence can be enlarged, and I believe this to be such a case.

 

Those principles are equally applicable to the s. 4(1)(a) analysis.

[10]        As pointed out by the Province, and as set out below, there is a growing body of judicial authority for refusing to certify proceedings as class proceedings on the basis that the plaintiff has failed to demonstrate that a cause of action is set out in the pleadings before the Court:

Cooper v. Hobart, [2001] S.C.J. No. 76 (Q.L.);

Halvorson v. British Columbia (Medical Services Commission) (2001), 88 B.C.L.R. (3d) 319 (S.C.);

Price v. British Columbia, [2001] B.C.J. No. 2284 (Q.L.) (S.C.); and

F.G.M. Holdings Ltd. v. British Columbia (Workers’ Compensation Board) (2000), 79 B.C.L.R. (3d) 271 (S.C.).

THE PLEADINGS

[11]        In this section of my reasons, I set out the relevant paragraphs in the statement of claim as they relate to the causes of action against each defendant:

Against The Province:

9.    At material times the Province, through the Ministry of Municipal Affairs, Building Standards Branch, exercised its statutory discretion pursuant to the Municipal Act and established a Provincial Building Code for British Columbia ("the BC Building Code").  The Province did so by adopting the NBC with the amendments that the Province considered necessary.

 

10.   The Province holds itself out as having the necessary skill, qualification and competence to create the BC Building Code to establish minimum standards for the construction of buildings suitable for the different climactic areas and conditions in British Columbia and that would ensure that buildings constructed in accordance with those provisions would have and maintain structural sufficiency, quality, durability, and safety with respect to the health of occupants for the reasonable lifetime of the building.

 

11.   In and after 1985, the Province established BC Building Codes to set minimum provisions respecting standards for the construction of buildings suitable for the different climactic areas and conditions in British Columbia, and to ensure that buildings constructed in accordance with those provisions would have and maintain structural sufficiency, quality, durability and safety with respect to the health of occupants for the reasonable lifetime of the building.

 

12.   The Municipal Act, R.S. [sic] 1979, c. 290, as amended from time to time, provided that the BC Building Code applied to all Municipalities in British Columbia and had the same force and effect as a validly enacted bylaw of a Municipality.  Municipalities in British Columbia were required to, and did, enforce the minimum provisions contained in the B.C. Building Code.

 

...

 

31.   The Province was in a relationship of sufficient proximity to the Plaintiff Class that it owed them a statutory duty and a duty to take care to ensure that the BC Building Code was suitable for use in all climactic areas of British Columbia, and to warn if it was not.

 

32.   The Province also owed the Plaintiff Class a duty to warn if changes in the BC Building Code necessitated changes in common construction practices and that Buildings built in accordance with the BC Building Code would not have structural sufficiency, quality and durability for a reasonable lifetime and/or safety with respect to the health of occupants if practices used in construction of Buildings were not changed.

 

33.   The Province owed the Plaintiff Class the statutory duty, and a duty of care to ensure that the minimum requirements of the NBC would be such that all Buildings constructed in accordance with the BC Building Code would have and maintain structural sufficiency, quality and durability for a reasonable lifetime, and that they would also have and maintain safety with respect to the health of occupants, and to warn if they would not.

 

34.   The Province represented to the Plaintiff Class that a Building constructed in accordance with the BC Building Code would have and maintain structural sufficiency, quality and durability for [sic] reasonable lifetime, and that the Building would have and maintain safety with respect to the health of occupants.

 

35.   The Province owed the Plaintiff Class a duty to take care in the making of the said representations.

 

36.   The Province knew or ought to have known that the Plaintiff Class would rely and did rely on its representations and would thereby be induced to purchase Buildings.

 

37.   Acting on the faith of the said representations of the Province and induced thereby, members of the Plaintiff Class purchased Buildings.

 

38.   In breach of its duty, the Province was guilty of negligence in making the said representations, and failing to warn, thereby causing the Plaintiff Class loss and damage.

 

39.   In breach of all of its said duties, the Province was guilty of negligence in establishing the BC Building Code and implementing it in British Columbia.  It was unsuitable for use in British Columbia and did not anticipate or provide a remedy for the likely entrapment or condensation of water in exterior walls and/or the problems that result.

 

40.   In further breach of its duties, the Province failed to warn that changes to the BC Building Code, in or after 1985, required changes in construction practices and failed to warn that Buildings constructed in accordance with the BC Building Code thereafter would not maintain structural sufficiency, quality, durability or safety with respect to the health of occupants for the reasonable lifetime of the Building.

 

41.   Buildings were not suitable for use in British Columbia.  They developed problems resulting from the entrapment or condensation of water vapour in exterior walls and did not maintain structural sufficiency, quality, durability, or safety with respect to the health of occupants for a reasonable time.

 

42.   The said problems that developed in exterior walls have required changes in construction practices and both the problems and required changes were reasonably foreseeable as the result of amendments to the BC Building Code in or after 1985 and maintained thereafter.

 

43.   Particulars of the negligence of the Province include:

 

      a)    failing to ensure that after 1985, the BC Building Code was suitable for use throughout British Columbia, and failing to warn that it was not and/or that it required changes in construction practices, and

 

      b)    failing to ensure that all Buildings would maintain structural sufficiency, quality, durability and safety with respect to the health of occupants for a reasonable time, and

 

      c)    failing to ensure that changes to the NBC relating to reduction of vapour diffusion and increased airtightness of Buildings would not, when adopted in British Columbia, lead to a decrease in or failure of structural sufficiency, quality or durability in Buildings, and/or the loss of safety in respect to the health of occupants, and

 

      d)    failing to acknowledge or investigate experience in other jurisdictions, scientific knowledge, opinions and advice of members of the Building Standards Branch and/or others that warned against the adoption in British Columbia of the provisions of the NBC that related to reduction of vapour diffusion, and increased insulation and airtightness of Buildings, and

 

      e)    failing to amend the NBC as adopted in British Columbia so that the provisions therein that related to reduction of vapour diffusion and increased insulation and airtightness of Buildings would not cause a decrease in or failure of structural sufficiency, quality and durability in Buildings, and/or the loss of safety in respect to the health of occupants, and

 

      f)    failing to ensure that the BC Building Code adequately dealt with problems that would result from condensation or entrapment of water vapour in exterior walls, and

 

      g)    failure to warn that Buildings would suffer premature depreciation, obsolescence and failure, and

 

      h)    failure to warn that after the said amendments to the BC Building Code, Buildings would henceforth be intolerant of moisture within exterior walls, while previously exterior walls had been tolerant of such moisture, and

 

      i)    failure to consider the effect on a Building if water or moisture did leak into or condense in exterior walls that were required by the BC Building Code to be airtight, and to provide a remedy for that potential problem as part of the minimum standards of the BC Building Code, and

 

      j)    failure to warn that common construction practices had to change.

 

Against Canada:

6.    Through the National Research Council ("NRC"), Her Majesty the Queen in Right of Canada is responsible for the creation of the National Building Code for Canada ("NBC").  The NBC is a set of minimum provisions respecting the safety, quality and durability of buildings to protect public health and maintain structural sufficiency.  Her Majesty the Queen in Right of Canada intended that the NBC be adopted as a building code by all jurisdictional authorities in Canada, without amendment.

 

7.    The NRC holds itself out as having the necessary skill, qualification and competence to fulfill its responsibility to create the NBC so that it would be suitable for adoption as a building code by any authority in Canada.

 

8.    Pursuant to its said responsibility, the NRC created, copyrighted and published the NBC from time to time.

 

...

 

13.   Her Majesty the Queen in Right of Canada was in a relationship of sufficient proximity to the Plaintiff Class that it owed them a duty of care to ensure that all of the provisions of the NBC, if adopted, were suitable for use in British Columbia, and/or to warn if they were not.

 

14.   Her Majesty the Queen in Right of Canada also owed the Plaintiff Class a duty to warn if changes in the NBC necessitated changes in common construction practices, and/or if buildings built in accordance with the NBC would not have structural sufficiency, quality and durability for a reasonable lifetime, and/or if those Buildings would not have safety with respect to the health of occupants if the practices used in construction of Buildings were not changed.

 

15.   Her Majesty the Queen in Right of Canada owned the Plaintiff Class a duty of care to ensure that the minimum requirements of the NBC would be such that all Buildings constructed in accordance with the NBC in British Columbia would have and maintain structural sufficiency, quality and durability for a reasonable lifetime, and that such Buildings would have and maintain safety with respect to the health of occupants, and to warn if they would not.

 

16.   By creating the NBC and holding it out as suitable for use in all parts of Canada, Her Majesty the Queen in Right of Canada represented to the Plaintiff Class that a Building would have and maintain structural sufficiency, quality and durability for a reasonable lifetime, and that it would also have and maintain safety with respect to the health of occupants.

 

17.   Her Majesty the Queen in Right of Canada owed the Plaintiff Class a duty to take care in the making of its said representations.

 

18.   Her Majesty the Queen in Right of Canada knew or ought to have known that the Plaintiff Class would rely on its said representation and would thereby be induced to purchase Buildings.

 

19.   Acting on the faith of the said representations of Her Majesty the Queen in Right of Canada, and induced thereby, members of the Plaintiff Class purchased Buildings that were constructed, and that were required to be constructed, in accordance with the NBC.

 

20.   In breach of its said duties, Her Majesty the Queen in Right of Canada was guilty of negligence in making its said representations and in failing to warn, thereby causing the Plaintiffs loss and damage.

 

21.   Further and in the alternative, in breach of all of its duties, Her Majesty the Queen in Right of Canada was guilty of negligence in writing, publishing and holding the NBC out as suitable for adoption in all parts of Canada.  The NBC did not anticipate or provide a remedy for the likely entrapment or condensation of water in exterior walls constructed in accordance with the NBC and/or the resulting problems.

 

22.   In further breach of its duties, Her Majesty the Queen in Right of Canada failed to warn that changes to the NBC in about 1985 required changes in construction practices and failed to warn that buildings built in accordance with the NBC thereafter would not maintain structural sufficiency, quality or durability, or safety with respect to the health of occupants for a reasonable lifetime of the Building.

 

23.   Buildings were not suitable for use in British Columbia.  They developed problems resulting from the entrapment or condensation of water in exterior walls and did not maintain structural sufficiency, quality, durability, or safety with respect to the health of occupants for a reasonable time, thereby causing the Plaintiff Class loss and damage.

 

24.   The said problems that developed in exterior walls have required changes in construction practices and both those problems and the required changes were reasonably foreseeable as the result of amendments to the NBC made in or about 1985, and maintained thereafter.

 

25.   Particulars of the negligence of Her Majesty the Queen in Right of Canada include:

 

      a)    failing to ensure that after 1985, the NBC was suitable for adoption in all parts of British Columbia, and failing to warn that it was not, and/or that the NBC required changes in construction practices, and

 

      b)    failing to ensure that Buildings would maintain structural sufficiency, quality, durability and safety with respect to the health of occupants for a reasonable lifetime, and

 

      c)    failing to ensure that changes to the NBC relating to reduction of vapour diffusion and increased airtightness of Buildings would not, if adopted in British Columbia, lead to a decrease in, or failure of, structural sufficiency, quality and durability in Buildings, and/or the failure of safety in respect to the health of occupants, and

 

      d)    failing to obtain or investigate or adequately investigate experience in other jurisdictions, scientific knowledge, opinions or advice of members of the NRC and/or Building Standards Branch, and/or others, that warned against the adoption in British Columbia of the NBC that related to reduction of vapour diffusion and increased insulation and airtightness of Buildings, and

 

      e)    failing to recommend that the NBC as adopted in British Columbia should be amended so that the provisions therein that related to reduction of vapour diffusion and increased insulation and airtightness of Buildings would not cause a decrease in or failure of structural sufficiency, quality or durability of Buildings and/or the failure of safety in respect to the health of occupants, and

 

      f)    failing to ensure that the NBC adequately dealt with problems that would result from condensation or entrapment of water in exterior walls of Buildings, and

 

      g)    failure to warn that Buildings built in accordance with the NBC would suffer premature depreciation, obsolescence and failure, and

 

      h)    failure to warn that after the said amendments to the NBC, Buildings would henceforth be intolerant of moisture within exterior walls, while exterior walls previously had been tolerant of such moisture, and

 

      i)    failure to consider the effect on a Building if water or moisture did leak into or condense in exterior walls that the NBC required to be airtight, and to provide a remedy for that problem as part of the minimum standards of the NBC, and

 

      j)    failure to warn that common construction practices had to change.

 

Against CMHC:

26.   For a fee, CMHC acts as an insurer of construction and conventional mortgage loans made in Canada.

 

27.   CMHC requires that any new property against which a mortgage insured by CMHC is to be registered must be built in accordance with the NBC.  At times material to this action CMHC approved plans for Buildings prior to construction commencing.

 

28.   By its requirements and by implication CMHC represented that a Building would have and maintain structural sufficiency, quality and durability for a reasonable lifetime and/or the term of the insured mortgage, and that it would also have and maintain safety with respect to the health of occupants.

 

29.   CMHC was in a position of sufficient proximity to members of the Plaintiff Class that it owed them a duty to take care in making the said representation.

 

30.   CMHC was negligent in making the said representation in that Buildings for which CMHC granted mortgage insurance did not maintain structural sufficiency, quality or durability for a reasonable lifetime or the term of the insured mortgage, nor did those Buildings maintain safety with respect to the health of occupants, thereby causing the Plaintiffs loss and damage.

 

In paragraph 44 of the statement of claim, it is alleged as against all defendants:

44.   By reason of the said breaches of duties of care and statutory duties and by reason of the said negligent misrepresentations members of the Plaintiff Class have suffered loss and damage, including:

 

      a)    the cost of repairs to their Building, and

 

      b)    the cost of alternative accommodation, and

 

      c)    diminution in the value of their Building, and

 

      d)    loss of use and enjoyment of their Building, and

 

      e)    further and other loss and damage as shall be advised.

 

DUTY OF CARE

[12]        Ms. Kimpton contends that her pleadings disclose causes of action in negligence, breach of duty to warn and negligent misrepresentation.  In law, each of those causes of action requires proof that the particular defendant owed a duty of care to the plaintiff that was breached.  Accordingly, the underlying issue in each instance is whether the particular defendant owed a duty of care to Ms. Kimpton.  If no duty was owed, the particular claim is bound to fail.

[13]        Ms. Kimpton also suggests, albeit not forcibly, that whether a duty of care exists is, itself, a triable issue that might be certified as a common issue in a class proceeding.  A similar approach was urged on the court at the certification hearing in Campbell v. Flexwatt Corp. (1996), 25 B.C.L.R. (3d) 329 (S.C.), a case decided very early in the history of class proceedings in this province.  That approach, however, does not sufficiently take into account the passage from Kripps set out above.

[14]        Kripps makes it clear that a court is not bound to refuse relief under Rule 19(24) simply because the relevant area of the common law is uncertain.  As set out at para. 9 of the decision:

It would be wrong that those against whom action is brought in an area of law which happens to be in an active state of development should for that reason alone be required to bear the cost of inquiry into the facts before the court will decide whether the claim is one which calls for an answer.

 

I turn now to the analytical framework for determining whether a duty of care exists.

 (More)

Le Soleil Hotel (Vancouver): Ang v. Spectra Management Services et al., 2002 BCSC 1544

Citation:

Ang v. Spectra Management Services et al.

Date:

20021105


2002 BCSC 1544

Docket:

L022102

Registry: Vancouver

IN THE SUPREME COURT OF BRITISH COLUMBIA

BETWEEN:

SIM WEE BETTY ANG

PETITIONER

AND:

SPECTRA MANAGEMENT SERVICES LTD.,

THE OWNERS, STRATA PLAN LMS3837,

521006 B.C. LTD., SUNBELT HOTEL MANAGEMENT SERVICES LTD.,

347518 B.C. LTD., AND LE SOLEIL HOTEL & SUITES LTD.

RESPONDENTS

REASONS FOR JUDGMENT

OF THE

HONOURABLE MR. JUSTICE LOWRY

Counsel for the Petitioner:

H.M. Ferris

P.J. Roberts

Counsel for the Respondent, Spectra Management Services Ltd. and 521006 B.C. Ltd.:

J.L. Williams

Counsel for the Respondent, The Owners, Strata Plan LMS3837:

F.E. Verhoeven

E.L. Bosma

Counsel for the Respondents, Sunbelt Hotel Management Services Ltd. and Le Soleil Hotel & Suites Ltd.:

R.J. Sewell, Q.C.

S.A. Griffin

Counsel for the Respondent, 347518 B.C. Ltd.:

M.D. Andrews

K.E. Siddall

Counsel for the Executive Inn Inc.:

D.C. Harbottle

G. Bryant

Dates and Place of Trial:

Oct. 2%u20144, 16%u201417, 2002


Vancouver, BC

[1] The Sheraton Suites Le Soleil Hotel opened in downtown Vancouver in 1999. It is a strata lot development consisting of 127 units that were offered for sale and lease back to the developer, American Corporate Suites (Canada) Inc. (%u201CACS%u201D), for 20 years to facilitate the operation of a boutique, condominium corporate suites hotel. In less than three years, ACS was rendered bankrupt and the trustee disclaimed all interest in the unit leases such that they terminated. The hotel continues to operate, but the commercial crisis that resulted has given rise to the commencement of a variety of litigious proceedings. There is dissension among the owners of the units as to how best to protect their interests. A large number of them, acting as a group, and at least two third parties have been attempting to take over the operation of the hotel.

[2] This proceeding is brought by one of the owners to challenge the validity of two leases of common property, the control of which is pivotal to the operation of the hotel. The leases are for terms of 20 and 21 years and they survive the termination of the unit leases. They are now held by a third party. It is a challenge that is based on what is said to have been a breach of a fiduciary duty ACS owed to the individuals to which it sold the units. The contention is that ACS preferred its interests over that of the owners by wrongly arranging to hold, directly or through a related company, leases of first, the parkade (the %u201CParking Lease%u201D) and second, all other common property including the lobby, hallways, elevators, loading areas, and common washrooms (the %u201CLobby Lease%u201D) that are at odds with provisions of the Disclosure Statement ACS was, by statute, required to publish to prospective owners and upon which the owners were entitled to rely in assessing the investment they made when they purchased their units.

[3] I begin by outlining the background to the proceeding and the issues to which it gives rise.

The Proceeding

[4] Sim Wee Betty Ang (referred to as %u201CMs. Ang%u201D) applies pursuant to s. 164(1) of the Strata Property Act, S.B.C. 1998, c. 43 (the %u201CAct%u201D), to have the two leases declared void. ACS executed a General Security Agreement in 1997 and the leases, together with an assignment of the GSA, were sold by the secured creditor to Sunbelt Hotel Services Management Ltd., or to its related company, 347518 B.C. Ltd (together %u201CSunbelt%u201D). The sale put Sunbelt in a position to operate the hotel subject to negotiating new unit lease agreements with the owners. Thus far, that has proven difficult. Sunbelt currently operates the hotel through Le Soleil Hotel & Suites Ltd. pursuant to an interim court order, made by consent, under which the owners are entitled to receive a specified amount of rent for the use of their units.

[5] The two leases are encumbrances of the common property that ACS caused to be executed after the agreements for the purchase and sale of the units were made but before any were completed. They provide for only nominal rent ($10.00). A strata corporation, being the Owners, Strata Plan LMS3837 (the %u201CStrata Corporation%u201D), was created by operation of statute on March 12, 1999, when the strata plan was filed in the Land Title Office. The first unit sale was completed April 9th. The Parking Lease was executed on March 10th and registered against the title to the common property just before the strata plan was filed. ACS leased the parkade to a related company, 521006 B.C. Ltd., which then granted a licence for its use to ACS. The Lobby Lease was executed on March 30th after the plan was filed but during the period when ACS was the only unit owner. The lease was never registered. The strata corporation leased the lobby, hallways, and elevators to ACS. It may then have assigned the lease to another related company, Spectre Management Services Ltd., but that remains unclear. ACS caused the Strata Corporation to pass a unanimous special resolution authorizing the two leases on March 30th.

[6] Ms. Ang is associated with the group of the owners that seeks to take over the operation of the hotel. It is referred to as the Le Soleil Owners Group (%u201CLSOG%u201D). When the two leases were offered for sale following the bankruptcy of ACS, the sale was undertaken by a receiver%u2019s closed-bid auction. LSOG (acting through an agent, Executive Inn Inc.) bid against Sunbelt and others in an effort to acquire the leases. Its bid was $30,000 too low but the owners%u2019 involvement probably had some effect on what Sunbelt considered it had to bid for the leases. It bid, and then paid, over one and a half million dollars. Having failed in that attempt to obtain control of the common property, LSOG then tried to purchase the leases from Sunbelt, but they were unable to come to terms. Now, LSOG has apparently chosen Ms. Ang to challenge the validity of the leases in a further attempt to gain control of the common property and the operation of the hotel. Thus, where Ms. Ang was part of a group that was prepared to pay a substantial sum for the leases, and further, likely influenced the bidding for them, she now takes the position that they are void and of no value. She says that Sunbelt acquired nothing.

[7] Section 164(1) of the Act provides:

On application of an owner or tenant, the Supreme Court may make any interim or final order it considers necessary to prevent or remedy a significantly unfair

(a) action or threatened action by, or decision of, the strata corporation, including the council, in relation to the owner or tenant, %u2026

[8] Ms. Ang claims that she has been subjected to significant unfair action by the Strata Corporation in respect of the leasing of the common property. She maintains that ACS bore a fiduciary duty, both before and after the filing of a strata plan, to act, in all respects, in the best interests of the owners, citing decisions where it is said such a duty on the part of condominium developers has been recognized: Hill v. Strata Plan N.W. 2477 (1991), 81 D.L.R. (4th) 720 (B.C.C.A.), Strata Plan. 1261 v. 360204 B.C. Ltd., [1995] B.C.J. No. 2761 (S.C.), York Condominium Corp. No. 167 et al v. Newrey Holdings Ltd. et al (1981), 122 D.L.R. (3rd) 280 (Ont. C.A.), and Terrace Corp. (Construction) v. Owners, Condominium Plan 752-1207 (1983), 146 D.L.R. (3d) 324 (Alta. C.A.). Ms. Ang says that the duty was breached in a number of ways in respect of both leases because they were not made for the benefit of the owners but for ACS. She accepts that it would not be open to her to complain if proper disclosure of the arrangement ACS put in place had been given in the Disclosure Statement, but she says that it was not and that the statement was, in fact, misleading. She claims that, on the authority cited, the remedy to which she is entitled under s. 164(1) is an order declaring the two leases to be void.

[9] It is, however, significant that Ms. Ang seeks the relief she does not because of any benefit ACS actually received of which she was deprived, but because the owners, of which she is one, do not have control of the common property and hence of the operation of the hotel - something they did not pay for and, when they purchased their units, did not expect to have.

[10] The hotel is not the customary kind of condominium complex that was to be operated for the benefit of the owners alone. It was a business that ACS was to operate for its own benefit as well. The owners had, at the outset, a choice of whether to lease their units or to occupy them and keep them separate from the hotel operation. Most leased and did so on the basis of receiving a fixed rent from ACS, renewable on five year terms. It was then ACS that bore the business risk. The justification offered for the lease of the common property is that ACS needed a long term lease both to obtain a Sheraton franchise and to secure the substantial investment it had made in enhancing the common property. It is against this background that ACS%u2019s arranging the two leases must be understood. What underlies Ms. Ang%u2019s application is the fact that ACS did not structure them so that they would not survive its own bankruptcy.

[11] The application is opposed by Sunbelt and by its related companies. The Strata Corporation appears, but takes no position on the application. The other parties named in the petition are companies related to ACS. They also take no position.

The Issues

[12] Sunbelt opposes the application on various grounds that raise a range of issues. Broadly, they include: whether the Parking Lease was an action of the Strata Council which permits s. 164(1) of the Act to be invoked in respect of that lease at all; what the scope of the developer%u2019s fiduciary duty was; whether, having regard for the Disclosure Statement, any breach of the duty ACS owed the owners caused any significant unfairness to Ms. Ang; and what, if any, remedy is available to her in the particular circumstances that now prevail, specifically whether the leases are void ab initio or merely voidable and whether she is now estopped from taking the position that the leases are void in any event. However, the first issue, which if decided against Ms. Ang is determinative, is whether she has standing under s. 164(1) to make application to have either of the two leases declared void.

[13] Sunbelt says Ms. Ang does not have standing because the rule in Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189 precludes a member of a strata corporation from making the kind of application that Ms. Ang makes in the same way it would if she were a shareholder or member of an incorporated company. Reliance is placed on Watson v. Imperial Financial Services Ltd. (1994), 88 B.C.L.R. (2d) 88 (C.A.) and Lee v. Block Estate (1984), 50 B.C.L.R. 289 (S.C.), where it was held that the rule is not limited in its application to companies, as well as on Beck v. Andrews Realty Ltd. (c.o.b. Re/Max Real Estate Services), [1994] B.C.J. No. 2796, a decision of the Provincial Court holding the rule applicable to strata corporations.

[14] Ms. Ang maintains that the section of the Act under which she applies is worded to give each owner an independent cause of action which extends to proceedings to preserve common property. She says that the Act does not preclude an individual owner from taking such proceedings and that both strata corporation and owner are proper parties to seek remedies in that regard. Support for her position is said to be found in an article by Gerald Ghikas, %u201CThe Strata Corporation as Plaintiff%u201D, (1986) 44 The Advocate 783.

Discussion

[15] Section 2 of the Act constitutes the owners as members of the Strata Corporation which has the power and capacity of a natural person of full capacity. That means it has the power to bring legal proceedings.

[16] The Strata Corporation is, under s. 3 of the Act, responsible for managing and maintaining the common property and assets of the Strata Corporation for the benefit of the owners, and it is authorized to sue as their representative to preserve the common property and assets under s. 171. That section provides:

(1) The strata corporation may sue as representative of all owners, except any who are being sued, about any matter affecting the strata corporation, including any of the following matters: %u2026

(b) the common property or common assets; %u2026

(2) Before the strata corporation sues under this section, the suit must be authorized by a resolution passed by a 3/4 vote at an annual or special general meeting. %u2026

[17] LSOG is apparently unable to muster sufficient support among the owners to obtain the requisite three quarters vote that would authorize the Strata Corporation to make this application. Thus, by having Ms. Ang apply, it seeks to circumvent the governance provisions of the Act and achieve what it cannot achieve through a special meeting of the owners. The question is whether s. 164(1) authorizes an owner to make his or her own application to preserve common property notwithstanding the statutory scheme which vests in the Strata Corporation the responsibility to manage and maintain that property and to sue to preserve it on behalf of all of the owners when authorized by the requisite vote.

[18] The rule in Foss v. Harbottle is among the most firmly entrenched rules of company law. It states that where there is damage to a company, being a distinct legal entity, only the company, and not the shareholders, is the proper party to seek relief. In Watson, supra, at paras. 25-29, the Court of Appeal held that Lee v. Block Estates, supra, correctly decided that the rule applied to limited partnerships. I can see no sound reason why it should not apply to a strata corporation. I am supported in my view by the reasoning employed in what, with respect, is a full consideration of the point well supported by authority in Beck v. Andrews Realty, supra, at paras. 10-27. Little need be added to what is said there.

[19] The article upon which Ms. Ang relies does not argue against the applicability of the rule in Foss v. Harbottle to strata corporations. On p. 786, the learned author does say that the point has not yet been decided and he explains that, unlike the shareholders of a company, the members of a strata corporation are personally liable for its debts in proportion to their unit entitlement. He then, however, expresses the view that the efficient administration of justice will probably be best served by the courts insisting on the strata corporation initiating proceedings subject to the direction of the owners.

[20] The wrong for which Ms. Ang seeks relief is not one that was suffered by her in any personal capacity and she is not a party to either of the leases she seeks to have declared void. If any wrong was committed, it was to the Strata Corporation itself. Ms. Ang is attempting to pursue what is, in effect, a derivative proceeding, something that is not open to her on this application. The rule in Foss v. Harbottle precludes her application as, in my view, it should. Its working is consistent with the statutory scheme that vests the authority to initiate proceedings to preserve common property in the Strata Corporation. No one owner ought to be able to apply to have a lease of such property declared void.

[21] In my view, s. 164(1) does no more than authorize proceedings by an owner to redress the actions of a strata corporation that are significantly unfair to that owner. As Sunbelt suggests, it is not unlike statutory oppression remedies that are available to the shareholders or members of a company.

Conclusion

[22] I conclude, then, that Ms. Ang is without standing to make the application she does. It is neither necessary nor desirable to consider the other issues that are raised now.

Disposition

[23] The application is dismissed with costs.

%u201CP.D. Lowry, J.%u201D
The Honourable Mr. Justice P.D. Lowry