Le Soleil Hotel (Vancouver): Dockside Brewing Co. Ltd. et al. v. The Owners, Strata Plan LMS 3837 et al., 2005 BCSC 1209

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Dockside Brewing Co. Ltd. et al. v. The Owners, Strata Plan LMS 3837 et al.,

 

2005 BCSC 1209

Date: 20050823
Docket: L042671
Registry: Vancouver

Between:

Dockside Brewing Company Ltd. and
Klaus Jurgen Scholz

Petitioners

And

The Owners, Strata Plan LMS 3837,
Patrick A. Williams, Clark, Wilson,
Khoon Wah Alfred Tan, Lam Siat Khevn,
Peck Kiat Chee, Lye Eam Tan,
Tuck Fai Tham, Tan Hui Chuan,
Ah Kow Foo, Toong Jin Lam

Respondents


Before: The Honourable Mr. Justice E.R.A. Edwards

Reasons for Judgment

Counsel for the Petitioners

R. J. Sewell, Q.C.
S. A. Griffin

 

Counsel for all Respondents other than The Owners, Strata Plan LMS 3837, Patrick A. Williams and Clark, Wilson

G. S. Hamilton

Counsel for the Respondent The Owners, Strata Plan LMS 3837

A. M. Murray

Date and Place of Trial/Hearing:

June 15, 2005

 

Vancouver, B.C.

[1] The petitioners apply under Rule 18A for the following relief:

(a) a Declaration that the Strata Councils elected on May 13, 2002 and February 27, 2003 have acted in a manner which is significantly unfair to the Petitioners by using monies from the operating funds of the Strata Corporation to pay nonrecurring expenses in the form of legal fees to the law firms Miller Thomson; Edwards, Kenny & Bray; Clark, Wilson and other law firms in respect of legal proceedings contrary to the wishes and interest of the Petitioners without obtaining a 3/4 resolution of the members of the Strata Corporation at an Annual General Meeting or Special General Meeting as required by the Strata Property Act (the %u201CSPA%u201D);

(b) An Order that the Respondents Khoon Wah Alfred Tan, Lam Siat Khevn, Peck Kiat Chee, Lye Eam Tan, Tuck Fai Tham, Tan Hui Chuan, Ah Kow Foo and Toon Jin Lam, being members who controlled a majority of the 2002 and 2003 Strata Councils (collectively the %u201CRespondent Strata Council Members%u201D) who approved the payment of legal fees to Miller, Thomson and Edwards, Kenny & Bray or Clark, Wilson, be required to indemnify the Strata Corporation for any such amounts paid pursuant to Section 33 of the SPA;

(c) In the alternative, that only those owners of strata lots in the Strata Corporation who are members of the Le Soleil Owner%u2019s Group (%u201CLSOG%u201D) be responsible for the payment of such legal fees and that all other owners be exempted from responsibility for payment of such legal fees.

[2] Counsel for The Owners Strata Plan LSM 3837 provided a letter to the Court referring to a resolution of the owners approved at the January 31, 2005 Annual General Meeting of the Strata Corporation that: %u201Cthe owners support the complaint lodged by the petitioners %u2026 in SCBC Action Number L042671%u201D, as a result of which the letter states %u201Cthe Strata Corporation does not intend to take a position in the above noted action%u201D.

[3] No relief was sought against the respondents Patrick A. Williams and Clark, Wilson, who were not represented at the hearing.

[4] Mr. Hamilton, on behalf of those respondents he represents (%u201Cthe Respondent Strata Council Members%u201D), consented to an order

directing and declaring that the following owners may vote on all resolutions presented at the special general meeting initiated by certain owners pursuant to s. 43 of the SPA.

682649 B.C. Ltd.;

Golden Alley Enterprises Canada Ltd.;

D.T.H. Holdings Ltd.;

All Stars Motor Inn Ltd.;

Interval Resorts Ltd.;

Bahram & Virag Maria Dabiri;

Ting Fei Ho;

Diamond Karim;

Diamond Tajdin Hassanali;

Sarosh Dastoor;

Farid Faraz; and

Klaus J. Scholz.

[5] In light of that consent and the position stated by Ms. Murray on behalf of the owners, I grant that order.

[6] The underlying dispute is between two factions of strata lot owners in a hotel, %u201CLe Soleil%u201D.

[7] The developer of the project and initial hotel operator, American Corporate Suites Ltd. (%u201CACS%u201D) got into financial difficulty.

[8] One faction, the Le Soleil Owners Group (%u201CLSOG%u201D) was formed when ACS was unable to meet its financial obligations to the original investors, including members of the LSOG. The LSOG embarked on a strategy to take over the operation of the hotel.

[9] The second faction, including the petitioners, opposed the LSOG strategy which included a legal challenge of leases of part of the Strata Corporation%u2019s common property.

[10] While ACS, as developer, controlled the Strata Council, the Strata Corporation entered into two leases with ACS. For a nominal $10, the Strata Corporation leased the lobby and parking areas of the hotel to ACS and accepted responsibility for their maintenance for twenty years.

[11] The LSOG%u2019s plan was to bankrupt ACS and enter into a new management agreement with Executive Inn Inc. (%u201CExecutive%u201D). However, a secured creditor put ACS%u2019s assets up for sale by sealed bid. ACS%u2019s main assets were the two leases which were essential to running the hotel. The LSOG authorized Executive to bid $1.5 million, but it was outbid by Sunbelt Hotel Management Services Ltd. (%u201CSunbelt%u201D).

[12] The LSOG then pursued a strategy of attempting to have the leases set aside on the basis they were entered into by ACS, as developer, in breach of fiduciary duty.

[13] To do so, the LSOG first took control of the Strata Council by electing its members to all but one of the council seats. The LSOG dominated Strata Council then approved an operating budget which included legal fees to challenge the leases. Finally, the LSOG would instigate litigation to challenge the leases by having the Strata Corporation give notice to Sunbelt terminating the leases and by having the LSOG sue the Strata Corporation.

[14] Section 171 of the SPA 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

[15] Section 173.1 of the SPA addresses the failure of a strata corporation to obtain the 3/4 authorization required under s. 171(2). It provides that such failure does not constitute %u201Ca defence%u201D to any suit or arbitration which requires 3/4 authorization, nor %u201Can objection%u201D by a defendant to %u201Cthe capacity of a strata corporation to commence or continue any suit or arbitration%u201D not undertaken in accordance with the SPA.

[16] Section 173.1 is retroactive and ensures that any unauthorized suit or arbitration is not defeated by a defendant to such a suit or arbitration for failure of a strata corporation to obtain the required 3/4 authorization. Section 173.1 does not repeal or supplant s. 171(2), which continues to provide a basis for a strata lot owner to challenge the validity of any resolution %u201Cpassed%u201D with less than a 3/4 approval, or any other action of a strata corporation or strata council, which purports to authorize the commencement of litigation. Section 173.1 does not alter this aspect of the internal management of a strata corporation.

[17] It is the petitioners%u2019 contention that the Respondent Strata Council Members, acting on behalf of the LSOG, through control of the Strata Council, took steps to circumvent s. 171(2) by approving in the Strata Corporation%u2019s operating budget an extraordinary or non-recurring authorization to spend money for legal fees to engage the Strata Corporation in litigation over the validity of the leases, when they knew that the 3/4 approval required by s. 171(2) of the SPA could not be obtained.

[18] The day after the May 13, 2002 Annual General Meeting of the Strata Corporation, the Respondent Strata Council Members were put on express notice by the owners opposed to challenging the leases that such litigation related expenditures were not properly approved, that the Respondent Strata Council Members would be held accountable, and that Miller Thomson was in a conflict of interest acting for the LSOG and the Strata Corporation.

[19] Nevertheless, the Respondent Strata Council Members passed a resolution on May 14, 2002 to retain Miller Thomson and subsequently approved payment of almost $200,000 in legal fees from the operating budget to challenge the leases.

[20] The course followed by the Respondent Strata Council Members to challenge the validity of the leases was based on legal and management advice. Their substantive defence is that they acted in good faith on the basis of that advice.

[21] Part of that advice, contained in an April 11, 2002 memo from the LSOG%u2019s legal counsel, Ms. Ramsay Q.C., was that a resolution under s. 171(2) of the SPA passed by 3/4 of the owners was unnecessary if Sunbelt sued the Strata Corporation. Ms. Ramsay advised that a regular majority of owners could approve a resolution directing the Strata Council to terminate the lobby lease, with the %u201Cseemingly inevitable%u201D result that Sunbelt would respond by suing the Strata Corporation. According to the memo, the funds included in the operating budget could then be used to pay for the anticipated litigation.

[22] Sunbelt did not sue the Strata Corporation, in response to its purported termination of the lease.

[23] At the May 13, 2002 Annual General Meeting eight of nine Strata Council members elected were LSOG members. They are the Respondent Strata Council Members. The ninth, Mr. Louie, represented the commercial section (a restaurant) of the Strata Corporation. He was not a member of the LSOG.

[24] The motion to increase the budget for legal fees from $360 to $100,000 was introduced by Ms. Ramsay, holding a proxy from an owner who was a member of the LSOG. The explanation for the increase was that the money would be spent to %u201Cinvestigate%u201D the enforceability of the leases. The LSOG had already incurred expenses of $19,284.75 for legal advice from Ms. Ramsay on this question.

[25] When the motion was introduced an objection was raised. The minutes recorded:

%u201CAn owner mentioned that they (sic) thought it was unreasonable to add $100,000.00 to the budget for legal fees when ultimately before any legal action was commenced against any parties that a 3/4 Vote Resolution would have to be passed anyway at another General Meeting.

An Owner noted that no notice was given to the owners that such a motion was going to be presented, noted that these items being dealt with in the motion were one-time concerns not part of normal operating expenses and as such should be handled by a 3/4 Vote Resolution %u2013 particularly in view that a great number of suites were already in significant arrears with their fees and raising fees further was not helping to resolve the (arrears) problem.%u201D

[26] The amount was amended to $93,772, to exclude the commercial section. The amended motion passed. The owners of all residential strata lots were assessed contributions accordingly, which they were obliged to pay under the SPA.

[27] The next day the Strata Council met, with Ms. Ramsay in the chair, and passed a resolution retaining her firm, Miller Thomson, on behalf of the Strata Corporation to provide an opinion on the leases. This was done in the face of an objection that Miller Thomson had a conflict of interest with the Strata Corporation.

[28] The Respondent Strata Council Members did not disclose that they also had a conflict of interest. Miller Thomson were the LSOG%u2019s lawyers, so the Strata Corporation, not the LSOG would henceforward be paying Miller Thomson for advice on the lease issue. The LSOG had a second undisclosed conflict of interest. The LSOG had signed a contract with Executive to manage the hotel and was facing a $600,000 claim if it failed to deliver to Executive the leases which Sunbelt had obtained through its successful bid for ACS%u2019s assets.

[29] In June 2002 opponents of the LSOG strategy to challenge the leases applied for an injunction to have Miller Thomson enjoined, on the basis of a conflict of interest, from acting for the Strata Corporation.

[30] Miller Thomson engaged Mr. Affleck Q.C., of Macaulay McColl for an opinion on their alleged conflict of interest. His June 7, 2002, opinion indicates the facts on which he was asked to base his opinion did not disclose that Ms. Ramsay acted for and had advised the LSOG as outlined in paragraphs 12 and 19 above, or that there had been an objection to the inclusion of the $100,000 in the operating budget, as noted in the minutes quoted in paragraph 23 above.

[31] On June 21, 2002, Mr. Justice Davies heard, but was unable to determine, the application. However, he expressed the tentative view that Miller Thomson was %u201Cat professional risk%u201D of acting in conflict.

[32] On June 25, 2002, Mr. Justice Tysoe granted the interim injunction restraining Miller Thomson from acting for the Strata Corporation. On June 27, 2002, Miller Thomson issued its first bill to the Strata Corporation, which was paid.

[33] At a meeting on July 8, 2002, the Strata Council authorized the chair, Mr. Yap, a member of the LSOG, to retain new counsel on behalf of the Strata Corporation and to issue notices of eviction in respect of the leases, consistent with the advice the LSOG had previously received from Ms. Ramsay. Also passed was a resolution that decisions of the Strata Council could be approved by a majority of council by e-mail or fax.

[34] The Respondent Strata Council Members had been put on notice before the meeting that they had a conflict of interest in dealing with these matters. The only member of the Strata Council not a member of the LSOG, Mr. Louie, opposed all three resolutions.

[35] The Respondent Strata Council Members made no disclosure at the meeting of any conflict of interest, nor did they disclose that the LSOG was about to sue the Strata Corporation to challenge the validity of the leases.

[36] On July 11, 2002, the LSOG filed a petition to have the leases set aside (%u201Cthe Betty Ang Petition%u201D). Edwards, Kenny & Bray were retained to act for the Strata Corporation which instructed Mr. Verhoeven as counsel to support Betty Ang%u2019s position that the leases were invalid, which he did in an initial outline to the court.

[37] When the respondents in the Betty Ang Petition challenged Edwards, Kenny & Bray%u2019s authority to act and alleged a conflict of interest, the Respondent Strata Council Members concealed the fact that they were instructing both the petitioner Betty Ang%u2019s counsel Campney and Murphy and Edwards, Kenny & Bray, counsel for the Strata Corporation.

[38] On October 4, 2002, Mr. Justice Lowry ruled that Mr. Verhoeven was not authorized to speak on behalf of the Strata Corporation in the Betty Ang Petition. When the hearing resumed on October 16, 2002, Mr. Verhoeven%u2019s instructions from the Strata Council were to take no position on behalf of the Strata Corporation as to the validity of the leases, understandably in light of Mr. Justice Lowry%u2019s earlier ruling.

[39] The Respondent Strata Council Members%u2019 strategy of budgeting and authorizing use of Strata Corporation funds to pay counsel to support the LSOG%u2019s challenge to the validity of the leases, which the LSOG had commenced through the Betty Ang Petition against the Strata Corporation, was a shambles. Much money had been spent, yet counsel for the Strata Corporation had been precluded from taking a position in support of the Betty Ang Petition.

[40] The Strata Council paid Miller Thomson and Edwards, Kenny & Bray a total of $190,398.99 in legal fess in respect of this litigation. This includes $21,787.09 paid to Macaulay McColl for the opinion on whether Miller Thomson was in a conflict of interest, before Miller Thomson was enjoined from acting.

[41] The $93,700 budget for legal fees approved at the May 13, 2002 Annual General Meeting was not for anticipated %u201Ccommon expenses that usually occur either once a year or more often than once a year%u201D as mandated by s. 92(a) of the SPA. It was to fund litigation the Respondent Strata Counsel Members intended to instigate by purporting to terminate the lobby lease or by having an LSOG member, Betty Ang, sue the Strata Corporation. This litigation they knew did not have the requisite 3/4 approval of owners, so expenditure for it would not receive the 3/4 approval necessary for expenditure from the contingency reserve fund.

[42] Section 97(a) of the SPA provides that a strata corporation must not spend money from the operating fund unless it is consistent with the purposes of the fund set out in s. 92(a). Payment of extraordinary legal fees like litigation expense incurred at the behest of the Strata Council is not such a purpose.

[43] Mr. Tan, a respondent in this case, deposed in an affidavit that because the Strata Corporation was named as a respondent, it was %u201Cforced to incur certain legal costs in relation to the Betty Ang Action%u201D. That is not so. The Respondent Strata Council Members, as LSOG members, chose to incur, planned and budgeted for those legal expenses by the Strata Corporation to advance the LSOG%u2019s strategy to have Executive operate the hotel.

[44] Mr. Tan acknowledged on cross-examination that the Betty Ang Petition was brought on behalf of all 93 LSOG members who paid Ang%u2019s counsel and that he was a member of an LSOG committee instructing that counsel, Campney and Murphy, at the same time he was a member of the Strata Council.

[45] As such Mr. Tan was aware of the impending Betty Ang Petition in advance of it being filed on July 11, 2002, and of the strategy of naming the Strata Corporation as a respondent in the Betty Ang Petition so that Strata Corporation funds could be expended for counsel in that proceeding. The Respondent Strata Council Members instructed Mr. Verhoeven to support Betty Ang. Only after Lowry J. ruled that Mr. Verhoeven was not properly authorized to represent the Strata Corporation did the Strata Council instruct him to take no position.

[46] Mr. Tan acknowledged on cross-examination that he and four other LSOG members, who were also Strata Council members, were instructing counsel for the petitioner Betty Ang and the respondent Strata Corporation simultaneously, although he claimed to be unaware of any conflict of interest.

[47] On November 5, 2002, Lowry J. dismissed the Betty Ang Petition on the basis that only the Strata Corporation could challenge the leases in an action properly constituted and approved pursuant to the SPA, noting at 2002 BCSC 1544, para. 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.

[48] At the February 2003 Annual General Meeting of the Strata Corporation a resolution to approve litigation by the Strata Corporation to challenge the validity of the leases failed to obtain the necessary 3/4 majority.

[49] However, a further $100,000 was included in the operating budget for legal fees, based on the previous budget. On cross-examination, Mr. Tan acknowledged this was included to pay for a possible court challenge of the leases by the Strata Corporation. This despite the defeat of the required resolution approving such litigation.

[50] By June 2004 the LSOG ceased to be a majority of owners, although they still controlled the Strata Council, because there had been no election of Strata Council members at an Annual General Meeting.

[51] No Annual General Meeting was held for almost two years from February 2003 until January 2005.

[52] In June 2004, the Strata Council spent $38,000 to retain Clark, Wilson to commence an action in the name of the Strata Corporation to challenge the leases. The LSOG members on the Strata Council knew they could not get a 3/4 majority of the owners to authorize that action or to approve the expenditure for the litigation. They did not even pass a Strata Council resolution to purportedly authorize the action.

[53] The action was clearly unauthorized and prompted the petitioners to bring the present petition. In January 2005, Mr. Justice Groberman granted an injunction prohibiting the expenditure of Strata Corporation funds on the unauthorized litigation until after the 2005 Annual General Meeting.

[54] The Annual General Meeting was scheduled for January 31, 2005. The Strata Council proposed a budget including legal fees of $150,000 which Mr. Tan acknowledged was for litigation to challenge the leases.

[55] On cross-examination Mr. Tan acknowledged he was aware of the terms of the injunction when he and other LSOG members of the Strata Council passed a resolution by e-mail on January 19, 2005, instructing the property manager to issue a $50,000 cheque to pay Robert King Law Corporation a retainer to proceed with the unauthorized litigation. In light of the injunction granted by Groberman J., the property manager refused to prepare a cheque to give effect to this resolution.

[56] At the January 31, 2005 Annual General Meeting a new Strata Council was elected which instructed counsel to discontinue the unauthorized litigation.

[57] I am satisfied the extensive record filed in support of this application provides, in every excruciating detail, a proper basis for finding all the facts necessary to determine the matter under Rule 18A. I therefore reject the Respondent Strata Council Members%u2019 counsel%u2019s submission that the case is unsuitable for resolution under Rule 18A.

[58] The Respondent Strata Council Members%u2019 next submission is that the petitioners cannot maintain this action because the wrong they allege, expenditure of funds on unauthorized litigation, resulted in a loss not to the petitioners but to the Strata Corporation, as reflected in the relief claimed by the petitioners, which is that the Strata Corporation be repaid by the Respondent Strata Council Members.

[59] There can be no doubt on the facts that the Respondent Strata Council Members, as members of the Strata Council, pursued a strategy to advance the LSOG%u2019s interests by pursuing court challenges to the validity of the leases. They did so with knowledge that the necessary resolution of 3/4 of the owners to authorize the Strata Corporation to embark on litigation could not be obtained.

[60] At the July 8, 2002, meeting of the Strata Council, which authorized Mr. Yap to retain counsel for the Strata Corporation and thereby incur expense on behalf of the Strata Corporation, none of the Respondent Strata Council Members disclosed that the Betty Ang Petition was imminent or that the LSOG had instructed counsel in that case to name the Strata Corporation as a respondent.

[61] The Respondent Strata Council Members successively retained Miller Thomson, Edwards, Kenny & Bray and Clark, Wilson to support the LSOG objective of challenging the leases in court and authorized the expenditure of money from the operating budget for that purpose.

[62] The Respondent Strata Council Members authorized money in the budget for that purpose with the knowledge that the expenditure of money to litigate the validity of the leases did not have the support of 3/4 of the owners. By failing to obtain the necessary resolution under s. 171(2) of the SPA and by approving first the budget for legal fees and then the expenditure, they did the very thing they knew did not have the requisite support of 3/4 of the owners. They deprived the non-LSOG owners of their right to insist that the support of 3/4 of the owners be obtained by resolution before such an expenditure was made.

[63] Sections 32 and 33 of the SPA provide:

32 A council member who has a direct or indirect interest in a contract or transaction with the strata corporation must

(a) disclose fully and promptly to the council the nature and extent of the interest,

(b) abstain from voting on the contract or transaction, and

(c) leave the council meeting

(i) while the contract or transaction is discussed, unless asked by council to be present to provide information, and

(ii) while the council votes on the contract or transaction.

33 (1) If a council member who has an interest in a contract or transaction fails to comply with section 32, the strata corporation or an owner may apply for an order under subsection (3) of this section to a court having jurisdiction unless, after full disclosure of the nature and extent of the council member%u2019s interest in the contract or transaction, the contract or transaction is ratified by a resolution passed by a 3/4 votes at an annual or special general meeting.

(2) For the purposes of the 3/4 vote referred to in subsection (1), a person who has an interest in the contract or transaction is not an eligible voter.

(3) If, on application under subsection (1), the court finds that the contract or transaction was unreasonable or unfair to the strata corporation at the time it was entered into, the court may do one or more of the following:

(a) set aside the contract or transaction if no significant injustice will be caused to third parties;

(b) if the council member has not acted honestly and in good faith, require the council members to compensate the strata corporation or any other person for a loss arising from the contract or transaction, or from the setting aside of the contract or transaction;

(c) require the council member to pay to the strata corporation any profit the council member makes as a consequence of the contract or transaction.

[64] By voting on the numerous resolutions before the Strata Council, on and after May 14, 2002, to give effect to their strategy to engage the Strata Corporation in litigation over validity of the leases, without disclosing their numerous and obvious conflicts of interest in such a %u201Ctransaction%u201D, the Respondent Strata Council Members acted contrary to s. 32 of the SPA. Had they complied with s. 32 and s. 33 of the SPA, the Strata Council resolutions could not have passed and the Strata Corporation would have been spared nearly $200,000 in fruitless expenditure on legal fees.

[65] By failing to comply with s. 32 and s. 33 of the SPA, the Respondent Strata Council Members authorized contracts and transactions which were %u201Cunreasonable and unfair to the Strata Corporation%u201D under s. 33(3) in that they knowingly circumvented the requirement of s. 171(2) and authorized the expenditure of funds from the operating budget which could only have been legally expended with authorization by 3/4 of the strata lot owners.

[66] Considerable sums of the Strata Corporation%u2019s funds were expended on legal fees in a deliberate attempt to advance the LSOG strategy of challenging the leases, with no benefit to the LSOG, let alone to the Strata Corporation.

[67] The Respondent Strata Council Members rely on s. 31 of the SPA in defence of their actions. That section provides:

31 In exercising the powers and performing the duties of the strata corporation, each council member must

(a) act honestly and in good faith with a view to the best interests of the strata corporation, and

(b) exercise the care, diligence and skill of a reasonably prudent person in comparable circumstances.

[68] The Respondent Strata Council Members argue that they acted on the advice of lawyers and a property manager and therefore did so %u201Chonestly and in good faith with a view to the best interests of the strata corporation%u201D. It follows, their counsel argues, that they cannot be liable to repay the Strata Corporation under s. 33(3)(b) of the SPA for the legal fees wasted in pursuing their strategy of litigation to challenge the leases.

[69] Failure to comply with the mandatory disclosure provision of s. 32 of the SPA cannot be characterized as acting %u201Chonestly and in good faith%u201D nor does it reflect the exercise of %u201Cthe care, diligence and skill of a reasonably prudent person in comparable circumstances.%u201D

[70] The Respondent Strata Council Members were not counselled against the strategy they pursued by the lawyers they engaged and were encouraged to pursue it by advice they received. However, the Respondent Strata Council Members were warned time and again by their opponents that they were acting in a conflict of interest and contrary to the provisions of the SPA, yet they never heeded those warnings nor did they seek independent legal advice as to their potential liability as Strata Council members.

[71] The law firm which recommended the LSOG strategy was found in conflict of interest by the court in June 2002, when retained to act for the Strata Corporation. Even then the Respondent Strata Council Members persisted in confusing their own interests as members of the LSOG with those of the Strata Corporation. The LSOG had obtained the initial opinion that the leases were susceptible to challenge from the firm which also provided the LSOG with advice that Strata Corporation funds could be used to pay for litigation challenging the leases without the approval of 3/4 of the owners, by budgeting legal fees as an operating expenditure and having the LSOG%u2019s surrogate Betty Ang sue the Strata Corporation.

[72] Even after the LSOG strategy of supporting the Betty Ang Petition was dashed when Lowry J. ruled that Mr. Verhoeven was unauthorized to represent the Strata Corporation to support the Betty Ang Petition, the Respondent Strata Council Members persisted in their strategy by purporting to retain, instruct and pay counsel to initiate, on behalf of the Strata Corporation, the very action they knew was not supported by a resolution of 3/4 of the ow

Case studies, Pendrell Place: False advertising

COLCO: Coalition of Leaky Condo Owners
www.myleakycondo.com


August 19, 2005

TO:
Phillip P. Ong
Sutton Group-West Coast Realty
Real Estate Council of B.C.
Strataco Management Ltd.
Strata Council, Strata Plan VR 1008

Re: 403-1819 Pendrell Street, MLS V549644
Leaky Rotten Condo Complex: Pendrell Place


This will confirm that we contacted Mr. Ong last evening shortly after learning that the above noted property was listed “For Sale”.

We informed Mr. Ong that his representation of the property as “Building envelope renovation completed.” was wrong in fact, misleading and deceiving.

Mr. Ong replied that “he had the minutes” which say that the repairs are completed.

After a short discussion, Mr. Ong agreed that the statement should be removed from the listing information and promised to do so.

See my letter to Richard B. Oldaker dated August 17, 2005.

James Balderson, Ph.D., Q.S.
www.myleakycondo.com
JamesBalderson@myleakycondo.com

Case Studies, Pendrell Place: Continuing mystery; lines of inquiry

This letter was sent by Dr. James Balderson to Mr. Richard Oldaker and copied to other owners and interested parties of Pendrell Place. In it, Dr. Balderson discusses areas of concern with respect to the issue of Mr. Oldaker's continuing struggle to have the building envelope contiguous to his strata lot completely and properly fixed so that repairs to the interior of his unit can be undertaken. These areas of concern involve the recommendations made by Levelton for the remediation of the building envelope, previous work undertaken at Pendrell place without permits, and lastly the money raised for building envelope renovation and repairs.

Also included in this letter is a very brief chronology of the events at Pendrell Place.


COLCO: Coalition of Leaky Condo Owners
www.myleakycondo.com


August 17, 2005

Mr. Richard Oldaker
Owner, Strata Lot 22, Strata Plan VR 1008
1819 Pendrell Street, Vancouver BC Canada

Dear Richard,

Re: Your Leaky Rotten Condo Problems - Pendrell Place, VR 1008, 1819 Pendrell Street

Our investigation continues.

Three additional lines of inquiry have been identified:

The first line of inquiry involves Levelton's recommendations and specifications for the remediation of Pendrell Place due to building envelope failure. We will examine and document Levelton's multiple recommendations and the actual work contracted for and done by Silex with a Building Permit issued by the City of Vancouver in accordance with Levelton's specifications. It appears that the majority (perhaps as many as 12 of 19, the exact numbers yet to be determined) of Levelton's recommendations have not been implemented.

The second line of inquiry involves work done by others (i.e., non-Levelton, non-Silex) without permits. We will examine and document work done involving the common property (exterior and interior); the work done involving private property inside strata lots, i.e., leak-related repairs, renovations, and improvements. Such work may be subject to inspection and removal by the City of Vancouver because the work was done, with or without Strata Corporation approval, without proper building, electrical, and plumbing permits.

The third line of inquiry involves following the money raised for building envelope renovation and repairs. The money was raised by special levy from the owners on the premise that the work would be done in accordance with Provincial and City laws, rules and regulations governing the repair and renovation of leaky rotten condos and that the work would be covered by the mandatory statutory warranty. The Homeowner Protection Office provided financing to a majority of the owners of Pendrell Place on that basis. Our audit of the funds raised and to whom the money was paid will reveal whether the funds were used properly. As far as we know, the HPO does not conduct such audits.

Strata Property Act

Given the requirements of The Strata Property Act (Part 4, Division 2 - Records) we foresee no difficulty in pursuing both lines of inquiry once you authorize access to the Strata Corporation records presently under the care of Strataco Management Ltd., with J.P. Daem as President of Strataco and the Property Manager responsible for Pendrell Place.

Furthermore, the Act provides (Part 6, Division 4 - 2013 Special Levy, s.108 ) that:

 

(4) The strata corporation must
(a) use the money collected for the purpose set out in the resolution, and
(b) inform owners about the expenditure of the money collected.
(5) If the amount collected exceeds that required, or for any other reason is not fully used for the purpose set out in the resolution, the strata corporation must return the money to the owners in amounts proportional to their contributions. [Emphasis added.]

 

 


The Dorgan Judgment

We will assess the results of our inquiries in light of Madam Justice Dorgan's Reasons for Judgment in Richard Bedford Oldaker v. Strata PlanVR1008 (20020913, L0034980).

Justice Dorgan clearly differentiated between common property and private property by recognizing that Pendrell Place is

 

[1] ...comprised of 22 strata units and the common property.
Justice Dorgan ruled to the effect that, regarding damage to your privately owned strata lot due to water ingress because of the failure of the common property building envelope, i.e., leaks, rot and mould, your remedy regarding your Pendrell Place leaky rotten mouldy condo, #504, Strata Lot 22, lies in a claim of negligence and damages. You were and are under an obligation to mitigate the damage inside your strata lot, i.e., the damage to your private property, which, unfortunately, and because of decisions made by others, namely strata council members and the strata corporation, you have been unable to perform because the contiguous building envelope which failed and which is common property, has not been repaired in accordance with the Act, which clearly states:
Repair of property

72 (1) Subject to subsection (2), the strata corporation must repair and maintain common property and common assets.

(2) The strata corporation may, by bylaw, make an owner responsible for the repair and maintenance of
(a) limited common property that the owner has a right to use, or

(b) common property other than limited common property only if identified in the regulations and subject to prescribed restrictions.
(3) The strata corporation may, by bylaw, take responsibility for the repair and maintenance of specified portions of a strata lot.


Catch 22

There being no bylaws at Pendrell Place in accordance with the provisions permitted by s. 72(2) or s. 72(3), you are caught in a Catch 22 situation where the Strata Corporation has not done that which it has a duty to do, as identified by Justice Dorgan, and you are consequently left powerless to do that which you must do to mitigate damages, and could do, if only the strata corporation would do that which it has a duty to do with respect to renovation of the leaky common property.

In 2002, Justice Dorgan made it quite clear that:
[12] ...The strata corporation must collect fees. It has a statutory obligation to look after the common property. In order to do so, it has to have money...
Quite perversely, it seems, decisions and events at Pendrell Place since Justice Dorgan's decision have shown that the Pendrell Place strata corporation and several strata councils have devoted much effort to the collection of money for the purpose of looking after the common property, including attempts to foreclose on your property, while clearly refusing to repair the common property building envelope contiguous to your strata lot.


The Crawford Judgment


We will therefore also assess the results of our investigations in light of 2004 BCSC 63, The Owners, Strata Plan VR1008 v. Oldaker, et al,

http://www.courts.gov.bc.ca/jdb-txt/sc/04/00/2004bcsc0063.htm

where the Honourable Justice R. Crawford stated:

 

 

[36] At the end of the Hearing on October 20, 2003, I indicated that in view of Mr. Oldaker's intention to sell the property, and counsel's [i.e., G. Stephen Hamilton's] advice that the repairs contemplated by the Strata Corporation should be completed in January 2004, my inclination was to allow Mr. Oldaker to perfect his sale, as that at least would eliminate one of his primary on-going concerns.

It now appears that G. Stephen Hamilton's advice to the court in October 2003 was a material error and that the court was thereby seriously misinformed regarding the necessary repairs to the East-wall and other areas contiguous to your strata lot as identified by Levelton Engineering. It seems fair to assume that Mr. G. Stephen Hamilton was, in October 2003, thoroughly familiar with Justice Dorgan's ruling and with the Levelton building envelope reports yet twisted the full and true story for the benefit of certain owners who were content to isolate your strata lot in a state of disrepair and not repairable by you.

We have received no information as of today's date, close to two years later, that indicates the Strata Council and the Strata Corporation are proceeding to facilitate the renovation of the East wall building envelope and thereby the inhabitability and re-occupation of your leaky rotten condo, Suite 504, Strata Lot 22, Strata Plan VR 1008, despite your having paid over $50,000 in good faith that the common property of the Strata Corporation contiguous to your suite would be renovated, thereby allowing you to proceed with the necessary interior repairs in accordance with City of Vancouver Building Permit requirements as confirmed by Mr. Dave Jackson, Chief Building Official, City of Vancouver.

The Continuing Mystery


It remains somewhat mysterious to this writer why the common property building envelope contiguous to your strata lot at Pendrell Place has not been completely and properly repaired.

 

 


A Very Abbreviated Chronology

 

 

 

 (More)

The Odyssey Towers (Surrey): Enefer v. The Owners, Strata Plan LMS 1564, 2005 BCSC 1866

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: Enefer v. The Owners, Strata Plan LMS 1564

2005 BCSC 1866

Date: 20050812
Docket: L051884
Registry: Vancouver

Between:

WILLIAM LAWRENCE ENEFER

Plaintiff

And:

THE OWNERS, STRATA PLAN LMS 1564

Defendants


Before: The Honourable Mr. Justice Taylor

Oral Reasons for Judgment

In Chambers

August 12, 2005

Counsel for Plaintiff

R. Fayerman

Counsel for Respondent Strata Plan

Ms. A. Murray

Counsel for respondent Jerome Collins

O.F. Sutherland

Place of Trial/Hearing:

Vancouver, B.C.

[1] THE COURT: This is an application by an owner in strata plan LMS 1564 for an order in terms as set out in paragraphs (a) to (c) and (f) to (g) of the petition filed the 3rd of August. In essence, the application seeks to authorize the strata council to raise some $850,000 by way of a levy as a part of the funding for a major rehabilitation project.

[2] The strata plan is known by the name Odyssey Towers. It is a leaky condo as that term has come to be applied to many structures in British Columbia. The application is supported by the strata council.

[3] The application is opposed by Jerome Collins who holds a proxy for his wife who owns a unit in the building. Mr. Collins represents a group of owners referred to in the material as the Toth group. It consists of between 30 to 40 percent of the owners.

[4] Mr. Collins with the consent of the petitioner and the strata council was joined as a party at the commencement of the hearing of this application.

[5] It is common ground that the opposition to the resolution to raise $850,000 is founded upon opposition by the Toth group of owners to the employment of another owner Mr. Ed Meril as the owners%u2019 representative in this rehabilitation project.

[6] On the 19th of September, 2004, having in hand a proposal for rehabilitation from an engineering firm, other than that presently engaged, the strata council proposed a special resolution to raise through a levy the sum of $5 million. A 75 percent majority was needed. That resolution passed by a vote of 90 to 3.

[7] As a result of further proposals by another engineering firm, Morrison Hershfield to which I will refer as "MH" that expanded upon the earlier proposal and revised costs, on the 6th of March 2005, a second special resolution was proposed and passed by the owners by a vote of 80 to 3 in favour of that special resolution. That resolution raised a levy of $1.15 million.

[8] The amount so authorized by the owners had been predicated on an as of yet to be completed set of drawings. When they were completed and the tendering process involving a contractor and the number of subtrades followed through, it was evident that the funds raised by the previous two levies were some $650,000 short of that required to complete the rehabilitation once undertaken in addition to a further $200,000 for a new roof for the structure.

[9] Prior to the 19th of September vote in which the $5 million was authorized, despite the 90 to 3 vote, the owners of this building have been divided into various factions in respect to a number of unrelated issues.

[10] Nevertheless, in September and March these two groups were able to coalesce for the overall good of the structure in which they live or have condominiums.

[11] At no time have the owners passed a resolution pursuant to section 27(1) of the Strata Properties Act by which they might have sought to direct or restrict the council in the exercise of its powers or performance of its duties. Such a vote would have been by way of a simple majority.

[12] Following the 19th of September and prior to the 6th of March resolution, the strata corporation through its council entered into contracts with MH on the 14th of January 2005 and a construction manager Heatherbray Restoration Company Ltd. hereafter referred to as Heatherbray, on the 26th of January 2005.

[13] The vote on the 6th of March which predicated on not yet completed drawings. A term of each of these two contracts required the strata corporation to designate an individual who would be the Strata Plan's representative who was to be familiar with the project and would liaise with MH, Heatherbray and the owners as required.

[14] In addition to liaising with the engineers and contractor, the job required the owners%u2019 representative to provide weekly and monthly progress reports, to council, to keep the owners generally informed with respect to progress by way of the preparation of graphs or other information. It also required the holder of this position to approve progress payments for the job which at that point was expected to cost $6.15 million and to maintain records for proposed litigation against the developer as a result of the poor workmanship that resulted in the water problems.

[15] The strata council discussed who would be best suited for this task and concluded that Mr. Meril fitted what they wanted. Recorded in the council minutes of the 24th of March at paragraph 5, a copy of which once approved at the next meeting of the board of directors is then made available to the public, there was a discussion about the need for MH and Heatherbray for a single contact and that the council would prepare a term of reference for such a position. That was prepared and the term of reference document contains some 12 points in terms of what was required of this liaison person.

[16] By April the 20th meeting of the council, the council minutes record that Mr. Meril had been appointed to this liaison position at a salary of $5,000 a month with the duration of the work expected to last 13 months. The minutes recorded Mr. Meril suite and telephone number so that owners might contact him. The same minutes record that the drawings "will be complete 75 percent by April 27th after which Heatherbray will prepare costs within 5 percent of actual costs." These minutes were formally issued after the 20th of May meeting once approved by the board.

[17] A contract for Mr. Meril's services was prepared in accordance with the job description and according to the minutes of the May 20th meeting (released the 2nd of June) it was then that the contract was signed between Mr. Meril and the council. The contract refers to the fact that the contract could be terminated after 14 months on a month's notice. As I pointed out earlier, it was anticipated this project once commenced would take some 13 months.

[18] Counsel for Mr. Collins objected to the way in which Mr. Meril was advised of his selection. Whether or not he was advised by a letter or informally at a birthday party as it appears he was is not relevant. This Strata Corporation is a community of neighbours some of who admittedly do not agree with one another on various issues. It is not some formal corporate monolith. Thus one might expect a certain degree of informality in terms of the way in which some of its affairs are conducted.

[19] Heatherbray then tendered the project. Mr. Keenan of Heatherbray at paragraph 12 of his affidavit says this was in the beginning of June. He generally obtained three bids for each of the subtrades. Upon receipt of these tenders, the costs tendered taking the minimum bids were some $650,000 beyond that authorized by the earlier two resolutions, plus there was the additional $200,000 that had been determined would be the cost of the new roof. As a consequence of this revised cost estimate and the roof costs, the strata council proposed a further special meeting by which a special resolution to raise the additional $850,000 by way of a levy was to be proposed.

[20] At a special general meeting of the 19th of July this resolution proposed a levy of the $850,000. An amendment was proposed at that meeting to reduce the $850,000 by $65,000, an amount that had been contemplated as the cost of Mr. Meril's services as the owners%u2019 representative. Thirty-five voted in favour of the amendment; 58 against. That proposed amendment was defeated as it did not obtain a 75 percent majority.

[21] The vote on the resolution itself as originally proposed was then taken. Fifty-eight voted in favour; 37 were opposed. Because that did not result in a 75 percent majority, it was also defeated.

[22] A third resolution proposed by the so%u2011called Toth group that would have rescinded Mr. Meril's contract was by agreement of the owners in attendance tabled as it had no purpose at that point given the defeat of the $850,000 resolution.

[23] The tenders received have not yet been accepted. They are open for acceptance by the strata corporation through its general contractor Heatherbray up to the 15th of August. On that date, 95 percent of them will lapse.

[24] Mr. Keenan deposes that they will, in his opinion, either be lost entirely because subtrades will move away from this project given the uncertainty of the Odessey Towers rehabilitation project proceeding. Alternatively, he suggests that if retendered, it can be expected that the cost will increase by 10 to 15 percent above current tendered amounts.

[25] Following the defeat of the July resolutions, Mr. Collins then organized a demand under section 43(1) of the Strata Properties Act for a special general meeting for the purpose of considering a special resolution proposed to raise $785,000 and cancel the contract with Mr. Meril. It is not challenged that this demand to the strata council received the requisite 25 percent of the owners%u2019 signatures necessary for such a meeting to occur.

[26] The demand was delivered to a Mr. Alison. Mr. Alison is not a member of the strata council but because of the absence on holidays of the property manager, Mr. Bower, had stood in as chairman of the meeting on the 19th of July. There is no evidence as to when Mr. Alison gave the demand to the strata council.

[27] A Mr. Hadad is the chairman of the board of directors. On July the 28th, Mr. Collins wrote to Mr. Hadad demanding that a special general meeting be held no later than Tuesday, August the 16th. That of course would be a day after the tender had expired. On August the 4th Mr. Collins then wrote a second letter demanding the special general meeting be held on August the 14th. On August the 8th, the council having considered this request then issued a notice of the special general meeting to which was attached the special resolution proposed by Mr. Collins and the owners who had signed the section 43 demand.

[28] Special resolutions require 14 days notice exclusive the day of notice and the day the meeting to every owner. The meeting was then scheduled for the 28th of August. There is no provision in the Strata Property Act for the abridgment of the notice period. On the basis of 14 days plus 2, the earliest that the meeting could have occurred was the 24th of August. Following the issuance of this notice, the strata council solicited proxies in opposition to that resolution.

[29] As Ms. French deposes to at paragraph 13 of her affidavit, the council has acquired 35 of such proxies. There is a potential of 109 votes in the strata plan. To succeed, a special resolution therefore would require 82 votes in favour. If the strata council is provided with no more than the 35 votes that it had as of August the 10th and all the other owners supported the motion, the best that they could muster in support of the resolution would be 74, insufficient to obtain a three%u2011quarters majority.

[30] While one should not with any sense of confidence predict the dynamic of democracy, given the fractious conduct within this strata corporation and the past voting practices, it is reasonable to assume that when put to a vote this resolution would be doomed to failure, and as with the 19th of July meeting, the owners of the strata corporation will again be deadlocked.

[31] Counsel for Mr. Collins argued that scheduling of the August 28th meeting was simply done so as to create a crisis that now exists being that the August 15th date rapidly approaches. The timing, in my view, cannot be said to be contrived. It was simply a consequence of the way in which the section 43 demand was delivered to Mr. Alison who presumably then in turn eventually delivered it to the strata council.

[32] Section 3 of the Strata Properties Act (Act) charges the strata corporation with the responsibility to manage and maintain the common property and assets for the benefit of the owners. Section 72(1) of the Act makes that obligation very specific and furthermore mandatory when it provides as follows: "A strata corporation must repair and maintain common property and assets."

[33] Within the strata corporation there is no issue that the substantial repairs that were proposed by MH are necessary as evidenced by the two votes, for the $5 million one based upon the earlier engineering estimates and the additional $1.5 million based upon MH's recommendations. As I observed earlier both of those votes were almost unanimous as to the need for these repairs.

[34] It is in the fulfillment of its section 3 responsibility, that the council engaged the engineers, the contractor, and propose the three resolutions to undertake this necessary project. In the fulfillment of its responsibilities and duties the strata corporation acts through its council.

[35] The council accordingly engaged MH, and Heather Bray, in anticipation of the funding already approved in September and subsequently approved in March.

[36] It would be the height of irresponsibility knowing that it was short some $650,000 plus the cost of the roof repairs to commit to the tenders received through Heatherbray in the total funding authorized by the first two resolutions but not the third. To do so in my opinion would be a dereliction of its duty by exposing the strata corporation to a liability that exceeded its authorized funding to meet that liability. No responsible party to a contract should enter a contract without knowing that at least at that point it has the ability to fulfill its obligations.

[37] Much of the complaint of the respondent Mr. Collins and those for whom he speaks centres around Mr. Meril. Mr. Collins perceives that the $850,000 resolution somehow included the expenditure of $65,000 with the liaison person to be included in that sum. That is not correct as his cost was part of the earlier approved votes. The $850,000 is derived solely from the increased cost of the tenders and the roof repairs. Nevertheless the $65,000 is included in the overall figures.

[38] However, by reducing the third resolution to $65,000, Mr. Collins seeks to eliminate not only the funding for the position of Mr. Meril but also the contractual obligations by which he would be engaged.

[39] Mr. Collins proposes another person Mr. McKoven [phonetic] be appointed as a liaison person and points to aspects of his background that he says are better for the owners as a whole. In my opinion it is not necessary for this court to assess the relative merits of Mr. McKoven over those of Mr. Meril for to do so would be an interference that essentially would be in a form of judicially imposed interference or restriction under section 27, something that I would not be prepared to do. The Owners have not sought to limit council in this respect and I see no reason for this court to so limit council.

[40] Mr. Collins also complains that he has not seen the contractual arrangements between MH, Heatherbray and Meril, until this petition was filed. Firstly, they have in fact been disclosed by the affidavit of Miss French, but more importantly there is no evidence of any requests being made prior to the commencement of the events following the 19th of July to see them or that the council was at any time obliged to provide owners generally with copies of any subcontracts they proposed to enter into. The council is charged with the obligation and the responsibility of repair and maintenance. It has selected a person it concluded was the appropriate person to perform those tasks as set out in his job description. Those are not tasks lightly undertaken or fulfilled and despite Mr. Collins conversation with Mr. Keenan of Heatherbray. They will amount to considerably more than what was in fact discussed in Mr. Collins affidavit at paragraph 29.

[41] The responsibility of the liaison person goes far beyond what contact Mr. Keenan envisions as a liaison person. That person must also deal with owners, must prepare documentation and information necessary for the propagation of the litigation against the developers, approve progress payments to the contractor and subtrades which will involve a necessary examination of the state of progress from time to time once that progress draws are requested and finally must provide the owners and council with progress information from time to time. These tasks are not insignificant. They will be time consuming and will require much attention on the part of the person who performs them.

[42] The council conclude that a paid position would bring a degree of dedication to the task in a way that a volunteer might initially bring but which may wane over time. That is a decision of the council that it was entitled to make. It is not one which the owners in the absence of any section 27(1) resolution would have any role in.

[43] Having elected their representatives to council, the recourse of the owners who are dissatisfied with the conduct of the council is at the ballot box when directors are next elected assuming that before then there is no significant unfairness in the way in which the council conducts itself towards the owners%u2019 interest. No owners suggest that the engagement of Mr. Meril inflicts some significant unfairness upon them as that term is used in section 164. Indeed his costs amount to less than 1 percent of the total repair costs which including that expense of $65,000 amounts to some $7 million.

[44] Counsel for Mr. Collins argues that under section 98 the council was unauthorized to enter into a contract between the strata corporation and Mr. Meril. With the greatest respect to counsel, section 98 has no applicability here as that section concerns itself with operating budgets or contingency fund expenditures.

[45] Mr. Meril's engagement under the terms of the contract entered into is no different than the contracts of engagement between MH and Heatherbray. It is directly relayed to the overall repair budgeted, including the roof, of almost $7 million of which $6.15 million has been approved.

[46] Absent the approval of the further $650,000 and the $200,000 for the roof, the entire project stands in peril by either not being able to retain those who have tendered so far within the repair budget or to be faced with increases in costs that may range from 10 to 15 percent over that which is budgeted.

[47] The view of those that have tried to tie the approval of the remaining funding necessary for this project to the disengagement with Mr. Meril places them in a position of being ones who know the price of everything and the value of nothing. History has shown that while volunteer work is admirable, where private interests as here are at stake with some 109 units, problems can and do develop when strictly volunteer supervision is relied upon. That was unquestionably a fact which the council took into account in determining that the position should be a paid one.

[48] I now turn to the more immediate question of whether or not this Court should make a declaration sought by the petitioner and supported by the strata council being:

1) Firstly, that the sum of $850,000 in addition to the $6.15 million already approved is required to be paid for the rehabilitation of Odyssey tower. Rehabilitation is recommended by MH.

2) That the strata corporation be directed to proceed with those repairs, and

3) That the strata corporation be authorized to issue a special levy based upon unit entitlement not to exceed the sum of $850,000 in addition to that approved in September and at March.

[49] Section 165 as it applies to this case provides as follows:

On application of an owner, tenant, mortgagee of a strata lot or interested person, the Supreme Court may do one or more of the following:

(a) Order the strata corporation to perform its duties as required to perform under this act, the regulations the bylaws or the rules and as applies here.

(c) Make any other orders it considers necessary to give effect to an order under paragraph (a) or (b).

[50] I have no reservation in concluding that these owners in terms of any special resolution being passed are in a simple deadlock position. Neither faction can raise the requisite three%u2011quarters majority. Clearly the stumbling block is the approach view of the Toth Group towards the Meril contract, something that I have concluded was entirely within the competence of council to conclude. The council was obliged under the terms of the strata corporation's agreement with MH and Heatherbray to appoint such a liaison person and they concluded such a person should also have other duties. The repairs are necessary as is evidenced by the earlier resolutions whatever the reasons for the opposition of Mr. Meril's appointment may be, whether they be economic or personal.

[51] As I have earlier observed, the way to deal with a council that does something the owners disagree with is to vote for or against such directors at the appropriate time. It is not appropriate to hijack already agreed upon necessary repairs by playing brinksmanship to the special resolution needed to secure the repair funding. The consequence of what has happened is a hamstringing of the Strata Corporation in its ability to fulfill its obligation under sections 3 and section 72 which had already received the endorsement of the owners in the earlier meetings as to the necessity for this rehabilitation.

[52] I conclude on the evidence that the deadlock that prevents either faction from obtaining a three%u2011quarter majority has resulted in the corporation being unable to perform its duties that it is required to by statute. Counsel for Mr. Collins argued that if such an order is made under section 165, that it should only be for $785,000 with a further provision eliminating a contract for Mr. Meril. As I observed earlier it is not for this Court in essence to make orders under section 27(1) that restricts or limits the ability of council to perform its functions.

[53] Whatever the merits or otherwise of Mr. Meril's engagement, the council on behalf of the corporation has concluded that his services are necessary for the proper fulfillment of the task set out in the job description as well as fulfilling its contractual obligations to both the engineer and the general contractor. To not require the strata corporation to fulfill its duty to repair, will result in a significant increase in costs after the 15th of August. If the memorandum of the strata council attached as Exhibit P to Mr. Collin's affidavit is correct, the tender bids can be expected to rise by a minimum of 10 percent, paling into insignificance to the cost of Mr. Meril.

[54] Accordingly, I conclude that council has been unable to perform its duty and obligation of repair, as a consequence of this deadlock. Therefore, the orders sought are made. There will as well in addition be an order that the respondent's strata corporation pay the petitioner's cost on scale 3 and that the petitioner will be exempted from any payment of any special assessment levied by the strata corporation necessary to pay those costs. No submissions were made in respect to Mr. Collin's cost or any responsibility for cost. If counsel wish to make those submissions, they may do so in writing.

(SUBMISSIONS)

[55] I've asked counsel if there's any issue with respect to the question of costs in terms of Mr. Collins either as an entitlement to or a responsibility for. Miss Murray informs me that she wishes to make written submissions in that respect and therefore what I'm going to do is direct the petitioner of the strata corporation file any written submissions with respect to costs by August the 30th. Mr. Sutherland on behalf of Mr. Collins you will have until the 15th of September to respond and any replies to your submissions are to be received by the 22nd of September. (SUBMISSIONS)

[56] If there is any difference between the petitioner and the strata corporation, they can be responded to by the replies due the 22nd of September.

%u201CP.D. Dohm, A.C.J. for J.D. Taylor, J.%u201D
The Honourable Associate Chief Justice P.D. Dohm
for The Honourable Mr. Justice J.D. Taylor

Place Fontainebleau (Coquitlam): Owners too late in joining defendants; no "open season"

Place Fontainebleau, Coquitlam. RDH Photo.

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners SP LMS 343 v. City of Coquitlam et al.,

 

2005 BCSC 1150

Date: 20050808
Docket: L001792
Registry: Vancouver

Between:

The Owners, Strata Plan LMS 343

Plaintiff

And

City of Coquitlam, John Doe and others

Defendants


Before: The Honourable Mr. Justice Pitfield

Reasons for Judgment

Counsel for the Plaintiff:

Amy A. Mortimore

Counsel for the Proposed Defendants:

Interplan Architecture and Planning Inc. and John Scott

Christopher M. Rusnak

Gauvin Construction Ltd.:

James D. Morin

 

Indalex Limited:

David L. Miachika

 

Haseman Canada Corporation,

Kenji Hasegawa, Katsuo Ono, and  Allan Lee:

Scott G. Cordell

 

 

Starline Windows Ltd.:

Stacey L. Boothman

 

Date and Place of Hearing:

June 16, 17 and July 8, 2005

 

Vancouver, B.C.

[1]                The plaintiff represents the owners of Place Fontainebleau described as a leaky, 130- unit, nine-building, residential condominium project situated in Coquitlam, British Columbia.  On June 30, 2000, the eve of the repeal of the Condominium Act, R.S.B.C. 1996, c. 64 and its replacement by the Strata Property Act, S.B.C. 1998, c. 43, the plaintiff commenced an action naming the City of Coquitlam and John Doe and others as defendants.  The writ was endorsed in the following terms:

The Plaintiff, The Owners, Strata Plan LMS 343, is a Strata Corporation whose members are collectively the owners of condominium units located at 1201, 1205 and 1215 - 1225 Brunette Avenue, 203, 207 and 211 - 219 Begin Street, and 202 - 206 Laval Street, Coquitlam, British Columbia ("Place Fountain Bleu").

The Plaintiff, on its own behalf and on behalf of the Owners, claims pursuant to Section 15 of the Condominium Act, R.S.B.C. 1996, c. 64 as amended, against each of the Defendants for the cost to correct various construction deficiencies (including deficiencies in design, inspection, workmanship and materials) in Place Fountain Bleu, and resultant damage arising therefrom, in the strata lots, common property, common facilities and other assets of the Strata Corporation.

The Plaintiff claims against the Defendant, the City of Coquitlam, as the governing authority with respect to the issuance of development, building and occupancy permits and the enforcement of the British Columbia Building Code for Place Fountain Bleu.  On various dates, the City of Coquitlam issued development, building and occupancy permits and conducted inspections with respect to Place Fountain Bleu.

The Plaintiff claims that the City of Coquitlam owed a duty of care to the Strata Corporation and its owners to exercise all reasonable care, skill, diligence and competence in the inspection of and in the issuance of permits with respect to Place Fountain Bleu.  In breach of its duty of care, the City of Coquitlam negligently failed to exercise all reasonable care, skill and diligence and competence in inspection of and in the issuance of permits with respect to Place Fountain Bleu, with said negligence causing or contributing to the aforementioned constructions deficiencies and damages suffered by the Plaintiff.

The Plaintiff claims against John Doe and others which were the architect, consultants, subconsultants, developer, contractor or contractors, subcontractors, suppliers and others and which breached their duties of care to the Plaintiff in the design, inspection and/or construction and/or performed deficient work and/or supplied deficient material and/or supervised the deficient work carried out during the construction of Place Fountain Bleu with said negligence causing or contributing to the aforementioned construction deficiencies and damages suffered by the Plaintiff.

The Plaintiff claims for general damages, special damages, interest and costs against the Defendants and each of them as a result of design and construction deficiencies in Place Fountain Bleu, which design and construction deficiencies have caused the Plaintiff to suffer loss and damage.

[2]                The plaintiff applies for an order adding the following persons or entities as defendants:  the developer, Haseman Canada Corporation, and it principals Messrs. Kenji Hasegawa, Katsuo Ono and Allan Lee; the general contractor, Gauvin Construction Ltd.; the architects, Interplan Architecture and Planning Inc. and John Scott; two window suppliers, Starline Windows Ltd. and Indalex Limited; and a sub-trade, Columbia Waterproofing Ltd.   

[3]                The hearing of this application follows upon an adjournment granted May 19, 2005, when the proposed defendants appeared to oppose the plaintiff’s application to add them as defendants.   Seven other respondents did not appear on that date and they were added as defendants.   The plaintiff was unable to serve another six proposed defendants, four of which were companies that had been dissolved.   The plaintiff says it intends to restore the dissolved companies and perfect service so that the application to add those six defendants may proceed.

[4]                The plaintiff says that the requirements of Rule 15(5)(a)(iii) have been satisfied because the subject matter of the claim it wishes to advance against each proposed defendant is related to or connected with the relief claimed in, or the subject matter of, the proceeding commenced against the City of Coquitlam and the defendants John Doe and others, and it would be just and convenient to adjudicate those claims in that action.  Rule 15(5)(a)(iii) provides as follows:

15(5)(a) At any stage of a proceeding, the court on application by any person may...

(iii)       order that a person be added as a party where there may exist, between the person and any party to the proceeding, a question or issue relating to or connected

(A)       with any relief claimed in the proceeding, or

(B)       with the subject matter of the proceeding,

which in the opinion of the court it would be just and convenient to determine as between the person and that party.

[5]                The proposed defendants, other than Columbia Waterproofing Ltd., oppose the plaintiff's application.  I was advised by plaintiff’s counsel that Columbia, which did not appear at the hearing, takes no position in relation to the application.  I have not been made aware of the nature and extent of Columbia’s involvement in the project and, in the absence of opposition, the plaintiff’s application to add it as a party will be granted.

[6]                In support of its application, the plaintiff says the following:

1.         The plaintiff did not know of a systemic water ingress concern and the need for remediation until January 2001. 

2.         The architects were notified of a potential claim on November 7, 2000, the developer and the general contractor were notified by letter dated June 5, 2001, and the window installers and suppliers were notified on August 26, 2004.

3.         The endorsement on the writ of summons discloses a reasonable cause of action against each of the proposed defendants.

4.         It is just and convenient to add each proposed defendant because few steps have been taken in the proceeding, remediation has only recently been completed, no date has been fixed for trial, the limitation period in respect of any proceeding against the proposed defendants has not expired, and there is no prejudice to any of the proposed defendants.

5.         Joinder of the parties should be preferred to the alternative of commencing a separate proceeding against the proposed defendants and thereafter applying for consolidation of separate actions.   

6.         Requiring the plaintiff to proceed by way of new action would result in increased administrative costs, unnecessary interlocutory applications, particularly if third party notices are issued in either of the proceedings, and will likely give rise to disputes with respect to the use of documents and evidence obtained in one proceeding in the conduct of the other.

[7]                The plaintiff commenced a separate action against the proposed defendants by writ filed July 7, 2005, the day before the hearing of this application concluded. 

[8]                The defendants collectively oppose the addition of any of them as a defendant on the following grounds:

1.         There has been excessive delay in bringing the application to join the proposed defendants.  Occupancy permits were issued April 6 and May 14, 1992, in respect of Phase One of the project comprised of 50 apartment and townhouse strata units.  Occupancy certificates were issued on July 22 and October 25, 1993, in respect of Phase Two comprised of 76 apartments and stacked townhouse strata units.  Occupancy permits were issued November 25, 1996, in respect of Phase Three comprised of 4 apartment and stacked townhouse units and a gatehouse for which a building permit had been issued in April 1996.  

2.         The commencement of the six year limitation period was not postponed beyond October 1996, when the plaintiff received advice from a professional engineer about shortcomings in the complex and a recommendation that a building envelope consultant be retained to advise on permanent remediation solutions.  The limitation period expired in October 2002.

3.         The names of the defendants which the plaintiff applies to add were known to or readily ascertainable by the plaintiff when the writ was filed on June 30, 2000, and the plaintiff has not adequately explained the delay in bringing this application to add defendants. 

[9]                Each proposed defendant advances additional arguments unique to their particular circumstances.  I will consider those arguments in due course.


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