Place LeBleu (Coquitlam): Still not fixed; Judge refuses order to sell leaky condo; orders accounting

Place LeBleu, Coquitlam, BC

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Citizens Bank v. E.M.F. Holdings et al,

 

2007 BCSC 16

Date: 20070105
Docket: H980908
Registry: Vancouver

Between:

Citizens Bank of Canada
(Formerly Citizens Trust Company)

Petitioner

And:

E.M.F. Holdings Ltd., Elizabeth M. Foster, George Foster,
Manuel Martin Pereira, Agostinha Pereira,
Gordon Frederick William Gooch, Barbara Lynn Richardson,
The Owners' Strata Plan LMS2435, Roy Boddy, Iola Boddy,
Creative Door Services Ltd. (Formerly Known as
Richards-Wilcox Door Systems (Vancouver) Ltd.),
Diana Krimmer, Larry Blanchard, Adam Tutinka

Respondents


Before: The Honourable Mr. Justice Johnston

Reasons for Judgment

(In Chambers)

Counsel for the Petitioner:

R. Finlay

Counsel for the Respondents:
  Barbara Lynn Richardson and
  Gordon Frederick William Gooch

G.F. Gregory

Counsel for the Respondents:
  The Owners Strata Plan LMS 2435:

J.A. Bleay

In Person:

F.M. Pereira (for himself and Agostinha Pereira)

Date and Place of Trial/Hearing:

20061124

 

Vancouver, B.C.

[1]                By motion dated November 14, 2006 the petitioner seeks orders settling the form of order made by me September 8, 2006, setting aside the appearance of Mr. Gordon Gooch in this proceeding, and that Mr. Gooch provide an accounting of monies received and disbursed by him relating to a commercial strata unit. 

[2]                The petitioner also brings back its motion of July 17, 2006, which was before me on September 8.  On that motion the petitioner sought an order for sale of a commercial strata unit which is the subject of the dispute in the petition.  On September 8, I adjourned that application generally.  On September 8, 2006 and November 24, 2006, the Owners' Strata Plan LMS 2435 (the "Owners") appeared by counsel, and both times supported the petitioner's application for an order for sale of the strata unit in question.

[3]                In September, Mr. Gooch and Mr. Pereira, both acting in person, opposed the order for sale.  Both continued their opposition on November 24th.  Mr. Pereira continued to appear in person; Mr. Gooch's position was argued by Mr. Gregory who appeared for Mr. Gooch's wife, the respondent, Barbara Richardson, who is a mortgagee of the strata unit in dispute.

[4]                Mr. Pereira is an owner of a residential strata unit in a building which contains 28 residential strata units in all, as well as at least one commercial strata unit.  It is the commercial strata unit that is in issue in these proceedings and which has, in over the past eight years or more acted, in the words of Mr. Finlay, as a "litigation magnet". 

BACKGROUND

[5]                On the material before me it is possible to give a superficial outline of the history which brought these litigants before the court on September 8 and November 24, 2006.  The material does not permit more than a bare outline and I do not intend this history to be taken as a finding of historical fact. 

[6]                Sometime in 1995 or 1996, the mixed used building was built, with the 28 residential strata units and at least the one commercial strata unit.  The owner and developer was the respondent, E.M.F. Holdings Ltd. 

[7]                A first mortgage was granted to the Mutual Trust Company ("Mutual") and a second mortgage to Citizens Trust Company ("Citizens") or its successor, Citizens Bank of Canada.  As units sold, partial discharges of the Mutual and Citizens mortgages were granted.

[8]                According to Mr. Tesky, who is now employed by a successor to Mutual, Citizens delivered executed but unregistered partial discharges of mortgages over all of the strata units in the development to Mutual on the understanding that only those partial discharges of Citizens’ mortgages that were necessary to facilitate sales of strata units would be used, and then only up until the Mutual mortgage was repaid in full.  At that point, Citizens expected that any unused partial discharges would be returned to Citizens.

[9]                According to Mr. Tesky, Mr. Gooch and Ms. Richardson registered mortgages subsequent in priority to the Mutual and Citizens mortgages.

[10]            Mr. Tesky says that at some point the Mutual first mortgage was paid in full, but that Mutual did not deliver back to Citizens any unused partial discharges as was the understanding between those two financial institutions.  Instead, the partial discharges were delivered to the solicitor for the owner, E.M.F. Holdings Ltd. ("E.M.F."). 

[11]            Mr. Tesky says that there were four unused discharges delivered to E.M.F.’s lawyer, and, for the purposes of this litigation, it is enough to know that one of them relates to the commercial strata unit in issue here, and one relates to Mr. Pereira's unit.  Mr. Tesky alleges that E.M.F. registered the partial discharges without the knowledge or consent of either Mutual or Citizens and at a time when somewhat more than $400,000 remained owing on the Citizens' mortgage.

[12]            The project ran into difficulty, the owner, E.M.F., defaulted.  A number of actions were commenced by various parties, including one or more petitions for foreclosure brought by Mr. Gooch and Ms. Richardson early in 1998, an action by Citizens seeking a declaration that its mortgage had priority over the Gooch and Richardson mortgages, and a petition in August 1998 in which Citizens sought much the same relief as in its action, and in addition sought an order for foreclosure on its mortgage.

[13]            These motions are brought in the petition commenced by Citizens on August 17, 1998. 

[14]            E.M.F., as the owner of the strata unit in issue here, has had little or no interest in the unit and has taken no active part in its management since approximately 1998.

[15]            That has left a vacuum which several parties have sought to fill, or have quarrelled over.  These include:  Mr. Gooch for himself and his wife, Ms. Richardson, as mortgagees and de facto managers of the strata unit; Mr. Tesky, for a company called MCap Financial Corporation, and as the authorized representative of Clarica Trust Company, formerly Mutual, which in turn seeks to advance the interest of Citizens over the unit; and the Owners, who are claiming unpaid strata fees, interest and penalties.

[16]            On September 18, 2000, this court ordered that Mr. Tesky be appointed receiver of the commercial strata unit, with limited authority to borrow money to pay property taxes.  On March 2, 2001 Mr. Gooch obtained an order that he be repaid money spent by him in the repair and maintenance of the commercial unit, and that he be reasonably compensated for the work done by him on the commercial strata unit.

[17]            In the meantime, there was no owner to pay strata fees attributable to the commercial unit.  Mr. Gooch, from time to time, made payments toward the strata fees levied, but in spite of that, they fell into arrears.

[18]            Mr. Gooch has alleged that the building envelope, for which the Owners are responsible, is in need of repair, that there are leaks into the commercial strata unit that make it difficult to rent and which depress its sale value.  When Mr. Gooch demanded that the need for repairs be investigated and that repairs be undertaken, the Owners responded by pointing to the fact that the strata fees have not been paid for the unit.  This led to an application before Edwards J. in April 2005.  The Owners applied for an order for conduct of sale of the strata unit.  Mr. Gooch applied for an order that he be appointed administrator of the strata corporation in order that he might take the steps necessary to determine what repairs were necessary and to effect those repairs.

[19]            Edwards J. was not persuaded that the Owners had fulfilled their duty to do "... all that can reasonably be done in the way of carrying out their statutory duty"  (Richardson et al. v. The Owners, strata Plan LmS2435 and Gooch et al. v. E.M.F. Holdings Ltd. et al. 2005 BCSC 636, at para. 19), by way of repairs to, and maintenance of, the building.  He ordered Mr. Gooch and Ms. Richardson to pay outstanding strata fees and subsequent monthly assessments attributable to the commercial strata unit into the trust account of Mr. Bleay, counsel for the Owners.

[20]            Edwards J. adjourned the Owners' application for conduct of sale of the strata unit pending performance by Mr. Gooch of the direction that he pay the outstanding arrears into Mr. Bleay's trust account.  Edwards J. said that the cost of the investigation and report could be paid from the funds paid by Mr. Gooch into Mr. Bleay's trust account, from the contingency fund, or by way of special assessment.  Edwards J. further said that the Owners must take the appropriate steps to fulfill the statutory duty to repair and maintain common property and that failure to do so would entitle the mortgagees, Gooch and Richardson, to renew their application to have an administrator of the strata corporation appointed.  That application was adjourned generally.

[21]            Mr. Gooch paid $30,000 into Mr. Bleay's trust account.  There is a dispute whether that amount was sufficient to cover all arrears at that time or, whether, if it was, the arrears have continued to increase since then.  Mr. Gooch has sought an accounting from the Owners to show what strata fees are owing as opposed to any claims for interest or penalties for late charges.

[22]            I was informed that the report directed by Edwards J. in April 2005 was not delivered to the Owners until the fall of 2006, and my impression was that it was delivered shortly before the applications were argued on November 24, 2006. 

[23]            In his motion filed July 2006, Mr. Tesky sought an order for the sale of the commercial strata unit in order that he be relieved of his duties as receiver and in order that he might be reimbursed the money he had borrowed to pay property taxes since 2000, which then totalled somewhat in excess of $200,000.

[24]            Mr. Gooch opposed that application, appearing in person at the hearing September 8, 2006.  While the evidence of what occurred around that time is not clear, it appeared that, before the application was heard, Mr. Gooch had offered to indemnify Mr. Tesky by paying to him or his company the amount borrowed, and Mr. Tesky had accepted the offer.  At the hearing on September 8, Mr. Gooch sought to be appointed receiver in place of Mr. Tesky, and Mr. Tesky did not oppose that application.  The Owners did oppose Mr. Gooch’s application.

[25]            I made certain orders on September 8.  Mr. Gooch and counsel have been unable to agree on the wording of the order.

[26]            The order of Edwards J., based on reasons given by him on April 28, 2005, had not been entered at the time the matter returned before me on November 24, 2006, although I was given a copy of an order which had been approved and submitted for entry just prior to the hearing.

[27]            This history can perhaps best be described in words used by Mr. Tesky in his third affidavit at para. 20 where he says:

Unfortunately, the litigation process has proven excessively protracted and costly and has not led to a resolution.

[28]            Mr. Gooch alleges that Mr. Tesky has, for some time, either impaired or blocked outright any attempts to lease the strata unit.  In spite of this alleged lack of cooperation, and in spite of the fact that he had no apparent legal authority, Mr. Gooch has managed to arrange one or more leases.  From time to time Mr. Gooch has provided to Mr. Tesky a summary accounting of the revenues and expenditures relating to the commercial strata unit.  There is some suggestion that by agreement between Mr. Gooch and Mr. Tesky, reached between their respective lawyers, Mr. Gooch has paid, out of rental revenue, money to Ms. Richardson's mother, who is one of the parties to one of the Gooch/Richardson mortgages.

[29]            As to the motion to settle the order made by me on September 8, 2006, a draft of that order has been approved by counsel for the Owners and for Mr. Tesky.  When the draft was sent to Mr. Gooch, who was still unrepresented, he objected to certain provisions set out in the draft, and to certain other omissions.  These included:  no accounting was provided for in the draft; that the draft did not contain any of the orders made by Edwards J. on April 28, 2005; the draft mentioned insurance and he had not been ordered by me to pay insurance on the unit; and, the draft provided that surplus funds be paid into court, and I had not made that order.

[30]            Mr. Finlay replied to these objections on behalf of Mr. Tesky on October 24, 2006.

[31]            While these disputes over the form and content of my September 8 order were going on, Mr. Gooch and Mr. Tesky were diverging on another and perhaps more fundamental question, and that is the amount Mr. Gooch was to pay to Mr. Tesky to indemnify him for the borrowings made by Mr. Tesky to pay property taxes on the commercial strata unit.  According to Mr. Tesky's affidavit, before the September 8 hearing, he had reached an agreement with Mr. Gooch that Mr. Gooch would pay Mr. Tesky's tax accounts and purchase receivership certificates securing funds which Mr. Tesky had borrowed to pay property taxes.

[32]            Mr. Tesky says there was an agreement that payment was to be made by October 16, 2006, and that day came and went without either payment by Mr. Gooch or an extension, to which Mr. Gooch was entitled.

[33]            Mr. Gooch had sent $205,000 to Mr. Tesky's solicitor and that money was deposited into the lawyer’s trust account.  The total amount claimed by Mr. Tesky to repay the borrowings to that time was $202,450.97. 

[34]            Mr. Gooch questioned the propriety of Mr. Tesky having borrowed from his own financial institution to pay property taxes from time to time, and disagreed with the interest charges claimed by Mr. Tesky's employer for those borrowings.

[35]            Additionally, Mr. Gooch questioned certain penalties that had been paid and which Mr. Gooch felt should have been avoided by Mr. Tesky.

[36]            Mr. Gooch therefore required the accounting, to which Mr. Tesky had agreed, before he authorized the release from trust of all of the funds to Mr. Tesky pursuant to their agreement.  Mr. Gooch did, however, agree that $150,000 could be paid to Mr. Teskey immediately, with the balance withheld until Mr. Tesky's accounts had been approved or passed.

[37]            The accounting was set for October 3, 2006 but a registrar declined to proceed because the order appointing Mr. Tesky receiver did not provide for an accounting.  Mr. Gooch swears that he was at all times willing to consent to an order to provide for the accounting but that Mr. Tesky has failed or refused to seek such an order.  Therefore, the accounting has not been done.  When it appeared to Mr. Gooch that Mr. Tesky was not about to proceed expeditiously to pass his accounts, Mr. Gooch asked for and received his funds from Mr. Tesky's counsel.  The money had been borrowed by Mr. Gooch and he was understandably reluctant to carry the cost of financing indefinitely.

[38]            During the hearing on November 24, 2006, I approved a draft of my September 8 order, with some variations that were spoken to and, I believe, agreed to by counsel.  The draft of my order of September 8, 2006, as approved by counsel, as varied on November 24, 2006, is approved by me for entry.  If counsel cannot agree on the variations after reviewing the tape of the proceedings, I direct that a transcript be ordered by Mr. Teskey, with the costs of the transcript to be spoken to.

[39]            That will dispose of the applications to set aside Mr. Gooch’s appearance, and for an order that he account.

APPLICATION FOR ORDER FOR SALE

[40]            Whether or not Citizens or any of its successors has a claim to the priority it asserts in its action should have been litigated years ago.

[41]            Mr. Finlay, in arguing in support of the application for order for sale, argued that a sale now would fix the amount of equity, if any, in this property and that would permit Citizens to make a business judgment whether there is enough money available to warrant proceeding to litigate its priority.

[42]            I do not have any sense of whether any increase in the value of this unit has outstripped any accumulation of interest of the principal owing under the disputed Citizens mortgage.

[43]            I am not inclined to order a sale of this unit on the basis that a sale will assist a litigant in deciding whether litigation that has been ongoing some eight years is worth pursuing. 

[44]            Mr. Gooch and Ms. Richardson and others are mortgagees under two mortgages, the value of which I am told now exceeds $1,000,000.  Whatever this unit is worth, it does not appear to exceed $600,000 at this point. 

[45]            Mr. Finlay argues that, when one considers the $202,000 owing for property taxes, some $54,000 owing for unpaid strata fees, an unknown value of the judgments or other claims against title to the unit, the total known or potential liabilities so far exceed any realistic estimate of the value of the unit that sale now should be ordered. 

[46]            In addition to the economic argument in favour of sale at this time, Mr. Finlay points to the various petitions and actions that have been commenced over the years, up to and including an action commenced in October 2006 by Mr. Gooch against the Owners.  He says, and there is merit to this, that sale of the unit might end the litigation and discourage litigants from pursuing other litigation.  At least, Mr. Finlay argues, a sale now might prevent any future litigation over this unit.

[47]            This argument might have more force if it were made by counsel acting for someone other than a litigant which has done little to advance its litigation over some eight years.

[48]            Additionally, some of the litigation is collateral in the sense that it concerns claims that the Owners have failed to properly maintain and repair the building.  To the extent that those claims can be proved, and to the extent they can be shown to have caused damage to mortgagees such as Mr. Gooch and Ms. Richardson, sale of the unit is not likely to end the litigation. 

[49]            I am concerned on the evidence before me that a sale now would be for a price which would be adversely affected by known deficiencies in the building, which have remained unrepaired for years, and which would have to be disclosed to any potential purchasers.  The losers in such a scenario would be Mr. Gooch,  Ms. Richardson, and other members of their family and friends who are subscribers to the Gooch/Richardson mortgages, if the Citizens mortgage does not have the priority claimed, or the Citizens claim is not pursued.

[50]            The financial interests driving the application to sell at this time are apparently something which Mr. Gooch is prepared to address and which he has tried to address, by borrowing $205,000 and sending it to Mr. Tesky's lawyer, subject only to an understandable and quite proper request that Mr. Tesky account for the amounts he says he has borrowed to pay property taxes over the years.

[51]            The support of the strata council for an immediate order for sale is also, to my mind, less than persuasive given the findings of Edwards J. as to the Owners' lack of diligence in performing their statutory obligations over the years, and Mr. Gooch's expressed willingness to pay the outstanding strata fees.

[52]            Mr. Gooch has not been the owner of this unit at this point.  He has in many ways acted as if he owned the unit by arranging for tenancies, receiving rents and applying rental monies to various purposes.  For that, he will have to account as has been ordered.  He has shown a willingness and an ability to pay the unpaid strata fees and to indemnify Mr. Tesky for money borrowed for taxes.  All Mr. Gooch has sought, as I see it, is an accounting for the strata fees and the taxes, to ensure that he is not paying monies that are not properly payable for either.

[53]            The application for order for sale is denied.  I direct that the Owners prepare and deliver to Mr. Gooch and to counsel for Ms. Richardson their accounts claiming strata fees within 30 days of this order.  Mr. Gooch and Ms. Richardson have 15 days thereafter to signify their approval to the accounts delivered by the Owners.  If the approval of Mr. Gooch and Ms. Richardson is not forthcoming within that 15 days, the Owners are directed to set the matter down before the Registrar for a report on the amounts claimed, the amounts paid from time to time, and the balance owing for strata fees.  Any other claims of the Owners by way of interest, penalties, etc., should also be investigated by the Registrar and form part of the report.

[54]            On receipt of the Registrar's report, either party to that accounting, that is the Owners or Mr. Gooch or Ms. Richardson on the other hand, are at liberty to set the matter down for approval of the Registrar’s report and recommendations.

[55]            Mr. Tesky is ordered to prepare and deliver his accounts relating to the amounts borrowed for taxes, including the delivery of any documents evidencing the amount of taxes claimed, the amount of any interest or penalty claimed by the municipality on unpaid or late paid taxes.  Mr. Tesky is further directed to provide any documents evidencing interest charged on monies borrowed by him to pay property taxes.  All of those documents will be disclosed by Mr. Tesky to Mr. Gooch and Ms. Richardson within 30 days of the date of this order.  Mr. Gooch and Ms. Richardson will have 15 days from the date of delivery of those accounts to indicate whether they approve the accounts as presented.

[56]            If Mr. Gooch and Ms. Richardson do not approve the accounts, or do not within 15 days signify their approval of those accounts, either party is at liberty to set the passing of Mr. Tesky's accounts as receiver for hearing before the Registrar. 

[57]            The Registrar shall inquire into and report on the amount of property taxes claimed from year to year by the municipality, the amounts of any penalties or interest claimed by and paid to the municipality for late payment of property taxes and the amount of any interest paid on money borrowed by Mr. Tesky to pay taxes and to whom that interest is paid.  The Registrar shall also inquire into and report on any relationship between Mr. Tesky and any party to whom interest has been paid by Mr. Tesky as receiver.

[58]            On receipt of the Registrar's report, either party is at liberty to set the matter down for a hearing into the approval of the Registrar’s report and any orders ancillary thereto.

[59]            Unless otherwise ordered by me, I am seized of both matters to return after the accounting.

[60]            Costs can be spoken to.

“R.T.C. Johnston, J.”
The Honourable Mr. Justice R.T.C. Johnston

Place LeBleu (Coquitlam): Judge finds conflict of interest; orders building envelope condition report

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Richardson et al. v. The Owners, Strata Plan LMS2435 and Gooch et al. v. E.M.F. Holdings Ltd. et al.,

 

2005 BCSC 636

Date: 20050428
Docket: L041997
Registry: Vancouver

Between:

Barbara Lynn Richardson and Gordon Gooch

Petitioners

And

The Owners, Strata Plan LMS2435

Respondent

 

- and -

 

Docket: H970963
Registry: Vancouver

Between:

Gordon Frederick William Gooch and
Barbara Lynn Richardson

Petitioners

And

E.M.F. Holdings Ltd., Francisco Manuel Martin Pereira and
Citizens Bank of Canada

Respondents


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

Reasons for Judgment

Counsel for the Petitioners

G. F. Gregory

Counsel for the Respondent:  The Owners, Strata Plan LMS2435

J. A. Bleay

Date and Place of Trial/Hearing:

April 25, 2005

 

Vancouver, B.C.

[1]                Two competing motions were heard together.

[2]                In the first, the Owners of Strata Plan LMS 2435 (“the Owners”) apply for an order for conduct of the sale of Strata Lot 2 of Strata Plan LMS2435, in a foreclosure proceeding, to recover approximately $35,000 in strata fees unpaid by E.M.F Holdings Ltd. (“EMF”), the bankrupt registered owner of Strata Lot 2.

[3]                In the second, Barbara Richardson and Gordon Gooch, mortgagees whose interest is registered against EMF’s title (“the Mortgagees”), petition for an order appointing Mr. Gooch, or someone else the Court deems appropriate, administrator of the Strata Corporation, for the purpose of hiring consultants to “find the source of all the building envelope leaks and sewage pipe leaks” which affect Strata Lot 2 and to hire contractors to effect repairs to the common property necessary to fix any leaks identified by the consultants.

[4]                The Mortgagees also seek a declaration that the Strata Corporation make a special assessment “to fund the administrator to complete the tasks” just described, and claim damages, and the right to set off unpaid fees against these damages.

[5]                The Mortgagees’ position is that the Owners of the 28 residential strata lots have acted to preclude the Strata Corporation from meeting its obligation to effect necessary repairs to the common property to prevent leaks into Strata Lot 2, which is a commercial premises leased to a video store and a grocery.

[6]                The Mortgagees assert that if the Owners are allowed to sell the property before the repairs are made the value of Strata Lot 2 will be reduced and the Mortgagees will suffer the loss.

[7]                EMF, the developer of the property, was insolvent when the building was completed in 1996.  EMF retained ownership of Strata Lot 2.  The Mortgagees lent EMF money secured by their mortgage.  EMF never paid its strata fees of about $1,000 per month, some 10% of the total assessments for the building.

[8]                The Mortgagees twice paid EMF’s arrears of strata fees and several months’ fees in advance.  Their counsel argued this amounted to consideration for two contracts under the terms of which the Owners agreed to fix leaks affecting Strata Lot 2.

[9]                If there were such contracts the Mortgagees may recover damages in an action for breach of contract.  I express no opinion on merits of such a claim.

[10]            The existence or otherwise of such contracts does not bear on the statutory power of the Court to appoint an administrator under s. 174(2) of the Strata Property Act S.B.C. 1998, c. 43 (“the Act”) “if, in the court’s opinion, the appointment is in the best interests of the strata corporation”.  Under s. 174(3)(c) of the Act, the Court may “order that the administrator exercise or perform some or all of the powers and duties of the strata corporation.”

[11]            The leading case on the appointment of an administrator to act on behalf of a strata corporation, cited by both counsel, is Lum v. Strata Plan VR519 2001 BCSC 493, in which Harvey J. set out at paragraphs 11 and 12 factors to be considered in exercising the Court’s powers under s. 174 of the Act.

[11]      In my view after reviewing the authority available, bearing upon this question, factors to be considered in exercising the Court's discretion whether the appointment of an administrator is in the best interests of the strata corporation include:

(a)        whether there has been established a demonstrated inability to manage the strata corporation,

(b)        whether there has been demonstrated substantial misconduct or mismanagement or both in relation to affairs of the strata corporation,

(c)        whether the appointment of an administrator is necessary to bring order to the affairs of the strata corporation,

(d)        where there is a struggle within the strata corporation among competing groups such as to impede or prevent proper governance of the strata corporation,

(e)        where only the appointment of an administrator has any reasonable prospect of bringing to order the affairs of the strata corporation.

In addition, there is always to be considered the problem presented by the costs of involvement of an administrator.

[12]      I also take into consideration the comments of Huddart, J. in Cook, supra, that the democratic government of the strata community should not be overridden by the Court except where absolutely necessary.

[12]            The key factual issue which the several affidavits filed by the parties address is whether the Strata Corporation has responded reasonably to the many complaints of leaks affecting Strata Lot 2 made by the Mortgagees.

[13]            It is clear from these affidavits the parties are far apart on the extent of the problems which are detailed in those complaints and the solutions appropriate to address such complaints as may be well founded.

[14]            In Wright v. The Owners Strata Plan # 205 (February 15, 1996) Victoria Registry No. 4165/93, Drake J. at paragraph 30, referring to the statutory duty of strata owners to repair and maintain their building, stated:

The defendants are not insurers.  Their business, through the Strata Council, is to do all that can reasonably be done in the way of carrying out their statutory duty:  and therein lies the test to be applied to their actions.  [emphasis added]

[15]            In the present case, the Owners obtained a property inspection report in September 2004, from Best Choice Property Inspection Ltd. (“BCPI”), a member of the British Columbia Institute of Property Inspectors.  The report includes the following “Component Rating System”:

‘A’ =  May not be perfect but is functional – Consider the age of the building.

‘B’ =  Note of the presence of this item – Minor &/or possible attention may be required.

‘C’ =  Significant concern with this component/system – Major &/or probable attention will be required.

‘D’ =  Critical (immediate) intervention is required.

Investigation techniques are used to qualify and document the findings of the inspection and are based on the Possibility of risk being 50% or less and the Probability of the risk being higher than 50%.  The written report is in addition to a detailed, verbal commentary that has been given and/or offered.

[16]            Of the 28 components rated in the report, none received a “D” rating, two received an “A” rating, five received a “C” rating and the other 21 received a “B” rating.

[17]            The BCPI report does not estimate the cost of any repairs.

[18]            The competing affidavits of Mr. Gooch, Mr. Pereira and Ms. Manaquil filed by the Mortgagees, and Mr. O’Hearn filed by the Owners, indicate strong disagreement over the extent to which problems associated with components given “B” and “C” ratings in the BCPI report are significant or have been satisfactorily rectified.

[19]            On the basis for my assessment of these affidavits, I am not persuaded that the Owners through the Strata Corporation have “done all that can reasonably be done to in the way of carrying out their statutory duty”.

[20]            That duty is imposed by s.72 of the Act which provides:

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

[21]            Before 2000, the predecessor section 34(1) of the Condominium Act RSBC 1996, c. 65 (repealed) imposed a similar duty:

34(1)    A strata corporation must do all of the following:

(d)        keep in a state of good and serviceable repair and properly maintain common property, common facilities and assets of the strata corporation;

[22]            Failure by the Strata Corporation to meet these statutory duties exposes the Owners to potential litigation and an award of damages for failing to effectively address the problems identified in the BCPI report and any other building repair issues of which they were or are aware.

[23]            Obtaining the BCPI report was an appropriate but not a sufficient response to the Mortgagees’ complaints.  Once alerted there were problems rated “B” and “C” by the BCPI report, the Owners had a duty to do all that was reasonable to address them.

[24]            The next appropriate step was to obtain a professional assessment by recognized engineering experts of the extent and cost of the necessary repairs and to effect any such repairs either from the contingency fund or by special assessment.

[25]            The fact the residential strata lots are unaffected by the problems disclosed in the BCPI report may explain, but does not excuse, any disinclination of the Strata Corporation to expend funds to deal appropriately with the problems identified in the BCPI report.

[26]            The Owners have a lien against the title to Strata Lot 2 which gives priority to their claim for strata fees above even the unpaid municipal taxes.  Any reluctance they may have to do their duty cannot be based on a risk that those fees will ultimately go uncollected.

[27]            On the other hand, as their counsel pointed out, the Strata Corporation and the Owners are not going to go away and will remain vulnerable to a claim for damages for failing to do their duty.

[28]            I accept that the Mortgagees are vulnerable to a loss if the Owners are granted conduct of sale and sell the property at a price reduced by their own failure to do their duty.

[29]            I therefore adjourn the Owners’ application for conduct of sale, with liberty to reapply if the Mortgagees do not meet the condition specified below.

[30]            I find it is not in the best interests of the Strata Corporation or the Owners to be exposed to a continuing claim for damages for failure to meet the statutory duty to repair.

[31]            I find that a conflict of interest between the majority of owners of residential strata lots, whose lots are unaffected by leaks and the Mortgagees whose interest in the commercial Strata Lot 2 is affected by leaks, has resulted in a “struggle” between two “groups” akin to that noted in para. 11(d) of the reasons of Harvey J. in Lum, cited above.

[32]            I am mindful of the consideration that “the democratic government of the strata community should not be overridden by the Court unless it is absolutely necessary.”

[33]            I am also mindful that this is a relatively small Strata Corporation and the Owners are entitled to keep expenses to a minimum.

[34]            I am disinclined to appoint Mr. Gooch as the administrator of the Strata Corporation, even for limited purposes, because he will be perceived by the Owners as someone preoccupied with his own, rather than the Strata Corporation’s interests.

[35]            I am disinclined to impose the expense of an administrator on the Strata Corporation for the limited purpose for which an administrator is immediately required, namely to engage an expert consultant to investigate the Mortgagees’ complaints and report on, and estimate the cost of, any necessary repairs.

[36]            I direct that the Mortgagees pay their outstanding strata fees and subsequent monthly assessments into the trust account of Mr. Bleay, the Owners’ lawyer.  If the Mortgagees fail to do so, the Owners may renew their application for an order for conduct of sale of Strata Lot 2.

[37]            I direct that the expense of engaging an expert consultant for the purpose set out above be paid from the funds deposited in Mr. Bleay’s trust account.

[38]            I adjourn the Mortgagees’ application for the appointment of an administrator for the purpose of engaging such expert in order to spare expense and because no person other than Mr. Gooch was suggested.

[39]            If counsel for the Owners and Mortgagees cannot agree on the expert to be engaged and the terms of the engagement, either may apply to the Court for a specific administrator to be appointed for the purpose of engaging the expert.

[40]            Once the expert’s report is before it, the Strata Corporation must take appropriate steps to meet its statutory duty to repair and maintain the common property.  Failure to do so will provide a basis for the Mortgagees to renew their application for the appointment of an administrator for that purpose.

[41]            Money held in trust by Mr. Bleay may be paid to the Strata Corporation with the agreement of counsel for the Mortgagees, or by further order of the Court.

[42]            Since I have only adjourned the two applications on conditions, I make no order as to costs at this stage of the proceedings.

[43]            In order not to prevent the parties getting before a judge quickly should it be necessary to renew either application, I will not seize myself of either application.

“E.R.A. Edwards, J.”
The Honourable Mr. Justice E.R.A. Edwards