Pitt Meadows, Edgepark Manor: Court decides owners of Edgepark do not have to pay for leaky condo repairs at Woodford Manor

Edgepark Manor in Pitt Meadows is part of a development which includes Woodford Manor.

See 

Pitt Meadows, Woodford Manor: Court orders owners of Phase I to pay for repairs

Pitt Meadows, Woodford Manor: Court orders owners of Phase I to pay for repairs

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

The Owners, Strata Plan LMS 1934 v. Westminster Savings Credit Union et al

 

2004 BCSC 1718

Date: 20041230
Docket: L001769
L023862
L023863
L023864
L023865
L030462
L033250
Registry: Vancouver

Between:

THE OWNERS, STRATA PLAN LMS 1934

 

PETITIONERS/RESPONDENTS

And:

WESTMINSTER SAVINGS CREDIT UNION
WILLIAM MCKINLAY MCSEVENY
KATHRYN ELIZABETH MCSEVENY
SORINA RODICA HORGA
CANADIAN IMPERIAL BANK OF COMMERCE
GRIFFIN MANAGEMENT CORPORATION
RICHARD JOSEPH DENIS CASSIDY
LISA JOAN WINTERS
405075 B.C. LTD.

 

RESPONDENTS/PETITIONERS

 


 

The Honourable Madam Justice Morrison

Reasons for Judgment

Counsel for The Owners, Strata Plan LMS 1934

R. Glen Boswall
Patrick A. Williams

 

Counsel for Westminster Savings Credit Union, William McKinlay McSeveny, Kathryn Elizabeth McSeveny, Griffin Management Corporation and Lisa Joan Winters

 

Tannis D. Braithwaite

Counsel for 405075 B.C. Ltd.

Dave Dahlgren

Richard Joseph Denis Cassidy appearing In Person

 

 

Counsel for Sorina Rodica Horga

Shawn M. Smith

 

Date and Place of Hearing:

May 3 and 4, 2004

 

Vancouver, B.C.

 

[1]                 This involves a number of disputes within a strata corporation to recover common maintenance and repair levies from certain owners of commercial lots within the strata corporation.

[2]                 Between December, 1994 and June, 1997, three buildings that comprise the strata corporation were constructed.  The developer was 405075 B.C. Ltd.; one of the three principals of the company was Brad Focken.  A management company was formed, New Pacific Construction Ltd.  Mr. Focken was also a principal of that company. 

[3]                 Phase I of Strata Plan LMS 1934 is referred to as the Edgewood Centre building.  It is a concrete frame building and has nine commercial units, numbers one to nine.  It shares a common underground parking garage with Phase II and Phase III.

[4]                 Phase II is the Woodford Manor, with 6 commercial lots and 52 residential lots.

[5]                 Phase III is Edgepark Manor, with 62 residential lots and 14 commercial lots. 

[6]                 The commercial lots are concrete framed, while the residential lots, which are on top of the commercial units, are of wood frame and stucco.  The balcony decks of the lower residential lots are on top of the commercial lots.  Which means some residential balconies are, in effect, the roofs of the commercial units.  There are no waterproof barriers between the two.

[7]                 These petitions arose because of leaks and repair expenses of Phase III, Edgepark Manor.  The respondents to the action brought by The Owners are all registered owners of commercial units within Edgepark.  Lot 80 registered to 405075 B.C. Ltd. was a developer’s lot.  Commercial lot 135 in Edgepark is in the name of Cassidy/Winters who became registered owners on January 24, 2000.  Lots, 130, 131, 132 and 133 were registered in the name of Griffin Management Corporation on February 27, 1997.

[8]                 Commercial lot 136 was registered in the names of William and Kathryn McSeveny on August 16, 2000 and commercial lots 134 and 137 were registered in the name of Sorina Horga on January 7, 1999.  The Canadian Imperial Bank of Commerce registered its first mortgage on lots 134 and 137 on January 7, 1999.

[9]                 Commercial lots 127, 128, 129, 138, 139 and 140 were transferred to Westminster Savings Credit Union following an order absolute granted October 9, 2002.  Although subsequently transferred to a third party in November, 2002, Westminster Savings Credit Union remains responsible for any amount found owing on the Westminster and Griffin lots.

CHRONOLOGY

[10]             On June 28, 1995, the developers executed a Disclosure Statement which indicated that the bylaws for the strata corporation were those contained in the Condominium Act, R.S.B.C. 1996, c. 64 with the exception of some amendments which were attached as an exhibit to the Disclosure Statement.  That exhibit was a form under the Condominium Act, “Notice of Change of Bylaws”.  That change stated that the residential and commercial lots would be divided into separate sections, with separate councils and separate obligations for payment of monies or accounts owing for the benefit of that separate section.

[11]             In 1996, leaks were first noticed in the residential units of the Woodford Manor building, Phase II. 

[12]             On June 24, 1997, the developer, as a strata corporation, passed a resolution adopting bylaws under the Condominium Act.  In the following year, 1998, engineers were hired for a building envelope repair estimate because of continuing leaks.

[13]             Bylaws were filed on July 17, 1998, and the strata was divided into three sections, with each section to operate as a separate entity.  The three sections were as follows:  First, all commercial units in Phases I, II and III would be a separate group.  Second, all residential units of Phase II, Woodford, would operate as a separate entity.  Third, all residential units of Phase III, Edgepark, would operate separately. Those three groups began operating in that fashion in July, 1998.

[14]             When the special resolution was passed by the developer, acting as the strata corporation on June 24, 1997, the bylaws registered as part of the Disclosure Statement were confirmed.

[15]             Thus, from the beginning, the three separate sections of strata lot owners have each been responsible for themselves as separate sections.  That is, the one section which is comprised of all commercial units in Phases I, II and III; secondly, the residential units in Phase II; and third, all the residential units in Phase III. 

[16]             Further, the residential sections of Phases II and III have, from the beginning, had their own strata councils, held their own general meetings, been governed by their own budgets for expenses pertaining to their separate section, and had their own property management arrangements. 

[17]             There is no information as to whether the residential owners in Phase III, Edgepark Manor, ever appointed a strata council, held meetings or prepared budgets for expenses unique to their group.  The same lack of information pertains to the commercial units of Phases I, II and III.  However, management of all commercial units in Phases I, II and III was assumed in July, 1998 by a company whose principals included Brad Focken.

[18]             Water leaks were increasing, with Phases II and III experiencing leaks soon after their completion.

[19]             On April 27, 1998, the residential unit owners of Phase III, Edgepark, held an Extraordinary General Meeting (“EGM”).  They invited council members from the Phase II residential owners.  Legal advice to the owners at that meeting was that because of the bylaws filed at that time, owners in Phases II and III could be jointly responsible for any construction deficiencies and repair costs in either building.  This concerned the owners of both buildings, as they had always understood that each section operated as a separate strata corporation.  The lawyer present was instructed to do whatever was necessary to ensure that the residential owners of Phase II and the residential owners of Phase III, as well as the commercial owners of all three phases, would be separate sections.  That would mean each would be responsible for their own strata council, budget, bylaws, and repair costs only for their own separate section.

[20]             On July 6, 1998 there was a combined Annual General Meeting of the residential unit owners in Phases II and III.  The commercial unit owners were also invited to the meeting.  The notice of the meeting indicated there would be a special resolution vote to approve an amended bylaw package and a proposed operating budget. 

[21]             The bylaws attached to the notice and the invitation to the commercial units set out the division of the strata corporation lots into the three sections that had originally been operating:  (1) The commercial section which would be all commercial units in all three buildings, Phases I, II and III.  (2) All residential units in Woodford Manor, Phase II.  (3) All residential units in Edgepark Manor, Phase III.  The proposed bylaws also included the following provision:

19.3      The expenses common to a separate Section shall be apportioned by the Section Executive in the following manner:

            (e)        expenses, if any, attributable to or reasonably allocable to property common to commercial strata lots situate within the buildings forming Phase 2 (Woodford Manor) or Phase 3 (Edgepark Manor) together with Woodford Manor or Edgepark Manor, as the case may be, shall be borne by all the owners of Phase 2 or Phase 3, as the case may be, in the proportion that the unit entitlement of each of the Phase 2 or Phase 3 strata lots bear to the aggregate unit entitlement of all Phase 2 or Phase 3 strata lots;

[22]             At that meeting, Mr. Focken was present, apparently representing the nine commercial units in the centre building, Edgewood Centre, Phase I.  There was no one representing the two commercial units in Phase II, Woodford Manor.  Mr. Phillip Bradshaw represented 2 of the 14 commercial units in Phase III.  There were also a number of residential owners present from Phase III, Edgepark Manor.

[23]             The bylaw resolution received the required greater than 75% vote.  The amended bylaws were filed at the Land Title Office on July 17, 1998.  The residential unit owners of Woodford Manor and Edgepark Manor now assumed that with the bylaws filed, expenses common to one building would be borne by the strata lots in that building.

EdgePark Manor, Phase III

[24]             Throughout 1998, as the Phase III Edgepark Manor owners attempted to deal with leaks in their building, they were negotiating with the developer; in August of that year, the Phase III residential owners retained a consulting firm to conduct an assessment of the building envelope.  That report revealed extensive deficiencies.  The consultants later recommended a mock up repair on one section of the building to give a better assessment of the extent of damage and a more accurate estimate of what total repairs would cost.

[25]             An EGM was held May 20, 1999 for all unit owners of Edgepark Manor, both residential and commercial.  A special resolution was passed authorizing $53,500 for the mock up repair and each owner, residential and commercial, was assessed on a unit entitlement basis.  The management company for the commercial owners, through its spokesman Brad Focken, advised that the commercial owners would not be paying that special assessment.  The commercial owners took the position that because their units were of concrete construction, it was not fair that they should have to contribute to the wood frame unit repairs for the residential lots.

WOODFORD MANOR, PHASE II

[26]             Meanwhile, in November, 1999 the Woodford Manor water leaks were being dealt with by the owners of Woodford Manor.  Eventually a total payment of $295,548 was paid for by all residential and commercial lot owners of Woodford Manor.  Mr. Focken was part of the company that investigated and repaired the water leaks in that building.

CHRONOLOGY CONTINUED

[27]             Mr. Focken deposes he requested information with regard to Edgepark and the cost and extent of repairs for that building, but he did not receive answers to his requests.  The petitioners deny those assertions by Mr. Focken.

[28]             An EGM was held February 26, 2000 to deal with the problems of the water leaks of Edgepark Manor.  The purpose of the meeting was to vote to raise money for extensive repairs required on the building.  There is some dispute in the material filed as to whether the commercial owners received sufficient advance notice of the information to be presented at the meeting. 

[29]             The lawyer for Edgepark also advised the owners that any outstanding fees and assessments must be paid before an owner could vote at the EGM.  Counsel for Westminster Savings wrote on February 25, 2000 that the EGM was not properly convened for a number of reasons. 

[30]             But primarily, the respondents were taking the position that there was no jurisdiction to issue a special levy for the cost of repairs and to impose these on any of the commercial units.  That, in effect, the residential unit owners had no authority to impose levies on the commercial lot owners within Phase III, Edgepark Manor.  The commercial unit owners maintained that any repairs which were to be done were for the exclusive benefit of the residential owners only of Phase III.

[31]             The EGM was held and 75% of those present and eligible to vote voted to assess $1,474,175 among all residential and commercial owners for building envelope repair costs.  There was also a special resolution to assess all owners, residential and commercial, for an additional $60,000 to fund the ongoing legal costs of pursuing the developer and the builders for the costs of the repairs.

[32]             The commercial lot owners remained adamant in denying responsibility for any payments; so the full amount was collected from the residential owners to ensure funds were available for payment of repairs.

[33]             Effective July 1, 2000, the Condominium Act was repealed, replaced by the Strata Property Act S.B.C. 1998, c.43. 

[34]             In accordance with s. 128 and Regulations under the new Act, a majority of the residential owners of Strata Plan LMS 1934 held a vote on December 12, 2001 to further amend their Bylaw Amendment of July 17, 1998.  That further amendment sought the following division:  (1) Strata lots 1 to 9 inclusive shall be “one type of strata lot” to be referred to as the “Edgewood Strata Lots”.  (The original Phase I, all commercial lots.) (2) Strata lots 10 to 63 inclusive “shall be a different type of strata lot” and shall be referred to as the “Woodford Strata Lots”.  (The original Phase II, 6 commercial and 52 residential lots.)  (3) Strata lots 64 to 140 inclusive “shall be a further different type of strata lot” to be referred to as the “Edgepark Strata Lots”.  (The original Phase III, 14 commercial and 62 residential lots.)

[35]             At the vote on December 12, 2001, one of the Phase III commercial owners, Horga, had proxies on behalf of some of the commercial owners, but they were not eligible to vote as they were in arrears as a result of refusal to pay assessment and shared common area costs.  The end result was that no one who was eligible to vote voted against the resolution.  That bylaw amendment was filed at the Land Title Office on December 14, 2001.

[36]             Meanwhile, between 2000 and 2003, Edgepark Manor was involved in a number of lawsuits over leaks, with the developer, designers, builders and inspectors.  The lawsuits were finally resolved late in 2003.

POSITION OF THE PETITIONER, THE OWNERS, STRATA PLAN LMS 1934

[37]             The petitioners are claiming strata fees, assessments and fines payable for the 14 commercial lots in Phase III, plus the developer’s lot in amounts that total $209,764.20.  According to the petitioners, the Condominium Act governs the rights and obligations of these parties with regard to these assessments, fees, fines and interest.  This is with regard to sums that accrued before July 1, 2000. 

[38]             Further, that the Strata Property Act applies to those sums which arose after July 1, 2000.  That pursuant to s. 28(5) of the Condominium Act, bylaws are a binding contract between the owners and strata corporation.  And that the statute did not prohibit strata corporations from employing methods beyond sections and types set out in the Act for dividing expenses.

[39]             Counsel for the petitioners argue that fairness and the history of sharing costs is central to this case.  The strata corporation had set up three separate sections, one for the combined commercial lots of all three buildings, a second one for the residential lots in Phase II and a third one for the residential lots in Phase III.  Common expenses for more than one of these groups were budgeted amongst all three.  But the arrangement did not force anyone to pay who might not benefit from the repairs which had to be done.

[40]             The legislative policy behind provisions governing strata property is to protect owners of one type of strata lot from having to pay costs which would be exclusively for the benefit of another type of strata lot.

[41]             While there may be some objections to the technical validity of the separation of the combined commercial lots and residential lots, the owners of the three buildings have a history of carrying on with their own budgets, their own strata plans, and paying for their own maintenance and repairs.  They have done it on the basis of unit entitlement.

[42]             The petitioners also argue estoppel, that all owners approved the 1998 bylaws which divided the strata corporation into sections.  Based on that, the Phase II building owners went ahead with their own repairs, and did not attempt to look to the other sections for contribution.  And that is all that the residential owners of Edgepark, Phase III are attempting to do.  It is submitted that the commercial owners and the owner of lot 80 should be estopped from demanding apportionment to only the residential owners of Phase III, or alternatively, to all owners of the strata corporation, Phases I, II and III.

[43]             There is a further argument that sorting out such entitlement would be a complex and disruptive exercise.  There has been the usual turnover of owners from the time that the leaks arose until the present time.  Presumably that would also involve reapportioning the repair expenses that occurred and have been paid with regard to Phase II.

[44]             If the petitioners are successful, they acknowledge there will be a credit against the sums that they are seeking of the net recovery of actions taken against the developers, builders, designers and municipality.  The figures of that net recovery have not been finalized as of this date.

POSITION OF THE RESPONDENTS

[45]             Counsel on behalf of Westminster Savings Credit Union and the McSevenys argues that the legislation will not allow this court to do as the petitioner asks.  While the owners, the petitioners, argue that the special levies voted for the repair of water damage to Edgepark Manor should be divided among all owners of that building, both residential and commercial, Westminster Savings and the McSevenys argue that those levies should be divided and payable by all owners in the strata corporation, Phases I, II and III, commercial and residential owners.

[46]             These respondents rely on the Disclosure Statement of the strata corporation which created only two sections, a commercial section and a residential section.  They claim subsequent attempts by the strata corporation to re-divide the sections are invalid.  Alternatively, if the court decides that the re-division of sections was valid, these respondents argue that all the units of the strata corporation benefited from the repairs, and therefore all should be responsible for their cost.  They also object to any penalties or interest charged, along with the filing of any liens.

[47]             Finally, these respondents argue that strata fees should not be assessed against the commercial owners on a straight unit entitlement basis because the commercial owners do not use several of the common facilities which incur ongoing costs.  Because the residential units have wood frame construction, while the commercial are constructed of concrete, and since no repairs were undertaken to the commercial units, the commercial units did not benefit from any repairs.  The only benefit would be to all of the strata units inasmuch as the strata corporation would no longer be termed a leaky condo development.

[48]             The affidavit of Brad Focken points out that part of the repairs made to the Edgepark Manor building involved replacing the stucco finish with vinyl siding.

[49]             On behalf of the respondent 405075 B.C. Ltd., counsel opposes the petitioner’s application for payment, pointing out that the EGM of February 26, 2000 passed a resolution before the Strata Property Act came into effect on July 1, 2000.  Thus, counsel argues that the special assessment passed on February 26, 2000 is void and unenforceable and that the Edgepark Manor section was improperly constituted pursuant to s. 51 of the Condominium Act, and thus did not have the power or authority to pass a special assessment.  Further, that the expenses associated with the repairs for water damage to the Edgepark building should have been allocated to all residential units within the entire strata plan, in accordance with s. 128 of the Condominium Act, including the residential owners of Woodford Manor, as they are all of a similar “type” of strata lot.

[50]             The numbered company argues that the court should make an order that all residential owners of Woodford Manor, Phase II and Edgepark Manor, Phase III, should contribute to the expenses for the repair of water leaks to Edgepark Manor.  That it was unfair for the strata corporation to try and establish two residential sections in violation of ss. 51 and 128 of the Condominium Act.  Further, it was discriminatory and unfair to the residential owners of Edgepark Manor because it attempted to place all of the expenses with them, rather than being shared with the residential owners of Woodford Manor.

[51]             Counsel for Sorina Horga argues that the special levy approved at the May 20, 1999 meeting was invalid and unenforceable, as was the special levy approved at the February 26, 2000 meeting.  Further, that the bylaw amendments filed December 14, 2001, purporting to create three types of strata lots, were invalid pursuant to ss. 128 and 191 of the Strata Property Act.

[52]             On behalf of Horga, it is argued that the expenses should be borne exclusively by all residential units in the entire strata corporation; or alternatively, exclusively to the Edgepark Manor section, or alternatively, to the residential type of strata lot only.

[53]             This respondent seeks an accounting of all levies and payments for each of the petitioner’s strata lots; that the fines, penalties and interest charges be declared null and void.  Leave is sought to amend their petition to seek an order that certain bylaws were at material times invalid as contrary to the provisions of the Condominium Act and the Strata Property Act.

AUTHORITIES CITED

[54]             Some of the authorities cited include the following:

Ernest & Twins Ventures (PP) Ltd. v. Strata Plan LMS 3259, [2003] B.C.J. No. 2710 (B.C.S.C.); Oakley v. Strata Plan VIS1098, [2003] B.C.J. No. 2571 (B.C.S.C.); Strata Corp. LMS 509 v. Andresen, [2001] B.C.J. No. 225 (B.C.S.C.); Strata Corp. VR1767 v. Seven Estate Ltd., [2002] B.C.J. No. 755 (B.C.S.C.); Oakley v. Strata Plan VIS1098, 2003 BCSC 1700; Strata Plan LMS 608 v. Strata Plan LMS 608, [2001] B.C.J. No. 2116 (S.C.); Strata Plan VR 1767 v. Seven Estate Ltd., 2002 BCSC 381; Smith v. Read 1993 WL 1442486 (B.C.S.C.); Lim v. Strata Plan VR2654, 2001 BCSC 1386; Coupal v. Strata Plan LMS2503, 2002 BCSC 1444; Strata Plan LMS1537 v. Alvarez, 2003 BCSC 1085; Wilfert v. Ward, 2004 BCSC 289; Owners, Strata Plan VR 2654 v. Mason, 2004 BCSC 685; Butterfield v. The Owners, Strata Plan NW 3214, 2000 BCSC 1110; Strata Corp. LMS 509 v. Andresen et al, 2001 BCSC 201; Strata Plan LMS 608 v. The Apartment Owners of Strata Plan LMS 608 et al, [2001] B.C.J. No. 2116; Primero Cigar Imports Ltd. v. Strata Plan VR 2327, 2003 BCSC 175; Coupal et al v. The Owners Strata Plan LMS 2503, 2002 BCSC 1444.

THE INTERPRETATION ACT

[55]             The Condominium Act has been repealed, replaced by the Strata Property Act.  Section 35 of the Interpretation Act was referred to in argument.  That states, in part:

35(1) If all or part of an enactment is repealed, the repeal does not ... (c) affect a right or obligation acquired, accrued, accruing or incurred under the enactment so repealed.

[56]             Counsel for the petitioners is relying on a decision of Mr. Justice Preston in the Butterfield case where the court had to decide which of the two Acts applied.  Mr. Justice Preston found that because all of the relevant events occurred while the Condominium Act was in force, and the claim involved rights that had accrued under the Condominium Act, that Act applied.  In that case, the hearing was originally to take place before the Strata Act came into force, but was not heard until after that date, after July 1, 2000. 

[57]             In the subsequent case of Andresen, the court ruled that the Strata P