Surrey, LMS 869 & LMS 1588: Condo owners lose suit claiming significant unfairness in cost-sharing agreement for recreational centre

Citation:

Frechette and Meagher v. Crosby Property et al

Date:

20070528

2007 BCPC 0174 

File No:

05-08018

 

Registry:

Vancouver

 

 

IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

    

 

 

 

BETWEEN:

RICHARD FRECHETTE and LARRY MEAGHER

CLAIMANTS

 

 

AND:

CROSBY PROPERTY MANAGEMENT LTD / THE OWNERS

STRATA PLAN NO. LMS 1588 / THE OWNERS STRATA PLAN NO. LMS 869

    

DEFENDANTS

 

 

   

    

   

 

 

 

 

REASONS FOR JUDGMENT

OF THE

HONOURABLE JUDGE P. R. MEYERS

 

 

 

 

 

 

 

 

Appearing in person:

R. Frechette and L. Meagher

Counsel for the Defendants:

V. Franco

Place of Hearing:

Vancouver, B.C.

Dates of Hearing:

November 17, 2006 and April 12, 2007

Date of Judgment:

May 28, 2007

             

 


 

[1]        This case involves two residential / commercial strata title buildings, built side by side, by the same Builder / Developer.  The first building (a 186 residential unit building) was built in 1992.  The second smaller building (a 122 residential unit building) was built in 1994.  In contemplation of the construction of the second building, in 1993, an Easement Agreement concerning common usage of the recreation centre by the two strata titled buildings, was registered in the Land Titles Office.

[2]        The registered Easement Agreement set out that each residential strata owner of the two buildings, would be responsible for an equitable share of all costs pertaining to the management, operation, control and maintenance of the recreation centre (clause 5 of the registered Easement).  The Easement Agreement set out how each owner’s “proportionate share” of the costs, was to be calculated:

Section 5. (b)           For the purposes of this Agreement, “Proportionate Share” shall, for each Transferee and the Strata Corporation, mean a fraction which has:

 

(i)      as its numerator the aggregate of the habitable area, expressed in square meters, of each and every residential strata lot located on the Dominant Lands of the Residential Strata Lots, as the case may be, which has been substantially completed for all purposes under the Builders Lien Act (British Columbia) and which has been either sold or rented by the developer of such strata lots, provided that “habitable area” shall mean the unit entitlement of the residential strata lots for any lands which are stratified; and

 

(ii)      as its denominator the sum of the numerators of the fractions constituting the Proportionate Share for each of the Dominant Lands and the Residential Strata Lots.

 

[3]        As required, the Strata Plan relating to each building was filed in the Land Titles Office.  Each Strata Plan included the usual “Unit Entitlement” calculations for each of the individual strata units.

[4]        The Claimants bought their strata lot in 1994.  They purchased their unit, not from the Builder / Developer, but from the first purchaser.  They purchased Strata Lot #36 which was in the smaller of the two buildings.  The recreation centre was in the larger building and up and running when they moved in.  They had free access coming and going to the recreation centre by walking through a hallway connecting the two buildings. 

[5]        The Strata Plan for their building, filed at the Land Titles Office, showed Strata Lot #36 as having a “unit entitlement” of 826 sq. ft.

[6]        The Claimants have three complaints: (1) they argue that the “cost sharing” for the recreation centre, as per the Easement Agreement, is supposed to be “on an equitable basis” and that a proper interpretation of the formula set out in clause 5 of the Easement Agreement, should have been interpreted as each residential unit being required to pay their proportionate share of recreation centre costs, according to the individual strata unit’s “habitable area”.  They argue that when the Easement was filed, the Builder / Developer had contemplated that the second building would be of the same size as the first building.  They argue that, to base cost sharing on “unit entitlement”, rather than “habitable area”, is not equitable and not in keeping with the intent, wording and spirit of the Easement Agreement.  It should be pointed out however, that clause 5 (b)(i) of the Easement Agreement, specifically states that “habitable area shall mean the unit entitlement of the residential strata lots for any lands which are stratified… .”; (2) they argue that the Easement Agreement provided that the owners of the strata lots in both buildings were to be treated equally, have equal access and equal use of the recreational centre, notwithstanding that it was situated in the larger building. Their argument is that when they first bought their property in 1995, they were able to go up and back from their unit to the recreation centre via an unlocked indoor hallway between the two buildings.  Later on, their access was changed due to construction and required that they travel through the dusty, stale, underground parking lot to get to the recreation centre and when it came time to leave, they would have to exit the (bigger building) and walk a ways outside to regain access to their building, through their front door.  The strata unit owners in the building housing the recreation centre, of course, had access to and from the recreation centre via indoor hallways and did not have to go underground or outside.  The Claimants say that is not equitable nor equal treatment of all strata owners as per the Easement Agreement; (3) with respect to the relief that the Claimants seek, that is, that the Defendants reimburse them for their past over payments respecting the cost sharing formulas, they argued that a formula based upon “unit entitlement” versus “habitable metres” would net different figures.  They argued that the terms “unit entitlement” and “habitable metres” were not the same.  They calculated that if the costs sharing formula were based on “unit entitlement” their building would pay $49.5% of the costs; if the cost sharing formula were based upon “habitable metres”, their building would pay 49.82% of the costs.  The difference insofar as the Claimants’ unit is concerned, works out to a difference of only about $2.50 per month.

[7]        The three complaints were voiced continually by the Claimants since 1995.  Crosby Management were the Property Managers for both buildings from the beginning and continue to be the Property Managers for both buildings.

[8]        The Claimants were finally “fed up” with complaining about the (alleged) inequities for over a decade, so they decided to sue for damages in Small Claims Court.  They named as Defendants, their own Strata Corporation, their next door neighbours’ Strata Corporation and Crosby Management.

[9]        At the outset of the trial, counsel for all Defendants raised the argument that the Small Claims Court is the wrong venue for this type of court action.  They argued that the Small Claims Court, pursuant to s. 3 of the Small Claims Act, and sections 163, 164, 165 and 246 of the Strata Property Act, precluded this case from being heard and adjudicated in the Small Claims Court.  They argued that the Provincial Court lacked the statutory jurisdiction to hear and decide the case.  They argued that the Claimant’s case had to be filed, heard and decided in the Supreme Court of British Columbia.

[10]       The Defendants’ counsel referred to the legislation (supra) and cited case law, to support their argument that the Small Claims Court lacked the jurisdiction to hear this case because, “in pith and substance” the Claimants’ case was about seeking monetary damages and relief for what they saw as “significantly unfair decisions and actions” by the two Strata Corporations and their common Property Manager.  The “significantly unfair decision and actions”, concerned the two Strata Corporations and the Property Management Company, failing to assure that the cost sharing and the of the recreation centre was fair and equitable to all of the owners, including them.  The Defendants argued that the Claimant’s cause of action, fell directly within the ambit of s. 164 of the Strata Property Act and the cause of action could only be pursued in the Supreme Court of British Columbia.

[11]       I agree with the submissions of counsel for the Defendants: the Small Claims Court does not have the jurisdiction to decide this Claim nor award the remedies requested.  The reasons that I have come to this conclusion, are as follows:

(i)         The Strata Property Act, in sections 163 and 164, under the Heading, “Suits Against the Strata Corporation”, sets out the following:

 

Division 1 – Suits Against the Strata Corporation

 

Strata corporation may be sued

 

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

 

(2)      An owner may sue the strata corporation.

 

SBC 1998-43-163, effective July 1, 2000 (B.C. Reg. 43/2000).

 

Preventing or remedying unfair

acts

 

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

 

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

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

 

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

 

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

 

(b)     vary a transaction or resolution, and

 

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

 

SBC 1998-43-164, effective July 1, 2000 (B.C. Reg. 43.2000).

 

Other court remedies

 

165    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 a duty it is required to perform under this Act, the regulations, the bylaws or the rules;

 

(b)  order the strata corporation to stop contravening this Act, the regulations, the bylaws or the rules;

 

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

 

 

[12]       The essence of the Claim at Bar is that the two Strata Corporations and the Property Management company, failed to act fairly and in accordance with the Easement Agreement, in order to ensure that the Claimants’ were charged properly and equitably for their share of the recreation centre costs and to ensure an ease of access to the recreation centre, which was equal to that of owners of the units next door to them.  Whether the Claimants use the terms “significantly unfair actions”, “oppressive conduct” (the wording in the former Condominium Act”) or simply “a failure in governance”, by the Strata Corporations and the Property Management company, their complaints fall squarely within the ambit of section 164 of the Strata Property Act.  Section 164 of the Strata Property Act specifically, requires that cases based on complaints about the way the strata corporation makes and applies decisions, be heard in the Supreme Court.

[13]       See also the cases of Heliker v. SPVR 1395 [2003] B.C.J. No. 2424 (Prov. Ct. of B.C.), paragraphs 7 – 9; Clappa v. Parker Management [2003] B.C.J. No. 1980 (Prov. Ct. of B.C.); McNeill v. Strata Plan KAS1099 [1996] B.C.J. No. 2553 (Prov. Ct. of B.C.); Seller v. Singla Bros. Holdings Ltd. [1995] B.C.J. No. 2826 (Prov. Ct. of B.C.).

[14]       The Claimants cited two cases, which they argued supported their argument that the Provincial Court had the jurisdiction to hear and decide their Claim.  The first case was David v. Vancouver Condominium Services Ltd. [1999] B.C.J. No. 1869 (Prov. Ct. of B.C.).  The David case was entirely different from the case at Bar.  In the David case, the management company (following the directions of the Strata Council), authorized the claimant to hire a person to repair the water damage caused to his unit.  They promised to reimburse him the costs of his repairs.  When the claimant’s bill came in, the management company refused to reimburse him in full.  The claimant sued in Small Claims Court for breach of contract.  Clearly, there was a privity of contract between the management company and the owner (David).  The Provincial Court Judge ruled that the Provincial Court had jurisdiction because it was a simple case of a contract entered into between two parties (David and the management company), one party breached the contract (the management company), so the other party (David),was able to sue the management company in Small Claims Court.  Plain and simple, this was a private contract between David and the management company and fell outside of the legislative scheme envisioned in the Strata Property Act.  The facts, the allegations and the claim in the case at Bar, are totally different from those in the David case; the David case was decided under the provisions of the former Condominium Act, not the current Strata Property Act and; the Strata Property Act was drafted in such a way to clear up some of the jurisdictional ambiguity that existed within the former Condominium Act.

[15]       The other case relied upon by the Claimants was Valana v. Law [2005] B.C.J. No. 2820 (Prov. Ct. B.C.).  In that case, the claimant and the defendant were both strata owners in the same building complex.  The defendant’s dog mauled the claimant’s dog.  The defendant’s dog was on the common property and the claimant’s dog was on its owner’s limited common property, i.e. their patio.  The dogs were separated by a fence, a fence that apparently was in poor condition.  The defendant third partied the strata corporation on the basis that the strata corporation had not properly maintained the fence and that resulted in making a dog attack, a foreseeable occurrence.  In my view, the Valana case (supra) is distinguishable from the case at Bar.  In paragraph 52, His Honour Judge Chen concluded his Decision as follows:

In my view, the cause of action described in the Third Party Claim does not fall within the ambit of section 164 of the Act.  It is not an action seeking relief from a significantly unfair decision or action by the strata corporation.  It is simply an action in negligence alleging a breach of a duty of care.

 

[16]       The case at Bar is an allegation and claim of significant unfairness, not an allegation and claim of negligence.  Accordingly, the case at Bar does fall within the ambit of s. 164 and must accordingly be heard in the Supreme Court and not the Provincial Court.

[17]       The Defendant Crosby Management Company acted only and always, as an agent of the Strata Corporations.  Their involvement in the strata complexes, came about as a result of a management contract entered into by Crosby Management Company and the two Strata Councils (on behalf of their respective strata corporations).  Whatever they did or did not do, was strictly as an actual and lawful agent of the Strata Corporations.  In this case, it is clear that they were following the directions of the two Strata Corporations and their legal status was only as an agent acting within their actual scope of authority, as given to them by the Strata Corporations.  Their actions or inactions, can only serve to attach liability to the Strata Corporations.  Any individual liability of Crosby Management Corporation, would arise only if they were either sued directly by or third partied by, the Strata Corporations and that was not the situation in this case.  In fact, apparently both Strata Corporations, were in the past and still are now, content with their implementation and enforcement of their Strata Councils’ decisions respecting the cost sharing and usage of the recreation centre.  It is the two individual owners of Strata Lot #36 who have brought this action on behalf of themselves, alleging that Crosby’s actions in not resolving these issues for over a decade, amounted to a significant unfairness to them.  The Claimants cannot speak on behalf of the other 307 owners.  It must be remembered that: (a) Crosby Management simply carried out the decisions and directions of the Strata Councils and the Strata Councils have registered no complaints with the way they have managed the properties; (b) Crosby Management Corporation, along the way, set up a “Liaison Committee” composed of owners from each building, with a view to resolving the issues raised by the Claimants.  The Claimants chose not to be a part of that Liaison Committee; (c) other than the first year, neither Claimant ran for a position on the Strata Council; (d) neither Claimant attempted to have a Special Resolution put on the agenda of a strata owners’ meeting, moving to change the cost sharing arrangement then in place or to alter the awkward access to the recreation centre for all of the owners in their building; (e) it is true, that repeatedly, for over a decade, the Claimants raised these issues at Strata Council meetings and general meetings, but prior to acquiring their unit, the Easement Agreement was available for them to see, as were the financial statements and budgets, showing exactly how the shared costs of the recreation centre were being calculated.  These documents were readily available to them before they purchased their unit.  The Claimants testified that they did not see the Easement Agreement prior to purchasing their unit.  Apparently, the Notary Public who attended to their purchase, did not review the Easement Agreement with them.  The Claimants testified that they probably had ordered copies of the financial statements, budgets and minutes of past strata meetings, but were unable to specifically recall whether they actually looked at them to see how the recreation centre costs were being assessed and shared, between the two strata buildings.  Presumably, had they read the documents before completion of the conveyance, they would have been alerted to what they may have viewed as a significant problem and then may have decided not to buy the property.  Even if the jurisdictional issue, had not been fatal to the Claimants:  (i) Crosby Management did what they did at the direction of the Strata Councils; they were the lawful “agents” of the Strata Corporations;  (ii) All of the owners in both complexes were subject to the same bylaws, same rules and same formula for cost sharing and all of the owners in the Claimants’ building had identical access routes to the recreation centre.  The Claimants were treated “equally”:  The Claimants failed to prove on the balance of probabilities that Crosby Management Corporation or the Strata Corporations’ actions, amounted to “significant unfairness”.

[18]       In conclusion, the Claimants’ Claim against all three Defendants is dismissed.  The reasonable costs, including filing and service fees incurred by the Defendants, are to be reimbursed to them, by the Claimants.  Counsel for the Defendants shall submit their costs in writing to the Claimants and unless those costs are disputed by the Claimants as being “unreasonable”, those costs shall be paid to the Defendants within four weeks of receipt by the Claimants.  Should the Claimants wish to contest the reasonableness of the Defendants’ Costs, they can set the matter down for hearing, discussion and decision by the Registrar of the Provincial Court of British Columbia at Robson Square, 800 Hornby Street, Vancouver, British Columbia.

 

 

________________________

P. R. Meyers, P.C.J.