Kelowna: Court rules owners of town houses must pay their share of cost to repair leaky condo tower in Kelowna


 

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Poloway v. Owners, Strata Plan K692,

 

2012 BCSC 726

Date: 20120522

Docket: S84849

Registry: Kelowna

Between:

James Michael Poloway, John Wayne Toljanich, Lorraine Dorothy Toljanich, William Rutherford Bradley, Deborah Louise Bradley, Gusbertus Bastiaan Bouma, Emma Josephine Bouma, Victoria Crompton, Nicholas John Kozuska, Elizabeth Gail Kozuska, Randall Yatscoff, Nancy Christine Yatscoff, Sherry Linn Priebe, David Gibbons and Carol Ponsford

Petitioners

And

The Owners, Strata Plan K692

Respondents

 

Before: The Honourable Mr. Justice Barrow

 

Reasons for Judgment

Counsel for the Petitioners:

J.D. Metherell

Counsel for the Respondents:

A. Murray

Place and Date of Hearing:

Kelowna, B.C.

January 11-12, 2012

Place and Date of Judgment:

Kelowna, B.C.

May 22, 2012


 

[1]             The petitioners are owners of townhouse-style strata lots within the respondent Strata Corporation (the “Strata Corporation”). They argue that the respondent has acted, and will act in the future, in a significantly unfair manner. The past unfairness relates to a special resolution put before a general meeting on April 30, 2011 (the “Special Resolution”). The future unfairness relates to costly repairs that are needed to the apartment tower within the development. The Strata Corporation proposes that those costs be borne by all of its members, including the owners of townhouses, on the basis of unit entitlement. The petitioners argue that to do so will result in them subsidizing repairs to a building that they have little connection with. They seek an order under s. 164 of the Strata Property Act, S.B.C. 1998, c. 43 creating “sections” within the Strata Corporation - one section for the townhouse-style strata lots and another for the apartment-style lots. They seek ancillary orders allocating the repair costs to the sections based on the building involved. The respondent argues that to allocate costs on the basis of unit entitlement is simply to follow the statutory regime, and in the absence of some reasonable expectation that another method would be used, that cannot be significantly unfair.

Background

[2]             The Strata Corporation was created with the filing of a strata plan in the Land Title Office in 1988. The property is comprised of 29 residential units housed in three buildings. Building A is a four-storey building containing 17 apartment-style strata units. Buildings B and C are single-storey buildings each containing 6 townhouse-style strata units. The petitioners are the owners of 10 of the 12 townhouse units.

[3]             The apartment building houses several amenities which benefit all of the strata lots in the development. Those amenities include a mailroom, a garbage collection room, and the primary water, cable and telephone hook ups for the development.

[4]             Between its creation and the year 2000 when the Strata Property Act came into force, the Strata Corporation functioned under the statutory framework contained in the Condominium Act, R.S.B.C. 1996, c. 64. Part 5 of the Condominium Act sets out the bylaws of strata corporations, and by s. 26 those bylaws applied until altered or repealed in a manner provided for by the Act. Part 5 included s. 128 which dealt with the allocation of common expenses. Although the Condominium Act did not define different types of strata lots, s. 128 (2) required that common expenses attributable to one or more types of strata lots be allocated to and shared by the owners of those particular strata lots in proportion to their unit entitlement. All other common expenses were required to be shared by all the owners in proportion to their unit entitlement to the entire condominium development. Section 128 read:

(2) If a strata plan consists of more than one type of strata lot, the common expenses must be apportioned in the following manner:

(a) common expenses attributable to one or more type of strata lot must be allocated to that type of strata lot and must be borne by the owners of that type of strata lot in the proportion that the unit entitlement of that strata lot bears to the aggregate unit entitlement of all types of strata lots concerned;

(b) common expenses not attributable to a particular type or types of strata lot must be allocated to all strata lots and must be borne by the owners in proportion to the unit entitlement of their strata lots.

[5]             Despite this statutory regime, the Strata Corporation did not allocate common expenses attributable to one type of strata lot solely to the owners of that type of lot; rather, except for the year 1991, the Strata Corporation’s budgets simply allocated all common expenses to all owners, regardless of whether the expenses were attributable to only one type of strata lot or not. The amended disclosure statement filed on March 22, 1989, foreshadowed the approach to common area expenses that the Strata Corporation would follow. Under the heading “Budget”, paragraph 6 (o) of that document provides in part as follows:

An estimated operating budget for a typical full year of operating expenses of the Strata corporation, based on current costs, is attached .... These common expenses will be allocated among the individual Strata Lot owners in the proportions that the Unit Entitlements of their respective Strata Lot bear to the total Unit Entitlements of all Strata Lots, and Exhibit “C” hereto gives the estimated monthly assessment for each Strata Lot based on the budget.

[6]             For the year 1991 the Strata Corporation changed the manner in which it treated the common area expenses that were attributable to one type of strata lot but not to others. Further, it seems that consideration was given to a similar approach in 1992. Uncertainty about this stems from a lack of minutes for that period indicating which of two proposed budgets was adopted by the Strata Corporation. There is a schedule of strata fees for 1991 and if fees were in fact levied based on that schedule then common area expenses were allocated according to the method prescribed in s. 128 of the Act. There is a “proposed” schedule of fees for 1992, and if it was adopted then common area expenses were shared by all strata lots in accordance with their unit entitlement and regardless of  whether the expenses related to only one type of strata lot.

[7]             What is clear from the material is that by 1993 the method of allocating common area costs associated with only one type of unit was becoming an issue within the Strata Corporation. The issue arose because expensive repairs to the fire sprinkler system in the apartment building were in the offing. One of the townhouse owners wrote to the Deputy Superintendent of Real Estate inquiring about how costs of that sort could be allocated. The Deputy Superintendant responded, and his letter and the issue more generally was the subject of discussion at an extraordinary general meeting of the Strata Corporation on September 29, 1993. The minutes of that meeting include the following:

Discussion of both letters [that is the letter to and the letter from the Deputy Superintendent] ensued. Owners recognized that there were a number of costs borne by the townhouse type units which were directly attributable to the highrise type units. However, it was stated that owners had agreed from the inaugural General Meeting onward that the Strata Corporation was to be treated “all as one” with the costs being apportioned among all units. It was decided to proceed with the meeting, but mention that the contents of the letter from [the Deputy Superintendent] had been received, and duly noted.

While nothing was decided at this meeting regarding the manner in which common area costs should be allocated, the minute is relevant in three respects. First, it tends to support the conclusion that the proposed budget that would have allocated common area costs according to unit type was not adopted. Second, it is an indication of what the owners knew about the cost sharing arrangements when they purchased their units. Third, it demonstrates that the Strata Corporation turned its corporate mind to the manner by which common area expenses should be shared.

[8]             It is clear that in the years since 1993 common area expenses have been shared by all strata units in accordance with their unit entitlement and without regard to whether the expenses related to one type of unit or another. This has been the case notwithstanding that on February 17, 1994 the owners adopted changes to the Strata Corporation’s bylaws. The changes were voluminous, and among them was the adoption of the cost allocation scheme envisioned by s. 128 of the Condominium Act. Thus, from 1994 forward the Strata Corporation should have been accounting for common area expenses by allocating those referable to one type of strata lot to strata lots of that type. In spite of the adoption of this approach in its bylaws, the Strata Corporation did not change the method by which it accounted for such expenses.

[9]             The ability to allocate common area expenses according to unit type changed with the coming into force of the Strata Property Act on July 1, 2000.

[10]         From 1993, when the fire suppression system in the apartment tower was replaced at a cost of just over $14,000, until 2007, there were at least four special levies imposed to cover the cost of various repairs. According to John Tolijanich, one of the petitioners, those levies totalled $213,922, and of that sum $42,000 was for repairs that benefited the complex as a whole; $51,717 was for repairs that benefited only the townhouse units; and $120,205 was for repairs associated with the apartment complex. In addition the Strata Corporation spent a further $90,000 to repair the balconies attached to the apartment units and to fix some associated water damage. These costs were treated as common area expenses and borne by all units regardless of type.

[11]         There remains some dispute as to whether the foregoing amounts are properly categorized as benefiting the apartment tower or the townhouses. When this petition initially came on for hearing in August 2010 Burnyeat J. adjourned the matter. He said that it would be of assistance if the Strata Corporation had its auditors prepare a list of past and future expenses allocating them according to the unit type benefited. That exercise has not been done for reasons I will mention below. All I am now asked to take from the evidence about how past expenses have been allocated is that it demonstrates that the townhouse owners have not disproportionately benefited from the uniform sharing of expenses. In other words this is not a situation in which the apartment owners have subsidized repairs to the townhouses, and that the townhouse owners are now seeking to avoid doing the same for in relation to repairs needed to the apartment tower. This conclusion is well supported by the evidence even if the cost of past repairs or their characterization is not entirely accurate.

[12]         What is not in dispute, and what prompted this petition, is that there are much needed and very expensive repairs necessary to address water ingress in the apartment tower. These expenses may exceed $2 million. The deficiencies that give rise to these costs first surfaced in 2007. From the outset, at least some of the townhouse owners have been concerned about how these costs would be allocated. In February 2009 the Strata Corporation held its annual general meeting. In advance of that meeting some of the townhouse owners, including the petitioners, requested that a resolution be placed before the meeting as provided for by s. 46 of the Strata Property Act. The resolution read:

The Bylaws of the Strata Corporation KAS692 be amended to provide for the creation and administration of separate sections for the town house style strata lots (strata lots 18 to 29) and the apartment style strata lots (strata lots 1 to 17) in accordance with Section 191 and 193 of the Strata Property Act. ...

The resolution was defeated by a vote of 10 in favour and 16 opposed.

[13]         The next event of consequence occurred in the spring of 2009 when the Strata Corporation’s insurers carried out an inspection of the development. In April 2009 they wrote to the corporation advising of a number of issues which, in an effort to reduce and manage future risks, needed to be addressed. On that list was water ingress in several of the apartment-style units. At a September 2009 meeting, council authorized the expenditure of $4,000 to have a professional building inspection done. In October 2009 this petition was filed. On January 31, 2010 the building inspection report prepared by Aqua - Coast Engineering Ltd. was released. The report noted significant water penetration problems primarily in relation to the cladding, the balconies and the skylights in the apartment tower. While it is not entirely clear exactly how much of these repairs relate to the apartment tower and how much relate to the townhouses, it is reasonable to assume that close to 90 percent of the costs would be for the apartment building.

[14]         Aqua - Coast provided three options for remedying the problems and the costs of those options ranged from just over $1 million to $1.14 million. The petitioners sought a second opinion and that opinion was provided by Timothy Spiegel, a professional quantity surveyor, on June 17, 2010. He estimated the costs, exclusive of soft costs, mark ups and the like, at $1.14 million. Of that sum, $954,035 was for repairs to the apartment tower and $186,665 was for repairs of the townhouses.

[15]         Votes at meetings of the Strata Corporation are allocated according to units; each unit has one vote. Given that there are 29 units of which 17 are apartments, the apartment owners hold 58 percent of the available votes and townhouse owners the remaining 42 percent. Allocation of common expenses is done according to unit entitlement, and the apartments have 57.9 percent of the units of entitlement while the townhouse owners have 42.1 percent.

[16]         When the petition came on before Burnyeat J. he had two concerns. One related to resolving the evidentiary conflict surrounding how to characterize the past expenses, that is, whether they related to the townhouses, the apartment tower or both. Burnyeat J.’s other concern was that the petition was premature insofar as the Strata Corporation had not yet resolved to proceed with the repairs. He therefore asked for the accounting noted above and ordered that the Strata Corporation convene a special general meeting prior to November 15, 2010 for the purpose of considering a special resolution to be prepared by the strata council dealing with the levy by which the repair costs would be funded. The resolution the council was to prepare was to be “fair to all owners”.

[17]         Following Burnyeat J.’s decision the owners of the Strata Corporation established an ad hoc committee with four members, two from each type of strata unit (the “Committee”). The Committee was charged with exploring the possibility of a consensual solution to the issue of cost allocation between the different types of units and with providing input on the resolution ordered by Burnyeat J.

[18]         Not long after the Committee was struck there was a serious rain storm in Kelowna which caused flooding in three of the apartments. Aqua - Coast was asked to revisit its recommendations in light of this additional damage. It issued its second report on January 17, 2011 (the “2011 Report”) (in the interim the parties had filed a consent order extending the deadline imposed by Burnyeat J.). In the 2011 Report the cost of remediation is estimated at just over $2 million. Of those costs, $1.88 million relate exclusively to the apartment tower and $137,838 relate to the townhouses. In percentage terms, just over 93 percent of the costs relate to the tower and just under 7 percent relate to the townhouses.

[19]         Armed with this new information, the Committee set about attempting to agree on an acceptable resolution to be placed before the special general meeting. The townhouse representatives on the Committee proposed that townhouse owners pay for the repairs to the townhouses recommended in the 2011 Report and contribute $200,000 towards the repairs necessary to the apartment tower. Further, they recommended that going forward any common area repairs to the apartment tower would be paid for by the owners of the units in the tower, and the townhouse owners would pay for repairs to their buildings; in neither case would there be contribution by owners in buildings housing one type of strata unit to repairs made to buildings housing another type of unit. The townhouse owners on the Committee thought that if the Committee could not agree on a resolution, then each faction on the Committee would put forth a draft resolution and council would put them in final form for presentation to the owners.

[20]         The apartment owners provided a counter proposal in which they suggested the townhouse owners would only contribute 33 percent of the cost of the remediation of the apartment tower (down from the 42 percent that would otherwise apply) but that all future repairs would be paid for in accordance with unit entitlement regardless of which type of building needed the repairs.

[21]         These drafts were given to the council who, after seeking legal advice, proposed the Special Resolution that would have had the townhouse owners contribute $300,000 to the remediation of the apartment building as well as pay for all the repairs to the townhouse buildings. As a percentage of the total cost, this amounted to just under 22 percent. Further, the Special Resolution included an explicit rejection of future sharing of costs otherwise than on the basis of unit entitlement without regard to which building the repairs may relate to. The Special Resolution was put before a special general meeting on April 30, 2011, and defeated by a vote of 19 opposed and 6 in favour.

[22]         After the April 30 meeting, the respondent retained Ms. Murray. She advised that it was not legally possible for the Strata Corporation to allocate costs otherwise than by unit entitlement unless the Strata Corporation passed a unanimous resolution to that effect or created sections. Given Ms. Murray’s advice on the matter, further attempts at a consensual resolution appeared doomed and the parties reset their petition.

Analysis

[23]         The petitioners seek relief under s. 164 of the Strata Property Act which provides that:

(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.

[24]         The parties agree that the definition of “significantly unfair” is that set out in Reid v. Strata Plan LMS 2503, 2003 BCCA 126, 12 B.C.L.R. (4th) 67. In that case Ryan J.A. approved of the definition of “significant unfairness” in Gentis v. Strata Plan VR 368 2003 BCSC 120, 8 R.P.R. (4th) 130, where at paras. 27-29 Masuhara J. held:

[27]      The scope of significant unfairness has been recently considered by this Court in Strata Plan VR 1767 v. Seven Estate Ltd. (2002), 49 R.P.R. (3d) 156 (B.C.S.C.), 2002 BCSC 381. In that case, Martinson J. stated (at para. 47):

The meaning of the words "significantly unfair" would at the very least encompass oppressive conduct and unfairly prejudicial conduct or resolutions. Oppressive conduct has been interpreted to mean conduct that is burdensome, harsh, wrongful, lacking in probity or fair dealing, or has been done in bad faith. "Unfairly prejudicial conduct" has been interpreted to mean conduct that is unjust and inequitable: Reid v. Strata Plan LMS 2503, [2001] B.C.J. No. 2377.

[28]      I would add to this definition only by noting that I understand the use of the word ‘significantly’ to modify unfair in the following manner. Strata Corporations must often utilize discretion in making decisions which affect various owners or tenants. At times, the Corporation’s duty to act in the best interests of all owners is in conflict with the interests of a particular owner, or group of owners. Consequently, the modifying term indicates that court should only interfere with the use of this discretion if it is exercised oppressively, as defined above, or in a fashion that transcends beyond mere prejudice or trifling unfairness.

[29]      I am supported in this interpretation by the common usage of the word significant, which is defined as “of great importance or consequence”: The Canadian Oxford Dictionary(Toronto: Oxford University Press, 1998) at 1349.

[25]         The Strata Property Act recognizes and permits the creation of “sections” within a strata corporation. Section 191 provides that:

(1) A strata corporation may have sections only for the purpose of representing the different interests of

(a) owners of residential strata lots and owners of nonresidential strata lots,

(b) owners of nonresidential strata lots, if they use their strata lots for significantly different purposes, or

(c) owners of different types of residential strata lots.

(2) For the purposes of subsection (1) (c), strata lots are different types if they fall within the criteria set out in the regulations.

[26]         Section 11.1 of the Strata Property Regulation, B.C. Reg. 43/2000, establishes three types of strata lots, including apartment-style and townhouse-style lots. Sections may be established either by the owner developer on depositing the strata plan or by the strata corporation following its creation. In relation to the latter, s. 193 of the Act provides in part that:

(1) To create or cancel sections, the strata corporation must hold an annual or special general meeting to consider the creation or cancellation.

(2) The notice of meeting must include

(a) a resolution to amend the bylaws to provide for either the creation and administration of each section or the cancellation of the sections, ...

(3) The resolution referred to in subsection (2) (a) must be passed

(a) by a 3/4 vote by the eligible voters in the proposed or existing section, and

(b) by a 3/4 vote by all the eligible voters in the strata corporation.

[27]         In Chow v. Strata Plan LMS 1277, 2006 BCSC 335, 54 B.C.L.R. (4th) 380 Taylor J. ordered the creation of sections pursuant to the remedial power in s. 164. The parties agree that this Court has the authority to order the creation of sections under s. 164; they disagree on whether anything done or proposed to be done by the Strata Corporation has been or will be significantly unfair.

[28]         The petitioners argue that two actions, one that has occurred and the other which is proposed, has been or will be significantly unfair. The past action is the manner in which the Strata Corporation dealt with the Special Resolution which Burnyeat J. wanted the Strata Corporation to consider. The proposed action is the imposition of a special levy that will be necessary to fund the repairs to the apartment tower.

[29]         It is the prospect of the special levy which is at the core of the petitioners’ concern and I will therefore deal with that issue first. The Strata Property Act prescribes how operating and other costs are to be shared. Section 99 sets out how the owners’ contribution to the Strata Corporation’s operating and contingency reserve fund are to be calculated. It provides that each owner is to pay that portion of such costs that the owner’s unit entitlement bares to the total unit entitlement of all the lots in the Strata Corporation. Repairs of the kind necessary to the apartment tower are not operating expenses and the contingency reserve fund does not and will not have a sufficient balance to cover them. As a result they will have to be funded by a special levy. Section 108 of the Actprovides that:

(1) The strata corporation may raise money from the owners by means of a special levy.

(2) The strata corporation must calculate each strata lot's share of a special levy

(a) in accordance with section 99, 100 or 195, in which case the levy must be approved by a resolution passed by a 3/4 vote at an annual or special general meeting, or

(b) in another way that establishes a fair division of expenses for that particular levy, in which case the levy must be approved by a resolution passed by a unanimous vote at an annual or special general meeting.

...

[30]         The Strata Corporation has a total unit entitlement of 3,537. The unit entitlement of the apartments range from 108 to 138 per lot and total 2,041 units or 58 percent of the total. The townhouse lots range from 118 to 150 per lot and total 1,496 or 42 percent of the total unit entitlement.

[31]         The 2011 Report groups the recommended repairs according to the urgency of undertaking them. The two most urgently needed repairs relate exclusively to the apartment tower. As noted above they are estimated to cost $1,882,406. The third category of repairs, those that are the least urgently needed, relate to the two townhouse buildings and are expected to cost $137,838. Assuming all the repairs are undertaken, the cost per unit of entitlement will be $571. The cost for each apartment-style lot will range from a low of $61,668 to a high of $78,798. The cost for the townhouse lots will range from $67,378 to $85,650. If the Strata Corporation is divided into sections and the repair costs are borne by the type of units to which they relate, the cost per unit of entitlement for the apartment-style lots would be $922 per unit. The cost to each apartment owner would range from a low of $99,576 to a high of $127,236. The townhouse owners’ cost per unit of entitlement would be $92. The individual owners would have to pay from $10,856 to $13,800.

[32]         Put in other terms, some 93 percent of the repairs relate to the apartment tower. If they are paid for by all of the owners contributing according to their unit entitlement, the townhouse owners will pay 42 percent of these costs. In terms of the impact on individual townhouse owners, they will be paying from between $56,522 to $71,850 more than if they were paying only for repairs to the buildings housing their units. This, they say, is significantly unfair.

[33]         The apartment owners on the other hand argue that they purchased lots in the Strata Corporation as a whole and on the assumption that every owner would contribute as provided for by theAct. If sections are created and costs allocated according to unit type and building benefited, then they will pay from between $37,908 to $48,438 more than they reasonably expected to pay. They also say that there is no history of treating the townhouse buildings differently than the apartment tower. Further, they argue they will be saddled with the additional administrative costs associated with running what will be in effect three strata corporations - the two sections and the umbrella Strata Corporation. Those costs they argue are not insignificant. Finally, they point out that there are amenities and services housed in the apartment tower which benefit the townhouse owners. To the extent that is so, repairs to the apartment building benefit the townhouse owners. Section 195 of the Strata Property Act provides that only the expenses that relate “solely” to the strata lots in a section are section expenses to be paid for by that section. If the townhouses benefit from the cost of repairs to the apartment building, then arguably the expense does not relate “solely” to the apartment-style units and is not an expense to be borne by only one section.

[34]         The petitioners argue that their situation is similar to that dealt with in Chow and to a lesser extent Shaw v. Strata LMS 3972, 2008 BCSC 453, 71 R.P.R. (4th) 255. The respondents argue that support for their position is found in  Strata Plan LMS 1537 v. Alvarez, 2003 BCSC 1085, 17 B.C.L.R. (4th) 63; Terry v. Strata Plan LMS 2153, 2006 BCSC 950; Peace v. Strata Plan VIS 2165, 2009 BCSC 1791; Liverant v. Strata Plan VIS-5996, 2010 BCSC 286, The Owners, Strata Plan VR1767 v. Seven Estate Ltd., 2002 BCSC 381, 49 R.P.R. (3d) 156 and Large, McCall v. Strata Plan No. 601, 2005 BCSC 1128, 34 R.P.R. (4th) 62.

[35]         An examination of this jurisprudence should begin with Alvarez, a decision of Bauman J. (as he then was). The issue in Alvarez related to the cost of repairs to the building envelop. The threshold legal question was whether the regime created by the Strata Property Act or the Condominium Act governed the allocation of those costs. In the course of answering that question Bauman J. considered the overall scheme of the Strata Property Act. He held at paragraph 35 that the organizing principle of the Strata Property Act is that “you are all in it together”.

[36]         The strata development in Alvarez consisted of eight units - two of which were in a heritage house while the other six were in a new building attached to the heritage house. The new building experienced water penetration problems and costly repairs were needed to remedy them. The Alvarezes, who owned one of the heritage units, did not want to contribute to the cost of the repairs, taking the position that the repairs did not benefit them at all. Bauman J. concluded that all of the units in the development were of one type, and thus the option of creating sections was not available. The question of whether the allocation of the repair costs in accordance with unit entitlement was significantly unfair was however considered. At paragraph 97 he wrote:

            From the perspective that this building is an integrated structural unit (albeit marrying old and new construction) there is nothing unfair or oppressive, as urged in the alternative by Mr. and Mrs. Alvarez, in the resolution of 15 October 2001. On the contrary, it is wholly consistent with the implicit representations made by the Alvarezes as owner developers of this project. That is to say, there was never any suggestion in the disclosure statement for this development but that common expenses would be shared by all units in accordance with their unit entitlement.

[37]         The repair costs in Alvarez were estimated at $160,000. The precise implications for the individual owners is not set out in the decision but, assuming relatively equal unit entitlement, the cost to the Alvarezes would likely be $20,000 if all contributed to the repair costs. If only those housed in the newly constructed portion of the building paid, then each of them would pay about $26,666.

[38]         Terry is another decision of Bauman J. It involved a phased strata development. All the units were of the same type and thus sectioning was not available as a remedy if the actions complained of were found to be significantly unfair. Phase 1 of the development had water penetration problems. The other two buildings did not. The cost of repairing the problems was variously estimated at between $2.9 million and $4 million. There were 302 units in the building. The repairs would cost between about $10,000 and $13,500 per unit. If only phase 1 units were required to shoulder the cost, the levy would be about $25,000 per unit (about half the units were in phase 1). The phase 1 owners sought declarations that the repairs were necessary and that there be a special levy applicable to all owners according to their unit entitlement. This was resisted on the ground that it would be significantly unfair. The court held that all owners in all phases were required to contribute to the cost of repairs. In reaching that conclusion Bauman J. adopted the more expansive definition of “significant unfairness” in Reid and then noted at paragraph 86:

I begin by noting that in each of the cases cited by counsel where "significantly unfair" conduct was found, there had been a history of past dealing or conduct which the strata corporation, in each case, was ignoring in pursuing the impugned action, usually against a distinct minority within the strata corporation...

He then concluded in paragraphs 100 and 102 that:

[100]    Nothing in the conduct of the strata corporation before the advent of Phases 2 and 3 can sustain a submission that the corporation has been "significantly unfair" to these new members. ...

...

[102]    The unfairness argument really falls away when one looks at what the Phase 2 and Phase 3 owners knew, or ought to have known, when they purchased their units. Nothing about the problem with the Phase 1 buildings was kept secret. The nature and extent of that problem was disclosed in the minutes of the strata corporation. The problem was also, eventually, more fully disclosed by the developer, at least to the extent of putting purchasers on their enquiry in the amended Disclosure Statement of October 2003. There is no suggestion that the Phase 1 owners delayed so as to subject the Phases 2 and 3 owners to responsibility for the repair costs.

[39]         The declarations requiring the strata corporation to effect the necessary repairs and allocate costs based solely on unit entitlement sought in Terry were, for the most part, made. The court found that it was not significantly unfair for owners in buildings that did not have water ingress problems to pay, according to their unit entitlement, for repairs necessary to the buildings that did have those problems.

[40]         The matter at hand has three circumstances that may serve to distinguish it from Terry. Those three circumstances are: firstly, in the matter at hand the buildings house different types of units; secondly, the expenses are not ones that anyone anticipated when they purchased; and finally, the expenses per unit of entitlement are significantly higher.

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