Transfer of strata corporation’s lawsuit from small claims to supreme court must be authorized by three-quarter vote

13 March 2017

By Kevin Zakreski

According to section 171 of the Strata Property Act, before a strata corporation commences a lawsuit in BC Supreme Court, “the suit must be authorized by a resolution passed by a 3/4 vote at an annual or special general meeting.” In contrast, this authorization by resolution passed by a 3/4 vote isn’t needed “for a proceeding under the Small Claims Act against an owner or other person to collect money owing to the strata corporation, including money owing as a fine, if the strata corporation has passed a bylaw dispensing with the need for authorization, and the terms and conditions of that bylaw are met.”

What happens if a strata corporation commences a proceeding in small-claims court and then decides to transfer that proceeding to supreme court? The Strata Property Act doesn’t directly say whether a resolution is required for the now supreme-court proceeding. But a recent decision by a master of the BC Supreme Court has determined that a resolution authorizing the proceeding is needed when a small-claims proceeding is transferred to supreme court.

The Owners, Strata Plan KAS 3162 v Staerkle, 2017 BCSC 392, involved a dispute between the strata corporation and a strata-lot owner over restrictions on construction. The restrictions were based on a statutory building scheme that was in place on the land before it was stratified. After deposit of the strata plan, the strata corporation “adopted bylaws which included restrictions on construction on the same terms as the statutory building scheme.”

The strata corporation considered the owner to be in breach of this bylaw. The owner disputed this conclusion. Ultimately, the strata corporation levied fines on the owner, which the owner refused to pay.

As the fines mounted up, the strata corporation commenced an enforcement action in small-claims court. Eventually, “the fines had accrued to the point where they exceeded the $25,000 small claims limit.” The strata corporation applied under rule 19-1 (2) of the Supreme Court Civil Rules to transfer the proceeding to supreme court. While this application was initially unopposed, “roughly three months after the proceeding was transferred” the defendant owners first raised the issue of requiring authorization by a resolution passed by a 3/4 vote under section 171 (2) of the Strata Property Act.

While there were procedural aspects to the application before the master, the focus of the decision was on interpretation of section 171. The master summarized the positions of the parties as follows:

The Strata Corporation says that no authorization was required prior to the commencement of this proceeding because its bylaws authorize commencement of proceedings in small claims court without the need for authorization from the owners as contemplated under section 171(4) of the SPA. It says there is nothing in the legislation that requires authorization to continue with an action in Supreme Court upon transfer of an action that was validly commenced in Provincial Court.

***

The Strata Corporation says that there may be a gap in the legislation, but that I ought not to read into the legislation something that is not there and should therefore not attempt to fill the legislative gap. It says the only consideration under s.171(2) is whether authorization was needed at the time the proceeding was commenced and points out that this proceeding was so authorized as it was filed in Provincial Court. It refers me to R. 19-1(2) of the Supreme Court Civil Rules in support of the position that this is not a new proceeding, but rather is the same proceeding in a different forum.

***

The defendants say that the purpose of requiring the authorization is to ensure that the owners do not find themselves embroiled in litigation that they do not support. They say that the exception for small claims matters is reasonable, because costs are not generally awarded and the only matters that could be decided are financial matters. They contrast this with Supreme Court proceedings which, in addition to the possibility of adverse costs consequences, can include forced sales, injunctive relief, and other relief in rem.

The defendants say that the significance of R. 19-1(2) is that the transferred proceeding is treated as if it had been a Supreme Court proceeding from its commencement, which includes costs consequences should the action fail. The defendants also point out the possible mischief that could result if a strata corporation could commence a proceeding in small claims court and apply to transfer it to Supreme Court as a method of circumventing the need for authorization from the owners.

The master considered these arguments in relation to the earlier supreme-court decision in Dockside Brewing Co Ltd v The Owners, Strata Plan LMS 3837, 2005 BCSC 1209. In the master’s view “Dockside Brewing provides clear authority for the Court to consider the legislative purpose of s. 171(2) of the SPA in determining whether a three-quarter vote is required, despite there being no clear statutory requirement on a narrow reading of the SPA.”

Examination of the provision’s legislative purpose led the master to draw these conclusions:

The legislature has limited the ability of a strata council to bind a strata corporation by requiring that certain decisions require approval by resolution passed by the owners. The provisions of the SPA that require owner authorization restrict the ability of the strata council to bind the strata corporation and give the owners the opportunity to participate in those decisions deemed significant.

***

The ability of a strata council to expose the owners to the risk of a judgment for costs of a Supreme Court proceeding without their authorization is the sort of concern that s. 171(2) of the SPA was intended to prevent.

I see no difference in principle between litigation that was precipitated by the strata council in which the strata corporation was a defendant as in Dockside Brewing and the transfer to Supreme Court of a proceeding commenced in Provincial Court as here, and therefore the Strata Corporation requires authorization from the owners to continue this claim.

In the result, the master granted the defendants their order “to adjourn the summary trial unless and until the Strata Corporation is authorized to continue with this litigation by a three-quarter vote of the owners.”


Website by: Usable Web Designs