Appeal of CRT decision will give BC Supreme Court opportunity to review the law on insurance deductibles and strata properties
March 22, 2018
BY Kevin Zakreski
In The Owners, Strata Plan BCS 1589 v Nacht, 2018 BCSC 455, the Supreme Court of British Columbia has granted leave to appeal a decision of the Civil Resolution Tribunal in a case involving damage resulting from a water leak in a strata lot. The appeal will give the court the opportunity to review key questions for insurance deductibles and strata properties, such as the effect of a strata corporation’s bylaws on the application of section 158 (2) of the Strata Property Act and the precedential value of Strata Plan LMS 2446 v Morrison, 2011 BCPC 519.
Facts and background
The court summarized the facts of the case as follows:
Briefly stated, there was a water leak in the respondents’ strata unit which caused approximately $87,000 in damage to the respondents’ strata unit, other strata units, and common property.
The costs of the damage were covered by the appellant’s insurance, except for a $25,000 deductible. The appellant paid the deductible and then sought reimbursement from the respondents. The respondents refused to pay.
The appellant then brought its claim to the CRT. The CRT heard the matter and ruled in favour of the respondents.
As the court also noted, “[t]o be granted leave, the appellant must show that there is a question of law arising from the CRT decision and that it is in the interests of justice and fairness for the Court to hear the appeal” (this being the court’s summary of section 56.5 of the Civil Resolution Tribunal Act).
Questions of law
The court found three questions of law for determination. “[I]n order to distill matters for the hearing judge,” the court concluded, “I have framed the questions of law as follows”:
- Can the by-laws of a strata corporation serve to narrow the application of s. 158(2) of the Strata Property Act, S.B.C. 1998, c. 43?
- What is the correct interpretation of by-law 4.4 of the appellant’s by-laws?
- Should the decision of the Provincial Court in Strata Plan LMS 2446 v. Morrison, 2011 BCPC 519 (CanLII) have application?
The bylaw noted in the second bullet point was quoted in the court’s judgment:
4.4 (a) An owner must indemnify and save harmless the strata corporation from the expense of any maintenance, repair or replacement rendered necessary to the common property, limited common property, common assets or to any strata lot by the owner’s act, omission, negligence or carelessness or by that of an owner’s visitors, occupants, guests, employees, agents, tenants or a member of the owner’s family, but only to the extent that such expense is not reimbursed from the proceeds received by operation of any insurance policy. In such circumstances, and for the purposes of Bylaws 4.1, 4.2 and 4.3, any insurance deductible paid or payable by the strata corporation shall be considered an expense not covered by the proceeds received by the strata corporation as Insurance coverage and will be charged to the owner.
(b) Bylaw 4.4(a) does not limit, in any way, the ability of the strata corporation to sue an owner pursuant to section 158(2) of the Act.
The court made the following general comments on the three issues of law:
With respect to the second question, this question comes into play if it is determined that, as a matter of law, a strata corporation’s by-laws may narrow the application of s. 158(2) of the SPA. The CRT interpreted by-law 4.4 as requiring the respondents to have been negligent before the appellant could recover against them.
With respect to the third question, this question covers the issues of stare decisis and whether Morrison was wrongly decided as set forth by the appellant.
Whether a strata corporation’s by-laws can narrow the scope of s. 158 of the SPA is a matter of statutory interpretation and, accordingly, a question of law which is determined by the correct legal test. The proper interpretation of by-law 4.4 of the appellant’s by-laws is also a question of law which is independent of the facts at bar and engages the correct legal test. Finally, stare decisis is a legal principle and its proper application is a question of law engaging the correct legal test, as is whether a particular decision (Morrison) was wrongly decided.
Interests of justice and fairness
The court was also satisfied, for the following reasons, that it was in the interests of justice and fairness for the court to hear the appeal:
Each question is of such importance that it would benefit from being resolved by this Court to “establish a precedent”. The questions are of importance to the parties and may affect the future relations of the appellant and the strata unit owners.
With respect to the first and third questions, this Court’s answers would be of importance generally to strata unit owners and strata corporations. The escape of water from a particular strata unit causing damage is, unfortunately, a common event with, as contemplated under s. 158(2) of the SPA, insurance in place necessitating the need to address the funding of the insurance deductible. With respect to the second question, the answer may also have general importance in that the meaning given to by-law 4.4 may serve as a precedent for others.
Arguable merit and standard of review
The court concluded its judgment by noting: (1) it “did not need to engage in an arguable merit test” in order to grant leave to appeal; and (2) it had no comments at this time to make on the applicable standard of review of the tribunal’s decision.
