BC Court of Appeal: Strata corporation entitled to recover actual legal costs for registering and enforcing lien
November 2, 2017
BY Kevin Zakreski
In The Owners, Strata Plan KAS 2428 v Baettig, 2017 BCCA 377, a decision released as October came to a close, the Court of Appeal for British Columbia clarified the reach of a strata corporation’s lien on a delinquent owner’s strata lot. Overturning a chambers judge’s decision, and rejecting an earlier BC Supreme Court case, the court found that the reference to “reasonable legal costs” in section 118 of the Strata Property Act entitled a strata corporation to recover its actual legal fees for registering and enforcing the lien, not just its “party-and-party” costs recoverable under the Supreme Court Civil Rules. This decision will have implications whenever the strata corporation is entitled to register a lien against a strata lot, that is when “the owner fails to pay the strata corporation any of the following with respect to that strata lot”:
- strata fees;
- a special levy;
- a reimbursement of the cost of work referred to in section 85;
- the strata lot’s share of a judgment against the strata corporation.
The decision also adds force to the court’s view that the lien is one way in which “the SPA ensures that every strata owner ‘pulls their own weight.’ ”
Facts and issues
Baettig involved a “resort community on Okanagan Lake.” After the strata-lot owner failed to pay her strata fees, the strata corporation registered a lien on title to her strata lot. Eventually, the strata corporation “petitioned the court for judgment in the amount unpaid and for an order for the sale of Ms. Baettig’s lot.” The order was made, but at a subsequent costs hearing “Master Young found that that there was no authority for awarding a strata corporation ‘full indemnity’ costs under s. 118 . . . . She awarded the Strata its costs at Scale B.” This ruling was upheld upon appeal to a justice of the supreme court in chambers, who followed an earlier supreme-court decision in First West Credit Union v Milligan, 2012 BCSC 610.
On further appeal to the court of appeal, the court considered the following issues:
- Whether the judge erred in concluding that registering a lien under the SPA falls within the definition of “proceeding” in R. 1‑1 of the Civil Rules; and
- Whether the judge erred in following Milligan and concluding that “reasonable legal costs” in s. 118 of the SPA means party and party costs.
Does registering a lien under the SPA fall within the definition of “proceeding” in rule 1‑1 of the Supreme Court Civil Rules?
The court began by noting that the chambers judge had concluded “registering a lien is a ‘cause’ or ‘matter’ ”—two terms used to define “proceeding.” The court disagreed, finding that the terms can’t be read in a way to extend the reach of the rules of court into out-of-court proceedings, such as registering a lien in the land title office. The upshot of this conclusion was:
The import of this determination is that the Civil Rules have no application to the legal costs of registering a lien pursuant to s. 116 of the SPA. Since “reasonable legal costs” in s. 118 includes the legal costs of registering a lien under s. 116, it makes no sense to interpret “reasonable legal costs” to include only party and party costs governed by R. 14‑1 of the Civil Rules. Doing so would mean that a strata corporation could not recover under s. 118 any costs attributable to registering the lien or other steps taken prior to the commencement of an enforcement action. I agree with the appellant that the legislature could not have intended this absurd result.
But the court cautioned that its conclusion on this issue “is not determinative of the measure of costs that may be added to the amount owing under the lien once enforcement proceedings [in court] have been commenced.” This point led to the court’s consideration of the second issue.
Did the chambers judge err in following Milligan and concluding that “reasonable legal costs” in s. 118 of the SPA means party and party costs?
The court identified this issue as the “central issue on appeal,” saying that it turned on the interpretation of the words “reasonable legal costs.” In interpreting those words, the court applied general principles of statutory interpretation, looking at the ordinary meaning of the words and their legislative history.
The court gave particular emphasis to legislative history, noting the contrast between section 118 and its predecessor provision, section 37 of the Condominium Act. The court noted that “[s]ection 37(9) of the old CA drew a distinction between the legal costs incurred by a strata corporation in registering a lien in the land title office versus those it incurred bringing enforcement proceedings before the court.” This distinction doesn’t appear in section 118. In another significant change, “the legislature also changed the wording used to describe the legal costs that may be added to the amount owing under a lien,” moving from “legal costs of a proceeding” (Condominium Act) to “reasonable legal costs” (Strata Property Act).
In the court’s view, these changes supported the broader purposes of the act and the specific purposes of its provision for a lien, which the court described as follows:
The scheme of the SPA in general, and ss. 116‑118 specifically, ensures that individual strata owners have clearly defined rights and responsibilities and provides legislative mechanisms designed to prevent compliant strata owners from being forced to shoulder the burdens created by delinquent owners.
Consistent with the philosophy underlying the SPA, the objectives of Part 6 [where the lien provisions appear] include: (1) keeping the strata corporation whole as to the reasonable costs it incurs; and (2) protecting compliant owners from the financial burden of taking recovery steps against delinquent owners who are unable to pay or otherwise refuse to pay their fair share in strata fees.
Applying these considerations, the court reached the following conclusion:
In my view, it is consistent with the remedial objective of ss. 116–118 and with the purposes of the SPA as a whole to interpret s. 118 as providing a strata corporation with the means to recover costs reasonably incurred in registering and enforcing a lien against a delinquent strata owner. If actual reasonable legal costs are not included in s. 118(a), legal fees not covered by the tariff must be borne by non‑delinquent strata owners by way of increased common fees. This would further increase the financial burden on owners who are paying their share. In my view, this interpretation would be inconsistent with the philosophy and scheme of the SPA.
In view of this conclusion, the court held that the two cases relied on by the chambers judge (Milligan and Canada Trustco Mortgage Co. v Gies, 2001 BCSC 1016) “were wrongly decided and should not be followed on this point.”
As a parting shot, court considered how its decision could affect third-party creditors, such as mortgagees. The court found:
adequate safeguards are built into the SPA. Section 118(a) provides that only reasonable legal costs may be added to the amount owing under the lien. In other words, a strata corporation is entitled to add to the amount owing under the lien its actual legal costs subject to this qualification: those costs must have been reasonably necessary.
In the result, the court “allow[ed] the appeal and set aside the orders made below” and “grant[ed] judgment in the appellant’s favour for the ‘amount owing under the lien.’ The ‘amount owing under the lien’ shall include the appellant’s reasonable legal costs incurred in registering and enforcing the lien, land title and court registry fees and other reasonable disbursements.”