BC Supreme Court confirms resolution to wind up West End strata corporation

BC Supreme Court confirms resolution to wind up West End strata corporation

March 14, 2018

BY Kevin Zakreski

In Re The Owners, Strata Plan VR2702, 2018 BCSC 390, the Supreme Court of British Columbia dealt with an application under section 278.1 of the Strata Property Act, confirming a winding-up resolution and appointing a liquidator.

The case involved “a 26-year-old, seven-story concrete building containing 36 strata units, located . . . in the West End of Vancouver.” As the court noted, the vote on the winding-up resolution reflected the fact that strata lots in the strata property had been bought up by two corporations looking to market the property for redevelopment:

The result of the vote was never in doubt. The Resolution was approved by the owners of 34 of those units, or 94%. Those 34 units are owned by only two corporations: Barclay Thurlow Property Inc. (“BTPI”), which owns 28 units, and Shepstone Investments Inc. (“Shepstone”), which owns six. . . .

The Majority Owners had gradually purchased those 34 units from their former individual owners in order to be in a position to drive the winding-up process so they can reap the significant redevelopment potential of the land.

The owners of two strata lots argued that the winding-up resolution shouldn’t be confirmed for the following reasons:

• [the resolution] was improperly amended at the SGM, contrary to s. 50 of the Act;
• they were not adequately consulted or kept informed during the sale process;
• the sale price is too low;
• [the strata corporation’s] allocated share of the sale price is too low; and
• the Sale Agreement contains deficiencies that may cause significant confusion and uncertainty, particularly if the proposed transaction does not close as contemplated.

The court rejected these arguments in turn. It began with an examination of previous winding-up cases, from which it derived “the following principles . . . to inform the application of the s. 278.1 test:”

• the statutory requirements in s. 277 and 278 of the Act must be complied with unless specific provision is made there or elsewhere in the Act to relax them;
• the onus is on the opposing respondents to establish the factors that would justify refusing an application for an order to confirm a winding-up resolution;
• in determining what is in the best interests of the owners for the purpose of s. 278.1(5)(a), the interests of all of the owners must be weighed, not just those of the dissenting minority;
• any alleged unfairness or uncertainty must be significant enough to override the interests of the majority who voted in favour of the winding-up;
• the kind of “significant unfairness” referred to in s. 278.1(5)(b)(i) includes conduct that is “burdensome, harsh, wrongful, lacking in probity or fair dealing, done in bad faith, unjust, or inequitable, and might extend to less severe conduct as well”; and
• in determining whether confirming or refusing to confirm the winding-up order would cause significant unfairness, the court must consider whether the evidence supports the reasonable expectation asserted and if so, whether that expectation was violated in a way that is significantly unfair.

Applying these principles, the court found that amendments to the proposed winding-up resolution didn’t violate section 50 of the act:

It is possible for an amendment to be one of “substance” (i.e., as opposed to procedure) but still “technical and relatively minor” so that it does not “substantially change” the resolution and thereby violate s. 50. That is indeed precisely what occurred in Thiessen. At para. 17, Beames J. described the impugned amendment in issue before her as being “an amendment of substance” that was nevertheless “technical and relatively minor” so as to be capable of being made without violating s. 50(2) of the Act.

In summary, I am not persuaded that any of the amendments that were made at the SGM, including the addition of the missing value estimates, were sufficiently significant to change the essential nature of the Resolution and thereby require a fresh notice period.

Further, the respondents hadn’t been prejudiced by the process to market and sell the strata property:

What legitimate expectation can the Minority Owners have to participate in the marketing and sale process in such circumstances? They cannot reasonably expect to exercise any measure of control or a veto over any deal that is struck. In summary, I am not persuaded that they have been prejudiced by the process that was followed.

The court also concluded that the respondents weren’t prejudiced by the sale price or the allocation of the sale proceeds between the two buildings that were subject to the transaction.

Finally, the court concluded that concerns about confusion and uncertainty can be “addressed by including terms giving effect to [the applicants’] assurances in the vesting order that the liquidator must seek under s. 279 of the Act. In addition, the vesting order should include a direction to the liquidator that the Minority Owners be given sufficient advance notice of the possession date to allow them to acquire new accommodation.” And the court also noted the relevance of section 276 of the act, which incorporates by reference section 325 of the Business Corporations Act. In the court’s view, “any confusion or uncertainty that may arise in the course of the winding-up process can be addressed through” the court application enabled by this provision.