BC Supreme Court confirms Richmond strata’s winding-up resolution

12 April 2018

By Kevin Zakreski

Re Strata Plan NWS837, 2018 BCSC 564, is the latest in a stream of cases on terminating a strata property under the Strata Property Act’s new winding-up provisions.

The case involved a strata “known informally as ‘Ascott Wynde,’ ” consisting of “102 strata lots and associated common property, which are contained primarily in two free-standing buildings located . . . in Richmond, British Columbia.” The strata’s two buildings “were built in or around 1977” and “are now in need of significant maintenance and repair work.” Faced with substantial special levies to fund that work, the strata’s owners decided to meet to consider a winding-up resolution:

The meeting took place on January 30, 2018. 100 of the 102 units were present in person or by proxy. 86 votes were cast in favour of the Resolution, 13 were cast against it and there was one abstention. The two non-voting units were treated as votes against the Resolution. Having exceeded the requisite 80% approval threshold set out in s. 277(1) of the SPA, the Resolution was approved.

The “strata corporation, the registered owners of seven of its 102 strata lots and the proposed liquidator” then applied to the supreme court, by way of petition, “seeking an order confirming a winding-up resolution that was passed by the owners of a strata corporation at a special general meeting convened for that purpose under s. 277 of the Strata Property Act . . . and other related relief.” The petition was “opposed by six of the other owners.”

The outcome of Re Strata Plan NWS837 turned on the application of the burgeoning jurisprudence under the act’s new termination provisions:

The considerations that should guide the court in the application of the s. 284 test were recently considered by Loo J. in The Owners, Strata Plan VR2122 v. Wake, 2017 BCSC 2386 (CanLII) (“Hampstead”).

Even more recently, in The Owners, Strata Plan VR2702 (Re), 2018 BCSC 390 (CanLII) (“Barclay Terrace”), I had occasion to consider a similar application under s. 278.1 of the SPA, which is the provision that serves the same function in Division 2 that is served by s. 284 in Division 3. In doing so, I summarised some of the principles that have emerged from the jurisprudence, including Hampstead, to assist in the application of the test under both provisions, as follows: . . .

a) 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;

b) 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;

c) 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;

d) any alleged unfairness or uncertainty must be significant enough to override the interests of the majority who voted in favour of the winding-up;

e) 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

f) 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.

One further consideration was significant for this case:

One important difference between s. 284 and s. 278.1, the provision governing the application that was before me in Barclay Terrace, is that s. 284 must be read in conjunction with s. 285, which allows the court to “vary or dispense with any of the provisions in Division 2” whereas there in no such general power in Division 2 that can be invoked on an application under s. 278.1: Hampstead, at paras. 74-75. This means that in dealing with an application such as this under s. 284, I have greater flexibility to relax the requirements in Division 2, and so the first of the principles I identified in the summary quoted above must be read with that qualification in mind.

With these principles and this consideration in view, the court considered the arguments of the owners, which it described as “fall[ing] into the following broad categories”:

  • the information that council presented to the owners in advance of the vote was false or misleading in various ways;
  • the marketing process should have been conducted by a neutral party, such as a liquidator, because the council, the realtor and the law firm it hired all had a conflicting interest in consummating a sale;
  • the council failed to honour commitments that were made to the owners in respect of the process and the resulting PSA [purchase and sale agreement];
  • the cost and timing of the repairs that will be needed in the buildings were exaggerated in an apparent effort to induce the owners to vote for the Resolution;
  • the owners are receiving insufficient compensation;
  • it will be difficult for the owners to find comparable replacement accommodation in the area, particularly in the current market;
  • the process was undemocratic because those opposing the winding-up proposal were intimidated and not given a proper chance to be heard; and
  • the owners were not properly served with the court materials in advance of the confirmation hearing.

The court declined to accept any of these arguments, variously noting other reasonable explanations, a lack of prejudice to the cause of the respondents, and a failure to support an argument with evidence.

In the result, the court granted the requested order:

The opposing owners submit that the Resolution should not be confirmed because it is not in the best interests of the owners, it would be significantly unfair to them and would cause significant confusion and uncertainty in their affairs. The only basis I have found in the evidence to support that submission, apart from the difficulties some of them will face in having to move, is the failure to include a term in the PSA giving the former owners of Ascott Wynde “priority access” to acquire “a unit of choice” in the new development to be built on the site, as some of them were apparently promised.

Against this, I must weigh the interest of the strong majority in proceeding with the winding-up and sale that they voted for. Those owners who spoke in favour of the petition at the confirmation hearing and who conveyed their support for the petition in writing through petitioners’ counsel emphasized their concerns about the state of the buildings and the prospect of having to deal with the daunting maintenance and repair burden that otherwise looms on the horizon for them. They are unsure about whether it will be possible to get the needed levies approved and the expense actually paid without risking insolvency. Furthermore, they question the wisdom of investing so much money into a 40-year-old building, even if they could succeed in raising that money.

Having considered the evidence adduced and the submissions made to me, I find that it is in the best interests of the owners for the Resolution to be confirmed. I also find that it would probably cause greater unfairness, confusion and uncertainty if the Resolution were not confirmed.

I have therefore concluded that the Resolution should be confirmed and that the order sought by the petitioners should be granted on the terms sought.

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