BC Supreme Court confirms winding up of strata over objections of minority group
January 4, 2018
BY Kevin Zakreski
In a wide-ranging decision on the Strata Property Act’s new provisions for winding up a strata, the BC Supreme Court has confirmed a decision to wind up that reached the new threshold of support by 80 percent of the owners.
The Owners, Strata Plan VR2122 v Wake, 2017 BCSC 2386, concerned “a four-storey, wood-frame structure with 33 units,” “which was constructed in 1988,” and which was located in the West End of Vancouver. The strata property was “facing increasing capital expenditures to maintain and repair the building and physical infrastructure.” It was also located in a part of the neighbourhood zoned for redevelopment.
Taking these factors into account, the strata “began exploring the possibility of a sale of the entire building to a third party.” An extensive process unfolded, leading to a special general meeting at which a winding-up resolution “received 27 affirmative votes (81.8%) and six negative votes.”
Following the vote, a petition to the court under the legislation was commenced, seeking
an order confirming, pursuant to ss. 278.1 and 284 of the SPA, a wind-up resolution passed by the owners at a special general meeting (“SGM”) on June 15, 2017 and/or alternatively on November 21, 2017. The petition also seeks approval of the sale of The Hampstead to Townline Ventures Inc. (“Townline”) pursuant to the terms of a purchase and sale agreement dated March 27, 2017 (the “PSA”).
The petition was opposed by various owners in the minority group that had voted against the resolution.
As the court noted, the core of the case concerned “issues relating to the interpretation of the winding-up provisions” of the act. These provisions were significantly changed by Bill 40 (2015):
Bill 40, among other things, amended the SPA by implementing the recommendations made in the British Columbia Law Institute Report on Terminating a Strata [PDF] No. 79, February 2015 (“BCLI 2015 report”) by reducing the unanimous consent provisions for winding-up and terminating a strata corporation to 80%.
The court received “extensive and detailed evidence relating to the process” leading up to the winding-up resolution, and provided a detailed examination of this evidence, the arguments of the parties, and the new provisions in the act. This examination led to the following detailed conclusions:
The winding-up provisions of the SPA [balance] the various legal rights, so that property rights are not to be given priority over other legal rights.
The opposing respondents argue that the court should consider that reasonable expectations of the owners who purchased their units prior to Bill 40 could live in their units as long as they wanted, or as long as they were able to live there. However, I agree with the petitioners that the SPA does not provide that the 80% provisions only apply to strata corporations that come into existence after the provisions came into force. The SPA has always provided for a wind-up and termination of a strata comprised of at least 10 strata lots, and where there is a 95% vote in favour of termination, to have the court declare the vote to be a unanimous vote.
In my view, the question should be: whether examined objectively, does all of the evidence support the assertion that owners who purchased prior to Bill 40, reasonably expected to live in their units as long as they wanted, or for the rest of their lives. I say the answer to that question must be no. Reasonable expectations are not static, but change over time with all of the surrounding circumstances.
It is not for the court to determine on this application the wisdom of the City’s decision on social housing, densification, or the re-zoning or the City’s West End Community Plan allowing for redevelopment of The Hampstead. Those matters are in the purview of the City. Thus, the impact of the proposed and existing redevelopment in and to the surrounding community, the loss of community heritage, the importance of preserving the City’s history, and the environmental impact of what is considered to be “premature redevelopment or demolition of the building” are not factors that ought to be considered by the court in considering “the best interests of the owners” under s. 278.1 or s. 284(3)(a). If I am wrong, they are not to be given undue emphasis in the face of more than 80% who want to sell the property to a developer.
I have also indicated that I do not accept the position of some of the dissenting owners that they will be displaced from their community, or that they will be unable to find similar condominium units and remain in the community, if the order confirming the wind-up and termination were made. The whole of the evidence satisfies me that with the proceeds from the proposed sale, all of the owners should be able to acquire comparable units in the West End, and on that point, a wind-up and sale is not significantly unfair to them.
While I understand the reasons why each of the opposing respondents do not want to move, I conclude that it would be significantly unfair to the majority of the owners if the orders sought by the petition were not granted; more than 80% of the owners would have their wishes thwarted by a small minority. Each owner of the supermajority would suffer a significant financial loss: the opportunity to receive roughly two and a half times what they would receive if they were to sell their unit individually, and the opportunity to remain in the community.
The evidence does not convince me that a winding-up resolution would or is significantly unfair to one or more of the owners. “Significant unfairness” in s. 278.1(5)(b)(i) and s. 284(3)(b)(i) encompasses oppressive conduct and unfairly prejudicial conduct or resolutions. It is conduct or consequences that are “burdensome, harsh, wrongful, lacking in probity or fair dealing, or has been done in bad faith.” The modifying term “significant” indicates that the “unfairness” must be oppressive or transcend beyond mere prejudice or trifling unfairness. It must be “unfairness” that is “of great importance or consequence.”: Dollan v. The Owners, Strata Plan BCS 1589, 2012 BCCA 44 (CanLII), paras. 25-28. The word “significant” imposes a more stringent threshold than simply “unfairness”: Jaszczewska v. Kostanski, 2016 BCCA 286 (CanLII) at para. 41.
The opposing respondents may feel stressed by having to move, and that being forced to move is not fair to them. I cannot find that an order confirming the winding-up resolution is significantly unfair to any of them.
While the opposing respondents contend that having to move from their home will cause “significant confusion and uncertainty” the SPA clearly contemplates that owners on a winding up of the strata corporation will have to move. I do not agree that having to move as a result of the termination of a strata corporation results in the kind of “significant confusion and uncertainty” in the affairs of the owners, within the meaning of s. 278.1(5)(b)(ii) or s. 284(3)(b)(ii).
In the result, the court decided that “the petitioners are entitled to the orders set out in the petition.”