BC Supreme Court holds that compliance with statutory obligation to pay common expenses “cannot create an independent legal obligation between a strata corporation and the party to whom the expenses are paid”
November 3, 2017
BY Kevin Zakreski
Although Interville Development Limited Partnership v The Owners, Strata Plan BCS2313, 2017 BCSC 1947, is a case primarily concerned with civil procedure, the reasons for judgment do contain some interesting comments on section 14 (1) of the Strata Property Act. That provision requires a strata corporation to pay common expenses during the interim-budget period—or, as the legislation puts it, “[t]he strata corporation must pay the expenses that accrue in the period beginning the first day of the month following the month in which the first conveyance of a strata lot to a purchaser occurs until the date the first annual budget takes effect.” The court in Interville found that this section can’t be “stretched so far” as to make a strata corporation liable to reimburse the owner-developer for paying for ongoing maintenance obligations entered into by the owner-developer.
The substantive dispute in the case involved liability for upkeep costs for the Keefer Steps in downtown Vancouver:
The Keefer Steps were constructed in the mid-1990s, and they connect downtown Vancouver to the area known as “International Village.” International Village includes three towers known as the “Firenze,” which is one of a total of four developments undertaken by Interville in International Village. The Firenze is made up of the strata lots comprising the Strata Corporation.
The plaintiff, Interville, “seeks a declaration that the Strata Corporation is and was required on an ongoing basis to pay Interville the ‘Keefer Steps Costs’ . . . as invoiced and on demand by Interville. In addition, Interville seeks judgment for approximately $17,000, general and special damages, and restitution.” At issue in this judgment was a preliminary application brought by the strata corporation seeking an order striking Interville’s notice of civil claim “as disclosing no reasonable claim.”
Interville argued that its notice of civil claim disclosed four viable grounds for liability: “a statutory obligation (based on the operation of the Strata Property Act, S.B.C. 1998, c. 43); contract; estoppel; and unjust enrichment.” Its argument in connection with the Strata Property Act focussed on section 14 (1):
Interville says that the facts pleaded track the scheme of the Strata Property Act, in that (as pleaded) it took the necessary steps both to give notice of the obligation in relation to the Keefer Steps Costs in the disclosure statement and to bind the Strata Corporation to the obligation at the first annual general meeting and through the First Annual Budget (as defined in the NCC). Interville says that the scheme established by the Strata Property Act creates a legally unique relationship between the owner-developer and the strata corporation. Interville says that the Act provides for a transition of powers, duties and obligations from the owner-developer to the strata corporation at the first annual general meeting of the strata corporation. Prior to that transition, the owner-developer is required to carry out the functions and make commitments that the strata corporation will later acquire and be responsible for. As part of that transition, the owner-developer is required to deliver an interim and annual budget and comply with its disclosure obligations at the first annual general meeting.
The court rejected this argument, basing its conclusion on its interpretation of section 14 (1):
Interville relies in particular on s. 14(1) of the Strata Property Act to support this theory of liability. . . . However, I agree with the Strata Corporation that this provision does not assist Interville, and Interville has not cited any case authority to support the theory it advances. Indeed, Interville acknowledges there is no authority. The cases cited by Interville are not ones where the main issue concerned the existence of liability on the part of the strata corporation to the owner-developer for a financial obligation of the owner-developer. Section 14(1) does not create a substantive obligation between a strata corporation, as payor, and another entity, as payee. I agree with the Strata Corporation that, by fulfilling its statutory duty to pay expenses during the specific period described in s. 14(1), a strata corporation does not automatically bind itself to a contractual obligation to pay those expenses. Compliance with s. 14(1) cannot create an independent legal obligation between a strata corporation and the party to whom the expenses are paid. The language of the section cannot be stretched so far.
It follows that Interville has failed to plead a reasonable cause of action for liability on the part of the Strata Corporation for the Keefer Steps Costs based on the facts alleged and relying on s. 14(1) of the Strata Property Act.
In the result, “the amended notice of civil claim is struck out, with leave to the plaintiff to apply to amend” (with the court noting in passing its disapproval of using the construction “and/or” in pleading).