Incomplete interest schedule foils strata’s bid for termination

29 September 2017

By Kevin Zakreski

Re The Owners, Strata Plan VR 1966, 2017 BCSC 1661, was, as the court noted, the first contested case to consider the recently amended procedure to cancel a strata plan and wind up a strata corporation. The case illustrates the importance of strict compliance with the Strata Property Act’s requirements for employing this procedure.

The case involved a strata corporation consisting of “a three-story, wood-frame building containing 36 strata lots and associated common property,” located in the city of Vancouver. The strata was built in 1974 and “[l]ike many wood-frame buildings of its vintage, it is showing its age.” The strata had completed expensive repairs in 2015 and “[s]ome members of the strata council anticipate that more repairs are going to be required soon, perhaps as early as the next two years, at an estimated cost of approximately $711,880.”

“Prompted by their concerns about the work on the building that appeared to be needed and the capacity of the owners to continue to pay for it, as well as the recent changes to the Act,” the court noted, “a number of the council members embarked upon a process to consider the alternative of a winding-up and sale.”

The court described this alternative as process consisting of the following steps:

  • passing a resolution under s. 277 at an annual or special general meeting by a margin of at least 80% to cancel the strata plan and appoint a liquidator;
  • obtaining an order of this court under s. 278.1 confirming the resolution;
  • obtaining a vesting order from this Court under s. 279, on application by the liquidator, confirming the appointment of the liquidator and vesting the individual strata lots and common property in the liquidator for the purpose of selling them and distributing the proceeds of sale;
  • delivering the vesting order to the registrar of titles and filing of the vesting order by the registrar under ss. 280 and 281;
  • disposing of the property by the liquidator following approval by resolution passed by a 3/4 vote at an annual or special general meeting under s. 282; and
  • applying for dissolution following approval of the liquidator’s final accounts by 3/4 vote at an annual or special general meeting under s. 283.

A resolution to cancel the strata plan appoint a liquidator was “passed with 30 of 36 votes or 83.3%.” But when the case reached step (2) a wrinkle appeared. As the court noted:

Attached as Schedule A to the proposed winding-up resolution was an “interest schedule” that was required to be approved as part of the resolution pursuant to s. 277(3)(e). The interest schedule listed all of the information that it was required to include except for “the estimated value of the interest of each holder of a registered charge against the land,” as required by s. 278(1)(d).

That the interest schedule was missing this information only came to light after the court application had been launched. While the petitioner tried to correct the error, “[i]t was too late by then, however, to fix the deficient interest schedule that had been approved at the special general meeting.” This led to the issue in the case, which was

whether the petitioner can properly be said to have passed a valid winding-up resolution in accordance with s. 277, so as to be entitled to bring the application under s. 278.1(1)(a), when it has not complied fully with s. 278.

The petitioner argued that “its failure to list the requisite value estimates in the interest schedule was merely a ‘rectifiable procedural irregularity,’ ” which “should not prevent the owners who voted in favour of the resolution from obtaining the requisite court confirmation to permit them to proceed with the winding-up and sale that they approved.” The court rejected this argument:

I am unable to accede to those submissions. To overlook the deficiency as the petitioner urges would be to rewrite the legislation. The legislature has determined that the value estimates are one of the essential ingredients in a valid winding-up resolution. There is therefore no mechanism in the Act to “rectify” their omission, regardless of whether it may have caused prejudice or not.

In coming to this conclusion, the court made the following general comments on the new procedure:

While I agree that the application of the rule calling for a strict construction of expropriation statutes must be sensitive to the context, and in this case one must account for the shared ownership regime and the strong majority support for the winding-up resolution demonstrated by the vote, that context does not change the fact that this is still an involuntary taking of a home. It must, at a minimum, be done according to law. This is not a case in which there is an ambiguity in the legislation. The legislation is clear. What I am being asked to do here is to ignore a clear, mandatory provision in the legislation, rather than to resolve an ambiguity.

In the result, the court dismissed the petition.

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