Judgment in long-running dispute addresses powers of sections, voting
November 23, 2016
BY Kevin Zakreski
Yang v Re/Max Commercial Realty Associates (482258 BC Ltd), 2016 BCSC 2147, is the latest judgment in a dispute that has spawned two other BC Supreme Court decisions: Yang v The Owners, Strata Plan LMS 4084, 2010 BCSC 453, and Yang v 482258 Ltd (Re/Max Commercial Realty Associates) (21 January 2014), Vancouver S134432 (SC). Yang (2016) addressed a wide array of issues between the parties, largely concerning strata-property governance and the authority of sections. The case is noteworthy for its comments on section powers regarding common property and voting.
Facts and issues
The case concerned “a large strata complex in Richmond, British Columbia, consisting of 346 units in a number of separate buildings.” The strata property was made up of two apartment buildings, townhouses, and a mixed-use building (with apartments, townhouses, and commercial units).
In 2002, the strata corporation formed three sections: a commercial section, a townhouse section, and an apartment section. In 2006, the strata corporation changed strata managers.
Early in its tenure, the new management company discovered some issues with the strata’s handling of common expenses:
the allocation of expenses between the Strata Corporation and the Strata Sections did not comply with the Strata Property Act or the Strata Corporation’s bylaws. A number of expenses that had been allocated to specific sections were in fact common expenses and should not have been treated as section expenses. They recommended that those expenses be reallocated to the common budget of the Strata Corporation.
The strata corporation adopted these recommendations at its 2007 annual general meeting.
In December 2007, the petitioner purchased a townhouse strata lot. “Shortly thereafter the petitioner took issue” with the management company’s management of the strata property. The nub of the dispute between the petitioner and the strata property’s management was the 2007 reallocation of certain expenses, particularly those related to landscaping, electricity, and fire safety and security. The petitioner favoured the old system, in which these expenses were the responsibility of sections, rather than the strata corporation as a whole.
The petitioner’s two previous court proceedings were unsuccessful. In view of those earlier judgments, the court in Yang (2016) concluded that a number of issues raised by the petitioner should be dismissed as res judicata or abuse of process. Despite this conclusion, the judgment in Yang (2016) contained 15 subdivisions, addressing issues and aspects of issues raised by the petitioner. The discussion in a pair of these subdivisions is worthy of highlighting. This discussion concerned the scope of section authority over common property and voting in strata-council elections and at strata-council meetings.
Sections and common property
The townhouse section purported to adopt two resolutions by 3/4 votes giving it authority over certain common expenses and over repairs and maintenance of common property. The court found both resolutions to be ultra vires the section’s powers. On the first resolution, the court concluded:
This resolution is an attempt to circumvent the decision of Wedge J. [in Yang (2010)] by purporting to allow the Townhouse Section to take responsibility for common property expenses that benefit the Strata Corporation and not just the Townhouse Section. She had found that expenses such as landscaping, electricity, fire safety and security, mechanical, garbage disposal and recycling and irrigation and fountains benefited the townhouse strata lot owners making them common expenses of the Strata Corporation. The July 22, 2010 resolution would mean that such expense were to be divided among the sections rather than paid from the common budget. That is contrary to s. 194(2) of the Strata Property Act, which provides that a sections’ governance only extends to matters that relate solely to the section. The resolution is therefore ultra vires of the section. Since the expenses involved are not limited to matters related solely to a section neither the Strata Corporation nor the sections can pass resolutions that divide responsibility for the payment of common expenses other than on the basis of unit entitlement.
The court found that the second resolution raised two issues: “The first is whether it contravenes the Strata Property Act and the second is whether a Strata Section can take responsibility for common property.” The court decided this point on the basis of the first issue.
The resolution in question purported to amend the strata corporation’s bylaws, and the court found this to be a contravention of section 197 (2) of the Strata Property Act:
This bylaw attempts to take responsibility for repairs and maintenance matters that are the responsibility of the Strata Corporation and do not relate only to the section. In addition it appears to be meant to apply to all sections making them responsible for common property that is described as “appurtenant to a section” and is not restricted to “limited common property.” As the Strata Property Act makes clear, this is something a section cannot do and is therefore also ultra vires.
In addition the bylaw is vague. What “appurtenant” means and what common property is appurtenant is not defined. The bylaw fails to provide for delineation of the area or a means of doing so.
The court declined to address the second issue.
Yang (2016) addressed two aspects of voting.
The first was voting for strata-council members at an annual general meeting. The strata corporation’s bylaws required “that the Strata Council have at least three and not more than seven members.” The strata corporation had a practice, when seven or fewer individuals volunteered to serve on council, of declaring those individuals to be elected by acclamation, without an actual vote being taken.
The petitioner argued that this practice was in breach of section 25 of the act:
Section 25 of the Strata Property Act states that at each AGM the eligible voters at the meeting must “elect” a council. The petitioner submits that where the council is acclaimed the Strata Property Act is breached. He argues that the use of the word “elect” requires that the owners vote, even if the number of members running for council is seven or less apparently on the basis that if council is constituted by acclamation then individuals who are not supported by the majority could end up on council.
The court noted that the word election “is not defined in the Strata Property Act.” It turned to two dictionaries in order to interpret the word and found that “[n]either definition requires that there be a vote and both recognize acclamation as a means to elect an individual or individuals.” The court also found “additional support that acclamation is an effective means to elect a strata council without the need for a vote in s. 41(1) of the Strata Property Act.”
The court dismissed an argument based on section 50 (1) of the act as requiring election of strata-council members by a majority vote:
The difficulty with the petitioner’s argument is that a “majority vote” occurs in the context of an election and “election” is not a defined term. However, “election” as noted above can include choosing an individual or individuals by acclamation. As for the argument that not having an election even when seven or fewer individuals run for office could result in individuals ending up on the council without the support of the majority one answer to such a concern is for the majority to ensure that sufficient owners run for office and thereby force a vote.
But the court did allow that “given the uncertainty over this issue and the potential acclamation of a nominee to council that the majority do not support, it is better practice to avoid elections by acclamation and require a vote where a majority has not approved a resolution to have an election proceed by acclamation.”
The second voting issue raised by the petitioner concerned decisions made at strata-council meetings. The petitioner argued that “all decisions of council must be approved by majority vote.” This argument was based partly on the definition of “majority vote” in section 1 of the act and the strata corporation’s bylaw 18:
18 (1) At council meetings, decisions must be made by a majority of council members present in person at the meeting.
(2) Unless there are only 2 strata lots in the strata plan, if there is a vote at a council meeting, the president may break the tie by casting a second deciding vote.
(3) The results of all votes at a council meeting must be recorded in the council meeting minutes.
This bylaw is identical to bylaw 18 of the act’s schedule of standard bylaws.
The respondents argued that the bylaw “simply requires that the majority of council approve a decision and that it does not specifically require council members to conduct a formal vote with respect to each decision.”
While the court favoured the petitioner’s arguments on this issue, it ultimately decided not to invalidate council decisions that failed to meet this standard:
In my view s. 18(1) must be read in the context of ss. 18(2) and (3) which inform the interpretation of s. 18(1). That is, s. 18(2) states “if there is a vote” meaning not that sometimes decisions are confirmed by a vote and sometimes by a general recognition that the majority is in favour of a proposition. Rather, in my view it is saying that decisions aren’t made at every council meeting, but if they are the president may break a tie where there are more than two strata lots.
As a result decisions of [council] should be approved by a majority vote.
The petitioner also submits that where a vote is taken it is not being properly recorded in the minutes of the meeting arguing the minutes must indicate the number of votes for, against and any abstentions. Bylaw 18(3) simply requires that the “results” of the votes be recorded in the council minutes. It does not require the details of the votes as does bylaw 27(4), which deals with voting at an AGM or SGM. However, transparency, accountability and disclosure which council meeting minutes provide favour a broader interpretation of the word “results” including an indication of the number of votes for against and any abstentions to properly inform strata owners. The word “results” while referring to an outcome broadly construed includes its context, which favours inclusion of the information referred to.
I am satisfied that the Strata Corporation is not in compliance with Bylaw 18 in the manner in which it is recording its decisions. That said, given the evidence does not show that the decisions made were not by a majority, the failed voting and reporting does not affect their validity and it would be unreasonable to now invalidate them after the fact and after performance of the decisions taken.