Special costs awarded against couple who represented themselves in strata-property arbitration
December 22, 2015
BY Kevin Zakreski
A recent decision of the British Columbia Supreme Court shows, once again, the danger of becoming so entrenched in a strata-property dispute that informal, neighborly resolution becomes impossible and adversarial dispute-resolution becomes the preferred option. The case also illustrates the application of the principles that the Supreme Court of Canada articulated in Sattva Capital Corp v Creston Moly Corp, 2014 SCC 53 to an application for leave to appeal an arbitrator’s decision under section 188 of the Strata Property Act.
Hunt v The Owners, Strata Plan LMS 2556, 2015 BCSC 2412 involved a professionally managed strata property located in Vancouver. The applicants were concerned about an upstairs neighbor’s plans to install an HVAC system in his strata lot. Installation required the approval of the strata council. The applicants expressed their concerns to the strata council, which arranged an inspection of the proposed system. Through an honest mistake, the strata manager communicated the result of this inspection to the applicants “as meaning that the installation of the HVAC unit had been approved.”
Despite attempts by the strata manager to advise the applicants of her error and despite the fact that the HVAC system was ultimately never approved or installed, it appeared as though, for the applicants, the die was cast. They commenced an arbitration proceeding against the strata corporation. The arbitration primarily concerned the installation of the HVAC system. It incidentally involved a challenge to recent amendments to the strata corporation’s bylaws.
The arbitration panel found in favor of the strata corporation on each of the points raised by the applicants. The panel also exercised its discretion under section 186 of the act and awarded special costs against the applicants. The panel’s reasons for making this decision were quoted at length by the court:
The Arbitration was a culmination of the Hunts attempting to assert their will over the governance of the Strata Corporation. They commenced and continued with the Arbitration in spite of overwhelming and compelling evidence that they would not be successful. For its part, both before and after the Arbitration was commenced, the Strata Corporation repeatedly took reasonable steps to address the concerns of the Hunts, while the Hunts reached [sic] by refusing to cooperate.
Although the Hunts were given every opportunity, without technicality or restriction, to provide any and all information and documentation they wanted the Panel to take into account, none of their claims regarding the HVAC system or interior repair issues were supported by cogent evidence, and none had any validity. Instead, their claims were brought in willful defiance of the actual facts and the good faith efforts of the Council to inform them of the truth, in a deliberate attempt to unilaterally dictate how the Strata Corporation was to decide requests for HVAC Systems in the future. The Arbitration was attenuated throughout by the Hunts’ manifested attitude of resentment towards other members of their strata community and their disrespect for the legitimate authority of the elected Council of the Strata Corporation. In these circumstances, the conduct of the Hunts is deserving of reproof, and the Strata Corporation is entitled to special costs. [underlining by the court]
This was the point at issue in the court case, in which the applicants sought leave to appeal from the panel’s decision on costs. The court noted that this point was governed by section 188 of the act, the key part of which for the purpose of this case reads “the court may grant leave, but only if it determines that
- the importance of the decision justifies the intervention of the court and that the determination of the question of law may prevent a miscarriage of justice, or
- the question of law is of importance to some class or body of persons of which the applicant is a member, or that the question of law is of general or public importance.”
In interpreting section 188, the court relied on Sattva and BCIT (Student Association) v BCIT, 2000 BCCA 496. The latter case spelled out three “requirements” for interpreting a substantially similar provision in the old Commercial Arbitration Act:
- the importance of the result of the arbitration to the parties justifies the intervention of the court;
- the determination of the point of law may prevent a miscarriage of justice;
- granting leave is an appropriate exercise of judicial discretion.
Applying these requirements called on the court to determine the standard of review of the arbitrators’ decision. After observing that “the standard of review to be applied in connection with the decision of the arbitrators is ordinarily that of reasonableness,” the court noted that the applicants were arguing for the use of a stricter standard in this case: correctness. This argument was based in part on a submission that
self-represented litigants fall outside of the arbitrators’ expertise. It is argued that this is an area that is more familiar to the court than it is to lawyers, who have less experience in both dealing with self-represented litigants and the law surrounding special costs.
The court rejected this submission. (So the appropriate standard was reasonableness.) It also found this point to be significant in its analysis of the second requirement set out above (“the determination of the point of law may prevent a miscarriage of justice”). In assessing this requirement, the court noted that it “must consider the merits of the appeal at this stage” and observed that the “appropriate threshold is that of arguable merit, in other words, that the matter has a reasonable prospect of success: see Sattva Capital Corp.”
The court denied the application for leave for a series of reasons, most notably that the applicants’ case lacked arguable merit and that it failed to advance “an important legal question to either the general public or to a class of people of which the Hunts are members.” The court also refused to exercise its judicial discretion in favor of the applicants.
In the result, the applicants are left on the hook for what was estimated to be $106 000 in costs.