Strata corporation’s bylaws, lien against strata lot set aside due to failure to give notice of meetings and to accept proxy appointment


2 August 2018

By Kevin Zakreski

The Owners, Strata Plan NW499 v Kirk, 2018 BCSC 1249, is the latest chapter in a long-running dispute between a White Rock strata corporation and one of its residents, the beneficial owner of a strata lot. In a decision issued late in 2016, the BC Court of Appeal allowed the owner’s appeal on the issue of whether the owner would be entitled to relief under section 163 of the Strata Property Act. This latest decision considered that issue and formed supplemental reasons to the supreme-court decision that had been appealed from. In it, the court found that the strata corporation wasn’t able to overcome procedural failings in relation to the meeting at which it adopted its bylaws. As a result, those bylaws and a lien against the owner’s strata lot for failure to pay strata fees were declared to be invalid.

Although the facts of the case were complex, the key facts for this decision can be summarized. The owner’s mother was the owner of a strata-lot in the strata corporation until her death in 1999. Her will left the strata lot to the owner, his brother, and the executrix. But only the brother and the executrix were registered on title as owners. Nevertheless, only the owner ever resided in the strata lot, and there was an understanding that he would be solely responsible for the strata lot. As the court noted, the owner “owns a one-half beneficial interest in” the strata lot.

In 2012, the strata corporation adopted new bylaws at an annual general meeting. Shortly thereafter the owner stopped paying strata fees. This led to the strata corporation placing a lien on title to the strata lot and commencing a court proceeding to enforce its debt. “In response,” the court noted, “[the owner] filed a response to petition and an affidavit alleging that NW499’s failure to: give proper notice of meetings; recognize a proxy given by [the executrix]; provide proper information about the meetings; and to prepare and keep proper minutes of strata meetings, renders all votes at special and annual general meetings of the Strata between April 1, 2010, and the present invalid and without force or effect. Thus, he claims the strata fees claimed are not currently owing.”

The court ultimately concluded that the bylaws should be set aside due to the procedural failings noted by the owner:

In this case, NW499’s error was not technical or accidental. They deliberately ignored the express wishes of [the executrix] in refusing to recognize [the owner] as her proxy and to communicate with him concerning all matters related to Unit 206. NW499 made these decisions because they knew [the owner] would attend meetings and that his voice at those meetings could be disruptive. By doing so, NW499 interfered with [the executrix’s] democratic rights under the bylaws and her ability to be represented at meetings by [the owner].

NW 499 obviously knew that he was the sole occupant of Unit 206, he was paying all charges connected with the residence and he was the beneficial owner.

Absent properly adopted bylaws of the Strata Corporation, the Schedule of Standard Bylaws attached to the SPA are the default bylaws of a strata in BC.

Neither [the executrix] nor [the owner] were given notice of the annual general meeting at which the 2012 bylaws were adopted. There are significant differences between the 2012 bylaws and the SPA’s Standard Bylaws that would otherwise have applied to Unit 206. For example, the Standard Bylaws do not allow for fines or interest charges on unpaid strata fees whereas the 2012 bylaws prescribed a rate of 10% coupled with a $25 per month fine. Section 130 of the SPA permits a fine for breaches of bylaws and rules but before enforcement of a bylaw or rule notice must be given with a time limit for compliance.

Notwithstanding any hardship that might flow, I am not satisfied that NW499’s reliance on the previous Society Act and the provisions allowing the court to make discretionary and declaratory orders are apposite to this dispute. The legislature could have made an allowance for technical mistakes or errors in procedure in the SPA to address prejudice that might result from invalidation of bylaws—it did not.

NW499’s difficulty in the context of this case is its deliberate decision to disenfranchise [the executrix] of her democratic rights within the strata. It is significant that when [the executrix] directed that notices and information concerning NW499 be delivered to Unit 206, she intended and fully expected that [the owner] would receive notices, attend meetings, and vote with the proxy given to him. On balance, NW499’s behaviour cannot be excused.

Overall, the differences between the Standard Bylaws and the 2012 bylaws are significant in view of NW499’s refusal to provide notices and accept [the executrix’s] proxy. It would be inappropriate to exercise any discretion, if that option were available to the court, which would obviate the deliberate wrong done to Ms. Kirk and indirectly, to [the owner].

Taking into account the court’s conclusions in Omnicare and Daniels, I am satisfied there is no discretion to relieve against NW449’s failure to give the notices required under the SPA and conclude that the 2012 bylaws are invalid. It follows that the bylaws setting the budgets and strata fees are also invalid. There must be valid bylaws in place to set budgets and strata fees and to collect those fees and fines in regard to Unit 206. Absent the necessary authority, NW499 is not entitled to judgment because the strata fee debt is not yet owing.

As a result of this finding, the strata corporation lacked a basis for the debt and the lien:

I am satisfied in the circumstances that the demand to [the executrix] to pay strata fees which, according to the evidence may or may not include penalties, interest or other charges, cannot be sustained because of the 2012 bylaws are invalid.

The 2012 bylaws and subsequent resolutions passed in [the owner’s] absence cannot be used as a basis for calculating [the owner’s brother’s] and [the executrix’s] obligation to pay strata fees.

But the court cautioned against over-interpreting this conclusion:

This is not to say that the owners of Unit 206 are not obliged to pay their pro rata share of strata fees, special levies and costs, but only to conclude the process of obtaining the lien cannot be supported because the debt does not exist until the requisite bylaws and resolutions are passed or adopted.

***

I am satisfied that the petition of NW499 bases its claim for strata fees, legal costs, penalties or fines, on bylaws and/or resolutions of NW499 that are invalid. This does not mean that the strata fees necessary to operate NW499 from 2011 to the present will not be payable by the owners (including [the owner]); it simply means that the current debt claim arising from resolutions and bylaws passed since the 2012 bylaws fails.


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