Strata corporation’s fines against business owner found to be significantly unfair


24 February 2017

By Kevin Zakreski

In Omnicare Pharmacy Ltd v The Owners, Strata Plan LMS 2854, 2017 BCSC 256, a strata corporation and an owner of a nonresidential strata lot grappled with some of the challenges of “[l]iving and operating a business on the Downtown Eastside.” The case involved a longstanding dispute over whether the owner’s business attracted conduct that could be considered a nuisance. The court found, on a review of the strata corporation’s bylaws, that many of those bylaws were not adopted in accordance with section 128 of the act and that its nuisance bylaw had been applied in a manner that was significantly unfair under section 164.

Facts and issues

The strata corporation in the case was created in 1997, under the old Condominium Act. It consisted of “eight nonresidential strata lots and 74 residential strata lots,” located in the Downtown Eastside of Vancouver.

The petitioner was the “owner of three ground-level, nonresidential strata lots” in the strata corporation. Since 2000, the petitioner has operated a pharmacy from one of these strata lots. This pharmacy “is open 7 days a week, 365 days a year” and “serves, on average, about 200 customers a day, many or most of whom live in the neighbourhood.”

For many years, the operation of the Pharmacy has created considerable friction” between the petitioner and the strata corporation. This friction resulted in the petitioner commencing “legal proceedings against the Strata Corporation” in 2009. The proceedings “ultimately were settled by a consent order in 2011.” Concerns continued to mount in “a growing sense of frustration and anger regarding Omnicare’s business operations,” which residents characterized as breeding litter, loitering, and harassment.

The strata corporation’s bylaws were at the heart of this case. These bylaws were originally adopted under the Condominium Act. When the Strata Property Act came into force in 2000, a transitional period to new standard bylaws was opened. The strata corporation amended its bylaws during this transitional period and thereafter. The strata corporation’s practice was to approve bylaw amendments in a “single resolution,” and typically “there was no record made of the number of owners of residential and nonresidential strata lots, respectively, that were in attendance at the meeting, and no record was made of the number of votes cast on each resolution by each group, separately.”

Beginning “in December 2015, the Strata Corporation (through its property manager) sent a series of letters to Omnicare asserting that Omnicare was in breach of various bylaws. Many of the alleged breaches related to what was asserted to be the conduct of individuals who were said to be customers of the Pharmacy. Ultimately, the Strata Corporation levied a total of $1,000 in fines against Omnicare.”

The petitioner ultimately applied to the supreme court, seeking (among other things) relief from these fines and declarations that the bylaws underlying them were invalid.

The court addressed three issues arising from these facts:

  • Are the current bylaws valid?
  • Did the petitioner breach the strata corporation’s nuisance bylaw?
  • Has the Strata Corporation treated the petitioner in a manner that is significantly unfair?

Are the current bylaws valid?

The court found its answer to this issue in section 128 (1) (c) of the act. This provision establishes the procedures for amending strata-corporation bylaws. It calls for separate resolutions in mixed-use stratas (such as the one at issue in this case):

Subject to section 197, amendments to bylaws must be approved at an annual or special general meeting . . . in the case of a strata plan composed of both residential and nonresidential strata lots, by both a resolution passed by a 3/4 vote of the residential strata lots and a resolution passed by a 3/4 vote of the nonresidential strata lots, or as otherwise provided in the bylaws for the nonresidential strata lots.

It was common ground in this case that this procedure hadn’t been followed for most of the bylaws that the strata corporation had enforced against the petitioner. The question for the court was whether this amounted to a substantive defect or a mere technical breach that the court had the discretion to remedy.

In the court’s view, the defect was substantive because it had deprived the petitioner of its democratic rights:

In my opinion, s. 128(1)(c) of the Strata Property Act cannot be interpreted in a way that leaves the court with a discretion to override the democratic rights provided for in that section.

Under s. 128(1)(c) of the Act, a nonresidential owner has the democratic right to vote separately from the residential owners and to have its voice heard. There are no other provisions in the Act that would empower either the strata council or the court to dispense with the statutory requirement for separate residential and nonresidential voter approval of a bylaw amendment under s. 128, and clearer wording would be needed to override such a fundamental right. Treating the Current Bylaws as valid (as the Strata Corporation asks the court to do) deprives nonresidential owners of their democratic right to vote as a separate group, a right given to them under s. 128(1)(c) of the Act.

In that light, and contrary to the Strata Corporation’s submissions, the court cannot exercise a “discretion” in favour of upholding the validity of the Current Bylaws in the face of non-compliance with s. 128(1)(c). Rather, the consequence of the failure to comply with s. 128(1)(c) is that the Current Bylaws are invalid, and I so find.

Did the petitioner breach the strata corporation’s nuisance bylaw?

The strata corporation’s nuisance bylaw was a copy of section 3 (1) of the standard bylaws. As such, it was the one bylaw at issue to survive this declaration of invalidity. This gave the court the opportunity to consider whether the petitioner’s business practices and customers had in fact put the petitioner in breach of the bylaw.

After lamenting the state of the evidence on this point (particularly the evidence marshalled by the strata corporation), the court declined to make a ruling on this issue. The court said that “in view of the conflicts in the evidence, I prefer to deal with the question of whether the fines for asserted breaches of the Nuisance Bylaw should be cancelled in the context of whether the Strata Corporation has treated Omnicare in a manner that is significantly unfair.”

Has the Strata Corporation treated the petitioner in a manner that is significantly unfair?

The court began its analysis of this issue by reviewing several leading cases on the test for applying section 164 of the act: Reid v The Owners, Strata Plan LMS 2503, 2001 BCSC 1578, aff’d 2003 BCCA 126; Dollan v The Owners, Strata Plan BCS 1569, 2012 BCCA 44; Radcliffe v The Owners, Strata Plan KAS1436, 2015 BCCA 448. These cases emphasize that that “[t]he term ‘significantly unfair’ in s. 164 encompasses conduct that is oppressive or unfairly prejudicial.”

In the court’s view, the strata corporation’s actions had been oppressive and unfairly prejudicial to the petitioner:

I find that the actions of the Strata Council, in purporting to levy fines against Omnicare based on breaches of bylaws that had not been validly passed, and that were being levied by a Strata Council that was not validly constituted, were burdensome, harsh and wrongful, and those actions were therefore oppressive and significantly unfair.

I turn then to the fines that were levied against Omnicare based on the Nuisance Bylaw.

In my opinion, these fines were wrongful (and therefore oppressive) and unjust (and therefore unfairly prejudicial) because they were being levied by a Strata Council that was not validly constituted. A strata lot owner is entitled reasonably to expect that it will not be subjected to assertions that its conduct breached a valid bylaw and assessed a fine, except where the strata council has been duly constituted in accordance with valid bylaws. That never happened in relation to any of the four fines levied against Omnicare based on breach of the Nuisance Bylaw. Therefore, I find that, on the facts here, Omnicare’s reasonable expectations were violated by actions that were significantly unfair. I conclude in that light that the appropriate remedy is to cancel all fines levied against Omnicare based on breach of the Nuisance Bylaw. I so order.

Result

In the result, the court declared the current bylaws invalid, declared that the strata corporation had treated the petitioner in a significantly unfair manner, and cancelled the fines levied against the petitioner. The petitioner was also granted costs on Scale B.


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