Significant Unfairness: When is an Owner Treated Unfairly?
What can be done by a strata lot owner when they are unhappy with their treatment by a strata corporation or those who direct its actions? The Strata Property Act provides a powerful tool to strata lot owners who disagree with the actions or direction of a strata corporation or its council. Fundamentally, the Strata Property Act provides courts with the power to remedy “significantly unfair” actions or decisions taken by a strata corporation.
What is Fairness?
To first understand how an act can be significantly unfair, it is important to consider the meaning of fairness at law. In the strata property context, there are three fundamental principles that inform an understanding of fairness:
- Statutory obligations, and
- Protection of minority rights
Democracy is a core guiding principle of strata property governance. The strata corporation is directed in a democratic manner by the strata lot owners who make up the corporation. Consequently, the decisions and acts of the strata corporation must be made or taken democratically. As a starting point, decisions of the strata corporation or acts performed without the democratic support of strata owners are not considered to be fairly done.
For example, the bylaws which provide for the care, management and administration of the strata corporation, the common property and strata lots must be agreed to on a democratic basis by the members of the strata corporation. Enforcing a bylaw which has not been validly passed according to the democratic requirements of the Strata Property Act against an owner would be a significantly unfair act.
To put it simply, statutory obligations act as the guideposts for fairness. The Strata Property Act creates procedural requirements which must be met for an act of the strata corporation or council to be considered fair. For example, the Strata Property Act creates the minimum requirements for notice to strata lot owners of decisions or actions the strata corporation is considering taking, such as amending the strata bylaws. If the strata corporation or council does not fulfill these requirements by giving adequate notice to an owner of a proposed bylaw amendment resolution at an upcoming general meeting, the bylaw could not be validly, or fairly, amended at that general meeting. Generally, a fair decision or action is one which fulfills the relevant statutory procedural obligations.
Statutory obligations can also be the source of unfairness in some circumstances. For example, the courts have found that a strata corporation funding model can be significantly unfair, despite being in full compliance with the Strata Property Act. In Fraser v Strata Plan VR1411 et al, the court held that it would be significantly unfair to an individual owner to order common expenses to be paid in accordance with the formula set out in the Strata Property Act. Thus, in these circumstances, the statutory obligations were an impediment to fairness rather than a guidepost for fairness. Ultimately, this decision reveals that fairness is context dependent. Statutory obligations act as important guideposts for fairness, but certain circumstances can lead to conflict between the strata corporation’s statutory obligations and other underlying principles which inform fairness, such as the protection of minority rights.
Protection of Minority Rights
The third guiding principle of fairness in the strata property context is the protection of minority rights. Fundamental to fairness is the principle that the rights of the minority cannot be unreasonably overwhelmed and undermined by the tyranny of the majority. In this way, the protection of minority rights can be considered to act as a constraint on the principle of democracy.
The courts have acknowledged that some actions or decisions of the strata corporation will be unfair to one or more strata lot owners by necessity. Some decisions or actions of the strata corporation will serve the interests of majority of owners to the detriment of a minority of owners. However, the courts have identified that democracy via majority rule still has its limits and the imposition of too heavy a burden on minority interests may constitute unfairness. Thus, the courts generally will not intervene to rectify triflingly unfair acts. Instead, the unfairness alleged must be considered ‘significant’.
Under the Strata Property Act, the protection of minority rights can be found in the statutory requirements imposed on the strata corporation. For example, the protection of minority rights informs the vote threshold requirements for certain votes that would otherwise unfairly overwhelm and undermine the interests of the minority, such as requiring a unanimous vote of owners to change the formula for calculating the strata fees of each strata lot.
What is an Unfairness Claim?
The Strata Property Act empowers the court to rectify significantly unfair acts or decisions of the strata corporation or strata council taken against or concerning strata lot owners.
The court has interpreted ‘significantly unfair acts’ to include oppressive or unfairly prejudicial conduct or resolutions. This may include conduct that is burdensome, harsh, wrongful, lacking in probity or fair dealing, has been done in bad faith, or is unjust and inequitable. The court has also identified that the word ‘significant’ means that that the court should only interfere with an exercise of a strata corporation’s discretion where the act is more than mere prejudice or trifling unfairness. As such, the act must be meaningfully unfair or oppressive to rise to the level where a court will intervene.
Examples of circumstances where the courts have agreed that an act by a strata corporation or council is substantially unfair include:
- Where repair expenses have been disproportionately allocated between townhouse and apartment style strata lots [Chow v. The Owners, Strata Plan LMS 1277, 2006 BCSC 335]
- Requiring owners to pay a share of legal fees after they gave sufficient notice that they did not oppose the relief sought by the opposing party [Ranftl v. The Owners, Strata Plan VR 672 and Wennerstrom, 2007 BCSC 482]
- Where the strata corporation has refused to consider a proposal from a strata lot owner to keep a balcony enclosure during remedial work after the strata council had initially ordered removal of the enclosure for the remedial work [The Owners, Strata Plan VR 663 v. Murphy, 2012 BCSC 1294]
- Where the strata corporation failed to pay for water damage to a strata lot, failed to expeditiously repair the water ingress issues and then failed to pay for subsequent water damage to the strata lot [Radcliffe v. The Owners, Strata Plan KAS1436, 2015 BCCA 448]
- Where the strata corporation exempted certain owners from the enforcement of a bylaw while enforcing that same bylaw against the another owner [The Owners, Strata Plan LMS 3259 v. Sze Hang Holding Inc., 2016 BCSC 32]
- Where the strata corporation failed to perform its duty to repair and maintain in relation to a roof deck such that a strata owner’s use and enjoyment of the limited common property was interfered with [Frank v. The Owners, Strata Plan LMS 355, 2017 BCCA 92]
- Where fines have been imposed on an owner on the basis of bylaws which had not been validly passed [Omnicare Pharmacy Ltd. v. The Owners, Strata Plan LMS 2854, 2017 BCSC 256]
Who can make an Unfairness Claim?
The courts have clearly signaled that an unfairness claim should generally only be brought by an owner against a strata corporation.
An unfairness claim cannot be brought by an owner for actions taken by other owners in the strata corporation. If a claim of unfairness is made against an individual owner or strata council member, the courts will generally dismiss such claims barring exceptional circumstances. The courts have indicated that strong evidence of personal wrongdoing is necessary to sustain a claim of significant unfairness against a named individual.
Remedies Available in Unfairness Claims
The Strata Property Act grants the court broad discretion to remedy significantly unfair acts by the strata corporation. The courts have used this broad discretion to remedy significantly unfair actions by:
- Directing the strata corporation or council to take any act
- Prohibiting the strata corporation or council from taking any act
- Varying a transaction entered into by the strata corporation
- Varying a resolution of the strata corporation, including bylaw resolutions
- Regulating the conduct of the strata corporation’s future affairs, including writing new bylaws for the strata corporation
Despite the broad discretion offered by the Strata Property Act, the courts have been reluctant to award general damages in significant unfairness claims. Meanwhile, the Civil Resolution Tribunal, through its general remedial powers, appears to be more willing to award general damages in significant unfairness claims brought before it. Depending on the circumstances of the claim and the remedy sought, the Civil Resolution Tribunal may be the more appropriate venue for a significant unfairness claim.
Before a strata corporation takes an action or makes a decision that will affect a subset of owners, it must consider the fairness of that action or decision and the potential outcomes of that action or decision.