Source: http://blog.myleakycondo.com/index.php?op=Default&Date=200211&blogId=1060
Timestamp: 2019-04-22 20:40:45+00:00

Document:
a)	There has been an abuse of process.
b)	The individual unit owners cannot bring an action in relation to common property.
The claims are too complex for Small Claims Court.
 The first issue that the claimants are abusing judicial process is without merit. Firstly, there is no prohibition against commencing an action in the Supreme Court, abandoning the claim there before the matter has been heard on its merits, then commencing the matter in Small Claim Court, as long as the claim falls within the jurisdiction of this Court.
 Secondly, the claimant in the Supreme Court action was the Strata Corporation LMS 2508 and here the actions are commenced by seven individual owners. The issue is whether individual strata owners have standing to sue on their own behalf a third party for damage to the common property of the strata corporation.
 On February 7, 2001 the owners, Strata Plan LMS 2508 filed a claim in the Supreme Court of British Columbia against the defendants for damages caused by deficiencies in work, materials, design and inspection in the construction of their condominium. The subject property is a 21-unit condominium apartment block identified here as "The Tides".
 The Writ of Summons was not served on the defendants and the limitation period for service expired. Instructions were given to the claimants' solicitor that the claimants did not wish to proceed. Therefore, there is no claim before the Supreme Court. The action, although initiated, was never before that Court to be heard on its merits. The claim in Supreme Court was abandoned. The defendants were never called upon to answer the claim. They were not put to any prejudice, cost or inconvenience. Thus, there was no abuse of the Court process nor were any of the defendants' rights or interests.
 In considering this application, albeit, the claim as indicated is the same as that filed in the Supreme Court. It is not filed specifically by the same party. Individuals, it is trite to say, are at liberty to commence an action in this Court on their own behalf, but the question becomes one of whether that individual has a right to be heard as an individual. That issue will be dealt with after addressing the third issue raised by the applicant.
	That, "the claims are too complex for Small Claims Court". The submission on this point is that pursuant to the Small Claims Act, R.S.B.C. 1996 c 430 Section 2(1), this Court is to hear matters in a just, speedy, inexpensive and simple manner. Somehow, counsel equates this with this Court being qualified to only hearing simple matters. That is not the case. There are innumerable cases that are heard in this Court and this division of the Court that are lengthy, have a multitude of witnesses, sundry expert witnesses, copious exhibits, technical and otherwise, as well as hearing questions of law, evidence and procedure, including constitutional questions. My recollection of the history of this Court is that it has yet to be overwhelmed by a case that is more than simple case. The mandate of this Court is to provide for a system of justice that is just, speedy within the circumstances of the case, with Court procedure designed to facilitate lay litigants to resolve disputes without professional help administered and adjudicated in a manner that is understood by litigants without the aid of counsel. That is the goal, that is the object. Sometimes, that of itself is not a simple exercise but it does not exceed the mandate of this Court. The challenge that this claim is too complex to be heard by this Court, to put it very kindly, is without merit.
 Back to the issue of the claimants standing before this Court. There is no issue that the property in question is the common property of the strata corporation.
 No individual unit holder has an exclusive right to represent the interest of the other unit owners who have a common interest in common property. Sections 3 and 4 of the Strata Property Act provides that is the responsibility of the strata corporation.
3. Except as otherwise provided in this Act, the strata corporation is responsible for managing and maintaining the common property and common assets of the strata corporation for the benefit of the owners.
4. The powers and duties of the strata corporation must be exercised and performed by a council, unless this Act, the regulations or the bylaws provide otherwise.
"The strata corporation is responsible for managing and maintaining the common property."
"And, the powers and duties of the strata corporation must be exercised and performed by a council except as may otherwise be provided for."
(2)	An owner may sue the strata corporation.
Section 163(1) and (2) does not refer to the right of an individual to sue a third party. Subsection (1) says that the strata corporation may be sued. Subsection (2) says that an owner may also sue the strata corporation. That section says, yes, the individual owner may sue, but may sue the corporation, it does not speak of any other party.
 This does not expand the right of an individual to sue, it does state that it may sue on behalf of an individual about matters affecting only their strata lots, subject to the consent of others. It does not permit an individual owner to sue a third party about matters concerning common property. There is no implication in that section that suggests otherwise.
This section refers to a dispute between a strata corporation and an owner or one owner and another owner. It does not confer the independence of an owner to sue anyone else about the matters of common property. And, it is conceded that the property in issue here is in fact common property.
	The Act does not contemplate the responsibility of maintaining and managing common property being within the right of an individual owner to independently undertake. See Section 3, above.
(b) the owners of the strata lots in the strata plan are members of the strata corporation under the name "The Owners, Strata Plan [the registration number of the strata plan]".
(2) Subject to any limitation under this Act or the regulations, a strata corporation has the power and capacity of a natural person of full capacity.
Generally in all matters not particularly mentioned in this Act in which there is any conflict or variance between the rules of equity and the rules of the common law with reference to the same matter, the rules of equity prevail.
Subject to section 3, the Civil and Criminal Laws of England, as they existed on November 19, 1858, so far as they are not from local circumstances inapplicable, are in force in British Columbia, but those laws must be held to be modified and altered by all legislation that has the force of law in British Columbia or in any former Colony comprised within its geographical limits.
	The Strata Act is in fact legislation that has the force of law in British Columbia.
163 (1) The strata corporation may be sued as representative of the owners with respect to any matter relating to the common property, common assets, bylaws or rules, or involving an act or omission of the strata corporation.
(2) An owner may sue the strata corporation.
(b) exercise of voting rights by a person who holds 50% or more of the votes, including proxies, at an annual or special general meeting.
(c) regulate the conduct of the strata corporation's future affairs.
 The respondent owners, urge that the strata corporation has made a significantly unfair decision as it relates to their interests. Therefore, it is for the Supreme Court, by law, to provide any remedy not the Small Claims Court.
 The individuals as claimants in the above listed actions have no standing before this Court unless otherwise ordered by the Supreme Court. This Application is therefore granted.
Ang v. Spectra Management Services et al.
347518 B.C. LTD., AND LE SOLEIL HOTEL & SUITES LTD.
 The Sheraton Suites Le Soleil Hotel opened in downtown Vancouver in 1999. It is a strata lot development consisting of 127 units that were offered for sale and lease back to the developer, American Corporate Suites (Canada) Inc. (%u201CACS%u201D), for 20 years to facilitate the operation of a boutique, condominium corporate suites hotel. In less than three years, ACS was rendered bankrupt and the trustee disclaimed all interest in the unit leases such that they terminated. The hotel continues to operate, but the commercial crisis that resulted has given rise to the commencement of a variety of litigious proceedings. There is dissension among the owners of the units as to how best to protect their interests. A large number of them, acting as a group, and at least two third parties have been attempting to take over the operation of the hotel.
 This proceeding is brought by one of the owners to challenge the validity of two leases of common property, the control of which is pivotal to the operation of the hotel. The leases are for terms of 20 and 21 years and they survive the termination of the unit leases. They are now held by a third party. It is a challenge that is based on what is said to have been a breach of a fiduciary duty ACS owed to the individuals to which it sold the units. The contention is that ACS preferred its interests over that of the owners by wrongly arranging to hold, directly or through a related company, leases of first, the parkade (the %u201CParking Lease%u201D) and second, all other common property including the lobby, hallways, elevators, loading areas, and common washrooms (the %u201CLobby Lease%u201D) that are at odds with provisions of the Disclosure Statement ACS was, by statute, required to publish to prospective owners and upon which the owners were entitled to rely in assessing the investment they made when they purchased their units.
 I begin by outlining the background to the proceeding and the issues to which it gives rise.
 Sim Wee Betty Ang (referred to as %u201CMs. Ang%u201D) applies pursuant to s. 164(1) of the Strata Property Act, S.B.C. 1998, c. 43 (the %u201CAct%u201D), to have the two leases declared void. ACS executed a General Security Agreement in 1997 and the leases, together with an assignment of the GSA, were sold by the secured creditor to Sunbelt Hotel Services Management Ltd., or to its related company, 347518 B.C. Ltd (together %u201CSunbelt%u201D). The sale put Sunbelt in a position to operate the hotel subject to negotiating new unit lease agreements with the owners. Thus far, that has proven difficult. Sunbelt currently operates the hotel through Le Soleil Hotel & Suites Ltd. pursuant to an interim court order, made by consent, under which the owners are entitled to receive a specified amount of rent for the use of their units.
 The two leases are encumbrances of the common property that ACS caused to be executed after the agreements for the purchase and sale of the units were made but before any were completed. They provide for only nominal rent ($10.00). A strata corporation, being the Owners, Strata Plan LMS3837 (the %u201CStrata Corporation%u201D), was created by operation of statute on March 12, 1999, when the strata plan was filed in the Land Title Office. The first unit sale was completed April 9th. The Parking Lease was executed on March 10th and registered against the title to the common property just before the strata plan was filed. ACS leased the parkade to a related company, 521006 B.C. Ltd., which then granted a licence for its use to ACS. The Lobby Lease was executed on March 30th after the plan was filed but during the period when ACS was the only unit owner. The lease was never registered. The strata corporation leased the lobby, hallways, and elevators to ACS. It may then have assigned the lease to another related company, Spectre Management Services Ltd., but that remains unclear. ACS caused the Strata Corporation to pass a unanimous special resolution authorizing the two leases on March 30th.
 Ms. Ang is associated with the group of the owners that seeks to take over the operation of the hotel. It is referred to as the Le Soleil Owners Group (%u201CLSOG%u201D). When the two leases were offered for sale following the bankruptcy of ACS, the sale was undertaken by a receiver%u2019s closed-bid auction. LSOG (acting through an agent, Executive Inn Inc.) bid against Sunbelt and others in an effort to acquire the leases. Its bid was $30,000 too low but the owners%u2019 involvement probably had some effect on what Sunbelt considered it had to bid for the leases. It bid, and then paid, over one and a half million dollars. Having failed in that attempt to obtain control of the common property, LSOG then tried to purchase the leases from Sunbelt, but they were unable to come to terms. Now, LSOG has apparently chosen Ms. Ang to challenge the validity of the leases in a further attempt to gain control of the common property and the operation of the hotel. Thus, where Ms. Ang was part of a group that was prepared to pay a substantial sum for the leases, and further, likely influenced the bidding for them, she now takes the position that they are void and of no value. She says that Sunbelt acquired nothing.
 Ms. Ang claims that she has been subjected to significant unfair action by the Strata Corporation in respect of the leasing of the common property. She maintains that ACS bore a fiduciary duty, both before and after the filing of a strata plan, to act, in all respects, in the best interests of the owners, citing decisions where it is said such a duty on the part of condominium developers has been recognized: Hill v. Strata Plan N.W. 2477 (1991), 81 D.L.R. (4th) 720 (B.C.C.A.), Strata Plan. 1261 v. 360204 B.C. Ltd.,  B.C.J. No. 2761 (S.C.), York Condominium Corp. No. 167 et al v. Newrey Holdings Ltd. et al (1981), 122 D.L.R. (3rd) 280 (Ont. C.A.), and Terrace Corp. (Construction) v. Owners, Condominium Plan 752-1207 (1983), 146 D.L.R. (3d) 324 (Alta. C.A.). Ms. Ang says that the duty was breached in a number of ways in respect of both leases because they were not made for the benefit of the owners but for ACS. She accepts that it would not be open to her to complain if proper disclosure of the arrangement ACS put in place had been given in the Disclosure Statement, but she says that it was not and that the statement was, in fact, misleading. She claims that, on the authority cited, the remedy to which she is entitled under s. 164(1) is an order declaring the two leases to be void.
 It is, however, significant that Ms. Ang seeks the relief she does not because of any benefit ACS actually received of which she was deprived, but because the owners, of which she is one, do not have control of the common property and hence of the operation of the hotel - something they did not pay for and, when they purchased their units, did not expect to have.
 The hotel is not the customary kind of condominium complex that was to be operated for the benefit of the owners alone. It was a business that ACS was to operate for its own benefit as well. The owners had, at the outset, a choice of whether to lease their units or to occupy them and keep them separate from the hotel operation. Most leased and did so on the basis of receiving a fixed rent from ACS, renewable on five year terms. It was then ACS that bore the business risk. The justification offered for the lease of the common property is that ACS needed a long term lease both to obtain a Sheraton franchise and to secure the substantial investment it had made in enhancing the common property. It is against this background that ACS%u2019s arranging the two leases must be understood. What underlies Ms. Ang%u2019s application is the fact that ACS did not structure them so that they would not survive its own bankruptcy.
 The application is opposed by Sunbelt and by its related companies. The Strata Corporation appears, but takes no position on the application. The other parties named in the petition are companies related to ACS. They also take no position.
 Sunbelt opposes the application on various grounds that raise a range of issues. Broadly, they include: whether the Parking Lease was an action of the Strata Council which permits s. 164(1) of the Act to be invoked in respect of that lease at all; what the scope of the developer%u2019s fiduciary duty was; whether, having regard for the Disclosure Statement, any breach of the duty ACS owed the owners caused any significant unfairness to Ms. Ang; and what, if any, remedy is available to her in the particular circumstances that now prevail, specifically whether the leases are void ab initio or merely voidable and whether she is now estopped from taking the position that the leases are void in any event. However, the first issue, which if decided against Ms. Ang is determinative, is whether she has standing under s. 164(1) to make application to have either of the two leases declared void.
 Sunbelt says Ms. Ang does not have standing because the rule in Foss v. Harbottle (1843), 2 Hare 461, 67 E.R. 189 precludes a member of a strata corporation from making the kind of application that Ms. Ang makes in the same way it would if she were a shareholder or member of an incorporated company. Reliance is placed on Watson v. Imperial Financial Services Ltd. (1994), 88 B.C.L.R. (2d) 88 (C.A.) and Lee v. Block Estate (1984), 50 B.C.L.R. 289 (S.C.), where it was held that the rule is not limited in its application to companies, as well as on Beck v. Andrews Realty Ltd. (c.o.b. Re/Max Real Estate Services),  B.C.J. No. 2796, a decision of the Provincial Court holding the rule applicable to strata corporations.
 Ms. Ang maintains that the section of the Act under which she applies is worded to give each owner an independent cause of action which extends to proceedings to preserve common property. She says that the Act does not preclude an individual owner from taking such proceedings and that both strata corporation and owner are proper parties to seek remedies in that regard. Support for her position is said to be found in an article by Gerald Ghikas, %u201CThe Strata Corporation as Plaintiff%u201D, (1986) 44 The Advocate 783.
 Section 2 of the Act constitutes the owners as members of the Strata Corporation which has the power and capacity of a natural person of full capacity. That means it has the power to bring legal proceedings.
 LSOG is apparently unable to muster sufficient support among the owners to obtain the requisite three quarters vote that would authorize the Strata Corporation to make this application. Thus, by having Ms. Ang apply, it seeks to circumvent the governance provisions of the Act and achieve what it cannot achieve through a special meeting of the owners. The question is whether s. 164(1) authorizes an owner to make his or her own application to preserve common property notwithstanding the statutory scheme which vests in the Strata Corporation the responsibility to manage and maintain that property and to sue to preserve it on behalf of all of the owners when authorized by the requisite vote.
 The rule in Foss v. Harbottle is among the most firmly entrenched rules of company law. It states that where there is damage to a company, being a distinct legal entity, only the company, and not the shareholders, is the proper party to seek relief. In Watson, supra, at paras. 25-29, the Court of Appeal held that Lee v. Block Estates, supra, correctly decided that the rule applied to limited partnerships. I can see no sound reason why it should not apply to a strata corporation. I am supported in my view by the reasoning employed in what, with respect, is a full consideration of the point well supported by authority in Beck v. Andrews Realty, supra, at paras. 10-27. Little need be added to what is said there.
 The article upon which Ms. Ang relies does not argue against the applicability of the rule in Foss v. Harbottle to strata corporations. On p. 786, the learned author does say that the point has not yet been decided and he explains that, unlike the shareholders of a company, the members of a strata corporation are personally liable for its debts in proportion to their unit entitlement. He then, however, expresses the view that the efficient administration of justice will probably be best served by the courts insisting on the strata corporation initiating proceedings subject to the direction of the owners.
 The wrong for which Ms. Ang seeks relief is not one that was suffered by her in any personal capacity and she is not a party to either of the leases she seeks to have declared void. If any wrong was committed, it was to the Strata Corporation itself. Ms. Ang is attempting to pursue what is, in effect, a derivative proceeding, something that is not open to her on this application. The rule in Foss v. Harbottle precludes her application as, in my view, it should. Its working is consistent with the statutory scheme that vests the authority to initiate proceedings to preserve common property in the Strata Corporation. No one owner ought to be able to apply to have a lease of such property declared void.
 In my view, s. 164(1) does no more than authorize proceedings by an owner to redress the actions of a strata corporation that are significantly unfair to that owner. As Sunbelt suggests, it is not unlike statutory oppression remedies that are available to the shareholders or members of a company.
 I conclude, then, that Ms. Ang is without standing to make the application she does. It is neither necessary nor desirable to consider the other issues that are raised now.
 The application is dismissed with costs.

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