2006 BCCA 243 Hamilton v. Bal

Before:	The Honourable Madam Justice Newbury
	The Honourable Madam Justice Levine
	The Honourable Mr. Justice Smith

R.P. Hamilton	Counsel for the Appellant Denise M. Hamilton
D.C. Creighton	Counsel for the Appellants Christopher Robert Monk, Nevena Vojic and Nikica Vojic
R.D. Holmes	Counsel for the Appellant Richard Bedford Oldaker
M.L. Tweedy	Counsel for the Respondents
Place and Date of Hearing:	Vancouver, British Columbia
5 April 2006
Place and Date of Judgment:		Vancouver, British Columbia
17 May 2006

Written Reasons by:

The Honourable Madam Justice Newbury

Concurred in by:

The Honourable Madam Justice Levine

The Honourable Mr. Justice Smith

Reasons for Judgment of the Honourable Madam Justice Newbury:

[1] The "leaky condo" phenomenon experienced over the last several years in the Lower Mainland of this province has placed considerable strain both on condominium owners and on the inner workings of strata corporations, their bylaws, and the provisions of the applicable statute, the Strata Property Act, S.B.C. 1998, c. 43 (the "Act"). This "leaky condo" case raises what appear to be procedural issues that in fact require the consideration of substantive principles of law, including the very nature of strata property ownership. Although the events at issue took place several years ago – late 1998 – various procedural mis-steps have hindered any real progress towards the resolution of the plaintiffs’ claims. Indeed, in addition to the defendants' motion for the dismissal of the action pursuant to Rule 19(24), the chambers judge had before her a motion by the plaintiffs to amend their pleadings by substituting the strata corporation as plaintiff – a motion which they acknowledged in their factum was misconceived. The real question raised by the appeal is whether one or more strata owners may sue a third party for injury to their common property without involving the strata corporation as a plaintiff, and without the approval of the statutory majority required by s. 171 of the Act where the corporation sues.

The Scheme of the Act

[2] I begin with a general outline of the provisions of the Act that are relevant to the appeal. First, ss. 2‑4 of the Act provide that a strata corporation is established upon the deposit of a strata plan in a Land Titles Office. The corporation has the powers and capacity of a natural person, and its name is required to be "The Owners, Strata Plan ______". The owners of the strata lots are the members of the corporation, but it does not have share capital and the members are not shareholders. Nor do members enjoy limited liability as do shareholders of ordinary companies: s. 166(1) provides that a judgment against the strata corporation is a judgment against all the owners. By s. 291 of the Act, the Business Corporations Act, S.B.C. 2002, c. 57, does not apply to strata corporations.

[3] Section 66 of the Act deals with property ownership. It states:

66 An owner owns the common property and common assets of the strata corporation as a tenant in common in a share equal to the unit entitlement of the owner's strata lot divided by the total unit entitlement of all the strata lots. [Emphasis added.]

Although the phrase "of the strata corporation" may be confusing, other provisions of the Act confirm that the common property and common assets are held and owned directly (i.e., not through the medium of the corporation) by the owners in proportion to their respective unit entitlements. Section 251, for example, requires the Registrar of Titles to include on each indefeasible title representing a strata lot, a reference to "the owner's share in the common property created by the strata plan". Further, s. 251(3) states that a document dealing with the strata lot deals as well, without express reference, with the share of the owner in the common property and common assets. (See also ss. 253(4), 67 and 81.) At the same time, the use, enjoyment, alteration and disposition of common property are subject to various restrictions, and the strata council is responsible for managing and maintaining it "for the benefit of the owners": see ss. 3 and 72(1).

[4] Part 10 of the Act deals with legal proceedings affecting strata corporations and their members. For purposes of this case, the following provisions are of interest:

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.

164 (1) On application of an owner or tenant, the Supreme Court may make any interim or final order it considers necessary to prevent or remedy a significantly unfair

(a) action or threatened action by, or decision of, the strata corporation, including the council, in relation to the owner or tenant, or

(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.

(2) For the purposes of subsection (1), the court may

(a) direct or prohibit an act of the strata corporation, the council, or the person who holds 50% or more of the votes,

(b) vary a transaction or resolution, and

* * *

166 (1) A judgment against the strata corporation is a judgment against all the owners.

(2) A strata lot's share of a judgment against the strata corporation is calculated in accordance with section 99 (2) or 100 (1) as if the amount of the judgment were a contribution to the operating fund and contingency reserve fund, and an owner's liability is limited to that proportionate share of the judgment.

(3) Other than as set out in this section, an owner has no personal liability, in his or her capacity as an owner, for loss or damage arising from any of the following:

(a) the management and maintenance of the common property and common assets by the strata corporation;

(b) the actions or omissions of the council or strata corporation;

* * *

169 (1) If the strata corporation joins or sues an owner in the owner's capacity as owner or as owner developer, or if an owner sues the strata corporation, that owner

(a) is not liable to contribute to legal costs that a court or arbitrator requires the strata corporation to pay,

(b) does not, despite being an owner, have a right to information or documents relating to the suit, including legal opinions kept under section 35 (2) (h), and

(c) does not, despite being an owner, have a right to attend those portions of any annual or special general meeting or council meeting at which the suit is dealt with or discussed.

(2) If the strata corporation pays an amount to an owner in full or partial satisfaction of the owner's claim against the strata corporation, whether or not under a judgment, the owner is not liable to share in the cost of the payment with other owners.

170 The strata corporation may sue an owner.

Then follow sections 171 and 172, which are more directly relevant:

171 (1) The strata corporation may sue as representative of all owners, except any who are being sued, about any matter affecting the strata corporation, including any of the following matters:

(a) the interpretation or application of this Act, the regulations, the bylaws or the rules;

(b) the common property or common assets;

(d) money owing, including money owing as a fine, under this Act, the regulations, the bylaws or the rules.

(2) Before the strata corporation sues under this section, the suit must be authorized by a resolution passed by a 3/4 vote at an annual or special general meeting.

(3) For the purposes of the 3/4 vote referred to in subsection (2), a person being sued is not an eligible voter.

* * *

(5) All owners, except any being sued, must contribute to the expense of suing under this section.

(6) A strata lot's share of the total contribution to the expense of suing is calculated in accordance with section 99 (2) or 100 (1) except that

(a) an owner who is being sued is not required to contribute, and

(b) the unit entitlement of a strata lot owned by an owner who is being sued is not used in the calculations.

172 (1) The strata corporation may sue on behalf of one or more owners about matters affecting only their strata lots if, before beginning the suit,

(a) it obtains the written consent of those owners, and

(b) the suit is authorized by a resolution passed by a 3/4 vote at an annual or special general meeting.

(2) Only those owners on whose behalf the suit is brought must contribute to the expense of suing under this section.

(3) A strata lot's share of the total contribution to the expense of suing is calculated in accordance with section 99 (2) or 100 (1) except that

(a) only owners on whose behalf the suit is brought are required to contribute, and

(b) only the unit entitlement of strata lots owned by owners on whose behalf the suit is brought are used in the calculations. [Emphasis added.]

[5] It will be noted that where a strata corporation wishes to commence proceedings on behalf of all owners in respect of any of the matters enumerated in s. 171(1), the action must be authorized by a 3/4 vote, not including any person being sued. Where such a resolution is passed, all the owners, except any defendants, are required to contribute to the expense of the action in proportion to their unit entitlements. In contrast, where the strata corporation is suing on behalf of one or more owners about matters affecting only their strata lots, only those owners are required to contribute to the expenses of the action. Approval by a 3/4 majority is also required in that event.

Factual Background

[6] The plaintiffs and the defendants are all individual owners, past or present, of strata units in a residential building located in Vancouver. The plaintiffs originally filed a writ of summons in the Supreme Court in April 2001, claiming damages against the defendants "as a result of their improper conduct and actions concerning the management of the affairs of Strata Plan VR 1008". They alleged breaches of fiduciary duty, breaches of trust, negligence and bad faith, as well as the contravention of various provisions of the Act and its predecessor, the Condominium Act, R.S.B.C. 1996, c. 64. They sought damages and an accounting of the management of the financial affairs of the strata plan by the defendants.

[7] By an (amended) statement of claim filed November 18, 2002, the plaintiffs clarified that the defendants were members of the strata council of Strata Plan VR 1008 and that the defendants had caused certain repair and maintenance work to be carried out on the common property “without the prior approval of the Owners of Strata Plan VR 1008” (defined as the “Owners”.) The plaintiffs claimed that the work had been carried out defectively and by unskilled persons, rendering certain warranties void, and that a new management company hired by the defendants for the strata corporation continued the practice of engaging unqualified and unlicensed tradespersons to repair the damage caused by the first contractor. According to the amended statement of claim, a renovation of the entire building envelope is now required at a cost that is likely to exceed $800,000. It is also said that the defendants made false representations to the Owners aimed at levying funds which were used for purposes other than those approved by the Owners.

[8] The defendants filed their statement of defence on July 31, 2001. They denied the plaintiffs' allegations and inter alia denied that they as members of the strata council are personally liable for any acts relating to the management and maintenance by the strata corporation of the common property and common assets. In October 2001, they filed a motion to dismiss the action pursuant to Rule 19(24)(a). For reasons that were not explained, the motion did not come on for hearing until November 10, 2003. By that time, the plaintiffs had purported to file a second "amended" statement of claim. (The new amendments required leave of the Court pursuant to Rule 24(1), and since leave was not sought or obtained, the further amended pleading was not before the Chambers judge.) The amended writ stated that the action was a representative one brought on behalf of all the owners pursuant to Rule 5(11). At the same time, the amendment purported to add the following sentence to the writ:

The Plaintiff is a Strata Corporation pursuant to a Strata Plan deposited at the land title office designated VR 1008 and acts in a representative capacity for all owners of Strata Plan VR 1008 other than Defendant owners.

The appeal record does not disclose the nature of the amendments, if any, sought to be made in October, 2003 to the statement of claim.

[9] As I have said, the defendants' application under Rule 19(24)(a) came on for hearing on November 10, 2003, together with a motion of the plaintiffs seeking, inter alia:

… that this Action be continued in the name of and on behalf of the Owners, Strata Plan VR 1008 and that the Owners, Strata Plan VR 1008 be substituted as plaintiff in place of Denise M. Hamilton, Christopher Robert Monk, Richard Bedford Oldaker, Nevena Vojic and Nikica Vojic.

And that Denise M. Hamilton, Christopher Robert Monk, Richard Bedford Oldaker, Nevena Vojic and Nikica Vojic be authorized to control the conduct of this Action on behalf of the Owners, Strata Plan VR 1008, together with any other directions for the conduct of this Action that this honourable court deems necessary. [Emphasis added.]

[10] Although she did not have before her the pleadings as further amended by the documents filed on October 15, 2003, the chambers judge treated the action primarily as one in which the plaintiffs were seeking relief "on behalf of the owners of the building as a whole." Thus she began her reasons (delivered orally on November 10, 2003, Vancouver Registry No. S012351) as follows:

The plaintiffs have sued in their individual capacities but it is clear from the amended statement of claim that they are seeking relief on behalf of the owners of the building as a whole. "Owners" has been defined in the amended statement of claim, paragraph 16, to include all of the owners of strata plan VR 1008. It is clear from a review of the contents of the statement of claim, and in particular the relief claim at page[s] 8 and 9 of the statement of claim, that the plaintiffs are seeking to recover from the defendants damages or funds which accrue to the strata corporation or the owners as a whole. [At para. 3.]

She summarized the plaintiffs' position as follows:

The position of the plaintiffs is that they must be entitled to bring this action because if they are not, there is no relief available to them. Secondly, they say that they should be entitled to bring the action as a derivative action on behalf of the strata corporation. Thirdly, they say they should be entitled to maintain the action as a representative action on behalf of all of the owners of strata plan VR 1008, pursuant to Rule 5(11). [At para. 5.]

[11] Having noted that the plaintiffs' complaints related to maintenance "carried out on the common property of the strata building and not repairs relating to their units", the chambers judge referred to s. 171 of the Act, which I have quoted above. She noted that the plaintiffs had been unable to obtain the vote of 3/4 of the ‘non‑defendant' owners required to authorize the strata corporation to bring the action. However, she said:

… As was pointed out by Justice Lowry in the Ang decision, the rule in Foss v. Harbottle applies in relation to members of a strata council, and the individual owners may not bring an action for wrongs alleged to have occurred to the common property. Such claims must be brought under s.171. [At para. 13.]

(As will be recalled, Foss v. Harbottle (1843) 2 Hare 189, 67 E.R. 189, established the seminal rule in company law that a shareholder of a limited company may not sue for a wrong done to the company, since the company is a separate legal person at law whose affairs are managed by a board of directors.)

[12] The chambers judge then moved to the plaintiffs' alternative position, which was that "they are entitled to bring a derivative action, either under the common law or pursuant to Section 164 of the Strata Property Act". She relied on the decision of Lowry J. (as he then was) in Ang v. Spectra Management Services Ltd. et al. 2002 BCSC 1544, 117 A.C.W.S. (3d) 830, to conclude at para. 15 that s. 164 "does not permit an owner or a group of owners to bring an action on behalf of the corporation." In Ang, an individual strata owner had challenged the validity of two leases of common property which she claimed had been granted by the developer of a condominiumized hotel in breach of a fiduciary duty owed to the strata lot owners. Lowry J. elaborated:

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., [1995] 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. … [At paras. 8-10.]

[13] Lowry J. began his legal analysis by reciting s. 171 of the Act and noting that the plaintiff and her associates had been unable to muster the required 3/4 vote. He reasoned that they were attempting to circumvent s. 171. In his view, the question was therefore whether s. 164(1) authorized 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 the property and to sue to preserve it on behalf of all the owners when authorized by the requisite vote." (Para. 17.) He found that “If any wrong had been committed, it was to the Strata Corporation” and that the rule in Foss v. Harbottle therefore applied to negate the cause of action. In his words:

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 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. [Paras. 18 and 20; emphasis added.]

As for s. 164, it was said to do "no more than authorize proceedings by an owner to redress the actions of a strata corporation that are significantly unfair to that owner", much like the oppression remedy provided by most company law statutes. Since Ms. Ang had not shown she had any particular grievance arising out of actions of the strata corporation, he concluded that she was also "without standing" under that provision to apply to have the leases of common property declared void. (See also Beck v. Andrews Realty [1994] B.C.J. No. 2796 (Prov. Ct.), at paras. 24-7.)

[14] The chambers judge ruled that similarly in the case at bar, the plaintiffs were not alleging any "unique or particular oppression related to them in their individual capacity or as a minority group." Accordingly, she said, any “derivative claim” was precluded. (Para. 17.) (With respect, it appears the Court here confused a derivative action – i.e., a proceeding taken with leave of the court by a shareholder or other interested person to enforce a right or assert a defence belonging to a company – with an oppression action – i.e., a proceeding by a shareholder complaining of oppressive conduct of a company vis-à-vis the shareholder in particular. See Business Corporations Act, S.B.C. 2002, c. 57, s. 232 and s. 227, respectively.) Nor, the chambers judge said, was any of the exceptions to the rule in Foss v. Harbottle raised by the statement of claim in this case, "even if the exceptions have survived Section 171." (Para. 19.)

[15] Finally, with respect to the plaintiffs' prayer to bring their action in a "representative capacity on behalf of the owners of Strata Plan VR 1008", the chambers judge acceded to several objections raised by the defendants – first, that Rule 5(11), dealing with representative actions, did not itself create substantive rights; second, that the plaintiffs did not represent the other owners; and most importantly, that Mr. Justice Cohen had already dealt with this issue in The Owners, Strata Plan LMS 888 v. The City of Coquitlam, 2003 BCSC 941, 15 B.C.L.R. (4^th) 154. At para. 41 of his reasons in that case, Cohen J. had stated that the “plaintiff's right to commence a representative action does not exist outside of ss. 171 and 172 of the [Strata Property Act].” The Chambers judge apparently assumed that as in the case at bar, the plaintiffs in Coquitlam were individual owners of a strata plan who had commenced their action without the approval of 3/4 of the owners. In fact, however, the plaintiff in Coquitlam was the strata corporation itself, which in accordance with s. 13(2) of the Condominium Act (the counterpart to s. 2(1)(b) of the Act) was titled "The Owners, Strata Plan LMS 888". Cohen J. found the requirement for approval by the statutory majority before proceedings were commenced, to be mandatory and substantive rather than procedural. Since no such approval had been given, he dismissed the action. Thus his reasons dealt with the right of a strata corporation to bring an action under what is now s. 171 of the Act without the required approval, not with the right of individual owners to bring an action on their own behalf or as the representatives of some or all other owners in respect of injury or loss to their common property.

[16] In any event, the chambers judge in the case at bar considered that it would not be consistent with the scheme of the Act if individual owners could sue to protect their own rights to or interests in their common property. In her analysis:

… the entire scheme of the Strata Property Act is based on the fact that strata properties involve collective as well as individual rights. There are interconnecting rights and obligations which the legislature has determined must be exercised or recognized in a specific manner, and have set the requirement of a three-quarter majority of persons who are not intended to be defendants in the action.

It must be assumed, as the legislature has assumed, that reasonable people protecting their own interests and acting collectively are in the best position to make a decision as to whether or not a certain course of action is warranted given the risks and potential benefits of that course of action. In this case the plaintiffs having been unable to persuade their fellow owners to pursue this course of action against some of their former or present fellow owners must abide, in my view, by the decision made. [At paras. 25-6.]

[17] For similar reasons, the chambers judge also refused the plaintiffs' application to have the strata corporation substituted as plaintiff and to be authorized to control the litigation. She found this alternative not to be feasible, since it would override s. 171 and the wishes of those strata owners who refused to approve the commencement of the litigation. Such a ‘circumvention’ of the Act would, given the "long history of conflict between owners in this building", be unwarranted.

[18] In the result, the action was dismissed.

On Appeal

[19] On appeal, Mr. Holmes on behalf of the plaintiffs (who was not counsel in 2003) has re-cast, or at least re-focussed, the position reflected by the pleadings described above. The plaintiffs no longer seek – if they ever did – to sue as representatives of all owners or derivatively on behalf of the strata corporation. Instead, they rely simply on the fact that they, together with others, are tenants-in-common of the common property, and assert that like any other co-owners, they are entitled to sue for a remedy for injury to their own interests in such property. On this view, it is not necessary to rely on s. 171, Rule 5(11), or even an exception to the rule in Foss v. Harbottle.

[20] Mr. Holmes developed three principles in support. First, he noted cases decided in various disparate areas of the law to the effect that that which is not prohibited by law is permitted, and by corollary, that unless a right of action is expressly taken away by legislation, it continues to exist. He referred us to MacMillan Bloedel Ltd. v. British Columbia, 2000 BCCA 422, where this court approved the formulation of Lord Atkinson in Attorney‑General v. De Keyser's Royal Hotel Ltd. [1920] A.C. 508 (H.L.) at 542, that "[u]nless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation." Reference was also made to Chester v. Bateson [1920] 1 K.B. 829, which at 834 cited a stirring passage from the judgment of Scrutton J. in In re Boaler [1915] 1 K.B. 21 at 36; and to Raymond v. Honey [1983] 1 A.C. 1 (H.L.) at 12-3. (In the same vein, I also note Attorney General v. Guardian Newspapers (No. 2) [1990] 1 A.C. 109 (C.A.) at 178, aff’d [1990] 1 A.C. 233 (H.L.); and P. Hogg, Constitutional Law of Canada (looseleaf, 1997) at 31-2; and Ruth Sullivan, ed., Driedger on the Construction of Statutes (4^th ed., 2002), at 399-400.)

[21] The second critical component of the plaintiffs' submission was that co-owners, or one or a group of co-owners, have a cause of action for damages in respect of their property interests, with or without the participation of the other co‑owners. Thus in Baker v. Barclays Bank, Ltd. [1955] 2 All E.R. 571 (Q.B.), one partner of a two‑partner firm was held entitled to sue a bank for damages for conversion of cheques payable to the partnership which the plaintiff alleged had been fraudulently deposited by the other partner to his own account. Devlin J. (as he then was) discussed the right of a co-owner to sue for injury to property and whether this right was negated where the co-owners were partners:

It has been settled for a very long time past that one of several co-owners of a chattel can sue for conversion, relying on his own right to possession and recovering damages according to his interest in the chattel. Thus in Bloxam v. Hubbard ((1804), 5 East, 407; 102 E.R. 1126, 41 Digest 168, 89a) Lord Ellenborough, C.J., held that three out of four co-owners of a ship might recover three-fourths of the value of that ship, saying that each might recover according to his own interest. Lord Ellenborough said (5 East, at p. 420):

“As to the first of these objections, assuming it to be well founded, and we think it so, it has only the effect of precluding the plaintiffs, who are three out of the four assignees in whom the property of the ship originally was (and, until a new assignment is made under the order of the Lord Chancellor, continues to be) vested, from recovering more than their three-fourth parts in value of the property in question. For it is now too well settled to be any longer disputed in a court of law, that the defendant can only avail himself of an objection of this sort, viz, that all the several part owners in a chattel have not joined in an action of trespass, or of tort brought in respect to it, by plea in abatement I will only refer to Addison v. Overend (1796), 6 Term Rep. 766; 101 E.R. 816; 41 Digest 813, 6746), in which most of the cases on the subject are collected; and Sedgworth v. Overend (1797), 7 Term Rep. 279; 101 E.R. 974; 41 Digest 813, 6747.”

I was also referred in the course of the argument to a statement by Lord Denman, C.J., in Wilkinson v. Haygarth, [(1847) 12 Q.B. 837] where he said (12 Q.B. at p. 850): “The plaintiff can recover such damages only as are proportionate to his interest in the property …”

Bloxam v. Hubbard, supra, makes it plain that the only objection that can be taken to one of several part-owners suing is the procedural objection taken by means of a plea in abatement. Plea in abatement was a purely procedural matter, and it has now disappeared. It disappeared under the practice established by the Judicature Acts, and it has been replaced, if one can call it a replacement, by R.S.C., Ord. 16, r. 11 which says:

“No cause or a matter shall be defeated by reason of the misjoinder or non-joinder of parties, and the court may in every cause or matter deal with the matter in controversy so far as regards the rights and interests of the parties actually before it.”

I think that makes it quite plain that, whereas before by plea in abatement, one could require as a matter of procedure that all the relevant parties should be brought before the court, now under R.S.C., Ord. 16, r. 11, it is immaterial to the rights of the parties to the cause or action whether all the proper parties are before the court or not; no cause or matter shall be so defeated, and the court is entitled to deal with the rights and interests of the parties actually before it. The rule goes on to provide, of course, that the court may, at any state of the proceedings, make such order as might be just with regard to striking out the names of parties who are improperly joined, and then says that the court may order that,

“the names of any parties, whether plaintiffs or defendants, who ought to have been joined, or whose presence before the court may be necessary in order to enable the court effectually and completely to adjudicate upon and settle all the questions involved in the cause or matter, be added.”

But for this rule, no doubt it would be necessary that Mr. Bainbridge should have been joined, and, if he refused to join as plaintiff, he should have been joined as defendant. It is now quite plain, however, that it is only if the court considers that it cannot deal effectually and completely with the questions involved in the matter that the court would make an order requiring Mr. Bainbridge to be joined.

* * *

Counsel for the bank went on to contend that, whatever the position might be in the case of co‑ownership generally, it was different if the co‑owners were also partners. I can see no reason in principle why it should be. In Lindley on Partnership (11th Edn.), p. 361, the right of a co‑owner to sue is considered and it is not suggested that any different rule applies in the case of a partnership. It is there stated:

“An action for the recovery of goods of the firm or for damages for their loss or injury ought to be brought in the name of the firm or by all its members; but if one only sues he will be entitled to recover damages in respect of his interest in the goods …”

Counsel for the bank relied on the inconvenience that could be caused if one partner were allowed to sue for his own interest, and submitted that in such a case as this the plaintiff ought to have had the partnership wound up before he could proceed. These considerations, however, appear to me to be procedural only and not to go to the question whether the plaintiff has a good cause of action. [At 578-9; emphasis added.]

(See also Sheehan v. Great Eastern Railway Company [1878] 16 Ch.D. 59, at 63, concerning the right of a co‑owner of a patent to enforce his rights to a royalty without making his co‑owners parties to the action.)

[22] Rule 11 of Ord. 16, referred to in Baker, was later replaced in England by Rule 19.3. The British Columbia counterpart is R. 5(3), which provides:

5(3) Subject to any enactment or these rules or unless the court otherwise orders, a plaintiff or petitioner who claims relief to which any other person is jointly entitled shall join as parties to the proceeding all persons so entitled, and any of them who do not consent to be joined as a plaintiff or petitioner shall be made a defendant or respondent.

The rule was applied in 337965 B.C. Ltd. v. Tackama Forest Products Ltd. (1991) 64 B.C.L.R. (2d) 131 (S.C.), app. allowed in part (1992) 67 B.C.L.R. (2d) 1 (C.A.). (See in particular the judgment of Southin J.A., at para. 144.) As far as I am aware, no application was made in this case pursuant to R. 5(3), presumably because the argument is about the existence of the cause of action rather than the procedural matter of which parties had to be properly joined under the rule, if the plaintiffs have a cause of action.

[23] The third crucial element of the plaintiff’s submission was that properly construed, s. 171 of the Act does not take away the owners' common law right to sue in respect of damage to their property, nor does it vest that right exclusively in the strata corporation. Counsel emphasized the word "may" in the opening words of s. 171(1), and the fact that where the requisite approval is obtained and the strata corporation sues on behalf of the owners, the expenses of the litigation must be borne by all the others except any defendants. In Mr. Holmes’ submission, s. 171 simply creates an option for owners to use the convenient vehicle of the strata corporation to sue, and to spread the costs of litigation among all the non-defendant owners, provided the requisite majority approves. It does not follow, however, that the owners' right to sue (and to bear the costs of doing so) personally has been taken away; and as has been seen, clear statutory language is necessary to take away a right of action.

[24] Counsel for the defendants did not seem to take issue with the three propositions advanced by the plaintiffs, at least in the abstract. He contended, however, that the common law rules concerning "ownership" and "property rights" are simply inapplicable to the rights in question here, which are purely creations of statute. In his words, any rights of the plaintiffs were created, not taken away, by the Act. Thus he argued that although s. 66 refers to the ownership by an owner of the common property as a tenant in common, that provision is “merely descriptive” and should not be construed as creating what is understood as co‑ownership at common law. In fact, what is at issue is not “co-ownership” of “property” as generally understood, but statutory rights that must be construed in the context of the Act as a whole. Part of that context is s. 3, which makes the strata corporation responsible for managing and maintaining the common property.

[25] Mr. Tweedy cited no case authority, but pitched his argument on a practical level. He argued that in a building owned by ten persons in which a 100 sq. ft. area of floor had been damaged, it would be nonsensical and unreasonable if one owner alone could sue for the damage to his or her proportionate share of the floor. This argument flies in the face of cases such as Baker and Sheehan referred to above, and fails to consider R. 5(3), supra. However, Mr. Tweedy also relied on two British Columbia cases which have applied Foss v. Harbottle to strata corporations – Ang, supra, and Extra Gift Exchange Inc. v. Bryan Collins Land Surveying Inc. (2004) 35 B.C.L.R. (4th) 65, 2004 BCCA 588. The latter involved a dispute between the owner of a 1% interest in a strata lot, the developer of the property, and a land surveying company that had been engaged by the developer to carry out preparatory work at the site even before the strata corporation was formed. Shabbits J. dismissed the proceeding as disclosing no cause of action. He ruled that a land surveyor does not owe a fiduciary duty to his or her client and that no breach of any duty existing at law had been pleaded. This Court, per Huddart J.A., agreed. However, the Court also went on to say:

To the extent that ground for relief may be arguable, it must be put forward by the Strata Corporation, who is authorized by s. 171 of the Strata Property Act to sue as representative of “all owners, except any who are being sued,” if authorized by a resolution “passed by a 3/4 vote” of those owners who are not being sued. The wrong alleged is to the Strata Corporation. Thus, only that corporation may seek relief. Foss v. Harbottle …

In this regard I agree with the reasons expressed by Lowry J. in Ang v. Spectra Management Services Ltd. …, particularly in para. 17 where he wrote that an owner should not be permitted to “circumvent the governance provisions of the Act and achieve what it cannot achieve through a special meeting of the owners.” [At paras. 4-5; emphasis added.]

[26] Clearly, the Court was proceeding on the basis that the wrong being alleged was one to the strata corporation, rather than to individual owners or all the owners as a group. This is enough to distinguish Extra Gift from the case at bar. I take the view, however, that Foss v. Harbottle does not apply to strata corporations in respect of an action for injury to common property. As has been seen, in this province the common property is not owned by the strata corporation, but by the strata owners in proportion to their respective unit entitlements. The concept of injury to the corporation is not engaged by the circumstances of this case. (See also Pender v. Lushington [1877] 6 Ch. D. 70 at 80 and Hercules Managements Ltd. v. Ernst & Young [1997] 2 S.C.R. 165, at paras. 62-3.) The other side of this coin is that the strata corporation’s ability to sue under s. 171 is purely a creation of statute. Thus as Garson J. noted in Strata Plan LMS 1468 v. Reunion Properties Inc. (2002) 3 B.C.L.R. (4th) 79, 2002 BCSC 929, the only way in which the strata corporation could sue for damage to common property of the owners is by means of s. 171 of the Act. As she observed:

The common property of a strata corporation is owned by all owners as tenants in common (s. 12(1) of the Condominium Act).

The claim for damage to the common property in this case is not one for which the strata corporation could assert a claim other than as a representative plaintiff. The strata corporation does not have its own cause of action for defects in or damage to strata lots or to common property, because neither the common property nor the units are owned by the strata corporation. [At paras. 23-4; emphasis added.]

[27] As for the notion that individual owners should not be permitted to "circumvent" s. 171 and sue directly for injury or damage to their interests in common property, I see nothing in the Act taking away that right, which I view not as statutorily created, but as a common law incident of the ownership of property, albeit a type of property unknown to the common law. Section 171 creates a mechanism by which a three-fourths majority of owners may use the strata corporation as their vehicle for suing and spread the expenses thereof. But in the words of Seaton J.A. in Strata Plan No. VR 368 v. Marathon Realty Co. (1982) 41 B.C.L.R. 155 at para. 14, "that is as far as the legislation goes." It would take much clearer language, in my respectful view, to remove the right of individual owners to enforce their rights "on their own hook". Section 171 is not thereby “circumvented”, but is simply inapplicable. Nor do I foresee that frivolous actions and multiple claims are likely to result, since the court retains the ability to make orders as to costs, and the owners who do take legal action must bear the expenses of the litigation themselves, like any other co‑owners of property. (In the case at bar, since the plaintiffs have alleged fraud on the defendants’ part, they run the risk of special costs.) As well, it is open to the court to respond to any multiplicity of actions by authorizing a representative action under R. 5(12), or by following the course ordered in Beck, supra, at paras. 30-36. Short of this, all parties that should be before the court can be joined under R. 5(3) as defendants if they do not consent to be plaintiffs.

[28] Finally, I note as a matter of statutory construction the juxtaposition of, and similarity between, ss. 171 and 172 of the Act. Both employ the same introductory wording and permit the strata corporation to sue – s. 171 on behalf of all owners, and s. 172 on behalf of some owners. Both require a 3/4 majority vote before the suit is commenced. As Mr. Holmes contended, it could hardly be argued that s. 172 takes away the right of individual owners to sue "about matters affecting only their strata lots". If this is correct, it is difficult to see why s. 171, which uses parallel wording, should be taken to mean that the rights of owners in respect of their interests in the common property are abrogated and vested solely in the strata corporation.

[29] In the result, I conclude that the chambers judge misapprehended the nature of common property ownership under the Act and incorrectly interpreted s. 171. This also led her, with respect, to misapply the rule in Foss v. Harbottle as if an injury to the strata corporation itself had been alleged.

[30] I would allow the appeal, but do so on condition that the plaintiffs must within three weeks of the entry of this court's order apply below to amend their pleadings so as to reflect correctly the nature of their claims. It is to be hoped that this action may then proceed more quickly than it has thus far.

“The Honourable Madam Justice Newbury”

I Agree:

“The Honourable Madam Justice Levine”

I Agree:

“The Honourable Mr. Justice Smith”

Citation:	*Hamilton v. Ball,*
	2006 BCCA 243