2005 BCSC 51 Peoples Trust v. Meadowlark Estates et al

Before: The Honourable Madam Justice Gray

Reasons for Judgment

Counsel for the Petitioner: (Respondent on Appeal)	J.G. Howard
Counsel for the Appellants on Appeal: The Owners, Strata Plan No. V1S3270	B.L. Day
No other appearances
Date and Place of Hearing:	September 3, 2004
	Vancouver, B.C.

INTRODUCTION

[1] The issue in this appeal of a Master's Order is whether in a court-ordered sale, fines levied by a strata corporation must be paid before the property can be registered in the name of a new owner. The fines were not and cannot be the subject of a lien in favour of the strata corporation.

[2] The petitioner in this foreclosure proceeding, Peoples Trust, has paid the outstanding strata fees, but has not paid the fines. The purchase monies were too little to pay both the mortgage debt and the strata corporation fines. As a result, the issue can be restated as whether the registered mortgage debt takes priority over the unpaid strata corporation fines. Master McCallum's order had the effect that the mortgage debt has priority.

POSITION OF THE PARTIES

[3] Counsel for the appellant Strata Corporation, Ms. Day, argued that proper interpretation of the applicable legislation results in the Strata Corporation being entitled to require payment of fines before it executes a form known as both a "Form F" and a "Certificate of Payment". She also argued that the Registrar of Land Titles cannot register the purchaser as owner without a Form F. If her argument prevails, the Strata Corporation will have priority to payment over the mortgagee, Peoples Trust.

[4] Mr. Howard, counsel for Peoples Trust, argued that to do so would upset the system of priorities set out in the Strata Property Act, S.B.C. 1998, c. 43. He argued that the fines are a debt owed by the person owning the land at the time of the fine, but do not result in a claim to the land.

[5] The Registrar of the Victoria Land Titles Office took no position on the application or this appeal.

FACTS

[6] On December 13, 2002, Peoples Trust obtained an order nisi of foreclosure for a debt of about $1.2 million against 24 units of a 66 unit strata titled residential condominium complex in Comox, B.C. The Strata Corporation declined to provide a Form F unless all amounts including about $44,000 in fines were paid.

[7] On August 19, 2003, Master McCallum made a vesting order approving the sale of the strata lots to a third party purchaser for about $1.1 million. The vesting order provided that The Owners, Strata Plan No. V1S3270 (which I refer to in these reasons as the "Strata Corporation") had priority over Peoples Trust for all monies owing pursuant to the lien created by s. 116 of the Strata Property Act.

[8] The Strata Corporation has been paid all money owing pursuant to that lien. That lien does not include about $44,000 owing for fines at the time of the vesting order.

[9] Master McCallum concluded that a Form F is not required under the Land Title Act, R.S.B.C. 1996, c. 250, for the transmission of property pursuant to a vesting order. He directed the Registrar of the Victoria Land Title Office to issue title to the purchaser as registered owner without the provision of a Form F.

[10] Master McCallum applied the obiter dicta reasoning of Master Bolton in CIBC Mortgage Corp. v. Spreeuw, [2001] B.C.J. No. 2608 (QL), 2001 BCSC 1729. In that case, Master Bolton reasoned that a strata corporation should not have priority for unpaid fees over a registered mortgage debt, but he dismissed the mortgagee's application on procedural grounds. Master Bolton dismissed the application because the relief sought was in substance and effect an order requiring the Land Title Office to register a document, and the petitioner/mortgagee had not brought an application for mandamus to direct the Crown's conduct.

[11] That procedural concern did not arise in this case before Master McCallum because the Registrar of Land Titles was a party respondent and took no position on the application.

[12] Master McCallum effectively adopted what Master Bolton had said in Spreeuw as follows:

[3] Although a strata corporation has a lien for its basic fees which has priority over prior mortgages, an owner may owe additional monies for such items as penalties, interest and costs which do not form part of the corporation's priority claim. A dispute often arises in foreclosure actions involving strata properties, when the strata corporation has been paid to the extent of its priority claim, but is still owed money for these additional items by the owner. In those circumstances, the corporation will often (or always) decline to issue the Form F, on the sensible premise that they cannot certify that no monies are owing when that is not, in fact, the case. The Land Title Office will not accept for registration a vesting order relating to strata property without a Form F. Consequently, the petitioners either have to pay the fees to the corporation, or pay them into court and then make a subsequent, expensive application to have the monies paid out because of their priority.

[4] Mortgage companies have tried a couple of ways to avoid the problem, but the courts have ruled against them in The Toronto-Dominion Bank v. Madson et al (March 2, 2001), Nanaimo Registry No. S29818, per Master Horn, and Canada Trustco Mortgage Company v. Gies et al, [2001] B.C.J. No. 1597, 2001 BCSC 1016, per Preston, J. The current application is a third attempt to resolve this dispute in favour of mortgagees at the expense of strata corporations.

[5] I have concluded for procedural reasons that I am unable to resolve the dispute in the present proceedings, although I found the substantive argument of counsel for the petitioner compelling. Basically, it follows a chain of enactments and definitions.

[6] Strata Property Act, s. 256: a Form F is required for "a conveyance of title to a strata lot."

[7] Strata Property Act, s. 1: "conveyance" means "a transfer of a freehold estate in the strata lot."

[8] Land Title Act, s. 1 describes a distinction between "transfer" and "transmission." "Transfer" includes a conveyance. "Transmission" includes a change of ownership under an order of a court.

[9] Land Title Act, s. 3(1): that Act applies to the Strata Property Act unless the two are inconsistent.

[10] There is no inconsistency between the Acts in this context, and accordingly the distinction between transfer and transmission applies to the Strata Property Act.

[11] Accordingly, a sale of a strata property in foreclosure proceedings made pursuant to a court order is a transmission of ownership. It is not a transfer and therefore it is not a conveyance. Section 256 of the Strata Property Act is therefore inapplicable to such transactions, and no Form F is required.

[12] I must say that I find the logic unassailable. The representative of the strata corporation presented an impassioned written argument describing the difficulties experienced by the owners in her building in particular, and the owners of leaky condominiums in general, but this is a question of policy or fairness which is an issue for the legislature. The courts have to apply the law as it has been written, and the decisions in The Toronto-Dominion Bank, supra, and Canada Trustco Mortgage Company, supra, are of no assistance to the strata corporation here, as the argument made in this application was not made in those earlier cases.

[13] However, irrespective of any issues of fairness or logic, I have concluded that I cannot make the order sought, for purely procedural reasons...

[13] On September 4, 2003, Master McCallum's order was varied to provide for a sale price of about $1.255 million to a different purchaser. No other variations are material to this appeal. The increased purchase price was insufficient to fully satisfy the mortgage debt including accrued interest.

FURTHER LEGISLATION

[14] Further or more complete excerpts from the Strata Property Act are as follows:

s. 1: "convey" and "conveyance", when referring to the conveyance of a strata lot to a purchaser, means any of the following in respect of which an application to the land title office has been made to register:

(a) a transfer of a freehold estate in the strata lot...

115(1) Within one week of the request of an owner or purchaser...the strata corporation must give the person making the request a Certificate of Payment [a Form F] in the prescribed form if

(a) the owner does not owe money to the strata corporation, or

(b) the owner does owe money but

(i) the money claimed by the strata corporation has been paid into court, or to the strata corporation in trust, under section 114, or

(ii) arrangements satisfactory to the strata corporation have been made to pay the money owing.

...

(4) In completing the certificate, the strata corporation may include money owing in respect of

(a) the matters set out in section 116, and

(b) fines and the costs of remedying a contravention of a bylaw or rule charged against the owner or fines and costs for which the owner is responsible under section 131.

[15] Section 116 enables a strata corporation to file a lien against a strata lot for some, but not all, of the amounts which a strata corporation can claim against a strata lot owner. Section 116 provides as follows:

(1) The strata corporation may register a lien against an owner's strata lot by registering in the land title office a Certificate of Lien in the prescribed form if the owner fails to pay the strata corporation any of the following with respect to that strata lot:

(a) strata fees;

(b) a special levy;

(d) the strata lot's share of a judgment against the strata corporation.

(2) The strata corporation may register a lien against any strata lot, but only one strata lot, owned by an owner as owner developer, by registering in the land title office a Certificate of Lien in the prescribed form if the owner developer fails to pay an amount payable to the strata corporation under section 14(4) or (5), 17(b) or 20(3).

(3) Subsections (1) and (2) do not apply if

(a) the amount owing has, under section 114, been paid into court or to the strata corporation in trust,

(b) arrangements satisfactory to the strata corporation have been made to pay the money owing, or

(4) On registration the certificate creates a lien against the owner's strata lot in favour of the strata corporation for the amount owing.

(5) The strata corporation's lien ranks in priority to every other lien or registered charge except

(a) to the extent that the strata corporation's lien is for a strata lot's share of a judgement against the strata corporation,

(b) if the other lien or charge is in favour of the Crown and is not a mortgage of land, or

[16] Section 256(1) is as follows:

The registrar must not accept any of the following for registration unless it is accompanied by a current Certificate of Payment in the prescribed form referred to in section 115 [Form F] or, in the case of an electronic application for registration, unless it is accompanied by an electronic declaration under section 168.41 of the Land Title Act: ...

(d) a conveyance of title to a strata lot.

ANALYSIS

[17] It was common ground that this appeal of a Master's order must proceed as a rehearing. The Master's order finally determined entitlement to proceeds of sale and registration of title.

[18] The scope of appeal from a Master's decision was addressed in Abermin Corp. v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188 (S.C.). Macdonald J. said at 193:

An appeal from a master’s order in a purely interlocutory matter should not be entertained unless the order was clearly wrong. However, where the ruling of the master raises questions which are vital to the final issue in the case, or results in one of those final orders which a master is permitted to make, a rehearing is the appropriate form of appeal. Unless an order for the production of fresh evidence is made, that rehearing will proceed on the basis of the material which was before the master. In those latter situations, even where the exercise of discretion is involved, the judge appealed to may quite properly substitute his own view for that of the master.

[19] Ms. Day argued that the word "transfer" in the Strata Property Act was not ambiguous, and it was unnecessary to refer to the Land Title Act definitions. She argued that changing title from one person to another is the ordinary meaning of the word "transfer".

[20] However, s. 3(1) of the Land Title Act provides that such Act applies to the Strata Property Act unless the two are inconsistent. There is no need to establish ambiguity before considering the Land Title Act definitions. They can be avoided only if there is inconsistency.

[21] Ms. Day suggested that there was inconsistency. She argued that there is circularity in the definitions in the two statutes of "transfer" and "conveyance". She referred to the Land Title Act, s. 1, which provides that "'transfer' includes a conveyance...", and has a separate definition for a "transmission". Oddly, in the Land Title Act definition, transfer is the broader word including a conveyance, while in the Strata Property Act, s. 1, conveyance is the broader word and includes a transfer.

[22] Ms. Day referred to a number of cases which considered the meaning of the words "transfer" and "transmission" in other contexts. Other considerations apply in many of those contexts. In this case, the more helpful method of resolving any possible ambiguity is to look at the Strata Property Act in more detail.

[23] Mr. Howard argued that section 116 provides that charges including strata fees and special levies will have priority over registered mortgages, but charges like penalties will not.

[24] Mr. Howard argued that the distinction between "transfer" and "transmission" in the Land Title Act was essentially between voluntary conveyances and those resulting from external events and not requiring an act by the vendor, grantor or assignor. He referred to a number of cases which considered this distinction.

[25] Mr. Howard argued that it was logical for the legislation to require the filing of a Form F when there was a transfer, and not when there was a transmission. He argued that because a transfer is a voluntary act by a property owner, it would be expected that the property owner would want the transaction to proceed and therefore should pay everything outstanding to the strata corporation. In contrast, in a transmission, the property owner is not voluntarily transferring and may even be resisting the transaction. Mr. Howard effectively argued that in that circumstance, the strata corporation's claim against the property should be limited to the amount of the lien properly filed.

[26] The Strata Property Act defines "conveyance" to include "transfer". The Land Title Act definition of "transfer" applies to the Strata Property Act. It makes a distinction between "transfer" and "transmission". In the case at bar, there was a "transmission", not a transfer, so there was no "conveyance" under s. 256 of the Strata Property Act.

[27] While for the purposes of the Land Title Act, a transfer includes a conveyance, "conveyance" is not defined in that Act. If the Land Title Act definition is interpreted to mean a voluntary change of ownership by the original owner, it becomes simply a synonym for "transfer". There is no inconsistency or ambiguity.

[28] This is consistent with the legislative intent demonstrated by the limitation on what charges can be the subject of a strata corporation lien.

[29] If Ms. Day's argument is correct, there is no point to a strata corporation filing a lien under section 116. They would be able to withhold a Form F even without filing a lien for the charges which can be subject to lien.

[30] The purpose of filing the lien must be to provide notice to any interested party of the fact and amount of the strata corporation's claim. If a lien is filed, a mortgagee can assess its position and determine whether it will take steps against the mortgagor. This makes sense only if the lien represents the full amount which has priority over the registered mortgage.

[31] There was evidence that the Land Title Office required the filing of a Form F to complete transmissions in foreclosures, although there was no evidence about whether in such cases the purchase monies were insufficient to pay in full both the mortgage debt and the strata corporation's claim. Ms. Day argued that the court should avoid interpreting a statute in a way that would alter prevailing practice. She referred to a decision of Mr. Justice Trainer in Architectural Institute of British Columbia v. Lee's Design & Engineering Ltd. et al., [1979] B.C.J. No. 143 (SC) (QL) in which he said at para. 62 that:

the adoption of a particular construction which would radically change or alter a prevailing practice should be avoided in the absence of unequivocal language indicating that that was the clear intention of the legislation.

[32] Mr. Howard took the position that the judgment of Master McCallum accords with the current practise of the Registrar of Titles. He referred to the Land Title Practice Manual, published by the Continuing Legal Education Society of B.C. It refers to section 256(1) of the Strata Property Act and states that a Form F is not required on the registration of a foreclosure sale. It refers to the decision of Master Bolton in Spreeuw as authority for that proposition.

[33] The practice in the Land Title Office is of little assistance in the case at bar. It is based on an interpretation of the legislation. It is not a longstanding "prevailing practice". The Registrar of Land Titles was a party to this application and took no position. In these circumstances, the court should simply construe the legislation.

[34] Master McCallum's decision was correct. The appeal is dismissed. Unless the parties have submissions to make on costs, the petitioner is entitled to the costs of this application on Scale 3. If the parties have submissions on costs, the applicant for costs should file written submissions with the registry by February 15, 2005, and the responding party by February 28, 2005. Any reply by the applicant must be filed by March 7, 2005.

“V. Gray, J.”
The Honourable Madam Justice V. Gray

Citation:	*Peoples Trust v. Meadowlark Estates et al.,*
	2005 BCSC 51