A special resolution authorizing legal action by a strata corporation is now required before an action is commenced.
A recent decision of Cohen J. of the Supreme Court of British Columbia holds that the right of a strata corporation to commence a representative action does not exist outside of ss. 171 and 172 of the Strata Property Act, SBC 1998, c. 43: The Owners, Strata Plan LMS 888 v. The City of Coquitlam et al, 2003 BCSC 941.
The case holds that non-compliance with ss. 171 and 172 must result in an action being declared a nullity. The court postponed granting an order to strike the plaintiff's action pending receipt of further submissions on an application to substitute an owner (or owners) as a plaintiff in the action.
Section 171 provides that, before a strata corporation sues as a representative of all owners about any matter affecting the strata corporation, the suit must be authorized by a resolution passed by a three-quarters majority vote ("a special resolution") at an annual or special general meeting. Section 172 provides that, before a strata corporation sues on behalf of one or more owners about matters affecting only their strata lots, the strata corporation must obtain the written consent of the applicable owners, and the suit must be authorized by a special resolution.
Cases under the predecessor provisions in sections 15(1) and 15(7) of the Condominium Act, RSBC 1996, c. 64 held that the need for the applicable special resolutions was a condition precedent to bringing an action. However these conditions precedent were interpreted as procedural in nature and any failure to obtain the approval of the owners prior to commencing an action was a mere irregularity that could be rectified. Cohen J. decided that the result of new wording in the Strata Property Act is that the case law under the Condominium Act does not apply to actions commenced on or after July 1, 2000.
In The Owners, Strata Plan LMS 888 v. The City of Coquitlam, 2003 BCSC 941 the action was commenced after the Strata Property Act came into force. Special resolutions authorizing the action by the strata corporation were passed after the action had been commenced. Some defendants applied to strike the action on the basis that the plaintiff did not have the right, power or entitlement to bring the action. In making its ruling in favour of the defendants, the court held that requirements on a strata corporation for authorization to bring a representative action have changed substantially under the Strata Property Act. The mandatory provisions in ss. 171 and 172 are clear on their face and are substantive, rather than purely procedural.
If you are acting for a strata corporation in an action that was started on or after July 1, 2000 without the necessary resolution, you should immediately contact the Lawyers Insurance Fund for consideration of what course of action is appropriate in the circumstances of your file.
Editor's note: The following contact information was updated in January 2012.
Please direct any questions or comments to Ian Maclaren or Edna Ritchie at the Lawyers Insurance Fund.