Alberta court strikes down “pointless” fines levied against strata-lot owner

Alberta court strikes down “pointless” fines levied against strata-lot owner

June 24, 2016

BY Kevin Zakreski

In Condominium Corporation No 072 9313 (Trails of Mill Creek) v Schultz, 2016 ABQB 338, a master of the Alberta Court of Queen’s Bench refused to enforce a condominium corporation’s repeated fines against an owner who was in breach of the condominium’s bylaw against underage occupants. The case contains some interesting comments on the use of fines as a means to control owners’ behavior, procedural fairness and the need to give reasons in enforcing bylaws, and what British Columbia’s Strata Property Act refers to as “significantly unfair” acts.

Facts and issues

The case began “as an application to evict a 15 year old child” from the condominium corporation. That issue became moot when the owner sold her condominium unit, leaving the question of $2250 in fines, as well as other costs related to bylaw enforcement, outstanding between the parties.

The owner purchased the condominium unit in 2012. She had shared custody of her minor son with her estranged husband and was aware that the condominium was an adults-only building. At the time of purchase, she sought and received an assurance from the owner-developer’s representative that her son could live with her. She was told that “this would not be a problem,” since “the by-law is permissive.”

By March 2014, the condominium’s board of directors had revoked whatever permission was granted by the owner-developer’s representative. They gave the owner notice that her son “was to leave by July 6, 2014.”

The owner was unable to sell her condominium unit or make an arrangement with her son’s father by this deadline. The board decided in November 2014 to fine the owner “$250.00 every 2 weeks beginning January 1, 2015 for every 2 weeks the Bylaw breach continues and the underage occupant remains in the unit.” This left the owner, in the court’s words, “caught between the decision of the board and her legal and moral obligation to her son.”

In May 2015, with fines still accumulating, the board commenced proceedings in court to evict the owner’s son. When the owner subsequently sold her condominium unit, the proceedings were converted into this originating application to enforce the outstanding fines.

The court identified four issues for consideration, two of which were germane to strata-property law:

• The sufficiency of the Board’s reasons in levying these fines;
• The role of the Court in reviewing the decision of the properly elected condominium board.

The sufficiency of the board’s reasons in levying these fines

The court’s analysis of these two issues tended to intertwine. It began by noting that the case asked the court to apply section 67 of Alberta’s Condominium Property Act. (This provision is the equivalent of section 164 of BC’s act, which deals with preventing or remedying significantly unfair acts.) The court followed an earlier Alberta decision—Leeson v Condo Plan No 9925923, 2014 ABQB 20—which sets out the following approach to Alberta’s legislation:

Subsections 67(1)(a)(ii) – (v) use the words “oppressive or unfairly prejudicial [conduct].” An oppression remedy is well established in a company law setting, though it goes without saying that the remedy in that context protects a narrower range of interests than those that might be found in a condominium setting.

The learned authors of the Condominium Law and Administration, Carswell, vol. 2, (Looseleaf) Ch. 23 (T. Rotenberg), identify British Columbia as the pioneering jurisdiction for an oppression remedy in the condominium context. Mr. Rotenberg notes five general principles that apply in this setting:

• It is a broad remedy, broadly applied; attempts to narrow its impact and effectiveness should therefore be resisted.
• The purpose of the oppression remedy is to protect the objectively reasonable expectation that caused the relationship to begin or continue.
• Either the cumulative results of the conduct complained of or a specific egregious act ultimately determines whether there is an actionable wrong.
• The court must balance the competing interests of the minority, who are to be treated fairly, with the rights of majority to govern. Only if the minority’s interest is unfairly treated will the courts intervene.
• The selection of a remedy must be sufficient to achieve the desired result. Remedies should not be narrowly limited, and may be granted against individuals in appropriate cases.

The source of the remedy is the recognition that there are different, sometimes competing, interests within any group. Not every interest can prevail, so the law requires due consideration and fair treatment of the various stakeholders.

In applying these considerations, the court said it was helpful to consider the examples set by corporate and administrative law:

Though the company law remedy might be narrower, there is another advantage to be gained from the comparison: which is the concept of the reasonable expectations of the claimant. This can be helpful in terms of identifying threshold conduct to be considered under section 67. It is similar to the “legitimate expectation test” in Administrative Law; though this goes more to the measure of procedural fairness. [citations omitted]

Administrative law also provided a springboard for the court’s consideration of the procedural fairness of the board’s decision. Here, the court was particularly vexed by the lack of reasons for that decision: “No reasons are provided. We cannot tell what the Board had in mind.”

The role of the Court in reviewing the decision of the properly elected condominium board

The court noted that courts generally give considerable deference to a condominium corporation’s decisions. But, the court added, this

does not mean “hands off.” Certain analogies have been drawn to applications for judicial review in the administrative law context. . . . Arbitrary decision making cannot immunize the Board from scrutiny by this Court.

Relying on the leading administrative-law case New Brunswick (Board of Management) v Dunsmuir, 2008 SCC 9, the court decided that this “case involves the Board’s exercise of discretion and is to be measured against the standard of reasonableness.”

Conclusions and general principles for determining significant unfairness

In a “denouement” to its decision, the court articulated its general principles for “this type of decision”—that is, one involving an allegation of significant unfairness:

• Apply a reasonable or legitimate expectations analysis to determine the nature of the right or interest affected, and to identify whether there is threshold conduct for the application of section 67(1)(a)(ii)-(v);
• Consider the nature and the sufficiency of the evidence in support of the application; especially with Rule 13.18(3) in mind;
• Identify the type of the decision (i.e., whether it involves a question of law like the interpretation of the Condominium Property Act, or a by-law, or an exercise of discretion based on a set of facts). Condominium Boards may be especially in tune with the needs and interest of the unit owners but unless demonstrated, their election gives them no special ability to interpret questions of law. This leads to the fourth question which is to;
• Consider what level of deference the Court should afford the decision. That is, what standard should be applied: reasonableness, or correctness;
• If the decision involves an interest that is not trivial, and if the result is not self-evident, the Court should ask whether reasons are necessary and whether the rules of natural justice have been followed.

In applying these considerations, the court appeared to be struck by a number of factors that tended to undermine the condominium corporation’s case. One was the already-noted lack of reasons for the condominium corporation’s decision. Another was the ultimate futility of the condominium corporation’s course of action. The court made a number of pointed comments on this score. It observed:

In this case, a unit owner could reasonably, or legitimately expect that she would not be fined when there would be no useful purpose served by it. Both the by-law about minor persons staying in the complex and the power to levy a fine are discretionary. Enforcement by fines is not mandatory. The by-laws are not to be treated as a version of legislated inhumanity.

Elsewhere, the court characterized the fines as “pointless”:

There is no consideration of the purpose of sanction in the Board’s decision. The fines levied here appear to be pointless except, possibly, from the standpoint of deterrence. Otherwise the decision seems to be punitive and to serve no useful purpose. It might have been different if Ms. Schulz was unwilling to comply.

Result

In the result, the “originating application for fines and recovery costs [was] dismissed. The cross application was allowed under [section] 67(2) (f) and the fines are set aside with costs” to the owner.