Strata corporation’s counterclaim against owner-developer barred by Limitation Act
April 27, 2016
BY Kevin Zakreski
In Zaidi v The Owners, Strata Plan LMS 3464, 2016 BCSC 731, a recent decision on an application to dismiss a counterclaim and third-party notice, the BC Supreme Court considered the effect of a disclosure statement under the Real Estate Development Marketing Act in relation to the discoverability rules for limitation periods.
The application turned on a larger dispute involving the designation of amenity spaces and parking spots as limited common property. The case concerned a strata property consisting of “a residential building comprised of 13 strata lots located at 1150 Bute Street in Vancouver.”
The strata property was developed in 1997. In September 2005, the owner-developer filed “an amended strata plan with the Land Title Office, designating certain of the strata common property as limited common property for the sole benefit of Strata Lot 13 (also referred to as SL 13).”
Between September 2005 and June 2006, 12 strata lots were sold to purchasers. The exception was SL 13, which the owner-developer retained.
Each purchaser received a disclosure statement, which, among other things, advised the purchaser of the strata-plan amendments and the designation of limited common property.
In October 2015, in the course of ongoing litigation, the strata corporation issued a counterclaim and third-party notice to the owner-developer and its director, alleging a series of defects in the designation of limited common property. The applicants replied with this application, seeking to strike out the counterclaim and third-party notice as being commenced after the expiry of the applicable limitation period (which was taken to be either six years or two years, depending on whether the old or the new Limitation Act governed the proceeding).
The court began its analysis by noting that the disclosure statement functioned to put purchasers on notice about the designations of limited common property:
In spite of the assertions of the Strata I find that the disclosure statement is clear and unambiguous. It advised the purchasers of strata lots 1 through 12 of the resolution that was passed and the amendment filed in September 2005; the effect of the resolution on the use of the limited common property, and the two parking spaces allotted to strata lot 13; Schedule “B” of the disclosure statement confirms that.
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[T]he purchasers of strata lots 1 through 12, who comprise a strata corporation, knew the full details of “designation of the LCP on the ground and eighth floor being for the exclusive benefit of SL 13 prior to them purchasing the individual lots” and any purchaser negotiating (to purchase a strata lot) would have taken this into account in determining the appropriate purchase price; the owner/developer organized the affairs of the strata corporation in a manner anticipated by the disclosure statement and agreed to by the purchasers of the lot; and any subsequent purchasers who may not have received the disclosure statement would have had a professional involved in the conveyance who would have searched the title and found the existence of the “designation of the limited common property unto the sole benefit of SL 13.”
As a result, any claims based on the designation were discoverable by June 2006, at the latest. This meant that the counterclaim and third-party notice were out of time: “The Strata may now consider that the resolution and the amendment are illegal, but it chose not to challenge those until it filed the counterclaim and third party notice in October 2015.”
The court also considered the distinction between a “continuing contravention” and “continuing ill-effects,” adopting the reasoning in British Columbia Securities Commission v Bapty, 2006 BCSC 638:
The concept of a “continuing contravention” must be contrasted with the concept of “continuing ill-effects” of a past illegal act. The latter cannot extend a limitation period indefinitely as the limitation period is triggered by the completion of the offence even though the ongoing effects arising from the original breach may continue . . . .
What emerges from all of the decisions is that a continuing violation (or a continuing grievance, discrimination, offence or cause of action is one that arises from a succession (or repetition) of separate violations (or separate acts, omissions, discriminations, offences or actions) of the same character (or of the same kind). . . . To be a “continuing contravention,” there must be a succession or repetition of separate acts of discrimination of the same character. There must be present acts of discrimination which could be considered as separate contraventions of the Act, and not merely one act of discrimination which may have continuing effects or consequences.
In the result, the court dismissed the counterclaim and third-party notice against the applicants.
