The Owners, Strata Plan, BCS 1348 v. Travelers Guarantee Company of Canada, 2014 BCSC (unreported)

This case provides some much needed clarity on the relationship between tort claims made by strata corporations against consultants and trades involved in construction and contractual warranty claims made by the same strata corporation against their new home warranty provider.

The plaintiffs in this case were the owners of a strata titled hotel in Whistler, British Columbia. They brought a claim against the defendant Travelers Guarantee Company of Canada (“Travelers”) for breach of home warranty insurance issued by Travelers. 

Travelers sought leave of the court to file a third party notice against the architect and building envelope consultant involved in the construction of the hotel.  Travelers sought contribution and indemnity from these parties pursuant to the Negligence Act, R.S.B.C. 1996, c. 333.  The architect and building envelope consultant opposed the application on the following grounds: (1) there was no reasonable cause of action and the third party claim was bound to fail; and (2) Travelers had no basis upon which to bring third party proceedings for contribution and indemnity under the Negligence Act in respect of any costs and losses incurred under its warranty.

The court did not accept the first ground, finding that the proposed third party claim raised a triable issue against the architect and building envelope consultant.  The third party claim alleged that these parties owed a duty of care to the plaintiffs to ensure the hotel was constructed without deficiencies.  It was alleged that the architect and building envelope consultant breached that duty by permitting the hotel to be constructed with structural and other deficiencies which caused resultant damage. 

The court accepted the second ground and dismissed Travelers’ application.  The court noted that the plaintiffs’ claim against Travelers was contractual in nature.  There was no contract between the proposed third parties and either the plaintiffs or Travelers.  The court held that to advance a claim under the Negligence Act for contribution and indemnity, all parties must be (or have the potential to be) joint torteasors.  With its application, Travelers was attempting to erroneously intermingle a contractual claim with a tort claim, which cannot give rise to the right to claim contribution and indemnity pursuant to the Negligence Act.

Further, the court stated if it was wrong on the application of the Negligence Act, it would dismiss Travelers’ application on the basis of prejudice to the proposed third parties.  The court noted that this was not a case where Travelers had paid the warranty claim and was asserting its subrogated rights.  The proposed third parties would be required to sit through a long trial addressing issues of a contractual nature in which they had no vested interest.  The court preferred to have Travelers resolve its contractual issues with the plaintiffs and then pursue its subrogated rights, if any, against the proposed third parties by separate action.

Given the finding in this case, it may not be appropriate for a warranty provider to issue third party notices against consultants and trades in the context of an entirely contractual warranty claim made by a strata.  However, if the strata has commenced a separate negligence claim against the consultants and trades concerning the same alleged deficiencies in construction, the court may order the negligence action to be heard at the same time as the warranty claim, thus avoiding two separate trials. 

McRae v. Seymour Village Management Inc.2014 BCSC 714

This case concerns a multi-unit, wood-frame residential condominium complex in North Vancouver, British Columbia.  Eight buildings comprise the complex containing a total of 114 residential units.  The complex is around 40 years old.  Due to its age, the complex was constituted as a common law strata, which is established in a slightly different manner than a strata created pursuant to the Strata Property Act, S.B.C. 1998, c. 43.

The issue before the court was whether the complex should be sold as a whole over the objections of some of its owners?

The petitioners applied pursuant to the Partition of Property Act, R.S.B.C. 1996, c. 347 for an order permitting sale of the entire complex to an interested developer.  This legislation provides a mechanism by which a property with multiple owners may be sold.  Where a majority of owners want to sell, the court “must, unless it sees a good reason to the contrary”, order a sale of the property. 

The petitioners, comprised of owners supporting a sale of the complex, sought to sell for two main reasons: (1) given the age and condition of the wood frame buildings, they did not wish to continue to fund impending repairs and capital projects to the cost of an estimated $2.7 million; and (2) the market value of the complex, and each of the individual units, could be maximized if sold as a whole to a developer. 

The respondents, comprised of owners opposing a sale of the complex, argued that a sale of the complex would cause them undue hardship, including the inability to afford a comparable home, inability or unwillingness to assume mortgage debt to purchase a new home and unwillingness to leave the community. 

The court had to consider whether the hardships faced by the respondents justified refusing the sale desired by the majority of the owners.  While sympathetic to the concerns expressed by the respondents, the court noted that shared ownership has its disadvantages, one of them being forced sale by the other co-owners.  The court granted the order for sale. 

As condominiums, particularly those of wood frame construction, age and reach the end of their service lives, owners may find that maintenance and repair costs exceed the value of the property.  Rather than undertake expensive building remediation projects, applications for relief under the Partition of Property Act may become more common in British Columbia.