Canada: Kunzler v. The Owners, Strata Plan EPS 1433, 2020 BCSC 576

Kunzler v The Owners, Strata Plan EPS 1433, 2020 BCSC 576 ("Kunzler") is an notable recent case from British Columbia which addresses the ability of a strata corporation, a term used in BC which can include condominiums, townhouses and bare land strata corporations, to pass bylaws preventing or regulating certain types of businesses and activities on its grounds. In Kunzler, the Plaintiffs Kevin and Cheryl Kunzler (the "Kunzlers") and Skywater Cannabis (collectively referred to as the "Plaintiffs") were seeking to remedy alleged unfair treatment by the Defendant, Strata Plan EPS 1433 (the "Defendant") who passed bylaws preventing the Plaintiffs' planned construction and operation of a licensed cannabis production facility.

The strata in question is a bare land strata consisting of 27 large properties on Salt Spring Island BC (the "Strata"). In 2017 the Kunzlers purchased a property in the Strata (the "Property") with the intent to build and operate a commercial cannabis production facility on it. At the time of the Kunlzers' purchase of the Property the applicable zoning bylaws and the Strata bylaws (the "Old Bylaws") did not prohibit licensed commercial cannabis production.

Upon learning of the Kunzlers' intentions to build a cannabis production facility the Strata Council, a body elected to manage the Strata, in July 2019 held a special general meeting at the request of the owners and passed new Bylaws which expressly prohibited the commercial production of cannabis plants or commercial cannabis-based products along with prohibiting other commercial ventures (the "New Bylaws").

As such, the Plaintiffs brought an application seeking that the new Bylaws passed were significantly unfair and that the restraints on their cannabis business is unreasonable. They had purchased the Property in reliance on the Old Bylaws and believed that the act of changing them solely to prohibit their project was unfair.

The decision provided a short history of strata law before setting out the following tenants, forming a basis for the determination of the case:

- A strata corporation, in carrying out its mandate, must consider and act in the best interest of all the owners and must endeavor to accomplish the greatest good for the greatest number;

- "significantly unfair" conduct encompasses, at the very least, oppressive conduct and unfairly prejudicial conduct or resolutions. "Oppressive conduct" has been interpreted to mean conduct that is burdensome, harsh, wrongful, lacking in probity or fair dealing, or has been done in bath faith. "Unfairly prejudicial conduct" has been interpreted to mean conduct that is unjust and inequitable.

- Strata corporations must utilize discretion in making decisions which affect various owners. At times, the corporation's duty to act in the best interest of all owners is in conflict with the interest of a particular ground.

Reasonable Expectations

The Kunzlers proposed that they purchased the Property on the understanding that the Old Bylaws permitted a cannabis operation, and with the reasonable expectation that the Old Bylaws would not be changed.

In coming to its decision on this point, the court stated that the court should utilize restraint and exercise considerable deference to decisions of a strata counsel as it is a strata's chosen for of government used to govern their affairs. Further the court was uncomfortable applying the reasonable expectations test in these circumstances as they felt the application of a reasonable expectations test to the passage, or revision, of bylaws was problematic because it would provide each owner "a de facto veto over bylaw changes simply by claiming that their reasonable expectations have been violated". This would then allow them to seek an exemption from the effects of the new bylaw; undermining strata owners rights to make democratic decisions and "rob s.128" of the Act of its efficacy.

As such the court determined that the reasonable expectations test did not apply in this instance, rather the appropriate test is whether the passage of the New Bylaws was significantly unfair.

Regardless, out of an abundance of caution, the court applied the reasonable expectation test and determined that the Plaintiff's application on those grounds would fail. The Plaintiffs should have expected opposition to their proposed commercial Cannabis operation and as it is common knowledge to strata owners that bylaws can be changed with a three-quarters majority vote, it would be unreasonable for a strata owner to reasonably expect bylaws to remain constant.

Significant Unfairness

The Plaintiffs also argued that the passage of the New Bylaws was significantly unfair to them as owners in the Strata. The court stated that in order for conduct to be significantly unfair "the impugned conduct must result in something more than mere prejudice or trifling unfairness" and "in assessing whether the impugned conduct was significantly unfair, the court must consider both the decision making process and the outcome".

In evaluating the evidence, the court found that while there were some actions by the Strata which raised concerns over fairness, overall the conduct of the Strata was not unfair. Further, the new Bylaws were not created by, or proposed by, the Strata Counsel, but instead by the owners themselves. As such this was not an instance of the Strata Counsel being unfair to an owner, but rather the owners as a whole wanting to maintain "a specific type of strata community" and on that basis "the will of the majority" outweighed the desires of the Plaintiffs. As such, the conduct of the Strata was not sufficiently oppressive or unfairly prejudicial to be significantly unfair.

Bylaws Unenforceable under the Act

As a final effort, the Plaintiff's argued that the new Bylaws were unenforceable under s.121 of the Strata Property Act which allows for bylaws to be unenforceable to the extent that they contravene the act, the regulations, the Human Rights Code, or any other enactment of law. The Plaintiff's submitted that, at common law, an unreasonable restriction on the freedom to conduct business is unenforceable as a restraint on trade.

However, upon evaluation of the Defendant's reasons for passing the new Bylaws, the court found the new Bylaws were not in violation of s.121. Rather than being solely limited to cannabis production, which could have been seen as unreasonable, the owners' opposition was based on their concern over the general nature of the Strata. This is a legitimate reason to curtail trade and thus was permitted.

In conclusion, the Plaintiff's application was dismissed; the Strata was permitted to implement the New Bylaws preventing the Kunzler's from building and operating their cannabis production facility. As such, this case cements the power of a strata and/or condominium to enact or revise bylaws to prevent certain actions as long as they do so in a way that is reasonable and logical. The will of the majority, if wielded reasonably and fairly, can override the wishes of the minority.

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