Strata Corporations are free to get in their own way when it comes to claiming reimbursement of insurance deductibles from owners

B.C. Supreme Court upholds decision of the Civil Resolution Tribunal that the Bylaws of a Strata Corporation can narrow the Strata’s ability to sue an owner pursuant to section 158(2) of the Strata Property Act.

Administrative law – Decisions reviewed – Civil Resolution Tribunal – Condominiums – Strata corporations – By-laws – Judicial review – Legislative compliance – Standard of review – Reasonableness

Strata Plan BCS 1589 v. Nacht, [2019] B.C.J. No. 1967, 2019 BCSC 1785, British Columbia Supreme Court, October 18, 2019, M. Morellato J. (In Chambers)

The Owners, Strata Plan BCS 1589 (the “Strata”) appealed a decision of the Civil Resolution Tribunal (the “CRT”) that proof of negligence was required in order for the Strata to recover an insurance deductible from the respondent owners, the Nachts, and that the Nachts were not negligent.

A water leak in the Nachts’ apartment spread to other units as well as common property and cost $87,000 to repair. The cost of the damage was covered by the Strata’s insurance, except for a $25,000 deductible. The Strata paid the deductible and sought reimbursement from the Nachts, who refused to pay.

The Strata brought a claim to the CRT seeking an order directing the Nachts to reimburse the Strata for the deductible, on the basis that the Nachts were ‘responsible’ for the water damage as contemplated by section 158(2) of the Strata Property Act, S.B.C. 1998, c. 43 (the “Act”). The Strata argued in the alternative that the damage was caused by the Nachts’ negligence, and that as a result, the Nachts must reimburse the deductible pursuant to the Strata’s bylaw 4.4. Bylaw 4.4 provided that owners must indemnify the Strata for its insurance deductible paid as the result of an owner’s “act, omission, negligence, or carelessness.”

The CRT found that the effect of bylaw 4.4 was that proof of negligence was required in order to recover the insurance deductible from the Nachts, and that the Nachts were not negligent.

The standard of review of the CRT’s decision was found to be reasonableness. On appeal, the Strata argued that the CRT erred in finding that a strata corporation’s bylaws are capable of creating a negligence standard for recovery of a deductible. The Strata argued that bylaws cannot narrow the Act, and that the word ‘responsible’ contained in section 158(2) has a broader meaning than negligence.

The Court held that the CRT’s reasons for decision squarely addressed the Strata’s argument that strata corporations cannot narrow their ability to sue an owner pursuant to section 158(2). The CRT held that a bylaw cannot be seen to contravene the Act by requiring a more stringent standard of responsibility to be found prior to a strata being entitled to recover a deductible. The CRT held that the Strata’s bylaw 4.4 augmenting section 158(2) of the Act does not contravene any provision of the Act, but rather bylaw 4.4 clarifies the basis upon which the language in section 158(2) is to be interpreted. The Court held that to be a reasonable interpretation and application by the CRT of the Act and the bylaws in question. The Court further held that the CRT was reasonable in reaching the conclusion that the Nachts were not negligent. The appeal was dismissed with costs to the Nachts.

This case was digested by Mollie A. Clark, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact Mollie A. Clark at [email protected].

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