



COURT OF APPEAL FOR
BRITISH COLUMBIA




Citation:



The Owners, Strata
  Plan VIS2968 v. K.R.C. Enterprises Inc.,









2009 BCCA 36




Date: 20090204

Docket: CA35185

Between:

The Owners, Strata
Plan VIS2968

Appellant

(
Plaintiff
)

And

K.R.C. Enterprises
Inc.

Respondent

(
Defendant
)




Before:



The Honourable Chief
  Justice Finch





The Honourable Madam
  Justice Saunders





The Honourable Madam
  Justice Kirkpatrick









A.R. Tryon



Counsel for the Appellant





M.J. Hargreaves



Counsel for the Respondent





Place and Date of Hearing:



Vancouver
, British Columbia






18 December 2008





Place and Date of Judgment:



Vancouver
, British Columbia






4 February 2009









Written Reasons by
:





The Honourable Madam
  Justice Kirkpatrick





Concurred in by:





The Honourable Chief
  Justice Finch

The Honourable Madam
  Justice Saunders




Reasons for Judgment
of the Honourable Madam Justice Kirkpatrick:

I.          INTRODUCTION

[1]

This appeal arises from a dispute
between the owners of bare land strata lots in a development in Sooke, B.C.,
and the party to whom the developer assigned options to purchase some of the
common property of the strata corporation.  The sole issue on this appeal is
whether the granting of options to purchase some of the common property of a
strata corporation without first obtaining subdivision approval is prohibited
by s. 73 of the
Land Title Act
, R.S.B.C. 1979, c. 219,
the statute in force at the time the options were granted.

[2]

The only issue on the cross-appeal
is whether the fact that a strata plan was not registered at the time
invalidates the granting of the option to purchase the common property in
respect of one phase of the development.

[3]

The action in the Supreme Court
was heard as a special case by consent of the parties in March 2007.  Reasons
for judgment were pronounced on 1 June 2007, and are indexed as 2007 BCSC 774,
and reported at 74 B.C.L.R. (4th) 89, 59 R.P.R. (4th) 183.

II.         FACTS

[4]

The facts relevant to the appeal
may be briefly stated.  The appellants, The Owners, Strata Plan VIS2968 (the
strata corporation), are the owners of 48 bare land strata lots located in
the District of Sooke on Vancouver Island in a development known as Sooke Bay
Estates.  There is a single family dwelling on each strata lot.  The strata
corporation was created by deposit of the strata plan in the Victoria Land Title
Office on 25 November 1993.  The developer and registrant of the strata plan
was Blackstone Capital Corp. (Blackstone).

[5]

The strata plan was developed in
three stages with each phase consisting of 16 strata lots.  The three phases
were registered as follows:

(a)        Phase 1:          25
November 1993;

(b)        Phase 2:          9
March 1994; and

(c)        Phase
3:          9 March 1994.

[6]

Each phase of the strata plan includes
a common property area of parklands where the septic field for the sewage of
that phase is located.

[7]

During development, Blackstone
contemplated that in the future the local government might extend sewage
services to the area and there would be no need for the septic fields.

[8]

In anticipation of this
possibility, Blackstone, while owner of the parent property or while owner of
all of the strata lots, granted to itself contingent options to acquire the
parklands in the event that municipal sewage services became available.

[9]

The three contingent options are
substantially identical to one another.  In particular, each option states
(with the necessary modification in respect of the particular strata lots),

PROVIDED
HOWEVER, that the Option hereby granted may only be exercised following a
municipal, provincial or other public body providing access to a sewage
disposal system (the Public Sewer System) to service Strata Lots 1 through
16, Strata Plan VIS2968, and upon the Optionee providing to the Optionor, at
the sole expense of the Optionee, a Subdivision Plan converting the Optioned
Property to a separate and legally distinct lot or lots, no longer a part of
the Common Property of the Optionor.

[10]

Pursuant to the
Real Estate
Act
, R.S.B.C. 1979, c. 356, Blackstone was required to file an approved
disclosure statement or prospectus with the Superintendent of Real Estate as a
condition of offering strata lots for sale.  The disclosure statement refers to
the options as follows:

The
Developer will grant an Option To Purchase the Common Area septic disposal
fields in each phase in favour of the Developer, which Option To Purchase will
only be exercisable by the Developer in the event that the development is
serviced with a Municipal or other public sewage system at the date of
exercise.

[11]

All original purchasers of the
strata lots received a copy of the disclosure statement.  Many of the strata
lots are now owned by successors in title from original purchasers.

[12]

On 24 February 2004, Blackstone
notified the strata corporation that the options were being offered for sale. 
The strata corporation responded and advised that it considered the options to
be void and unenforceable.  On 1 April 2004, all of the options were assigned
by Blackstone to the respondent, K.R.C. Enterprises Inc. (K.R.C.
Enterprises).

[13]

At all material times, the standard
by-laws in Part 5 of the
Condominium Act
, R.S.B.C. 1979, c. 61,
applied to the strata corporation.

[14]

Municipal sewage services have not
yet been extended to Sooke Bay Estates but the parties anticipate that services
will be within a few years.

[15]

Since 1995 a search of the common
property folio for the strata corporation discloses registration of the
options.  Prior to 1995, the options were recorded on a separate strata plan
sheet which, as with the common property folio, could be searched by any
interested party.  The options are not registered against the individual strata
lots.

[16]

The chambers judge was asked to
answer seven question of which only two are in dispute on appeal.

III.        ANALYSIS

[17]

The strata corporations argument
on appeal is essentially the same argument it advanced in the Supreme Court.  The
strata corporation submits the options were prohibited by the combined effect
of ss. 20(1) and 21(4) of the
Condominium Act
and Part 7 of the
Land
Title Act
.  At all relevant times, the capacity of the strata
corporation to grant the options was governed by the
Condominium Act
.

[18]

Sections 20(1) and 21(4) of the
Condominium
Act
governed the disposition of common property of a strata corporation
as follows:

20(1)    The
owners may, by special resolution, direct the strata corporation
to dispose
of all or part of its common property or assets, and, without limiting the
generality of the foregoing, may direct the strata corporation to grant an
easement or a restrictive covenant burdening the common property included in
the strata plan.



21(4)    Notwithstanding
the
Land Title Act
, a disposition, not including a lease for a term of 3
years or less, of all or part of the common property of a strata corporation
under section 20 is a
subdivision of land
, and Part 7 of the
Land
Title Act
applies.

[Emphasis added]

[19]

The relevant section of the
Land
Title Act
that dealt with the subdivision of land read as follows:

73(1)
Except on compliance with this Part
, no person shall subdivide land
into smaller parcels than those of which he is the owner for the purpose of

(a) transferring it; or

(b) leasing it, or agreeing
to lease it for a life, or for a term exceeding 3 years.

(2)
Except
on compliance with this Part, no person shall subdivide land for the purpose
of a mortgage
or other dealing
that may be registered under this Act as
a charge if the estate, right or interest conferred on the transferee,
mortgagee or other party would entitle the person in law or equity under any
circumstances to demand or exercise the right to acquire or transfer the fee
simple.



(4)  No
instrument executed by a person in contravention of this section confers on the
party claiming under it a right to registration of the instrument or part of
it.

[Emphasis added]

Compliance
with this Part requires the filing of a subdivision plan in conformity with
Part 7 of the
Land Title Act
.

[20]

Dispose is defined by the
Interpretation
Act
, R.S.B.C. 1996, c. 238, s.29, (and the
Interpretation Act
,
R.S.B.C. 1979, c. 206, s. 29) to mean to transfer by any method and includes
assign, give, sell, grant, charge, convey, bequeath, devise, lease, divest,
release and agree to do any of those things.

[21]

The strata corporation submits
that since there was no subdivision plan filed at the time of the granting of
the options, the options were invalid as they contravened s. 73 of the
Land
Title Act
.

[22]

In both the Supreme Court and on
appeal, K.R.C. Enterprises concedes that the granting of the options was a
disposition as defined by the
Interpretation Act
and a
subdivision of common property under s. 20(1) of the
Condominium Act
. 
The respondent contends, however, that the disposition does not actually occur
until the contingencies in the options come to pass  when the municipal sewage
system becomes available and K.R.C. Enterprises provides a subdivision plan to
the strata corporation.

[23]

The respondent relies on the wording
of the options:

PROVIDED
HOWEVER, that the Option hereby granted may only be exercised  upon the
Optionee providing to the Optioner, at the sole expense of the Optionee, a
Subdivision Plan converting the Optioned Property to a separate and legally
distinct lot or lots

[24]

K.R.C. Enterprises submits that
the word legally means that the optionee must comply with Part 7 as a
condition precedent to the exercise of the option.  Thus the respondent submits
that the options do not offend s. 73 of the
Land Title Act
.

[25]

The chambers judge accepted the respondents
submission.  She held,

[43]      In
this case, the options are conditional upon complying with Part 7 of the
Land
Title Act
in that they specifically require that there must be a subdivision
converting the optioned lot to a distinct lot or lots that are no longer a part
of the common property prior to the option being exercised.  In other words,
the option holder is not entitled to the transfer of the fee simple without the
approval of the subdivision by an Approving Officer who, in compliance with
Part 7 of the
Land Title Act
, will consider whether or not the proposed
subdivision is against public interest.  Although the option holder can demand
the right to acquire or transfer the fee simple in certain circumstances, those
circumstances are that Part 7 of the
Land Title Act
has been complied
with.  Accordingly, I have concluded that the granting of the options was not
prohibited under either the
Condominium Act
or the
Land Title Act
.

[26]

The strata corporation submits
that the chambers judge erred in failing to recognize that the fact that the
options are conditional does not exempt them from operation of s. 73(2) of the
Land
Title Act
.  The strata corporation submits that this is because the subdivision,
within the meaning of the
Land Title Act
,

occurred
when the options were granted, not when they were exercised, and thus
Blackstone was obligated to comply with Part 7 of the
Land Title Act

at
the time they were granted.

[27]

The strata corporation contends
that the decision creates mischief because it permits a host of dealings in
respect of a portion of a lot  mortgages, transfers, options, etc.  creating
clouds on title by the creation of partial interests in land.  The strata corporation
submits that there is no practice or precedent supporting the decision of the
chambers judge, citing the Wendi J. MacKay
et al.,
eds.,
Land Title
Practice Manual
, looseleaf, 3d ed. (Vancouver:  Continuing Legal Education
Society of B.C., 2007) at §. 7.109, which states that Section 73(2) prohibits
the filing of options to purchase, rights to purchase, mortgages and other
charges of a part of a lot.

[28]

The strata corporation submits
that the impugned decision would lead the way for developers to avoid the
provisions of the
Real Estate

Development Marketing Act
,
S.B.C. 2004, c. 41, that require developers to first obtain preliminary
approvals, and file a prospectus with the Superintendent of Real Estate, before
entering into agreements with prospective purchasers.  If the decision stands,
the strata corporation submits that developers may enter into conditional
purchase agreements and receive money from purchasers without first obtaining
preliminary approval from the relevant authority.

[29]

K.R.C. Enterprises posits that no
such mischief would be created, citing s. 4 of the
Real

Estate
Development Marketing Act
:

4

A
developer must not market a subdivision lot or a bare land strata lot unless,
in relation to the subdivision lot or bare land strata lot,

(a)  a subdivision plan
or bare land strata plan, as applicable, has been deposited in a land title
office, or

(b)  an approving
officer has given preliminary layout approval.

[30]

Further, K.R.C. Enterprises submits
that in the circumstances of this case, to require the optionor to obtain
subdivision approval in advance of the granting of the option and before the
realization of the event allowing the option to be exercised, namely the
arrival of municipal sewage services, is unnecessarily costly and cumbersome.

[31]

K.R.C. Enterprises seeks an
interpretation that would limit the general proscription in s. 73 of the
Land
Title Act
and make it conditional on compliance with Part 7.  The
respondent submits that s. 73 may, in its words, be paraphrased as follows:

No
person shall subdivide land for the purpose of a dealing that may be registered
under this Act as a charge if the estate, right or interest conferred on the
other party would entitle that party, in law or equity, under any
circumstances, other than on compliance with this Part, to demand or exercise
the right to acquire the fee simple.

[32]

In support of its argument K.R.C.
Enterprises relies on this Courts decision in
Bank of British Columbia
v. Tri Holdings Ltd.
(1992), 71 B.C.L.R. (2d) 58, 71 B.C.A.C. 264
(cited to B.C.L.R.).  The respondent emphasizes Seaton J.A.s comments in
reference to s. 73, at para. 29:

I do
not read these sections as prohibiting people making an agreement contingent on
there being a subdivision.  Doing so is a common practice that does not
constitute subdividing for the purpose of transferring or leasing, or
subdividing for the purpose of a mortgage or other dealing that might be
registered.

[33]

The crucial point in this appeal, however,
is that K.R.C. Enterprises concedes that the granting of the option itself
constituted a disposition.  Pursuant to s. 21(4) of the
Condominium
Act
a disposition  is a subdivision of land.  The option is not
contingent upon there being a subdivision.  By operation of law, the granting
of the option is a subdivision.  It is contingent upon the availability of a
municipal sewage system, after which the respondent must provide to the strata
corporation a subdivision plan converting the septic fields to legally distinct
lot or lots.

[34]

It is useful to note that common
law rights to subdivide land have been curtailed by statute for some time.  In
City
of Vancouver v. Simpson
, [1977] 1 S.C.R. 71, 65 D.L.R. (3d) 669, the
Supreme Court of Canada considered the effect of the
Land Registry Act
,
R.S.B.C. 1960, c. 208, on the common law right to subdivide land.  Martland J.,
for the majority, stated (at 77):

The
enactment of that statute took away a free right to subdivide.  The landowner
has no right to subdivide save subject to the approval of the approving officer
who is required by the Act to determine if the contemplated development would
be against the public interest.  The very exercise of the power given to the
approving officer by the Act must necessarily curtail the landowners right to
subdivide.

[35]

While I have some sympathy for the
position taken by the respondent and its pragmatic interpretation of s. 73 of
the
Land Title Act
, regard must be had to the words of the
applicable statutes.  I am impelled to the view that the combined effect of ss.
20(1) and 21(4) of the
Condominium Act
and s. 73 of the
Land
Title Act
render the options invalid, as they constitute subdivisions
which have not first obtained subdivision approval.

[36]

The challenges that flow from this
interpretation  decreased profitability for developers or increased costs to
strata corporations when common property becomes redundant and disposition is
necessary  are matters that may best be considered by the Legislature. 
However, the current statutes, in my opinion, permit no other interpretation.

IV.        DISPOSITION

[37]

It follows that I would allow the
appeal and declare the options invalid.  In the circumstances, it is
unnecessary to address the cross-appeal.

The Honourable Madam Justice Kirkpatrick

I agree:

The
Honourable Chief Justice Finch

I
agree:

The
Honourable Madam Justice Saunders


