Date Issued: March 9, 2021

File: ST-2020-003986

Type: Strata

Civil Resolution Tribunal

Indexed as: The Owners, Strata Plan LMS2195 v. Leung, 2021 BCCRT 260

Between:

The Owners, Strata Plan LMS2195

APPLICANT

And:

MEI SUM LEUNG and DAVID LEUNG

Respondents

REASONS FOR DECISION
Tribunal Member:	Julie K. Gibson

INTRODUCTION

1.      This dispute is about whether strata lot owners must pay a strata corporation’s deductible for a fire damage insurance claim.

2.      The respondents Mei Sum Leung and David Leung (owners) own a strata lot (SL40) in the applicant strata corporation The Owners, Strata Plan LMS2195 (strata).

3.      In August 2018, a fire started inside SL40, damaging the strata lot and common property (CP). The strata made an insurance claim and its insurer covered the remediation and repair costs which were over $300,000, less a $5,000 deductible.

4.      The strata says the bylaws make the owners responsible for the $5,000 deductible but the owners have paid only $4,000. The strata seeks an order that the owners pay the remaining $1,000.

5.      The owners say they paid the $4,000 under protest. They deny liability for the insurance deductible. They say the fire was not caused by any act or omission by them or their guests.

6.      In their Dispute Responses, the owners also describe damages arising from allegations that the strata:

a.    wrongly required them to pay $4,000 of the fire insurance deductible,

b.    misappropriated a $16,830.97 payment from its insurer, intended to repair fire damage to the strata lot, and failed to restore the strata lot, and

c.    wrongly charged them an insurance premium increase.

7.      The owners did not counterclaim for the $4,000 deductible, the alleged misappropriated payment or the insurance premium increase. Below, I find that only the strata’s $1,000 fire damage deductible claim is before me.

8.      The strata is represented by a strata council member. The owners are represented by primary applicant Mei Sum Leung.

JURISDICTION AND PROCEDURE

9.      These are the formal written reasons of the Civil Resolution Tribunal (CRT). The CRT has jurisdiction over strata property claims under section 121 of the Civil Resolution Tribunal Act (CRTA). The CRT’s mandate is to provide dispute resolution services accessibly, quickly, economically, informally, and flexibly. The CRT must act fairly and follow the law. It must also recognize any relationships between dispute parties that will likely continue after the CRT’s process has ended.

10.   The CRT has discretion to decide the format of the hearing, including in writing, by telephone, videoconferencing, or a combination of these. I am satisfied an oral hearing is not required as I can fairly decide the dispute based on the evidence and submissions provided.

11.   The CRT may accept as evidence information that it considers relevant, necessary and appropriate, whether or not the information would be admissible in court. The CRT may also ask the parties and witnesses questions and inform itself in any way it considers appropriate.

12.   Under section 123 of the CRTA and the CRT rules, in resolving this dispute the CRT may order a party to do or stop doing something, order a party to pay money, or order any other terms or conditions the CRT considers appropriate.

Preliminary Issues

Scope of Dispute

13.   In their Dispute Responses, the owners seek damages or payments arising from their allegations that the strata:

a.     should repay them $4,000 they have already paid toward the insurance deductible,

b.    wrongfully kept or misused a $16,830.97 insurance pay-out intended to fund strata lot repairs, and

c.    wrongly charged the owners for an increased insurance premium of $21,279.

14.   CRT Rule 3.2(1) says that for there to be a counterclaim, a party must complete a Counterclaim form (dispute application) and pay a fee. The owners have not done either of these things for the above allegations. As a result, I find that these issues are not before me.

15.   For these reasons, I find that the $1,000 fire insurance deductible claim raised in the Dispute Notice is the only claim before me.

16.   Nothing in this decision prevents the owners from bringing separate claims against the strata, subject to any applicable limitation periods.

Late Evidence

17.   The owners provided some evidence after the deadline for the exchange of evidence and arguments. At my direction, the late evidence was provided to the strata, which was given an opportunity to make further submissions. The strata did not provide any further evidence or submissions regarding the late evidence.

18.   I find there is no prejudice to the strata in admitting the late evidence, because it had the opportunity to respond.

19.   Consistent with the CRT’s mandate that includes flexibility, I have allowed and considered the late evidence in this decision.

ISSUES

20.   The issues in this dispute are:

a.    What is the standard of liability for the owners set by the Strata Property Act (SPA) or the strata bylaws regarding the strata’s insurance deductible?

b.    Has the strata proven that the owners are liable to the required standard?

EVIDENCE AND ANALYSIS

21.   As the applicant in this civil dispute, the strata must prove its claims on a balance of probabilities. I have considered all the parties’ evidence and submissions, but only refer to what is necessary to explain my decision.

Background

22.   The owners jointly own SL40. SL40 is located on the 5^th floor of a 22-storey high rise building.

23.   On August 8, 2018, a fire started in SL40. CP was damaged in the fire.

24.   The municipal fire investigator prepared a “Building Fire Field Report” (Report) reporting that the fire started in the kitchen, to the left of the stove. The cause of the fire could not be determined. The Report noted a “large amount of combustible” material was a factor “to fire progression”.

25.   On August 20, 2018, Ms. Leung wrote to the strata to say that a person, RL, had been occupying SL40 without the owners’ consent.

26.   The strata filed an insurance claim regarding the August 2018 fire.

27.   The strata paid its insurer a $5,000 deductible. The strata wrote to the owners, asking them to reimburse the strata the $5,000.

28.   The owners paid the strata $2,000 on July 11, 2019 and a further $2,000 on August 7, 2019. The owners have not paid the remaining $1,000.

The Strata Property Act and Bylaws

29.   The applicable bylaws were filed at the Land Title Office (LTO) on February 27, 2014, subject to subsequent amendments that I find are not relevant in this dispute (Bylaws).

30.   Section 72 of the SPA requires the strata to repair and maintain CP and common assets. The strata’s Bylaw 6.1 states that an owner must repair and maintain their strata lot, except for repair and maintenance that is the strata’s responsibility under the Bylaws.

31.   Bylaw 6.7 provides that the strata is responsible to repair and maintain CP and other items not relevant here.

32.    Section 149(1) of the SPA requires a strata corporation to obtain and maintain property insurance on: (a) CP, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot.

33.   Section 158(1) of SPA provides that the payment of an insurance deductible is a claim on the strata corporation’s insurance is a common expense to which all owners contribute through strata fees. Section 158(2) states that a strata may sue an owner to recover a deductible if the owner “is responsible for the loss or damage that gave rise to the claim.”

34.   Bylaw 11.2 provides that an owner shall indemnify the strata from any damages, losses or expenses the strata incurs “arising out of” an act or omission of the owner or its guests or the non-observance or violation by the owner or guests of the SPA, its regulations, the Bylaws or rules.

35.   Bylaw 15.1 provides that no owner shall do or permit to be done anything that increases insurance costs or whereby insurance coverage may be invalidated.

36.   Bylaw 15.2 provides that where “an act or omission” by an owner or guests “causes” an increase in insurance costs, the owner shall pay the strata the amount of the increase in insurance costs.

37.   Bylaw 15.3 and 15.4 provide that if the CP damage is caused by an act or omission of an owner or guests, the strata may make a claim to its insurer to repair the damage and have the owners pay the strata the lesser of the insurance deductible or the repair costs. The strata changed the language of Bylaw 15 via a 2020 amendment that does not apply in this dispute.

What standard do the SPA and Bylaws set regarding the owners’ potential liability for the fire insurance deductible?

38.   For me to find the owners responsible for the fire insurance deductible they must have either agreed to pay it or have been liable under the SPA or Bylaws.

Did the owners agree to pay the deductible?

39.   It is undisputed that the owners paid the first $4,000 because they wanted the strata to stop contacting them about it. I find that the owners did not agree to pay the deductible but made partial payment under protest.

Are the owners responsible to pay the deductible under the SPA or Bylaws?

40.   The courts have found that s. 158(2) of the SPA permits a strata corporation to sue an owner for repayment of a deductible even where the owner is not at fault, on the basis that the word “responsible” is not equivalent to negligence: see Yang v. Re/Max Commercial Realty (482258 BC Ltd.), 2016 BCSC 2147 at paragraph 139.

41.   In The Owners Strata Corporation VR2673 v. Comissiona et al, 2000 BCSC 1240 at paragraph 22, the court held that the question of whether a strata could successfully sue an owner under SPA section 158(2) must be determined by all of the provisions of the applicable statute, regulations, bylaws, and rules.

42.    The courts have found that a strata corporation can pass bylaws that modify the “responsible” standard under section 158(2) to a “negligence” standard (see Strata Plan LMS 2446 v. Morrison, 2011 BCPC 519 (Morrison); The Owners, Strata Plan BCS 1589 v. Nacht, 2019 BCSC 1785, upholding the CRT decision 2017 BCCRT 88 on appeal (Nacht)).

Bylaw 15

43.   First, I will consider Bylaws 15.3 and 15.4 which provide that if damage is “caused” by an “act or omission” by an owner or owner’s guest, the strata may require the owner to pay the lesser of the deductible or the repair costs. The question is what standard is required by this bylaw wording.

44.   In Morrison, the Provincial Court considered whether an owner was required to pay the strata’s deductible related to insured repairs after the owner’s strata lot toilet overflowed and caused damage. The strata’s insurance indemnity bylaw in Morrison stated: “An owner shall indemnify and save harmless the strata corporation from the expense, maintenance, repair or replacement rendered necessary... by the owner’s act, omission, negligence or carelessness...”.

45.   The court held that the words “owner’s act, omissions, negligence or carelessness” must be read collectively and import a negligence standard.

46.   At paragraph 17, the court reasoned that:

[The bylaw] requires some affirmative act or failure to act sounding in negligence before an owner is liable to indemnify the Strata Corporation for losses not covered by insurance. In my view, it makes sense for a collective of owners to agree that unless an owner is at fault for the loss giving rise to the payment of an insurance deductible by the strata, the deductible should be treated as a common expense.

47.   In Nacht, the strata considered a chargeback of an insurance deductible for water damage caused by a burst pipe in the owner's strata lot. The strata’s bylaw 4.4 included wording that an owner would indemnify the strata for any repair or maintenance made necessary by the owner’s act, omission, negligence or carelessness. The CRT member followed Morrison and his decision was upheld on appeal. The CRT member reasoned that in adopting bylaw 4.4, the strata intended that unless an owner was at fault, in the sense of being negligent, for the loss giving rise to the insurance deductible, the deductible would be treated as a common expense.

48.   The Bylaws in this dispute are worded differently to those in Morrison and Nacht. Specifically, the words “negligence” and “carelessness” do not appear in the Bylaws that apply here.

49.   The strata relies on its Bylaw 15 which, as I have indicated, allows the strata to require an owner to pay it the insurance deductible where an insurance claim is made to repair damage to CP caused by an owner’s “act or omission”. Bylaw 15 uses the words “act or omission” and the words “causes” and “caused”.

50.   In Bowles v. The Owners, Strata Plan NW 227, 2018 BCCRT 484, the CRT held that a negligence standard was imported by bylaw language requiring an owner to indemnify a strata for repairs “rendered necessary” due to the “act or omission” of an owner, visitor, guest or occupant, to the extent of the strata’s insurance deductible. I distinguish Bowles from this dispute because the Bylaws here use the word “cause” at several points. I will discuss the implications of the word “cause” further, below.

51.   Although CRT decisions are not binding on me, I find the analysis in Robertson v. The Owners, Strata Plan LMS 1952, 2019 BCCRT 771, and Laguerrier v. The Owners, Strata Plan K 776, 2020 BCCRT 958 useful to refer to here.

52.   In Robertson and Laguerrier, the CRT held that bylaws using the words “act, neglect or omission” set a standard of neglect, lower than a standard of negligence. In Laguerrier, it was sufficient that the owner had a dishwasher drain line on her property, and that the leak occurred due to the drain line’s failure. Ms. Laguerrier was held responsible for the insurance claim deductible.

53.   What standard of responsibility is set by the words “act or omission” that “causes” the strata to incur an expense or damage, without the word “neglect”? I find the standard is not negligence but requires a causation element that makes it more onerous than the neglect standard from Robertson and Laguerrier.

54.   In Reilly v. Freedom Gardens Condominium Assn., [2001] A.J. No. 1703, the Alberta Court of Queen’s Bench held that an owner did not have to pay an insurance deductible where a water supply line ruptured, causing damage. The bylaws made an owner liable to reimburse the strata for its insurance deductible where the “cause of loss” was due to an “act or omission” of an owner, tenant or occupier. This language is similar to that before me. The court imposed a negligence standard. The court wrote that the words “act or omission” in bylaws are “usually descriptive of a tort action” and “generally indicate negligence.”

55.   I agree with the analysis in Reilly to the extent that the bylaw language imposes a standard higher than section 158(2) SPA responsibility. However, I do not agree that the Bylaws before me impose a negligence standard and note Reilly does not bind me.

56.   I have examined the Bylaw language against negligence requirements. I find that the tort of negligence requires proof of more than a person’s act or omission causing damage. Negligence in the strata context requires proof than the owner owed the strata a duty of care, breached the standard of care, that the strata sustained damage, and that the damage was caused by the owner’s breach: Mustapha v. Culligan of Canada Ltd. 2008 SCC 27 at paragraph 33.

57.   If the strata wanted to import a negligence standard, I find that it would either have included the word negligence, or laid out the component requirements of negligence, in the Bylaws. I find that Bylaw 15 does not require that the act or omission be proven to be unreasonable or something that falls below a particular standard. As a result, I find that these Bylaws do not import a negligence standard.

58.   I find that Bylaw 15 requires an act or failure to act that causes the damage, with causation proven on a balance of probabilities. Both the act or omission and causation must be proven.

Bylaw 11

59.   Bylaw 11.2 provides that an owner must indemnify the strata from any damages incurred “by reason of or arising out of” any act or omission of the owner or guests.

60.   Bylaw 11 raises the question of what degree of connection is required for damage “by reason of or arising out of” an act or omission. As noted above, Bylaw 11.2 says that an owner shall indemnify the strata from any damages or losses the strata incurs “arising out of” an act or omission of the owner or its guests.

61.   In insurance law, the British Columbia Court of Appeal has interpreted the words “arising out of” as imposing a causal requirement greater than the “but for” legal test for causation: Kinnear v. Canadian Recreational Excellence (Vernon) Corpo., [2012] B.C.J. No. 1337 (BCCA). Applying this analysis and reading “by reason of or arising out of” in the context of the Bylaws as a whole, I find that the language of Bylaw 11.2 incorporates a standard for causation at least meeting the “but for” test.

62.   Under both Bylaws 15 and 11.2, I find that the strata must prove that some act or omission by the owners caused the fire damage, on a balance of probabilities, to recover the fire insurance claim deductible from them.

Has the strata proven some act or omission by the owners caused the fire?

63.   The strata submits that the owners’ acts or omissions resulting in the fire were:

a.    allowing occupants to reside in SL40 beyond the 30 days permitted under the Bylaws,

b.    having an occupant who used a CP electrical outlet contrary to the Bylaws, and

c.    allowing SL40 to be used like a “junk yard” to store an excessive amount of material, increasing the risk and the extent of the fire damage.

64.   The strata also suggests that the fire was likely started when an occupant burned something, because SL40 was without electricity. But, the strata did not prove that the occupant burned anything. The Report does not establish this fact, nor does it comment on whether there was electricity to SL40 when the fire started. The Report finds the cause of the fire to be “undetermined”.

65.   Even if I accept that SL40 committed the alleged Bylaw violations and that SL40 was used to store a large volume of material, the strata has not proven that those failures caused the fire damage. The Bylaws require causation to make an owner liable for the deductible. To find causation, I would need an expert opinion that the fire probably started due to the owners’ acts or omissions. I find that how and why the fire started and the reasons for the fire’s progression and the extent of the damage are technical issues that require expert opinion to prove.

66.   The only opinion evidence before me is the Report that the fire’s cause was undetermined and that the amount of combustible material was a factor “to progression”. The Report author did not provide their qualifications, and so the Report is not admissible as expert opinion under the CRT Rules. Even if it were, the Report does not comment on whether the volume of combustible material or some other conduct by the owners or occupants caused the fire.

67.   Therefore, I find that the strata has not proven that the owners’ acts or omissions caused the fire damage, on a balance of probabilities.

68.   I have also considered Bylaw 11.2(b) which says that an owner must indemnify the strata for any damages “by reason or arising out of” an act or omission of an owner or guest, or the non-observance or violation of the Bylaws, SPA, regulations or rules. I find that the strata has not proven that any Bylaw violation by the owners caused the fire damage.

69.   As a result, I find the owners are not liable to pay the deductible under Bylaw 11.2(b) or Bylaw 15.

70.   The strata submits that because Bylaw 15.3 allows it to make a claim to its insurer where damage is caused by an owner or guest’s act or omission, it cannot make an insurance claim where the damage is not caused by something other than an owner’s act or omission.

71.   Based on this interpretation, the strata suggests that the owners must pay it the cost to remediate the fire damage, $373,430, if the fire was not caused by their “act or omission”. I do not agree with the strata’s reading of Bylaw 15.3. Based on the wording of Bylaw 15.3, I find that it permits the strata to make an insurance claim where damage is caused by the act or omission of an owner or guest but does not preclude the strata from making an insurance claim in other circumstances.

72.   For these reasons, I find that the owners are not liable to pay the fire insurance deductible. I dismiss the strata’s claim for $1,000 payment towards the deductible.

CRT FEES AND EXPENSES

73.   Under section 49 of the CRTA, and the CRT rules, the CRT will generally order an unsuccessful party to reimburse a successful party for CRT fees and reasonable dispute-related expenses. Because the strata was unsuccessful in this dispute, I dismiss its claim for CRT fees. Neither party claimed dispute-related expenses.

74.   The strata must comply with section 189.4 of the SPA, which includes not charging dispute-related expenses against the owners.

ORDER

75.   I dismiss the strata’s dispute claiming the $1,000 insurance deductible payment.