[1]               The Applicant Condominium Corporation No 0312235 (the “Corporation”) seeks an order inter alia declaring that the Respondents Geoffrey Scott (“Mr. Scott”) and Donna Scott (“Ms. Scott”) (collectively, the “Scotts”) have breached the Corporation’s bylaws (“Bylaws”) and to compel the Scotts to abide by the Bylaws.  The Scotts in turn, seek an order inter alia declaring certain Bylaws contravene s 32(5) of the Condominium Property Act (the “Act”) and are therefore invalid.  They further seek an order that the Corporation has acted oppressively in breaking the bylaws failing to provide Board of Directors participation and denying requested disclosure of financial records.

[2]               The Scotts own two units in the condominium property located in the Town of Canmore (the “Property”).  The Property is subject to the Town of Canmore Land Use Bylaw restricting use of the Property to “Visitor Accommodation” only.  This term is defined in part as “a building or group of buildings not intended for residential use where sleeping facilities are provided for persons for periods of up to 30 days and which may also contain recreational facilities, commercial uses and additional facilities…” (Exhibit “C” to the Affidavit of Dean Jarvey, sworn January 8, 2014).

[3]               The Bylaws were registered on October 10, 2003.  In November 2003, the Scotts purchased their units.  At the time, the Corporation had a contract with a third party company to manage the Property (the “Management Agreement”).  The Management Agreement provided for the pooling of rental income and expenses. However, participation in the rental pool was voluntary.

[4]               The various unit owners of the Property (the “Owners”) amended the Bylaws by special resolution effective January 1, 2010 (the “Amendments”).  The Amendments were registered on January 13, 2010.  The Scotts signed the written special resolution for each of their units.  The Amendments mandated participation in the rental pool.

[5]               Ms. Scott was a member of the Corporation’s Board of Directors for various periods including November 27, 2010 to April 27, 2013.

[6]               On or about January 1, 2013, the Scotts withdrew their units from the rental pool.  Since then, they have independently been renting out their units. They have not received any portion of the income from the rental pool nor paid any of its expenses.  This has led to acrimony between the Scotts and other unit owners, including members of the Board of Directors.

[7]               In April 2013, the Corporation held its Annual General Meeting at which time a motion was made to remove Article 14 of the Amendments from the Bylaws.  The motion did not pass.

[8]               The Corporation takes the position that, it has always been the Owners’ intention that all Owners would participate in a rental pool.  The Owners would therefore share equally in the costs associated with management of rentals of their various units but would equally share in the benefits provided by a management company including guest reception, housekeeping, maintenance, marketing and management duties. Although not participating in the rental pool, the Corporation alleges the Scotts received certain benefits such as the management company’s efforts to promote the Property.  Furthermore, other Owners have suffered a detriment because the management company is unable to deal with unruly guests renting the Scotts’ units.

[9]               The Corporation states that it has acted only in accordance with the lawful Bylaws.  As such, the Scotts’ failure to abide by the Bylaws amounts to improper conduct under s 67(1)(a)(i) of the Act.  The Corporation further posits the Amendments are not offside s 32(5) of the Act as they govern merely the mechanism for rentals. They do not prevent a unit owner from renting the unit.

[10]           The Scotts argue the Amendments contravene s 32(5) of the Act as a restriction on their right to lease or otherwise deal with their units.  They do not dispute they signed the written special resolution.  However, they state that approximately a year and a half after the Amendments were registered, they became aware that it was not legally possible for the Bylaws to restrict the rental of their units.  They state the Bylaws, as amended, overly restrict, prohibit and interfere with their rights as unit owners.

[11]           In addition, after ceasing to be part of the rental pool, the Scotts became concerned that some of the rental pool expenses were being accounted towards the Corporation’s common expenses were being passed on to the Scotts on the basis of their unit factors.  The Scotts asked the Corporation for disclosure of financial records.  The Corporation provided some financial information, but they are not satisfied with that disclosure.

[12]           The Scotts also allege that during the time that Donna Scott held a position on the Board of Directors, the Board engaged in meetings and/or correspondence from which she was improperly excluded.

[13]           Under the circumstances, the Scotts argue the Corporation has acted in a manner that is oppressive or unfairly prejudicial to or unfairly disregards their interests as unit owners contrary to s 67(1)(a) of the Act.

[14]           The relevant provisions of the Act are:

[15]           Section 71(2) enumerates certain discretionary remedies a Court may order when satisfied improper conduct occurred.

[16]           Condominiums involve a unique form of ownership.  The majority of owners control the administration and management of property in a manner that may infringe upon certain property rights enjoyed by a fee simple owner of real property :Condominium Plan No 7721806 v Gobeil, 2011 ABQB 318 at para 9.  However, that authority is not unfettered.

[17]           As creatures of statute, condominium corporations do not have the same powers as business corporations, are not treated as “persons” in the law, and can only undertake actions that the Act specifically authorizes: Condominium Plan No 8222909 v Francis, 2003 ABCA 234 at paras 26-27 [Francis].  The unit holders decide how they want their condominium run through their bylaws, and courts will not intervene unless such bylaws run contrary to the Act: Devlin v Condominium Plan No 9612647, 2002 ABQB 358 at paras 2-3 [Devlin].  Condominium corporations cannot create mechanisms or schemes that run contrary to the Act and if they do so, such actions will be invalid as they are ultra vires to the condominium’s authority: Francis at para 34.

[18]           By the Corporation’s own admission all of the Amendments were intended to govern the renting of units in the Property (at para 13 of the Affidavit of Dean Jarvey sworn June 16, 2014).  I likewise find that the Amendments are, in their entirety, related to and govern the renting of units.

[19]           The Amendments to the Corporation’s bylaws were effected on January 1, 2010. These amendments, which focus on rental pool issues, state in part:

[20]           These amendments did not alter either Article 5.20 or 12.2 of the existing bylaws. These articles state in part:

[21]           It is evident that effective January 1, 2010, the bylaws contained two separate clauses addressing rental pool participation.

[22]           Article 5.20 (found in the original bylaws) is phrased in permissive language. Owners are permitted, upon management approval, to pool rental income. However, any approved pooling, expressly does not trigger participation of other Owners.

[23]           Conversely, Article 14.1(c) (an amendment to the existing bylaws) dictates participation of all Owners in the rental pool project.

[24]           I note that Article 5.20 is contained within Article 5 which generally considers “Meetings of the Corporation”. Article 5.20 falls under a “Special Resolution” subheading.

[25]           While arguably an odd placement, it is irrelevant to interpreting the Bylaw terms. Article 1.4 of these Bylaws reads:

[26]           There are two steps in the analysis of whether the Corporation’s actions are ultra vires:  The first step involves a determination of whether the rental mechanism incorporated by the Corporation complies with s 32(5) or is otherwise authorized by the Act.  The second step involves an interpretation of s 32(5) of the Act read with other provisions of the Act and the Act as a whole.  The words of the Act “are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act and the intention of the legislature”: Francis at para 25; Re Rizzo & Rizzo Shoes Ltd, 1998 CanLII 837 (SCC), [1987] 1 SCR 27, 36 OR (3d) 418.

[27]           In looking at what the legislature intended, it is imperative to remember that “[t]he legislature is presumed not to intend to abolish, limit, or otherwise interfere with the established common law or statutory rights, including property rights, in the absence of explicit statutory language that it intends to do so”: Hamilton (City) v Equitable Trust Co, 2013 ONCA 143 at para 34, 114 O.R. (3d) 602.  Moreover, in order for a court to conclude that a citizen’s rights have been truncated or reduced, the legislature must do so expressly using express language in the statute: Morguard Properties Ltd v Winnipeg (City), 1983 CanLII 33 (SCC), [1983] 2 SCR 493 (SCC), at p 509.

[28]           Section 32(5) of the Act does not expressly permit bylaws restricting or preventing leasing of condominium units. Nor does it contain a reasonableness standard inviting such restrictions. Its language is clear and absolute. In effect, this provision contains no articulated prohibition curtailing a substantive right to lease a condominium unit.

[29]           If any provision of the Bylaws contravenes the Act then such provision will be invalid, as the Act prevails (see s 32(7)).  It does not matter whether unit owners consented to an invalid provision or that it was acted on.  As noted by the Court of Appeal in Francis (at para. 35), “An ultra vires act is an illegal act and it remains such even if it is acted on over the course of time or on separate consecutive occasions”.

[30]           Courts have long recognized that the right of alienation includes the right to lease one’s property: Devlin at paras 15-21.

[31]           The Town of Canmore Land Use Bylaw further nuances the unique aspects of condominium property ownership.  The result of such Land Use Bylaw is that use of the units is restricted to temporary accommodation not exceeding 30 days.  The combined effect of both the Land Use Bylaw and the Amendments is that the Owners can only rent their respective units in accordance with the rental mechanism set out in the Amendments.

[32]           The Corporation asserts that the rental mechanism is only one of process and it does not remove any owner’s right of alienation - including the right to rent or lease the unit.  The rationale for this position is that an owner continues to have the right to choose not to lease the unit.  This is overly simplistic.  The right to alienate one’s unit includes how one will rent it out.

[33]           I find that the rental provisions of the Bylaws, including Amendments, do not comply with s 32(5) of the Act.

[34]           The second step involves an examination of the context and purpose of the Act and legislative intention.  As noted above, the Act describes the authority of condominium corporations and grants them power necessary to manage the affairs of their collective owners.  A reading of the Act in its entirety provides an understanding that the Act is in place to protect owners and their interests.  In addition, the Act also ensures the majority of owners have the liberty to decide how their condominium corporation will operate within the ambit of the Act.

[35]           The substantive wording of section 32(5) is found in the predecessor versions of the Act since the first Condominium Property Act was enacted in Alberta in 1966 (SA 1966 c 19 s 18(5)). A review of Hansard notes reveals no legislative concern with the wording of this subsection. Condominium property statutes have undergone several revisions in the last five decades however, the only changes to this section have been minor, non-substantive word changes.  Such consistency is telling that this subsection expresses the legislature’s intent.

[36]           In any joint ownership type, some rights of individuals may be tempered by the rights of the collective whole.  This is especially true for condominium ownership.  However, the collective whole has no authority to prohibit or restrict an individual’s ability to devolve, transfer, lease, mortgage or deal with his or her unit.

[37]           The rental management mechanism set out in the Amendments unlawfully restricts the Scotts’ right to rent/lease or otherwise deal with their units.  That they agreed to the Amendments is irrelevant, as the Amendments were unlawful from their inception.  Simply put, the Owners can never supersede the authority granted by the Act.  As stated in s 32(7), the Act prevails over enacted bylaws.

[38]           For these reasons, the Amendments that purport to compel the Owners to participate in the rental pool and that provide for the rental pool mechanism are contrary to s 32(5) of the Act and are therefore ultra vires and invalid.  The portion of section 5.20 dealing with voluntary participation in a rental pool continues in force.

[39]           In their additional written submissions, the Scotts suggest that condominium bylaws are similar to contracts because of the wording of s 32(6) of the Act, which reads:

[40]           The Scotts further submit that the proper interpretation of the Bylaws is by using the cannons of construction applicable to the interpretation of contracts.  The Scotts provide no authority for this proposition.  If the Bylaws are not ultra vires, they argue, the Court must resolve the contradiction between section 5.20 and the Amendments.  Following this line of reasoning, they submit that the contradiction is an ambiguity and that it ought to be resolved against the Corporation through the application of the contra proferentem doctrine.

[41]           I disagree that contract interpretation rules come into play in this context.  Because of my finding that the Bylaws are ultra vires and that section 5.20 continues to apply to the Owners, I need not get into the proper method to interpret conflicting bylaws.  However, if I did, I would resort to statutory interpretation principles as condominium bylaws are created in the execution of a power conferred by or under the authority of the Act.  This therefore brings them within the definition of “regulations” in the Interpretation Act, RSA 2000, c I-8, s (1)(1)(c).

[42]           In light of the foregoing, I make no further comments on the issue of the interpretation of conflicting condominium bylaws.

[43]           The Scotts contend that the effect of the Amendments is that the Corporation may lose its not-for-profit status for tax purposes and that, if so, there could be a significant impact on them.  The Corporation states that it is not earning any profits and as such its not-for-profit status is not in jeopardy.  Very little evidence was led on this issue, with most of the material on point before the court being conjecture.  It is not for this court to make rulings on the basis of what Canada Revenue Agency may do.

[44]           In the application and cross-application, the Corporation and the Scotts accuse each other of improper conduct under s 67(1) of the Act and each seeks the relief delineated in s 67(2).  Subsection 67(1)(a)(i) states that non-compliance with the Act is improper conduct.  Subsections 67(1)(a)(ii)-(v) refers to conduct that is “oppressive or unfairly prejudicial to or that unfairly disregards the interests of an interested party”.

[45]           In considering whether conduct falls within the ambits of subsections 67(1)(a)(ii)-(v), the court can consider corporate oppression principles: Laasko v Condominium Corp No 8011365, 2013 ABQB 153 [Laasko].  In 934859 Alberta Inc v Condominium Corp No 0312180, 2007 ABQB 640, 434 AR 41, Chrumka J canvassed the meanings of various words and phrases found in subsections 67(1)(a)(ii)-(v):

[46]           As noted by Wilson J in Laasko at para 26,

[47]           Upon satisfaction of this two-fold obligation, the Court will then determine whether the conduct complained of did, in fact, amount to oppression, unfair prejudice or unfair disregard.

[48]           If the court finds improper conduct, whether it be through non-compliance with the Act or through conduct that is oppressive, unfairly prejudicial, or unfairly disregards the interests of an interested party, then it may grant the s 67(2) remedies.  These remedies are discretionary: Leeson v Condominium Plan No 9925923, 2014 ABQB 20 (Master), at para 19 [Leeson].

[49]           As each party has accused the other of improper conduct, I will address each party’s claims separately.

[50]           Section 32(2) of the Act states that the Scotts, as unit owners, are bound by the Bylaws. The Corporation alleges that the Scotts have not complied with the Act in two ways.  Firstly, by offering their units for short term rental outside of the rental scheme contemplated in the Amendments.  Secondly, by offering their services and acting in the capacity of rental or property managers to other unit owners. 

[51]           Having found the Amendments invalid, the Scotts’ failure to comply with the Bylaws as alleged by the Corporation is inconsequential.  They have not failed to comply with the Act and therefore they have not acted improperly.

[52]           The Scotts allege that the Corporation has not complied with the Act by attempting to enforce the Bylaws.  The Scotts further allege that the Corporation knew that the Amendments contravened the Act as Mrs. Scott had emailed portions of legal opinions she had received to the other Owners and the board of directors.  This, they say, brings the Corporation’s actions within the scope of subsection 67(1)(a)(ii)-(v).  In addition, other alleged oppressive conduct includes failing to advise Mrs. Scott of board meetings while she was a director and failing to disclose financial records to the Scotts notwithstanding their request for those records.

[53]           As noted, this Court has already found that the Amendments are invalid as they offend s 32(5) of the Act.  The Corporation’s reliance on the Amendments and its attempts to compel the Scotts to comply with the Amendments are therefore contrary to the Act.  By virtue of the wording of subs 67(1)(a)(i), this is improper conduct.

[54]           The first step of the oppression remedy analysis requires the Scotts to establish a breach of reasonable expectations.

[55]           In their submissions, the Scotts suggest that the Corporation ignored a legal opinion that the Amendments violated the Act. The cryptic responses of two counsel are contained in exhibit C of Donna Scott’s June 26, 2014 affidavit. Both counsel caution that bylaws cannot restrict unit rentals. Neither opinion directly addresses the proposed amendments nor concludes they are illegal. Moreover, it appears that the Board believed the amendments were legal.

[56]           On the basis of the evidence before me, the Scotts have not satisfied their burden of showing that, by enacting the Amendments, the Corporation breached their reasonable expectations. The Corporation’s conduct was not oppressive, unfairly prejudicial or did not unfairly disregard their interests.

[57]           Ms. Scott also argued the Corporation acted oppressively by orchestrating her non-attendance at a January 16, 2013 Board meeting. It is clear from the Minutes that this was an emergency meeting called to discuss private unit rentals by owners.

[58]           Failure to notify Ms. Scott of this meeting was improper. However, there is no evidence proving such failure was oppressive, unfairly disregarded her interests or was unfairly prejudicial.

[59]           Even if Donna Scott had attended the meeting, s. 28(3) of the Act prohibited her from voting because of her “material interest” in the rental arrangement. Accordingly, Ms. Scott has not established a reasonable expectation in her ability as a Board member to address the issue. The meeting lasted approximately 12 minutes and, according to the minutes, was confined to the emergency basis upon which it was called.

[60]           In any event, the Board meeting result was inconsequential. Indeed, the meeting in her absence generated a vote to seek legal advice. This is the very result sought by Ms. Scott at the immediately preceding board meeting.

[61]           Mr. Scott complains that the Corporation has failed to provide financial documents to him sufficient to demonstrate that rental management expenses are not being included in common expenses.  He relies on section 4.1(h) of the Bylaws which states:

[62]           The term “books of account” is not defined in the Bylaws.  I accept the Corporation’s evidence that, through its property manager, it attempted to make available to Mr. Scott its bank statements and paid invoices.  Mr. Scott apparently was not satisfied with this disclosure and insisted on seeing the Corporation’s general ledger.  The Corporation has resisted, citing privacy concerns among other concerns.

[63]           I need not determine what is meant by the term “books of account”.  Since the Bylaws must comply with the Act, the matter can be resolved by resorting to s 44 of the Act which requires the Corporation to furnish Mr. Scott certain documents upon request.  The documents and records that the Corporation has offered to Mr. Scott contain more information than if he were to rely solely on the disclosure requirements of s 44.

[64]           It appears to me the Corporation has been more than accommodating in trying to assist Mr. Scott’s inquiry. He was granted, at least, the same access as that which all Condominium Owners were entitled under the governing bylaws.

[65]           Accordingly, Mr. Scott’s expectation that he receive the requested disclosure was not reasonably held. The threshold issue for determining oppressive conduct is not satisfied. Even if reasonably held, the Corporation provided generous opportunities for Mr. Scott to access permissible disclosure.

[66]           Section 67(2) if the Act grants the Court discretion to award costs where improper conduct occurs. In this case, the Corporation acted improperly in both enacting ultra vires bylaws and in failing to notify Ms. Scott of a Board meeting. While improper, such misconduct even considered cumulatively, was not oppressive. Accordingly, costs are not awarded as a discretionary remedy.

[67]           The Scotts, however, successfully obtained a declaration that the Amendments are ultra vires. This was the focal issue for the application. Accordingly, the Scotts are awarded costs of this application pursuant to Schedule C of the Alberta Rules of Court.