IN THE PROVINCIAL COURT OF BRITISH COLUMBIA

[1]         On November 29, 2019, the claimant, Abstract Projects Inc. (“Abstract”), and Strata Corporation EPS6069 (the “Strata Corporation”), entered into an Assignment of a Vehicle Lease (the “Assignment Agreement”) in which the Strata Corporation agreed to take over the lease of a BMW i3 from Abstract (the “BMW Lease”), commencing December 29, 2020. On or about November 25, 2020, the defendants herein, the Owners, Strata Plan EPS6069 (the “Strata Plan”) advised Abstract of its intention not to accept any responsibility for the BMW Lease. After failing to convince the Strata Plan of its legal obligation to assume the lease obligations pursuant to the Assignment Agreement, Abstract cancelled the BMW Lease, assuming, at that time, all of the attendant cancellation costs.

[2]         In this claim, Abstract seeks damages totalling $23,506.06 for costs arising out of the Strata Plan’s refusal to assume its lease obligations. In an Amended Reply, filed December 9, 2021, the Strata Plan denied any liability for the BMW Lease. It alleged, among other things, that it had no notice of the Assignment Agreement, that the Assignment required the passage of a resolution pursuant to s. 82 of the Strata Property Act, SBC 1998, c. 43, that Abstract acted in bad faith, and that the Assignment was unenforceable as being either a financing agreement and/or one purporting (unlawfully) to bind the “Residential Section” of the Strata Corporation.

[3]         With these pleadings in place, Abstract applied at the settlement conference in this matter for an order that the Amended Reply be struck pursuant to Rule 7(14)(b) and (c) of the Small Claims Rules, and that Abstract be granted its damages without the necessity of a trial. In submissions at the settlement conference, Abstract made a persuasive case for its application. The Strata Plan sought, and was granted, additional time to provide written submissions in reply to the application to strike. That application was granted on the grounds the defendant had not, it submitted, anticipated an application to strike at the settlement conference though that was clearly in Abstract’s materials. The Strata Plan was granted leave to file written submissions on or about December 21, 2021, and Abstract given leave to file any reply by on or about December 29, 2021.

[4]         On December 21, 2021, the Strata Plan filed its submissions, appended to which is a proposed second Amended Reply. Most, if not all of the defences in the first Amended Reply are deleted and substituted with new alleged defences particularly around the alleged breach of contract. These include a denial of a breach, an allegation that the Strata Corporation was induced to enter the Agreement, that circumstances frustrated its ability to perform its obligations under the Assignment Agreement, that there was a lack of consideration for the Agreement and, finally, that conditions precedent to the Agreement were not performed. All of these defences, the Strata Plan submits, raise triable issues. In addition, the Strata Plan proposes to file a counter-claim against Mr. Michael Miller, the Principal of Abstract. The Strata Plan seeks an order that this Court allow it to file the proposed second Amended Reply and counter-claim and that the matter be set down for a second settlement conference.

[5]         Notwithstanding the proposed second Amended Reply, Abstract maintains the defendant has raised no triable issues and seeks an order that it be granted all or most of its damages without trial.

[6]         These applications raise several issues. The first concerns the jurisdiction of this Court to hear either the Claim at all, including this application to strike, or to file a second Amended Reply. Assuming that question is answered in the affirmative, the question arises whether the pleadings, including those contained in the proposed second Amended Reply, as well as the materials filed in this settlement conference, disclose a triable issue such that the matter or even part of it must proceed to trial. Finally, the court must determine whether it will grant the Strata Plan’s application to file its proposed second Amended Reply and counter-claim.

[7]         As Abstract set out in its submissions at the settlement conference, it is - for the purpose of this proceeding at least - the developer of a mixed residential and commercial project in Victoria known as the “Black and White”. On May 15, 2019, in what appears to have been in the usual course of business, Abstract executed an amendment to its Disclosure Statement of the Black and White to include a BMW i3 as an amenity to be included in the common property held, ultimately, by the Strata once it was incorporated. On July 29, 2019, and for that purpose, Abstract entered into the BMW Lease. Once the Strata was incorporated in October 2019, Abstract, acting then as both developer and owner arranged, through the Assignment Agreement, to assign the BMW Lease to the Strata Corporation.

[8]         In its first Amended Reply, the Strata Plan took issue with the validity of the Assignment Agreement given various provisions of the Strata Property Act, including its enforceability against the “Residential Strata”. Those objections have been deleted from the Strata Plan’s proposed second Amended Reply and with good reason. I find I agree with the claimant, Abstract, that at this juncture, there is no dispute that the Assignment Agreement was validly entered into when Abstract was the owner-developer and in control of the Strata Corporation. Provisions enabling Abstract to enter into this contract, essentially with itself, are found at ss. 5 to 8 of the Strata Property Act.

[9]         The salient terms of the Assignment Agreement are that:

[10]      The Assignment Agreement was signed on behalf of all parties by Mr. Miller acting then as owner/developer.

[11]      As Abstract submits, there is no dispute in the materials before this Court that once the Black and White building was completed, Abstract made the BMW i3 available to the Strata Plan and that pursuant to the Assignment Agreement, the Strata Plan was obligated to assume responsibility for the vehicle as of December 29, 2020.

[12]      As the materials also demonstrate without doubt, by November 25, 2020, the Strata Plan indicated a clear intention to refuse to take responsibility for the vehicle. After some subsequent correspondence by email, Abstract had the vehicle towed from the building, and cancelled the BMW Lease, incurring costs. These include fees for towing, insurance and lease payments due after the November 29, 2020 payment, cab fare related to vehicle recovery, an ad to potential interested purchasers of the lease, and finally damages for the cost of replacement of a charger cable that was not in the vehicle when Abstract had it removed from the building.

[13]      In its claim, Abstract seeks damages as follows:

[14]      Abstract submits that its claim for damages for the costs of its lease buyout payment, as well as its cost of towing and cab fare can all be determined summarily without the need of a trial. Abstract concedes that the question of its meeting its duty to mitigate might well raise triable issues. In the event, Abstract submits it would be prepared to abandon its claim for damages other than those that do not engage either mitigation or, in the case of the charger cable, factual issues not readily ascertainable on the materials before this Court in this settlement conference, rather than proceed to trial on those issues.

[15]      As noted, in its proposed second Amended Reply, the Strata Plan submits there are numerous trial issues regarding its alleged breach of the Assignment Agreement such that all matters must proceed to trial.

[16]      This claim unquestionably relates to strata property. That fact raises the question of this Court’s jurisdiction to hear this claim given the jurisdiction of the Civil Resolution Tribunal (the “CRT”) over strata property matters.

[17]      The scope of CRT’s jurisdiction over strata property matters is set out at s.120 to 123 of the Civil Resolution Tribunal Act, S.B.C. 2021, c. 25 (as amended). The relevant section, s. 121, provides as follows:

[18]      At issue in this case is the enforceability of the Assignment Agreement. While the claim does relate to the common property of a strata corporation, it is, fundamentally, a case involving an alleged breach of contract with a claim for resulting damages. This is a subject matter over which this Court has jurisdiction. It is not one within the exclusive jurisdiction of the CRT and the claim can, therefore, proceed in this Court.

[19]      The second, unrelated jurisdictional question, has to do with the jurisdiction of this Court, or rather the scope of this Court’s authority to strike out pleadings at a Settlement Conference, or in any event, prior to trial.

[20]      There is no question in this case that this Court does have jurisdiction to consider an application to strike at a settlement conference. That is clear under Rule 7(14)(i) of the Small Claims Rules which provides that at a settlement conference as court may:

[21]      As I have previously noted, at issue in this application is whether the pleadings and materials filed in the settlement conference disclose a triable issue. In terms of the onus on the moving party, the parties disagree as to whether Rule 7(14) is analogous to Rule 9-5(1)(a) of the Supreme Court Rules but I find that of no moment. The question on this application is simply whether, given the pleadings and materials before this Court, there are triable issues such that the matter must be referred to trial. The court cannot, at this stage, determine disputed facts as they may appear in the pleadings or documents, much less make any assessments of credibility. If the case can obviously be determined without such resolutions it should at this stage. Such a determination is entirely consistent with the purpose of the Small Claims Act and Rules which is to enable all those litigants that come before us to resolve their matter in a just, inexpensive and simple manner.

[22]      In its first Amended Reply as well as in its proposed second Amended Reply, the Strata Plan asserts a number of defences which it maintains constitute triable issues. Most of these defences deal with the claimant’s allegation of a breach of contract. Others deal with mitigation issues and the question of quantum. Without first deciding whether to allow the Strata Plan’s application to file this proposed second Amended Reply, I will consider Abstract’s application to strike as if the second Amended Reply was filed.

[23]      Under this category, the Strata Plan asserts the following defences: (a) that the Strata Corporation did not breach the contract as alleged; (b) there was no consideration for the Assignment Agreement; (c) the conditions precedent to the Assignment Agreement were not performed; (d) the Assignment Agreement was frustrated thus relieving the Strata Plan of any obligation to perform; (e) the Strata Corporation was induced to enter into the Assignment Agreement under coercion by Abstract; and (f) it took all steps to avoid the Assignment Agreement.

[24]      In its written submissions, the Strata Plan maintains that it continues to assert the defence, set out in its first Amended Reply, that that the terms of the BMW Lease are unenforceable because they are impossible to assign and/or are unconscionable. This defence, which appears at para. 50 of the first Amended Reply is deleted in the proposed second Amended Reply. It appears, despite the written submissions, that the Strata Plan does not assert this defence. In any event, assuming it does, I find on the materials before me that the defence raises no triable issue. I find I agree with the submissions of Abstract at paras. 20 and 21 of its reply materials: the clear and express terms of the Assignment Agreement operate to transfer responsibility for the BMW Lease to the Strata Corporation. Those obligations (and benefits) are assumed under the Assignment Agreement. There is no requirement that the Strata Corporation assume the BMW Lease “at source”. The Assignment Agreement is not rendered inoperative based on this defence, nor is there any reasonable basis to assert it is unconscionable as a result.

[25]      In the proposed second Amended Reply, the defendants submit that the Strata Corporation never breached the Assignment Agreement, and that this Court must determine at trial as a fact whether there was a breach. It argues also that the Strata Corporation never entered into the Assignment Agreement, and that in any event no consideration for that contract was provided. Both are said to require findings of fact. The Strata Plan submits further that this Court must weigh evidence to determine whether the conditions precedent to the Assignment Agreement are met, and that its defence of frustration requires the court to weigh evidence and determine whether performance was possible. Finally, the Strata Plan argues the court must determine as a fact whether or not the Strata Corporation was coerced into entering into the Assignment Agreement.

[26]      Again, the question is whether it is necessary to refer this matter to trial to determine these issues. Certainly the question whether the Strata Corporation entered into the Assignment Agreement, or subsequently breached it, is a question of fact. Similarly, the defence of frustration could require findings of fact if that defence were reasonably made out on the pleadings or materials before this Court in the settlement conference. The same can be said for the defence of coercion – again, assuming there is a reasonable basis for the defence.

[27]      Here, there is no question the Strata Corporation entered into the Assignment Agreement. It was an agreement between Abstract as developer and Abstract as owner at the time. There is, in these circumstances, no reasonable basis for the claim that the Strata Corporation either did not enter into the Assignment Agreement or was coerced into entering it. Clearly the Strata Corporation entered into the Assignment Agreement and there is clear and indisputable evidence in the materials that the Strata Plan refused to assume responsibility for the Assignment Agreement. There is no plainer evidence of a breach. As Abstract submits, the facts in these materials are not in dispute; only their possible interpretation. In my view, the only possible interpretation is that the Strata Plan simply refused to assume its obligations and thereby breached the Assignment Agreement which it now submits was invalid in any event.

[28]      I find I agree with Abstract that there is no possible basis in the pleadings or materials on which to base a defence of frustration. It is the case the Strata Plan clearly and obviously did not want to and would not assume any obligation under the Assignment Agreement. But there are no facts pled or before the court in the materials to ground any defence of frustration. There was no change, let alone a radical change, in circumstances between the time the Strata Corporation entered into the Assignment Agreement and November 25, 2020, when it evidenced its refusal to assume the obligations under the Agreement. Likewise, on the face of it, nothing in the Assignment Agreement requires any sort of condition precedent be performed before it became operative. That much is obvious. These defences raise no triable issues.

[29]      It is the case, and I accept, that the defence of mitigation – or the alleged failure to take reasonable steps to mitigate – is largely a question of fact. It is obviously not possible on the facts in this settlement conference to determine whether Abstract took all reasonable steps to mitigate its damages. Still, it does not follow that a trial must be held to determine the whole of Abstract’s damages claim.

[30]      At the settlement conference, Abstract submitted that it would abandon those parts of its damages claim that engaged the mitigation question, or, in the case of the charger cable, those aspects of the claim that cannot be determined at this settlement conference. Abstract submits that what is left are costs indisputably incurred as a result of the Strata Plan’s refusal to assume its obligations under the Assignment Agreement. Those damages include: the cost of the lease buyout payment totalling $15,322.49; towing fees totalling $189.53; and cab fare totalling $29.40.

[31]      With respect to the value of the lease buyout, Abstract submits, and I agree, that the whole of the cost can be determined on these materials given Clause 26 of the BMW Lease which penalized the lessee in the amount of an additional month’s lease payments as well as the balance of all monthly payments in the event the lease is terminated early. Given the date of the termination, and the circumstances and timing of the breach, I find I agree with Abstract that any delay in breaking the lease would not have resulted in any different measure of damages.

[32]      The Strata Plan’s proposed second Amended Reply is composed of both an amended Reply to the Claim and a proposed counterclaim against Mr. Miller personally. I have dealt with the content of the proposed amended reply to the Claim in these reasons. I have found neither the first nor the proposed second Amended Reply raise a triable issue, but for the question of mitigation and the factual dispute around the charger cable.

[33]      The Strata Plan proposes to file a counterclaim seeking damages against Mr. Miller personally for failing to act honestly and in good faith, and/or failing to use reasonable care in ensuring the Strata Corporation could take an assignment of the BMW Lease. I have determined above, for the reasons given, that the Assignment Agreement did not require the Strata Corporation to assume the BMW Lease. This alleged defence raises no triable issue against Abstract and, it follows, no triable issue against Mr. Miller.

[34]      Abstract submits the application to file the second Amended Reply should be struck on this ground and others, including that it raises no defence to the claim or the remedy sought by the claimant. I find I agree. To paraphrase the court in Bai v. ML GG E-Sports Inc., 2018 BCSC 679 at para. 57, it is open to this Court to strike the first Amended Reply and grant judgment to the claimant despite the counterclaim so long as it “does not go to the root of and represent a true defence to the … claim”.

[35]      In this instance, unquestionably the proposed counterclaim has no bearing on Abstract’s claim. It is no defence to the claim. In any event, nor does the counterclaim raise a triable issue. Rather, it is a re-iteration, albeit against a different party, of a defence I have found to be plainly and obviously without merit.

[36]      For these reasons, I would deny the application to file the proposed second Amended Reply, including the counterclaim. For these same reasons, I would strike the Defendant’s first Amended Reply and grant judgment to Abstract in the amount of $15,541.42, plus its filing fee, service fee and other reasonable expenses pursuant to Rule 20(2) of the Small Claims Rules.