The Evolution of the Test for Significant Unfairness in the Strata Property Act

Q: WHAT TEST DID DOLLAN SET OUT IN 2012?

Dollan did not produce a single, unified test. Each of the three judges hearing the case wrote separate reasons, and they did not agree with each other on how an Owner's reasonable expectations should factor in. Justice Garson, writing for the majority, restated the meaning "significantly unfair" had already been given in Reid v. Strata Plan LMS 2503, 2001 BCSC 1578 — conduct that is oppressive, in that it is burdensome, harsh, wrongful, lacking in probity or fair dealing, or done in bad faith, or conduct that is unfairly prejudicial, in that it is unjust or inequitable — and then went further, proposing that a modified, two-part reasonable-expectations inquiry, borrowed from the corporate-oppression test in BCE Inc. v. 1976 Debentureholders, should also form part of the analysis (Dollan, paras 26-31). Justice D. Smith disagreed with that last step. In her own reasons, she endorsed the Reid meaning of "significantly unfair" but declined to import the BCE reasonable-expectations test, even in modified form, on the basis that doing so would unduly complicate the inquiry and risked misdirecting its focus (Dollan, para 54). Justice Hall took a third path again, proposing that a strata council decision reached through a fair, democratic process should be given a presumption of regularity, while the court retained a limited ability to correct a decision that placed too heavy a burden on a minority Owner (Dollan, paras 43-46). Dollan is the origin of the current test, but on the reasonable-expectations question, it left three separate views on the table rather than one.

Q: HOW DID KING DAY HOLDINGS SETTLE THE SPLIT IN 2020?

King Day Holdings settled the split Dollan left open. The Court of Appeal confirmed that the correct test for significant unfairness is uncontroversial and is the Reid formulation, fully endorsed in Dollan, and it characterized Justice Garson's reasonable-expectations framing as one relevant factor to weigh within that test, not a separate, mandatory second test an Owner also has to satisfy (King Day Holdings Ltd., paras 88-89). This is the answer that resolved Dollan's three-way split: an Owner's reasonable expectations still matter, but they are folded into a single oppressive/unfairly-prejudicial inquiry rather than standing beside it as a competing hurdle.

Q: WHAT DID KUNZLER CHANGE IN 2021?

Kunzler refined King Day Holdings rather than replacing it. The Court of Appeal drew a sharp line between two things a chambers judge might do with an Owner's reasonable expectations: correctly rejecting them as the determining, foundational factor is not the same as incorrectly treating them as legally irrelevant, and the second is an extricable error of law reviewed on a correctness standard (Kunzler, paras 92-93). In other words, a judge must still actually consider what the Owner reasonably expected, even while giving that expectation no more weight than King Day Holdings allows. Our understanding is that Kunzler also confirmed the section's reach extends to the passage or amendment of a Bylaw, not only to a resolution or a discretionary decision applying an existing Bylaw (Kunzler, paras 13, 94). It is important to note that Kunzler itself was a deference win for the Strata, not a win for the Owner who raised it. Our understanding is that the supermajority-enacted Bylaw under appeal, which prohibited commercial cannabis production after the Owner had taken only preparatory steps toward that use, was upheld as not significantly unfair (Kunzler). Requiring a judge to consider reasonable expectations is a procedural discipline, not a guarantee that considering them will change the result.

Trevor Morley
Jun 19
5 min read

Updated: 5 days ago

THE DEVELOPMENT OF THE TEST FOR SIGNIFICANT UNFAIRNESS

The test for significant unfairness under s.164 of the Strata Property Act has developed over the years, most recently in 2021, when the Court of Appeal clarified how an Owner's reasonable expectations fit into the inquiry. Section 164 itself is short: it lets the Supreme Court make any order necessary to prevent or remedy significantly unfair action, decision, or conduct by a Strata or by a majority of voters, but it does not say what "significantly unfair" actually means. Every part of the working test is judge-made, built up case by case since 2001, and it has shifted more than once along the way.

WHAT TEST DID DOLLAN SET OUT IN 2012?

Dollan did not produce a single, unified test. Each of the three judges hearing the case wrote separate reasons, and they did not agree with each other on how an Owner's reasonable expectations should factor in. Justice Garson, writing for the majority, restated the meaning "significantly unfair" had already been given in Reid v. Strata Plan LMS 2503, 2001 BCSC 1578 — conduct that is oppressive, in that it is burdensome, harsh, wrongful, lacking in probity or fair dealing, or done in bad faith, or conduct that is unfairly prejudicial, in that it is unjust or inequitable — and then went further, proposing that a modified, two-part reasonable-expectations inquiry, borrowed from the corporate-oppression test in BCE Inc. v. 1976 Debentureholders, should also form part of the analysis (Dollan, paras 26-31).

Justice D. Smith disagreed with that last step. In her own reasons, she endorsed the Reid meaning of "significantly unfair" but declined to import the BCE reasonable-expectations test, even in modified form, on the basis that doing so would unduly complicate the inquiry and risked misdirecting its focus (Dollan, para 54). Justice Hall took a third path again, proposing that a strata council decision reached through a fair, democratic process should be given a presumption of regularity, while the court retained a limited ability to correct a decision that placed too heavy a burden on a minority Owner (Dollan, paras 43-46). Dollan is the origin of the current test, but on the reasonable-expectations question, it left three separate views on the table rather than one.

HOW DID KING DAY HOLDINGS SETTLE THE SPLIT IN 2020?

King Day Holdings settled the split Dollan left open. The Court of Appeal confirmed that the correct test for significant unfairness is uncontroversial and is the Reid formulation, fully endorsed in Dollan, and it characterized Justice Garson's reasonable-expectations framing as one relevant factor to weigh within that test, not a separate, mandatory second test an Owner also has to satisfy (King Day Holdings Ltd., paras 88-89). This is the answer that resolved Dollan's three-way split: an Owner's reasonable expectations still matter, but they are folded into a single oppressive/unfairly-prejudicial inquiry rather than standing beside it as a competing hurdle.

WHAT DID KUNZLER CHANGE IN 2021?

Kunzler refined King Day Holdings rather than replacing it. The Court of Appeal drew a sharp line between two things a chambers judge might do with an Owner's reasonable expectations: correctly rejecting them as the determining, foundational factor is not the same as incorrectly treating them as legally irrelevant, and the second is an extricable error of law reviewed on a correctness standard (Kunzler, paras 92-93). In other words, a judge must still actually consider what the Owner reasonably expected, even while giving that expectation no more weight than King Day Holdings allows. Our understanding is that Kunzler also confirmed the section's reach extends to the passage or amendment of a Bylaw, not only to a resolution or a discretionary decision applying an existing Bylaw (Kunzler, paras 13, 94).

It is important to note that Kunzler itself was a deference win for the Strata, not a win for the Owner who raised it. Our understanding is that the supermajority-enacted Bylaw under appeal, which prohibited commercial cannabis production after the Owner had taken only preparatory steps toward that use, was upheld as not significantly unfair (Kunzler). Requiring a judge to consider reasonable expectations is a procedural discipline, not a guarantee that considering them will change the result.

DOES THIS MEAN COURTS NOW DEFER MORE TO A STRATA'S DEMOCRATIC DECISIONS?

Courts still defer to a Strata's fair, democratic decisions, but that deference has never been absolute. The presumption of regularity Justice Hall proposed in Dollan remains the touchstone for a council decision reached through a fair process (Dollan, paras 43-46). However, s.164 is remedial, and a fair, democratic process does not by itself immunize a significantly unfair outcome from review (Dollan). Kunzler's own result shows both principles operating together: the court insisted on considering the Owner's expectations, and having done so, still deferred to the Strata's democratically enacted Bylaw.

WHY HAS THIS TEST BEEN LEFT ENTIRELY TO THE COURTS TO WORK OUT?

Section 164 gives the Supreme Court broad remedial power but never defines "significantly unfair". Every element of the test discussed above, from Reid's oppressive/unfairly-prejudicial meaning cluster through Kunzler's error-of-law refinement, is judicial gloss on a single undefined phrase in the Act. It is important to recognize that there are a lot of drafting deficiencies in the Strata Property Act, and we remain optimistic that at some point the government will look at doing a revision and update in consultation with practitioners, Owners and professional service providers. Until then, a Strata and its Owners are left relying on two decades of case law to know what a two-sentence section actually requires.

THE TEST'S STRUCTURE IS SETTLED; ITS APPLICATION TO REASONABLE EXPECTATIONS IS STILL DEVELOPING

The core test for significant unfairness has been stable since King Day Holdings settled Dollan's three-way split in 2020: conduct is significantly unfair if it is oppressive or unfairly prejudicial in the Reid sense, and an Owner's reasonable expectations are one relevant factor within that inquiry, not a separate test. What Kunzler changed in 2021 was not the structure but the discipline around applying it: a judge must actually turn their mind to an Owner's reasonable expectations, on pain of an extricable error of law, even though doing so does not guarantee the Owner a different result. A robust and resilient Strata Community benefits from knowing that this test, however judge-made, has settled shape even as courts continue to work out how it applies to new facts.