When a Society may properly fine its members was raised before the Civil Resolution Tribunal, in the context of a rental pool arrangement and compulsory society membership in Whistler, BC. The case is Tam v. Evolution Owners’ Association et al, 2019 BCCRT 830 (CanLII).
BC Civil Resolution Tribunal (As a Small Claim, not a Societies Claim)
The applicant owned a quarter share of a residential strata lot. Each owner in the strata had a sublease with the respondent society, Evolution Owners’ Association (Evolution), which provided that all rentals be managed through Evolution’s rental pool.
Evolution’s bylaw 18.5 (a) prohibited an owner from renting out or advertising their unit for rent other than in accordance with the sublease, which requires that Evolution will manage the rental exclusively. Bylaw 18.5 (b) prohibited an owner from advertising their unit for rent on any service arranged by Evolution or its manager, including Craigslist.
Bylaw 18.5 (d) required an owner in contravention of bylaw 18.5 (a) to pay Evolution the “rack rate” for the strata lot for each day it was rented in contravention of bylaw 18.5 (a). It also requires an owner to pay Evolution $50 for each separate medium or service the owner advertised the strata lot for rent in contravention of bylaw 18.5 (b).
The applicant advertised the unit on Craigslist and rented it to the respondent of a Craigslist ad. The applicant was fined a significant amount ($3,400). The applicant sold the unit and subsequently disputed the fines as a small claim. A counter-claim was brought but will not be addressed in this case comment.
Analysis and Holding:
The CRT decided this case, which involved the interpretation of s. 70 of the Societies Act, without counsel for either the applicant or Evolution (as is the process of the CRT). It stated that even if fines were available as discipline of a member, no procedural fairness was afforded as no prior notice of the fine had been given under s. 70(3) of the Act and no opportunity to be heard was provided. The fine was quashed. The fine amount and court ordered interest was payable to the applicant as a small claims debt.
In coming to its conclusion, the CRT stated the problematic obiter dicta, meaning non-binding comments, underlined in the following:
“Evolution says it has authority to levy fines against its members under section 70 (1) of the Societies Act, which says the bylaws of a society may provide for the discipline or expulsion of members. Evolution says “discipline” must reasonably be interpreted to include fines, as there are limited ways to discipline members of a society.
The question of whether “discipline” in section 70(1) of the Societies Act includes fines has not been judicially considered, but I find it is unlikely that section was intended to allow societies to fine its members. Other sections of the Societies Act refer specifically to fines. If the legislature had intended fines to be a form of discipline under section 70(1) there is no reason it could not have specifically referred to fines in that section, which it did not do. However, because of section 70(3) of the Societies Act which I address below, I find it is unnecessary for me to make a finding as to whether fines are included in discipline under section 70(1) of the Societies Act.”
Where are the core societies and corporate law principles?
Bylaws create a contractual relationship between a member and the society as an organization. They are subject to the law of contract, with the remedy for disagreement being resignation (subject to special resolution and now the claim of oppression) or in this case, payment of the fine and sale of the unit that the bylaw rental fees and fines applied to.
As we will recall from Senez c. Montreal Real Estate Board,  2 S.C.R. 555 (SCC), wherein the Supreme Court of Canada stated the following fundamental principles of societies law, referred to with approval in BC in Lee v Lee’s Benevolent Assn. of Canada, 2007 BCSC 794:
- By becoming a member of a society, an individual accepts its constitution and bylaws and undertakes to observe them;
- A member undertakes to comply with future bylaw and constitution changes, even if he or she disagrees. The recourse on disagreement is to generally resign — but by remaining, the member accepts the new bylaws.
The characterization of the fine as a purely criminal or quasi-criminal fine by the CRT is troubling. In its analysis, it refers to “fine” being used elsewhere in the Act. While that is true, when the word is used it is only in the context of a criminal or quasi-criminal offence, and not in relation to the plain or common meaning of the word, the scheme of the Act, and the general understanding of how societies and other voluntary and social organizations function, or even the model bylaws published by regulation under the former Society Act (as Schedule B) and under the current Act (as Schedule 1). The model bylaws in both cases referred to annual dues, the ability to place a member not in good standing and remove the right to vote without a hearing, and the ability to collect a debt or other subscription owing to the society — all of which point to the ability to impose a fee, charge, or fine for a service.
In general, I support the CRT and the work it does as necessary for access to justice in BC — but I do believe it is unwise to place such obiter dicta of a personal, non-binding opinion into a publicly accessible decision, all without detailed argument and analysis. This may may lead to additional litigation or societies changing how they constitute their affairs. That portion relating to the member’s personal opinion should not have been included, the same way that names of witnesses and parties were anonymized, as it is not part of the vital reasoning which comes towards the final decision in the case.
In less than 5 minutes on CanLII, using the query “fine”, “society” and “society act”, I located Langas v. Sicamous Sands Resorts Society, 2004 BCSC 398, on all fours with the issue in the present case:
 It should be noted that neither the Society Act, R.S.B.C. 1996, c.433 nor the bylaws provide for fines. The only reference to fines is in the Rules and Regulations [ED: a schedule of the bylaws, which all members had to agree to in order to obtain membership]. The defendant contends that members, by signing the contract, become subject to fines if they commit infractions. I agree that it is possible for parties to contractually agree to some form of a penalty system. Unfortunately, the Rules and Regulations do not prescribe a maximum fine, do not stipulate some form of notice to the alleged wrongdoer, or provide some form of a hearing whereby the alleged wrongdoer can be heard before a penalty is imposed.
 Consequently, the management, with the endorsement of the Board of Directors, simply levied a fine without giving the plaintiff an opportunity to respond before the penalty was levied against him. In so doing, the management and board violated the rules of natural justice. Mullan D.J. Administrative Law (Ontario: Irwin Law, 2001) at 232 describes natural justice in the following terms:
The rules of procedural fairness or natural justice are divided into two separate categories. The first category comprises the various elements of the requirement that the decision maker provide adequate opportunities for those affected to present their case and respond to the evidence and arguments being advanced by other participants or in the knowledge or possession of the decision maker. … The second limb of the rules covers the requirement that decision makers be independent and unbiased.
 The requirement to ‘hear the other side’ is a fundamental principle of procedural fairness. Persons must be given an opportunity to influence a decision potentially adverse to their interests, and the explanation provided should assist the decision maker in making an informed decision. See Blake, S., Administrative Law in Canada, 3rd ed. (Toronto: Butterworths, 2001) at p.12; Baker v. Canada (Minister of Citizenship and Immigration) (1999), 1999 CanLII 699 (SCC), 174 D.L.R. (4th) 193 at 211.
 The defendant society was required to give the plaintiff an opportunity to respond to the possible imposition of a penalty prior to a final decision being made. Consequently, natural justice was not served. Accordingly, I find the fine to be a nullity. I will not, however, accede to the plaintiff’s request to issue some form of injunction against the defendant.
It would have been ideal for the CRT to cite this case as it is directly on-point with these facts. The procedural fairness issue was properly characterized by a higher level of court and supports the CRT’s final holding. It may also have avoided the need for the problematic obiter dicta to be included in the case.
Rent charge, liquidated damage, bylaw fee and charge, or fine?
No discussion on the characterization of the fine was performed or at the least, reported. It would appear the parties agreed what would otherwise be a rent charge, liquidated damage under contract (such as the sublease), or legitimate fee and charge under a schedule to Evolution’s bylaws, was automatically an impermissible quasi-criminal fine. Perhaps this is because Evolution in its defence focused on the definition of the word “discipline” and not on the inherent ability of a society to impose dues, fees and charges on its members. Perhaps this is because the sub-lease agreement that all owners enter into with Evolution did not have a separate contractual right to payment as a liquidated damage. Perhaps this whole scheme should have had a charge on title, permitting the strata to make a rent charge — not as a liquidated damage — to restrict rentals of its units (similar to the rent charge imposed by the Whistler Housing Authority on its affordable rental units). Perhaps it would be permissible if the ticket or fine of a society had a dispute mechanism or timeline for payment (such as a municipal ticket information).
A restructuring of the fine into a contract (personal covenant) or rent charge (running with the land) fee, outside of membership, would avoid the issue of having to send a fairness letter explaining the nature of the fine and provide a chance to make submissions.
How did the applicant become a “member” of Evolution?
It is assumed but not explained by the CRT that the applicant was made a member of Evolution, a society. No analysis occurs on how the applicant became a member, whether a schedule of fines or rental charges was set out in the sub-lease (contract) or whether the applicant ever consented to membership in the society or was provided with the bylaw and fee schedule in advance of notice of a fine. I note the decision does correctly focus on the procedural fairness concerns in imposing a fine or discipline on a member.
Where is the recent Supreme Court law on rental pools?
Rental pool arrangements are used in Whistler, and are not mentioned in this case (or likely argued). No discussion on any covenant on title is provided. No analysis or summary of the law in this area is provided, despite it appearing to be directly relevant to the dispute in issue — that is, whether the rental pool arrangement is valid, whether Evolution’s management of the property is valid, and whether the fee/fine imposed is valid or was validly applied.
What can we take from this: The CRT should have alerted the parties to the possibility of remedying the breach of procedural fairness
The analysis of the CRT should not be taken as a proper, fulsome, or correct statement on the ability of a society to levy fines, fees, or charges which members have agreed to by bylaw or posted fee schedule, and which the province has signaled is appropriate when it is a due, debt, or subscription owing to a society.
The BC Supreme Court has the power to remedy irregularities in a society’s affairs. Under s.105 of the Societies Act, the BC Supreme Court may step in and remedy a breach of procedural fairness in a discipline action: see a summary of the law at paras 40 onward in Brun v. Deep Cove Yacht & Sport Club, 2019 BCSC 1409. It may choose not to set aside a breach of procedural fairness where it is futile, as reconsideration may lead to the same result or the practical effect would lead to challenges in the operation of a society (Brun, above, citing Turnbull-Spence et al v. Kamloops Long Blades Assn., 2004 BCSC 1500).
If improper notice was given, the more appropriate route for the CRT and Evolution may have been to issue or request a stay of the CRT proceeding until the matter of whether the procedural irregularity could be remedied by the BC Supreme Court. This minor breach — the failure to provide notice or a deadline for dispute — may have been approved by the BC Supreme Court on review and the outcome of this case different.
Remedying irregularities is outside the jurisdiction of the CRT. The CRT would be wise to inform the parties when the potential for the remedying of an irregularity exists and either ask the parties to refer to the matter to the Supreme Court, or refer it to the court in its capacity as a tribunal. As this tribunal restricts access to counsel, it is incumbent on the tribunal to take such protective steps for participants in its processes. At the very least, it should have mentioned to the parties that the remedying of an irregularity was available to them.
Image courtesy of Elvind Lindseth, via a Creative Commons license. No alterations were made to this image.