Executive Summary: Key Legal and Evidentiary Issues

• Appellants challenged the validity of a restrictive covenant registered against their residential strata lots at Cove Lakeside Resort, previously declared void for uncertainty in Anderson (2015 BCCA 261).

• Central dispute concerned whether the respondent's attempt to re-litigate the Covenant's certainty constituted an abuse of process under the CUPE framework.

• The chambers judge erred by conflating differences in the evidentiary record with differences in the legal issue, thereby incorrectly concluding the abuse of process doctrine did not apply.

• Residual discretion to permit re-litigation was improperly exercised, as the Disclosure Statement did not meet the CUPE threshold for new or previously unavailable evidence.

• Neither the minor stakes factor nor any other principled basis justified departing from the Anderson result, given the respondent had meaningful incentive to defend in the original proceeding.

• Appeal was allowed, the Covenant was declared void and unenforceable against the appellants, and the petition-dismissing order was quashed.

The resort development and the restrictive covenant

Cove Lakeside Resort in West Kelowna, British Columbia, is a strata development consisting of 150 residential units and four commercial lots. The developer, Okanagan Land Development Corp. (OLDC), constructed the Resort to operate as a hotel, with a unified rental management system known as the Rental Pool. To ensure owners only rented their units through the Rental Pool, OLDC registered an identical restrictive covenant against all residential units on August 4, 2006. The Covenant prohibited any unit from being rented to the public except through a rental pool agreement between the unit owner and the designated rental manager. The respondent, 585582 B.C. Ltd., owns the commercial lot comprising the Resort's front desk and leases it to Cove Lakeside Resort Inc., the current rental manager.

The original Anderson decision and its aftermath

Before the present appeal, the same Covenant had been challenged and declared void for lack of certainty by the British Columbia Court of Appeal in 585582 B.C. Ltd. v. Anderson, 2015 BCCA 261. In that case, unit owner Tor Anderson rented his unit privately after declining to sign a rental pool agreement. The respondent sued Mr. Anderson and sought an injunction; Mr. Anderson counterclaimed, arguing the Covenant was void. Justice Tysoe, writing for the Court of Appeal, found that the Covenant lacked certainty because the rental pool agreement it referenced was not attached to, nor incorporated by reference into, the Covenant, and indeed did not even exist at the time the Covenant was created. The terms were left to negotiation between each owner and the rental manager, amounting to an unenforceable "agreement to agree" with no independent mechanism for settling disputed terms. Following Anderson, the respondent discharged the Covenant against 17 units at the owners' request but refused to discharge it against the remaining 132 units, including those belonging to the present appellants.

The rental pool's operational difficulties and changing terms

The Rental Pool began operating in 2007 but incurred significant losses. In 2008, the rental manager produced a new rental pool agreement that increased the management fee from 40% to 50% of rental revenues, effectively reducing owners' share from 60% to 50%. Owners wishing to continue renting were required to sign the new agreement; those who refused had their original agreements terminated. By September 2010, 91 owners agreed to continue with the 50/50 revenue split.

The appellants' petition and the lower court's reasoning

Relying on Anderson, the appellants — owners of 27 units — petitioned the Supreme Court of British Columbia to cancel the Covenant against their properties under s. 35(2) of the Property Law Act. They argued the Covenant was unenforceable on the basis of stare decisis, issue estoppel, and abuse of process. In opposing the petition, the respondent introduced a disclosure statement filed by OLDC with the Ministry of Finance in May 2005, which attached draft forms of the Covenant and a rental pool agreement. This Disclosure Statement had not been part of the evidentiary record in Anderson. The chambers judge dismissed the petition at 2024 BCSC 1632, finding the factual records in the two cases were different due to the Disclosure Statement and concluding that the Covenant was sufficiently certain. She rejected all three doctrinal arguments and, in the alternative, exercised her discretion not to apply issue estoppel or abuse of process, and also declined to cancel the Covenant under the PLA.

The covenant clauses at issue

The Covenant's material provisions included Article 2.1, which prohibited any unit from being used for "Rental Use" except in accordance with the Covenant and a "Rental Pool Management Agreement." Article 2.3 required that no unit be placed in any rental booking system other than the one operated by the rental manager, while Article 2.4 barred all private rental arrangements. The Covenant defined the Rental Pool Management Agreement as an agreement between the owner and the rental manager "setting out the terms by which the Rental Manager, upon request by the Registered Owner will manage and make the Unit available for Rental Use, as may be amended by mutual agreement from time to time." Critically, as Justice Tysoe had found in Anderson, no specific form of this agreement was attached to or incorporated into the Covenant, and the rental manager was under no legal obligation to offer identical terms to all owners.

The Court of Appeal's analysis on abuse of process

On appeal, the British Columbia Court of Appeal framed two primary issues: whether the chambers judge erred in finding the abuse of process doctrine did not apply, and whether she made reversible errors in her alternative exercise of residual discretion. Applying a correctness standard of review to the first issue, Justice Fleming — writing for a unanimous panel including Justices Riley and MacNaughton — concluded the chambers judge had erred in law. The Court held that the issue in both Anderson and the present case was the same: whether the Covenant was uncertain and therefore void and unenforceable. The chambers judge had improperly conflated differences in the evidence with differences in the issue itself, when in reality the respondent was relying on the Disclosure Statement solely for its potential to generate a different answer to the identical question already decided.

Application of the CUPE framework to residual discretion

Turning to the chambers judge's alternative exercise of discretion, the Court of Appeal applied the framework from Toronto (City) v. C.U.P.E., Local 79, 2003 SCC 63, which provides that re-litigation should be avoided unless circumstances — such as fraud, fresh previously unavailable evidence that conclusively impeaches the original result, or fairness concerns arising from minor stakes — dictate that re-litigation is necessary to enhance the integrity of the judicial process. The Court found the Disclosure Statement failed the new evidence factor because it was not new or previously unavailable to the respondent; OLDC's director (and the respondent's sole director) had knowledge of the Disclosure Statement, and the chambers judge herself accepted it as part of the factual matrix, implying the respondent knew or ought to have known about it. The only explanation offered — that the former director was undergoing cancer treatment — did not establish unavailability. Moreover, the chambers judge applied too low a threshold, finding the Disclosure Statement "may have an impact" rather than requiring it to "conclusively impeach" the Anderson result.

The minor stakes factor and the respondent's incentive to defend

The Court also found the minor stakes factor unsupportable. The Anderson proceedings involved meaningful stakes: the respondent had initiated the action to enforce the Covenant, both parties were represented by counsel throughout, and the litigation proceeded through a summary trial and a full appeal. The respondent had raised the same negative operational impacts in Anderson that it raised in this case, demonstrating awareness that the outcome extended beyond a single unit. Justice Fleming observed it was "almost obvious" that the respondent's incentive to defend would have encompassed concern about the impact on the identical covenant registered against all 149 other units.

Ruling and outcome

The Court of Appeal unanimously allowed the appeal, quashed the order dismissing the petition, and declared the Covenant void and unenforceable against the appellants. The Court granted the orders sought in the petition to cancel the Covenant as a charge against all properties registered in the appellants' names. No specific monetary amount was awarded, as the relief was declaratory and related to cancelling a charge on land rather than damages. The appellants — Anoroc Holdings Ltd. and the other named petitioners owning 27 units — were the successful parties, obtaining the cancellation of the restrictive covenant that had encumbered their properties since 2006.