Executive Summary: Key Legal and Evidentiary Issues

• Defendant owners were found in contempt of court for failing to pay five cost orders totalling $50,376.71, despite having actual knowledge of and ability to pay the amounts ordered.

• Good faith efforts by the defendant owners to purge their contempt—including offering to release $25,000 held in court and proposing offsets—were refused by SWS, leading the Court to conclude the non-payment was not deliberate.

• SWS lacked standing under the Strata Property Act to seek an order compelling tenants to pay strata fees directly to the strata corporation, as only the strata council holds that right.

• Orders in Petition S244097 attacking the enactment of Bylaw 27(7) were struck as res judicata, while those challenging its allegedly unfair use at specific meetings were permitted to proceed.

• Defendant owners failed to establish that SWS's exercise of Bylaw 27(7) voting rights at the February and August 2024 meetings constituted "significantly unfair" conduct under s. 164 of the Strata Property Act.

• Mr. Gauthier was not removed as the Strata's representative despite an apparent conflict of interest, as the joint venture agreements complicated the analysis and the threshold for undermining the integrity of the court's process had not yet been reached.

The long-running dispute over the Vernon Project

This case arises from a protracted, 13-year legal battle in the Supreme Court of British Columbia between SWS Marketing Inc. (the plaintiff) and multiple defendant owners of strata lots in two residential buildings in Vernon, BC, known as the "Vernon Project." The Vernon Project comprises 14 residential strata lots governed by The Owners, Strata Plan KAS 1886. The factual background was established following a 17-day trial before Justice Adair in the spring of 2022, resulting in the 2022 Decision (2022 BCSC 743). At the heart of the dispute are joint venture agreements signed by each defendant owner with SWS, granting SWS full, exclusive and complete authority and discretion in the management and control of the business of the joint venture, including matters relating to the strata corporation. The defendant owners breached these agreements by taking over management of their respective units and entering into Lease-Option Agreements with a third-party company, 1125003 BC Ltd. ("112"). Despite these breaches, SWS did not accept the repudiations and affirmed the joint venture agreements, which remain in effect.

Strata governance and the Bylaw 27(7) controversy

In or around November 2020, the strata corporation adopted various bylaws, including Bylaw 27(7). Bylaw 27(7) provides that for any property where SWS Marketing Inc. has a joint venture agreement with the owner on title, unless the two parties agree, the vote by SWS Marketing Inc. carries. The defendant owners challenged this bylaw as "significantly unfair" under s. 164 of the Strata Property Act. In her 2022 Decision, Justice Adair found the enactment of Bylaw 27(7) was neither significantly unfair nor contrary to the Strata Property Act, noting that there was no occasion as yet when SWS had exercised its voting rights under the bylaw and that its interests in ensuring the strata corporation was properly run aligned with those of the owners. In the February 2025 decision (2025 BCSC 187), the defendant owners filed Petition S244097 arguing that SWS's actual use of Bylaw 27(7) at the annual general meetings held on February 24, 2024, and August 23, 2024, was significantly unfair. At those meetings, SWS, through Mr. Gauthier, exercised Bylaw 27(7) to override the defendant owners' votes on matters including the election of new council members, approving the annual budget, and approving $4,000 in rezoning costs. Justice Burke concluded that while the enactment of Bylaw 27(7) had been adjudicated, its use had not—and Orders 1 and 10, which dealt directly with the use of Bylaw 27(7) at the February and August 2024 meetings, were not barred by res judicata. However, Orders 2, 4, and 6, which attacked the enactment of Bylaw 27(7) generally, were struck. On the merits, the Court found that the defendant owners had failed to establish that SWS's exercise of Bylaw 27(7) was significantly unfair. The joint venture agreements gave SWS full authority over strata management, and the impugned actions—approving a budget with a 4.83% fee increase, including rezoning costs, budgeting $20,000 in legal fees to collect strata fees, and excluding certain individuals from council elections—did not meet the threshold of conduct that is oppressive, unduly prejudicial, or done in bad faith. The defendant owners had not filed any affidavits pointing to actions that were significantly unfair, and the burden of establishing this fell on them as petitioners.

The question of Mr. Gauthier's conflict of interest

The defendant owners sought to remove Rene Gauthier as representative for the strata corporation, arguing he held conflicting fiduciary duties as both the controlling mind of SWS and the strata council president and agent for the Strata. While the Court acknowledged that Mr. Gauthier's conflict was "apparent," it declined to remove him at that time. The principles from MacDonald Estate v. Martin regarding conflict of interest were found to flow from the unique lawyer-client relationship and did not bind self-represented litigants, agents, or representatives in the same way. The Court noted that the existence of the joint venture agreements raised some question as to whether a conflict of interest existed, given Justice Adair's finding that SWS's authority in the management and control of the business extended to matters relating to the strata corporation. However, the Court observed that Mr. Gauthier's multiple roles may affect the weight of his submissions, and that the situation may at some point more fully engage the conflict of interest principles. The application was dismissed with the proviso that it could be refiled should additional litigation and/or circumstances provide a more definitive portrait that impacts on the integrity of the court process.

The contempt proceedings and their resolution

On July 19, 2024, SWS filed an application arguing the defendant owners were in contempt of court for failing to pay a total of five cost orders totalling $50,376.71, arising out of various applications—four made by the BCSC and one made by the BCCA. In the September 2, 2025 contempt ruling (2025 BCSC 1696), Justice Burke addressed several preliminary objections raised by the defendant owners—including that the application materials were inadequate, that the application did not read like an indictment, that additional materials were improperly served, and that the BC Supreme Court was an inappropriate forum for enforcing a Court of Appeal cost order. All preliminary objections were dismissed. On the merits, the Court applied the three-part test from Carey v. Laiken, 2015 SCC 17, and found all elements of civil contempt proven beyond a reasonable doubt: the cost orders were clear and unequivocal, the defendant owners had actual knowledge of them, and they had intentionally failed to pay. The Court also found the defendant owners had the ability to pay, satisfying a fourth element articulated by the BCCA in Swann v. Swann, 2009 BCCA 335, for contempt proceedings regarding orders for the payment of money. The defendant owners were given 65 days to purge their contempt.

Sentencing for contempt and the dispute over amounts

In the March 5, 2026 decision (2026 BCSC 381), the Court addressed SWS's application for contempt sentencing. SWS argued the defendant owners had not purged their contempt and sought orders including preclusion from bringing further proceedings and special costs of $10,000. However, the Court found that the defendant owners had made legitimate, good faith efforts to purge their contempt. They had abandoned an appeal of the contempt ruling to focus on bringing the litigation to an end, proposed using the $25,000 security for good behaviour held in court since September 9, 2021, along with offsets to satisfy the debt, and offered a signed consent order to release the funds—but SWS refused to accept the proposed payment. The parties disagreed as to the amounts subject to the contempt order. SWS sought an amount that included interest and enforcement costs in addition to the specific court-ordered costs, referring to the Court Order Enforcement Act and the Court Order Interest Act. The Court applied the principle of strictissimi juris and held that the amounts necessary to purge contempt were limited to the specific amounts set out in the contempt ruling, not the expanded figures sought by SWS. The Court ordered that SWS's own outstanding litigation costs of $15,998 from Action No. S213806, together with a $2,524 payment made by 112 to SWS in December 2025, be offset against the $50,376.71 owed, leaving a balance of $31,854.71. The court-ordered security of $25,000 plus interest was directed to be applied to the outstanding costs, with any remaining amount payable by the defendant owners within seven days of the order. Judgments registered against Mr. Gauthier's property under charge numbers CB1022912 and CB1107567 were ordered cancelled from title. The Court declined to grant an order precluding the defendant owners from bringing further applications and declined to award special costs, with each party bearing their own costs.

SWS's failed application regarding strata fees

SWS also applied for an order directing certain tenants of the Vernon Project to pay monthly strata fees directly to the strata council of the defendant strata corporation. SWS argued that 9 of the 14 strata units (most of which were owned by the defendant owners) were not paying monthly strata fees and that the Strata would soon run out of funds, resulting in its inability to pay bills, including hydro, and undertake essential tasks such as garbage collection, rodent control, and maintenance. The Court found that SWS did not have standing to bring this application. Under the Strata Property Act, collecting strata fees is a mandatory duty of the strata corporation exercised through its strata council—not a right that can be exercised by an individual owner or third party. The Court cited Extra Gift Exchange Inc. v. Ernest & Twins Ventures (PP) Ltd., 2007 BCSC 426, and Bjarnason v. The Owners, Strata Plan VR 584, 2021 BCCRT 462, confirming that strata unit owners cannot bring derivative actions on behalf of a strata corporation and have no standing to claim for unpaid strata fees against other unit owners. The Court also found that SWS was required to give notice to the tenants who stood to be affected by the application under Rule 8-1(7), and that the Strata Property Act imposes additional mandatory requirements under s. 112 to give owners or tenants at least two weeks' written notice demanding payment before suing. There was no evidence this was done. The application was dismissed on both the standing and notice grounds. Each party was ordered to bear their own costs.

The overall outcome

Across these three decisions, the Court navigated a web of contempt proceedings, strata governance disputes, and standing issues. The defendant owners were found in contempt but the Court recognized their good faith efforts to purge it, declining to impose the harsher sanctions SWS sought. The remaining balance owed to SWS after the offsets of $15,998 and $2,524 was $31,854.71, to which the $25,000 plus interest held in court was to be applied, with any remaining amount payable within seven days of the order. SWS's application to compel strata fee payments from tenants was dismissed for lack of standing and failure to give notice. SWS's bid to preclude the defendant owners from future litigation was denied. The defendant owners' challenge to SWS's use of Bylaw 27(7) was dismissed as they failed to establish significantly unfair conduct, and Mr. Gauthier was permitted to continue as the Strata's representative. Justice Burke left it to the parties to move forward in a positive way to resolve the outstanding issues, noting that the Vernon Project is presently listed for approximately $2.6 million and that proportionality is a consideration in allowing the release of funds and resolving this matter.