Part 1 published on 01/02/03
“Indoor Management Rule” aplied; Lawyers entitled to assume strata corporation had authority to hire them
Section 49 of British Columbia’s Condominium Act states as follows:
Unless otherwise provided by a bylaw added to Part 5, a strata council must not, except in emergencies, authorize, without authorization by a special resolution of the strata corporation, an expenditure of more than $500.00 which was not set out in the annual budget of the corporation and approved by the owners at a general meeting.
Lawyers hired by the strata council (for advice respecting possible building deficiencies) submitted invoices in excess of $500.00. There had been no special resolution to authorize these expenditures. Nevertheless, the Court said that the lawyers were entitled to be paid. The Court said:
“I do not believe that Section 49 was intended to prevent tradesmen such as plumbers or electricians, who have done work for a Strata council in excess of $500.00, from being paid, simply because no special resolution has been passed to authorize an expenditure over $500.00. The section, it seems to me, is aimed at the internal management of the Strata Corporation and not at external relations with persons such as plumbers, electricians or solicitors.”
In effect, the lawyers were entitled to assume that the Strata Corporation had the authority to engage them and had followed proper internal procedures to establish this authority.
[Editorial Note: In corporate law, this principle is termed the “indoor management rule”.]