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Condo Directors Found in Contempt and Fined

In a recent decision, the Ontario Court of Appeal fined condominium directors for having breached a prior court order. This decision is the culmination of a 3-year legal saga over the landscape of a condominium courtyard.

In 2011, the board had to remove the landscape outside of the complex to perform extensive repairs to the garage under it. The board took this opportunity to significantly change the landscape by adding parking spaces, removing vegetation and by significantly modifying the existing structures. The courtyard walls were also going to be changed from the previous red/brown bricks to a grey limestone veneer.

Some owners objected to this modification and were of the view that it constituted a “substantial change” to the common elements requiring the support of 2/3 of the owners. The board felt that this was “maintenance” not requiring any vote. Eventually, the owners and the board reached an agreement to submit the question to a 2/3 vote of the owners at an owners meeting. However, when the board did not obtain the required support, it reneged on the agreement and took the position that there was no agreement and that it could proceed with the changes to the courtyard. The objecting owners returned to court and obtained a decision ordering the board to “reinstate the Courtyard as it existed after the repairs to the garage”. The board did not do this and instead reinstated a significantly different design. Below are pictures filed as part of the evidence, showing some of the changes imposed by the board.

VegetationBefore15260363v1

Vegetation Before

Vegetation After

Vegetation After

The matter returned to court.  In a 2013 decision, the directors and the corporation were found to be in contempt of court. They were ordered (again) to reinstate the landscape. To avoid penalizing the owners for the board’s actions, the court also ordered that the cost of this work be imposed on the directors personally. The directors appealed this decision and sought, amongst other things, to shift onto the owners the cost of reinstating the landscape.

The majority of the court of appeal concluded that the order was clear and unambiguous; that the directors clearly understood their obligations but chose to willfully violate them; and that their conduct was contemptuous and unlawful. The Court of Appeal wrote:

[The directors] authorized landscaping work in deliberate defiance of the clear intent of the 2011 [court decision]. [They] ignored communications from the [owners] reminding them of their court-ordered obligations. Stubbornly, they continued to try to have their own way. Recklessly, they continued to add aspects of [their preferred design] to the newly-created Podium. Even after [the owners] contacted [the directors] with a view to persuading them to honour their obligations under the [court decision], they persisted in their contemptuous conduct.

[The directors] took matters into their own hands and, albeit for reasons they considered valid, defied a court order. [The directors’] arrogance led them to reckless and ultimately unlawful conduct.

However, while the court reiterated the seriousness of breaching a court order, it also concluded that the penalty imposed on the directors was too severe. The court was concerned that such a penalty would dissuade other volunteers from serving on condominium boards. Instead, the Court of Appeal imposed a $7,500 fine on each director and imposed on the corporation (the owners, really) the cost of reinstating the landscape. The parties agree that this work would cost in excess of $400,000. This really meant that the rest of the owners were left to fork out the bill for the contemptuous directors’ decisions.

What should be clear to condominium directors is that they cannot chose to deliberately ignore a court order even if they believe they are acting in the corporation’s interest. The court also reiterated the importance of getting proper legal advice early in the process. Such legal advice would have avoided, the court believed, needless consumption of time, money and needless acrimony.