Condo Corporations Owe a Fiduciary Duty to Owners in Breach of the Rules
This is the recent story of an Ottawa condominium corporation who brought a compliance application against the occupant of a unit. Unfortunately for the corporation, when came the time to rule on legal costs, the corporation was reminded that it must consider and balance the interests of all owners… even those in breach of the rules.
Facts of this case
A condo corporation brought the owner and her adult son to court, claiming that he had engaged in dangerous conduct which risked the health and safety of other residents. It even sought the intervention of the police and a permanent removal from the premises if the son failed to comply with an order of the court.
The court’s record did not disclose incidents involving actual violence or seriously prejudicial conduct similar to what was reported in the Korolekh or the WNCC No. 168 v. Webb cases. The son in question had been formally diagnosed with various mood and personality disorders including a borderline personality disorder with traits of Aspergers. As a result of these and other disabilities, he had uncontrollable mood swings and suffered from an inability to cope with confrontation, stress and authority. The condominium had been made aware of this. The son in question was now following a therapy.
As a result of the son’s disability, there was quite the history between the parties, going back some 25 years. For this reason, the corporation’s court record was very extensive. It was comprised of 2 volumes and 62 exhibits. However, 47 of these exhibits focused on 17-year old parking and traffic infractions, going back to when the son was 16 to 26 years of age. He was now in his 40s. The corporation also filed transcripts from an 8-year old court proceeding, where the son had pleaded guilty following some altercation but where a judge concluded that no assault had taken place and that he was not a danger to his community.
At this first hearing, the presiding judge ordered the son to comply with the condominium’s governing documents and with the Condominium Act. This order remained in place for nearly 2 years without incidents. The parties eventually resolved the matter with the son agreeing to an order to comply with the rules and the Act. This was a rather innocuous order considering the corporation’s initial allegations, the extent of the record and the order initially sought.
The parties could not agree, however, on how much of the corporation’s legal fees should be paid by the owner. The corporation had spent nearly $22,000 and wanted to be fully indemnified.
How much costs should the occupant pay?
The judge concluded that the extensive court record was unnecessary, that most of the evidence was historical in nature and that it could have been summarized in a page or two. The judge also concluded that this extensive evidence appeared to have been added solely to give more weight to the recent events. While the corporation raised section 117 of the Act (dealing with dangerous conduct), the corporation had not taken any steps to evict the son in 2007 after the more serious incidents, which resulted in criminal charges. The judge also considered the son’s disability and the fact that he was now following a treatment plan which evidently allowed him to better cope with stress factors.
The judge concluded that, while the occupant should pay for some of the costs associated with the legal proceeding, all other owners should also bear the cost of the board’s decision to “first litigate and only talk later”. The corporation was at liberty to do this but, according to the Judge, it showed poor judgement in doing so and did not merit to be rewarded by a fulsome costs award. The judge was of the view that a more conciliatory approach could and should have been considered.
The judge slashed the costs down from $22,000 to $5,000 and gave the owner 5 years to pay them.
Lessons learned
Condominium corporations should remember that, while they have an obligation to take reasonable steps to ensure compliance with the rules, they owe a fiduciary duty to all owners – including to the owner in breach of the rules. When possible, a corporation should take a more conciliatory approach and go to court only when/if necessary. Even then, courts always keep the discretion to fix costs that are appropriate in the circumstances. Section 134(5) of the Condominium Act, which gives the corporation the ability to recover actual costs, does not give condominium corporations a license to spend owner’s money with impunity.