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Can Condo Directors be Sued for Conspiracy?

An interesting case came out of Toronto last week where the owner of three commercial condominium units commenced a claim against the condominium corporation and the directors personally, claiming conspiracy, nuisance and intentional economic interference.  This raises an interesting question: Can condo directors be found to be involved in a conspiracy when they take decisions as a board?  Sadly, the answer is “maybe”.  Yet another reminder for condo directors to take their responsibilities very seriously.

Facts of this case

This case opposes the owner of three retail condominium units to the condominium corporation, its directors personally and the property manager.

The owner commenced an action, claiming that, from 2003 until 2015, its tenants were allowed to use a service laneway and a room identified as the “Retail garbage” room.  This service laneway was also used for deliveries to the retail units.  It is alleged that in 2015 the retail tenants were no longer allowed to use the laneway or the retail garbage room and that delivery vehicles were being prohibited from stopping in the laneway when making deliveries to the retail tenants. It appears that delivery trucks for residential tenants were not bothered.

The corporation, directors and manager brought a motion to strike the statement of claim on the basis that it did not disclose a reasonable cause of action.  In other words, they argued that the claim against them could not stand in court and that it was certain to fail.  On the issue of the claim of conspiracy (the most interesting one to me in the context of this blog), they argued that for such a claim to be successful, the owner needed to demonstrate that the directors had agreed to unlawfully act with either the predominant purpose of injuring the owner or in a way where they should have known that injury would result.

The owner argued, amongst other things, that directors interfered with the tenants’ use and enjoyment of the land (which they argued constituted nuisance) and that they committed an unlawful act for the predominant purpose of causing injury to the owner (through the interference with the tenant’s enjoyment of the property).

The court’s decision

It is important to note that the court did not decide whether these directors had in fact acted improperly or whether they had in fact conspired or intentionally interfered with the owner’s interests.  This was a motion on pleadings only, where the court was asked to determine whether the claim was certain to fail or whether the claim should be permitted to proceed to trial.

Still, I find it very interesting that the court concluded that condominium directors could be found liable of conspiracy (if the matter is properly pleaded and the facts support the allegations) on the sole basis that they are involved in the operations of a condominium!  Wow! There is a scary thought…

For there to be an actionable tort of conspiracy, all that is required is that identifiable individuals (the directors) agree to cause financial injury either through an unlawful act or even through a lawful act where the predominant purpose is to financially injure the plaintiff…

What is unsettling with this decision is that condo directors, by virtue of the fact that they must act on consensus, seem to be exposed to claims of conspiracy.  By definition, board members always have to “agree” to something for a corporation to act.

Lessons learned

The standard of care expected of condo directors has not changed.  Directors continue to be expected to act honestly and in good faith and must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.  Directors will also continue to benefit from a statutory protection when they rely in good faith on the advice of lawyers, public accountants, engineers and other persons whose profession lends credibility to the report or opinion they give.

It goes without saying that condo directors should act lawfully and that the predominant purpose of their actions should never be to cause someone injury (financial or otherwise).

Finally, boards should act reasonably and should properly document the rationale for their decisions.

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