Court cases—AGMs

Procedures for holding an election for directors
An attempt to overturn an election at a requistion meeting
No costs awarded for the above court application


York Condominium Corp. No. 42 v. Hashmi et a
l

Ontario Superior  Court of Justice
File No : 06-CL-6587
Justice Newbould
Date: August 2012

After having an administrator for six years, YCC # 42 is to hold an election for a board of directors. The corporation lawyer suggested that the judge mandate that if any candidates ran for the designated owner-resident position and lost, they should not be allowed then to run for one of the other four board vacancies.

The argument was that allowing the losing candidates to run for the other board positions made it hard to organize the election.

Justice Newbould rejected this argument, as it would unfairly deprive the losing owner-residents their full opportunities to be elected to the board.

He also directed that the board mail an announcement to all owners prior to the sending out the election notice asking for all interested owners to submit their names and addresses to be included in the election notice. This decision was made to give every candidate an equal opportunity to be considered by the owners who will be voting by proxy.

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Davis v. Peel Condominium Corporation No. 22
Ontario Superior Court
File:  CV-13-473390
Date: 04 June 2013
Justice Stinson

The application
An owner went to court to have the results of an owner's meeting annulled due to the chair approving twelve proxy votes. She claimed that the chair gave voting rights to 12 units that the corporation’s management and lawyer submitted were in arrears for over 30 days and therefore forfeited their
voting rights.

This was critical because if the 12 votes were not cast, the four directors would not have been removed at the requisition meeting.

The challenge to the chair
When the formal portion of the meeting was convened, the requisitionists’ lawyer objected to the corporation’s lawyer chairing the meeting on the ground that the person who had designated him to act as chair was not eligible to be a director.

The unit owners then present voted in favour of the requistionists’ lawyer chairing the meeting by a show of hands. She proceeded to do so.

After being appointed, the new chair examined the 12 proxies that were rejected by DPC Property Management. She asked the unit owners who allegedly were in arrears to stand and state whether or not they felt PCC #22's records were accurate. Six unit owners spoke and advised the following:
a.
payments made by unit owners to PCC #22 were not credited to their accounts;
b.
despite the fact that some unit owners had made payments for all arrears prior to the commencement of the requisition meeting, they were still being denied the right to vote;
c.
DPC could not explain or provide evidence as to why some unit owners were allegedly in arrears;
d.
notice was not provided to unit owners that they were in arrears; and
e.
DPC had updated the records for PCC #22 only a few days prior to the meeting, and on that basis was asserting the existence of arrears that had not been apparent before that time.
Upon reviewing all of the proxies that were alleged to be invalid, as chair of the meeting, the chair made the decision that they should be included in the vote because the records presented to her by the management company appeared inaccurate.

According to her evidence, she made her decision based on the following:
a.
DPC had been updating records on 08 October 2012 for arrears that could not be explained and which were not 30 days old;
b.
several of the unit owners were never advised that they were allegedly in arrears and DPC was unable to explain what the unit owners were in arrears for; and
c.
one unit owner who allegedly was in arrears produced banking records of her own that evening, based upon which the chair concluded that all her expenses had been paid for.
The chair made the determination that all proxies should be counted towards the vote as there was no clear evidence that any unit owner should lose their right to vote.

The vote
PCC #22 is comprised of 104 units. As a result, in order for a director to be removed an affirmative vote of 53 in favour of removal was the minimum required in respect of any director. The results of the vote were as follows:

Name For
Against
Pavkovic 61 27
Oliveric 60 29
Raszbuyk 62 26
Jimblat 60 30

DPC’s records

The applicant submitted that because PCC #22's lawyer and DPC Property Management had found the impugned proxies to be ineligible because the unit owners were in arrears; that should have been the end of the question.

The judge ruled that while the lawyer and the manager may assist in the meeting registration process; that does not confer authority upon them to make final determinations. Where there is a challenge to a proxy, that decision should be made by the chair of the meeting.

The chair was not neutral
The applicant also argued that the requistionists’ lawyer rulings as chair of the meeting should not be permitted to stand because she was retained by the requisitionists and therefore was duty bound to support their agenda to remove the existing board.

It is for the applicant to establish to the satisfaction of the court that what chair did was contrary to the best interest of the corporation. The fact that a chair of a meeting has an interest in the outcome of a decision does not impugn the integrity of the process.

The judge also stated that the bylaws of PCC #22 do not specify that the corporate meetings are to be chaired by a neutral third party. If the unit owners wish to insert such a requirement, they may amend the bylaws.

Note: I found this to be an interesting comment. Who has attended an AGM where the chair (far too often a property manager or the corporate lawyer) was completely fair and neutral? I have but it is not always the case.
editor


Accuracy of the financial records?
Justice Stinson went on to determine that the accuracy of the DPC’s financial records as of 09 October 2012 was, at best, questionable.

Missing records
Subsequent to the meeting, DPC has been terminated as the property manager of PCC #22, and new management has attempted to obtain from DPC the necessary financial information and documents to reconstruct the records of the corporation (and, indeed, has gone so far as to initiate court proceedings to obtain same).

In particular, an effort has been made to reconstruct the arrears list as at
30 September 2012 and 30 October 2012, as accurately as possible.

There is no sign of the 30 September 2012 arrears list that was purportedly used by PCC #22's lawyer and manager at the 09 October 2012 meeting. The only available one is as of 30 August 2012.

Burdon of proof
The burden is on the applicant to present evidence that establishes that the conduct of the corporation was in violation of the Act.

Judgment
The judge concluded that the applicant failed to make out a case for the relief sought. The application was dismissed.

Note:
At that time of this posting (late June 2013), DPC Property Management's website: "www.dpcpm.ca was currently down for maintenance".


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Davis v. Peel Condominium Corporation No. 22
Ontario Superior Court
File:  CV-13-473390
Date: 08 October 2013
Justice Stinson

The parties were unable to agree to costs and subsequently filed written submissions with Justice Stinson.

The successful respondent, PCC #22, sought costs on a substantial indemnity basis, in the amount of almost $46,000. The applicant submitted that each party be ordered to pay their own costs or in the alternative that PCC #22 pay her partial indemnity costs. She submitted that the costs claimed by PCC #22 are excessive and further that the threshold to award substantial indemnity costs has not been met.

Liability for costs
As the successful litigant, in the ordinary course PCC #22 would be entitled to an award of costs against the unsuccessful party. The applicant, however, submits that the facts of this case are such that the ordinary practice should
not apply.

This dispute raised the question of the legitimacy of the election of the new Board of Directors of PCC #22. The election of the new board followed a period of dissatisfaction and dissent among some unit owners including dissatisfaction regarding the practices of DPC Property Management that was hired by PCC #22 to operate the affairs of the corporation and maintain the corporation’s financial and other records.

That dissatisfaction was, in part, justified given the poor state of the records when the new Board assumed control. Indeed, it was the status of those records that in large part gave rise to the disputes that led to this application.

Although a new Board was elected at the disputed meeting and remains in place, one cannot lose sight of the fact that the substandard fashion in which the records of the corporation were maintained led to the problem and the litigation.

The corporation has responsibilities

The corporation is distinct from its Board of Directors and its management company, yet it cannot escape responsibility for their actions and failures.

In this case the failure to maintain proper records must be laid at the feet of the corporation.

Had those records been current, accurate and reliable, the voting eligibility of all unit owners would have been clear at the outset of the meeting. The confusion as to voter eligibility and the resultant need for the rulings by the chair would have been obviated. In turn, there would have been no question in the mind of the applicant concerning the legitimacy of the procedure followed and the outcome of the meeting.

Blameless owner
The applicant is merely a unit holder. She was not a member of the old Board of Directors. She cannot be held responsible for the shortcomings in the record-keeping of PCC #22.

She raised legitimate questions regarding the propriety of the voting process. Those questions would not have arisen had PCC #22 maintained its records in the fashion that it should have. PCC #22 cannot avoid responsibility for the situation that gave rise to the concerns about the legitimacy of the election process.

A matter of interest & concern
In the judge's view, this was a matter of interest and general concern to all unit owners at PCC #22. Each has an interest in the proper governance of the corporation and the proper adherence to due process in the conduct of the affairs of the unit owners.

The applicant incurred a significant personal expense to retain her own counsel to raise these questions. Having regard to the circumstances described above, and in particular the reasons for the problem in the first place, in my view it would be inappropriate and unfair to require the applicant to pay any costs to PCC #22.

The applicant’s costs
The applicant has requested that her costs be paid by PCC #22. Although the applicant may have had cause initially to be concerned about the legitimacy of the vote, she continued with the application despite having received information which indicated that her complaint could have had no impact on the outcome. She also declined an offer from PCC #22 for the withdrawal of the application on a without costs basis.

Her decision to proceed to the hearing notwithstanding that offer negates any suggestion that the successful party should pay her costs.

Judgment
The judge concluded that each party should bear their own costs of the application.

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