Court cases—board of directors
Corporation No. 137 v. Hayes
The respondent, a director on the board, assaulted three residents,
left a threatening phone message with a fellow director and verbally
abused a resident over a four month period.
In response, the board tried to have a Superior Court justice:
1. Bar her from all the common elements aside from access to & from
2. Bar her from communicating with any condo residents or employees.
3. Have the court remove her from the board.
4. Force her to vacant and sell her unit.
The board failed on most points and only succeeded in getting a
restraining order demanding that the respondent behave herself.
This is a big win for condo owners as the judge decided that it up to
the owners to remove a director and it confirms that the courts will be
very reluctant to kick owners out of their homes.
Rogers Cable Communications
Inc. v. CCC. No. 53
07 March 2005
The Honourable Mr. Justice Albert J. Roy
This is a very interesting case where Rogers tried to sue a condo
corporation because it signed a contract with a single director on the
condo board and it claimed that their contract was binding
on the condo corporation.
The evidence before the judge indicated that the agreement between CCC
No. 53 and the Plaintiff was signed by a single member of the Board of
Directors thinking that this agreement was simply a continuation of an
earlier agreement when in fact he was granting an agreement in
perpetuity to Rogers that the condo corporation would not enter into
any bulk service agreement with any cable service provider.
In this case, a single member of the Board of Directors signed the
document without knowledge or the authority of the Board of Directors.
The judge found that the “indoor management rule” does not apply to
condominium corporations so a single member of the Board of Directors
cannot bind the condominium corporation.
In accordance with the Act, all decisions of the Board of Directors
must be taken at a meeting of the Board of Directors where a quorum has
been established. Further, contracts cannot be executed without
authorization by resolution of the Board.
The judge stated: “I would have thought that Rogers would have made
sure their contract received the approval of the Board of Directors if
they wanted a binding agreement.”
Rogers lost this case.
Scourtoudis v Renaud
Small Claims Court—Brampton
|Court file No.
|M. Klein, Deputy Judge
|February 24, 2014
“Let me say, "right out of the gate," that the facts in this case are
really quite straight forward however, the claim before this court is
for only $837.80 and ought never to have warranted a two day trial. But
for the conduct of the Defendants (husband and wife) at trial, I find
that this proceeding was unnecessarily protracted (dragged out).
The Defendants were their own worse enemies, filling the courtroom with
two days of (unnecessary) outbursts, numerous side comments and
throwing emotionally charged grunts and groans at the opposing party.
On the second day of trial, I flatly stated on the record, that if the
Defendants wished, I would clear the courtroom and turn it into a
boxing ring, so that they could rid of their frustrations. This was
indeed how disruptive and bad it got.”
The plaintiff and one of the defendants are directors of their condo corporation.
In the summer of 2011, the defendant, Karen Renaud, suggested that it
would be far less expensive if the townhouse owners themselves mulched
the grounds instead of hiring a contractor. This case was about who
paid what and if the defendants owed the plaintiff any of the costs
It would be informative for you to read the actual judgment as the
judge refers to a letter that the plaintiff and the condo's treasurer
sent to defendants as being quite troubling.
The problem was that both the plaintiff and the defendants used their
own money to pay for the mulch required for this project and no proper
records were kept.
The Plaintiff's claim is dismissed.
Although the Defendants were successful in defending the Plaintiff's
claim, the judge was very cognizant of the fact that the Plaintiff
retained a paralegal, who diligently put forward her client's claim.
However, but for the disruptiveness of the Defendants, this trial would
never have taken as long as it has.
The judge therefore ordered the Defendants to pay to "Kanwaljit Kaur
Bains, in Trust" the sum of $600, being only a very small portion in
compensation for costs thrown away by the Plaintiff.
YCC No. 42 v. Gosal et al./YYC No. 42 v. Karim et al
Ontario Supperior Court of Justice
CV-14-496029 & CV-14-496588
Before: Justice Penny
Released: 02 April 2014
This case involved two conflicting applications arising out of an
election to fill two vacant positions on the Board of Directors of YCC
No. 42. The election took place during the AGM on 26 September 2013.
The first application purported to be authorized by the pre-26
September 2013, or “old,” Board (the “Khan Application”). Mr. Fulton
purports to act for the Corporation in the Khan Application. This
application seeks to set aside the results of the election.
The second application in response to the first application, purports
to be authorized by the post-26 September 2013, or “new,” Board (the
“Gosal Application”). Ms. Dirks purports to act for the Corporation in
the Gosal Application. This application seeks to uphold the results of
The hearing and what lead up to it is described elsewhere on this website.
Justice Penny stated that there were essentially three issues arising out of these applications:
|was the Chair’s purported decertification of the Election and removal of directors in late November, 2013 valid?
|if no, have Khan and Karim proved that the election should be invalidated on account of improper proxies? and,
|in any event, what terms and conditions should apply to the grant,
registration and voting of proxies at the next AGM and/or election of
There is a very high percentage of nonresident unit owners in this
Corporation. As a result, most of the votes cast at elections are by
proxy. The grant, registration and voting of proxies has created
problems in the past. Justice D.M. Brown wrote, in an earlier
"YCC 42 is a very dysfunctional community. From my reading of the
materials in the various motions brought before me, one factor
contributing to such dysfunction is the high number of units not
occupied by owners, but leased out. It appears that many unit owners no
longer have a direct interest in the health of the YCC 42 community,
save for collecting rent. As well, factions have formed and appear to
use proxies to further their particular points of view."
Although expressing concerns about the use of proxies in the pending 2012 election, Justice Brown held that:
"unit owners may use proxies to vote in the referendum in accordance with the Act, Declaration, By-law and rules."
On 01 October 2013, following the election the Chair, Mr. Campbell,
reported that he had counted the votes and had declared 135 of the
tendered proxies invalid – 75 on account of apparent tampering and the
remainder on other grounds, such as the owner being in arrears of
payment of corporation fees and therefore not entitled to vote. He concluded:
The final result of the election of directors at the 2013 AGM was as follows:
Amina Gure 255
Sandeep Gosal 248
Accordingly, the Chair hereby certified that Amina Gure and Sandeep
Gosal were elected at the 2013 AGM to the board of directors of YCC 42.
What happened next was an accusation by one of the applicants that
massive proxy fraud occurred prior to the election and that a new
election should be held. Several weeks after closing the AGM, and
declaring who had won the election, the Chair decertified the election
and called for a new election to be held.
To understand all the events that took place, the reader must read the actual judgment in its entirety. It makes for very disturbing reading.
|The result of the election as affirmed by the Chair’s report of 01 October 2013 is valid and stands.
|The Khan Application is dismissed. The Gosal Application is allowed, to the extend specified in these Reasons.
|At the next election of directors all proxies shall be deposited with the corporation by one of two methods:
Any proxies not received in accordance with these instructions shall be considered invalid and shall not be counted.
|the proxy shall be deposited prior to the meeting in person by the
owner or his Power of Attorney (POA), upon showing proof of identity
and in the case of a POA, the instrument granting the POA; or
|the proxy shall be deposited by mail by the owner or his POA prior to
the meeting, enclosing a photocopy of proof of identity and, in the
case of a POA, a photocopy of the instrument granting the POA.
Released: 16 April 2014
"Gosal and Gure were successful in their application. Khan and Karim
were unsuccessful. The Corporation is entitled, therefore, to
costs as against Khan and Karim, whose application was not authorized
by a majority of the board. I do not think this case warrants departure
from the normal scale of costs.
However, the Corporation's costs include the cost of injunction
proceedings before Belobaba J. fixed in the amount of $2,500. I
therefore find Khan and Karim are liable to YCC 42 for
its costs in application CV-14-496588 in
the amount of $30,000 (inclusive of fees, disbursements and all
applicable taxes). These costs are enforceable as a common
expense against any units owned by Khan and Karim in accordance
with s.134(5) of the Condominium Act, 1998."
You can reading the Costs Endorsement here.
Comments—by the editor
This court case highlights the following:
|Some directors will go to great lengths to gain control of the board.
||Proxy fraud is a serious concern. (it is not limited to just this corporation.)
||The rules listed in Nathan’s Company Meetings for Share Capital and
Non-share Capital Corporations, 10th Edition are recognized by the
||Directors who make decisions
without passing a resolution at a formal board meeting, with all the
directors invited, are not acting on behalf of the corporation. (This
is something the corporation's suppliers and contractors, including the
lawyers, should keep in mind.)
||Any allegations of election improprieties must be made during the AGM or soon after.
||The chair’s duties are over once the AGM is closed.
||Any accusations of election fraud require proof that will stand up in court.
||The chain of custody of the proxies and ballots must not be compromised.
||Going to court can be risky.
Ballingall v. Carleton Condominium Corporation No. 111
Ontario Superior Court of Justice
Court File No: 14-60620
Heard: February 5, 9, 2015 (at Ottawa)
CCC 111 is a 27-storey condominium tower, comprised of 242 units, located in Ottawa. It is almost 40 years old.
The Applicants are owner residents of units at CCC 111, and one was
President of the Board until her resignation in January 2014.
John MacMillan owns and occupies one unit and owns four other
units, which he has been renting to university students for several
years. He has been on the Board of the Corporation since June 2012, and
has been the Board’s President since approximately March 2014.
The corporation’s Declaration states that:
“each unit shall be occupied and used only as a private single family residence and for no other purpose ... .”
Mr. MacMillan wanted to continue to rent out his units to unrelated
university students and misused his position on the board to block
attempts to enforce the declaration.
Justice Aitken ruled:
"A reasonably prudent director of a condominium corporation, attempting
to meet his responsibilities as a director, would not undermine Board
decisions, mislead unit owners as to the Board’s responsibilities and
their efforts to meet those responsibilities, encourage unit owners to
distrust the Board, undermine the legal advice from the Corporation’s
legal counsel, mislead unit owners as to what that advice entailed,
provide his own legal advice to unit owners, and on one occasion post
to his personal website legal advice received by the Board without the
consent of the Board.
A reasonably prudent director, acting in good faith, would not make the
Board dysfunctional, would not promote antagonism and dissent on the
Board, and would not threaten other Board members.
A reasonably prudent director would not put his own economic interests
ahead of the legitimate interests of all categories of unit owners. A
reasonably prudent director would seek a compromise that respected the
disparate, but legitimate, interests of all unit owners in the context
of the community established by the Corporation’s Declaration, By-laws,
This is an important win for owner-residents. It is best that you read
the actual judgment to get a good understanding of all the details
involved with this application.
Superior Court of Justice—Ontario
Court File No: CV-14-10493-00CL
Date: 10 December 2015
Before: Justice L. A. Pattillo
This application came out of a complicated case dealing with a married
couple, (Ronauld and Norma Walton) who owned Wynford, a company that
bought the majority of units in a commercial office condominium located
at 18 Wynford Drive in Toronto. They then became the president and
secretary of the condo’s board of directors. They also controlled the
company that was hired to manage the condo corporation.
The other directors, were Dr. Stanley Bernstein, a business partner
of the Waltons, George Habib, the president and Chief Executive of an
association which owns units in MTCC 1037 and Jonathan Griffiths, a
lawyer who also owns a unit in MTCC 1037. Dr. Bernstein denied any
knowledge that he was appointed a director.
The Status Certificates among other things:
The Waltons then took out a mortgage on their units from a mortgage
company (Trez). Prior to closing to mortgage, Trez received two
separate status certificates from MTCC 1037 dated March 6, 2013 signed
by Norma Walton in her capacity as President of MTCC 1037 and a
statutory declaration, also dated March 6, 2013, sworn by Norma on
behalf of Wynford.
Following due diligence undertaken by both Trez and its lawyers, the Loan was fully advanced to Wynford on March 7, 2013.
|stated that Wynford was not in default of payment of common element fees for the Wynford Units;
|appended a list of all the Wynford Units which clearly stated under the
column “Common Expenses Payment” that the Wynford Units were not in
|stated that the MTCC 1037 reserve fund was in good order.
The Statutory Declaration stated, among other things, that:
|Norma Walton was unaware of any corporation who would have any claim or
interest in the Wynford Property that is adverse or inconsistent with
Wynford’s title to the Wynford units;
|there were no special assessments contemplated by MTCC 1037 and there
were no legal actions pending or in conflict by or against MTCC 1037;
|Wynford had complied with all terms, conditions, rules and regulations
contained in the respective Condominium Declaration, By-Laws and
Regulations since Wynford purchased the Wynford units; and
|the representations made to Trez in the Commitment Letter and the other
related security arising therefrom was true and accurate.
In or around December 2013, MTCC 1037’s evidence is that the minority
directors of the Board learned that the Waltons potentially had been
negligent or worse fraudulent and acted in bad faith in their role as
directors and officers of MTTC 1037. Subsequently, at a court ordered
annual general meeting of MTCC 1037 held on February 13, 2014, the
Waltons were removed as directors and a new board of directors was
It was at this AGM that the MTCC 1037 unit owners learned for the
first time that Wynford was in arrears of payment of its common element
fees and that no statutory lien for common element fee arrears had been
registered against the Wynford units. The new board did not learn the
exact amount of the arrears until sometime in March 2014.
The status certificates
In May 2014, the Receiver made payment of Wynford’s common element fee
arrears to MTCC 1037 for the months of February, March and April 2014.
The receiver then continued to keep Wynford’s common element fees
Wynford’s common element fee arrears are $1,284,508.23. Up to March 7,
2013, the date when the loan was fully advanced and the mortgage
registered, Wynford’s arrears were $811,841.34.
MTCC 1037 has commenced an action against, among others, the Waltons
and have sought, among other things, the following declarations against
them: that they acted fraudulently, negligently and in bad faith by
failing to pay Wynford’s share of its common expenses totaling
$1,284,508.23; that they acted fraudulently, negligently and in bad
faith by failing, as controlling members of the Board, to lien the
Wynford units for arrears of the common element fees and that they
breached the Act by failing to act honestly and in good faith.
It is interesting to note that at the time they bought their Wynford
units, the Waltons were lawyers licenced and in good standing with the
MTCC No. 1037 wanted the court to give it the fees that were in arrears and failed in their attempt two arguments.
The mortgagee relied on the status certificates and had no basis to
believe that there were any problems or issues in respect of them. The
Waltons were involved in running a substantial successful real estate
business at the time. Further, the fact that the Waltons were in
control of Wynford and on MTCC 1037’s board was not unusual or cause
for suspicion. They were just two of five directors and given the units
that Wynford owned, it was not unusual that the Waltons would be on the
board and hold positions as officers of MTCC 1037.
Both MTCC 1037 and Trez filed affidavits from condominium experts
addressing the issue of Trez’s due diligence and, in particular, the
effect of the status certificates. MTCC 1037 retained Ms. Denise Lash,
Chair of the Condominium Corporation Group at Aird & Berlis LLP.
Trez retained Ms. Audrey Loeb, head of the Miller Thompson LLP’s
Condominium Practice Group. Both lawyers are well qualified based on
experience to testify in respect of status certificates.
Relying on Section 76 of the Act, Ms. Loeb states it is her opinion
that it was reasonable for Trez and its counsel to rely on the Status
Certificates and that they contained no representations which would
raise suspicions on the part of counsel or Trez that would shift the
onus to them to “look behind” the status certificates.
MTCC No. 1037’s position
Ms. Lash on the other hand states that there were several issues or potential issues, including significant breaches of the Act,
which were clear on the face of the status certificates which should
have alerted Trez and its counsel to potential issues with the
information contained therein and given rise to further inquiry. In
particular, Ms. Lash points to the non-arm’s length relationships of
the Walton to MTCC 1037 and Wynford; the failure to include a reserve
fund balance in the Status Certificates within the time period
prescribed by the Act; and the failure to include current audited
financial statements for MTCC 1037 with the Status Certificate.
The Act contains detailed provisions to provide information to
purchasers and mortgagees of both newly-built condominium units and
re-sale units. For re-sale units, s. 76 of the Act provides for status
certificates. Section 76(1) provides that the status certificate, which
is a prescribed form, must contain a variety of organizational and
financial information about both the unit and the corporation as a
whole. In particular, s. 76(1)(i) requires a copy of the budget of the
corporation for the fiscal year, the last annual audited financial
statements and the auditors’ report on the statements and s.
76(1)(m)(ii) requires the amount of the reserve fund no earlier than at
the end of a month within 90 days of the date of the certificate.
Section 76(6) provides:
The status certificate binds the corporation, as of the date it is
given or deemed to be given, with respect to the information that it
contains or is deemed to contain, as against a purchaser or mortgagee
of a unit who relies on the certificate.
In the present case, the status certificates specified an amount of
the reserve fund as at December 31, 2010, a date some two years before
the status certificates were issued. Further, the financial statements
attached to the status certificates were for the year ending December
Ms. Lash states that because these documents were not in accordance
with the Act’s requirements for condominium corporations, that it
should have raised red flags for Trez and its counsel requiring further
The issue here is the arrears of common element expense fees. The
status certificates clearly stated there were no arrears of common
element expense fees. Trez and its counsel were entitled to rely on
In my view, the documents provided by the Act to be appended to the
status certificate are provided for information purposes only. Section
76(4) of the Act provides that if the status certificate omits material
information that it is required to contain, it shall be deemed to
include a statement that there is no such information.
The judge did not accept Ms. Lash’s evidence that a purchaser is
required to go behind the status certificate where the information
provided is incomplete or missing and inquire further. The Act is clear
that a purchaser or mortgagee is entitled to rely on the information
contained in the status certificate.
The judge agreed with Ms. Loeb’s statement at paragraph 16 of her February 20, 2015 affidavit where she states:
If the recipient of a status
certificate were given the onus of confirming the statements by the
condominium corporation by cross-referencing and analyzing the
corporation’s documents, then the very purpose of the status
certificate would be severely diluted. Few, if any, purchasers or
mortgagees would take any comfort in the status certificate if they
knew that, at some point in the future, they may be held to account for
their efforts to cross-check and verify the corporation’s
the judge's view, for the reasons stated, he was satisfied that Trez
and its lawyers carried out satisfactory due diligence in respect of
the loan. There was nothing in the status certificates that should have
raised any concerns about MTCC 1037 or its financial situation and in
particular Wynford’s common expense fees. Trez was entitled to rely on
the status certificates and particularly the explicit representation
that Wynford had no common expense arrears.
For the above reasons, he did not consider that MTCC 1037’s criticisms of Trez’s due diligence are well founded.
between Trez and MTCC 1037, it is the latter, in the judge's view, that
was in the better position to have discovered Wynford and the Walton’s
failure to pay common element fees. It is no answer to say that the
minority directors were kept in the dark. As board members they had a
duty to “exercise the care, diligence and skill that a reasonably
prudent person would exercise in comparable circumstances”. They should
not have acceded full control of the board to the Waltons. Nor should
they or the unit holders have acquiesced in the failure to provide up
to date financial statements.
Lessons for condo owners
The owners of these commercial condo units may well be able to absorb
over $1 million in missing maintenance fees but most owners in
residential condo corporations are far less fortunate. If one person,
or a couple, have too much power in your condo, clip their wings.
If there are not regularly held AGMs and if there are not annual
audited financial statements, then dump the board or sell your unit and
Lessons for prospective buyers
If you have put in an offer on a condo and the status certificate
package does not contain current audited financial statements and the
minutes of a current AGM, then walk away. Something is wrong.
I have talked to a couple of owners at a Scarborough condo who read in
the status certificate that there was $300,000 plus in the reserves.
The missing audited financial statements stated that the reserves had a
bank overdraft of $27,736. The owners and the board talked about
terminating the condo in the last AGM. Little wonder these documents
were missing from the status certificate package.
Lessons for directors
If you are asleep on the job and there are no regularly called meetings
or you are not privy to all the financial affairs of the corporation,
then you either vote to replace the president, you inform the owners
what is going on, you take the controlling directors to court or you
resign your position and sell your unit. You may be held personally
responsible if you do nothing.
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