Commercial units vs residential units

TSCC No. 1633 v. Baghai Development Limited   (use of sidewalks)
White Snow & Sunshine Holdings Inc. v. MTCC No. 561   (use of amenities)
MTCC No. 596 v. Best View Dining Ltd
Norenger Development (Canada) Inc. v. Strata Plan NW 3271  (BC)


TSCC No. 1633 v. Baghai Development Limited, 2012 ONCA 417
Court of Appeal for Ontario
Docket: C52283
Heard: 03 January 2012
Justices of Appeal: Rosenberg, Simmons and Armstrong
 
On appeal from the orders of Justice Lois B. Roberts of the Superior Court of Justice, dated June 11, 2010 and May 13, 2011, and from the costs endorsements dated June 14, 2011 and June 22, 2011.
 
TSCC 1633 is a mixed use condominium located at 16-18 Harrison Garden Blvd, just south of Yonge and Sheppard in North York. The ground floor has retail/commercial units while the upper floors contain residential apartments. Rabba, a small grocery store, leases five units from Baghai Development, the developer.

Rabba no longer has any merchandise on the sidewalks at this location.

Rabba had been putting merchandise on the sidewalks in front of the store. The condo corporation complained. Agreements were made a regularly broken. The condo corporation took the landlord and tenant to court to get the merchandise off the sidewalk.
 
Baghai claimed that this was unjust as Rabba had a lease that states:
"The landlord specifically grants to the Tenant an exclusive and irrevocable licence to use the area outlined in yellow on Schedule “A” attached hereto, at no extra charge to the Tenant, for the purpose of the seasonal display of fresh produce, fresh flowers, live plants and other temporary sales kiosks in such a manner as not to impede the safe flow of pedestrian traffic around the area, and subject to compliance with all applicable laws."
 
However, the condo corporations Declaration and By-laws say different. By-law No. 1 says:
"Section 9: The sidewalks, entry, passageways, walkways and driveways used in common by the owners shall not be obstructed by any of the owners or used by them for any purpose other than for ingress and egress to and from their respective units."
 
The lower court judge ruled that the Declaration and the By-laws override the lease. The grocery store and its landlord appealed. The Appeals court upheld the decision. Pretty straight forward.
 
Lower court costs awarded
TSCC claimed partial indemnity costs of $172,373.01 and full indemnity costs of $199,020.97. TSCC argued that it was entitled to the higher amount by virtue of s. 134(5) of the Condominium Act, 1998, which provides:
"If a corporation obtains an award of damages or costs in an order made against an owner or occupier of a unit, the damages or costs, together with any additional actual costs to the corporation in obtaining the order, shall be added to the common expenses for the unit… ."
 
Baghai and Rabba acknowledged that, as the successful party, TSCC was entitled to an award of costs. However, they disputed TSCC 1633’s entitlement to full indemnity costs, and also argued that the amounts claimed were excessive. They suggested an award of $80,000, plus or minus disbursements, was appropriate.
 
The application judge fixed TSCC’s costs at $100,418.11, including taxes and disbursements.
 
Appeal of costs order
TSCC 1633 asked for leave to appeal the costs order. Its principal submission is that that the application judge erred by failing to order full indemnity costs, in accordance with s. 134(5) of the Condo Act.

Appeals court ruled that the application judge accepted that TSCC was entitled to full indemnity for counsel’s appearances at cross-examinations and the various court hearings.  However, she concluded that the amounts claimed for preparation and research (over 330 hours in total) were “overkill” given the relative simplicity of the legal issues, on the one hand, and the expertise of TSCC’s counsel, on the other.  She explained, at para. 22, that TSCC could have avoided much of the expenses claimed if it had tried to negotiate or arbitrate a solution, “instead of embarking on a scorched earth campaign.”

Section 134(5) of the Condominium Act, 1998 does not allow the applicant to expend or authorize its counsel to expend any amount and then ask that it be completely indemnified for costs that are otherwise disproportionate and unreasonable. The Court retains its discretion to determine what amount of costs is fair and reasonable and to award no costs where appropriate.

The application judge went on to hold that the amount TSCC spent on the compliance order was excessive given that the legal issues were relatively straightforward, and its counsel, Mr. Fine, is an expert in condominium law.

She described the time counsel spent preparing the application materials (some 196 hours in total) as “overkill”. Similarly, she found that the nearly 36 hours counsel spent on legal research was not warranted.

In arriving at this figure, it appears that the application judge essentially came up with what she thought was a reasonable amount for TSCC to have paid its lawyers to obtain the compliance order. There is no arithmetic to support the amount of $95,000.

An appellate court will not interfere unless the trial judge considered irrelevant factors, failed to consider relevant factors, or reached an unreasonable conclusion.
 
Ordinarily, an appellate court will defer to a trial judge’s decision to reduce a bill of costs because the successful party overspent on the litigation. This holds true even when the trial judge does not “show her work” – that is, when the final number is not accompanied by a detailed breakdown of how it was arrived at.

Disposition
"I would grant leave to appeal the costs award and allow the costs appeal. I would refer the costs back to the application judge for reassessment. In light of the already protracted history of this dispute I would urge the parties to sit down and attempt to settle the costs, and, failing which, to seek an expedited date for this matter."

Costs of the main appeal
TSCC is entitled to partial indemnity costs for the costs of responding to the appeal of the compliance order, plus additional actual costs in accordance with s. 134(5) of the Act. In respect of the oppression application appeal, TSCC is entitled to partial indemnity costs.

Costs of the cross-appeal
"To a great extent TSCC was responsible for the problems associated with the costs order made by the application judge. In these circumstances I would make no costs award in respect of the cross-appeal."

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White Snow and Sunshine Holdings Inc. v. MTCC No. 561
Court of Appeal for Ontario
Docket: C64155
Before:  Doherty, MacFarland and Paciocco JJ.A.
Heard: 23 February 2018

On appeal from the judgment of Justice Thomas R. Lederer of the Superior Court of Justice, dated July 28, 2017

Reasons for decision
White Snow and Sunshine Holdings Inc. (“White Snow”) owns the commercial units in a mixed use condominium building.

Only owners of condominium dwelling units and their guests can use the building’s recreational common elements, including a swimming pool, a gymnasium, a library, and a squash court. White Snow asked the Superior Court to amend the MTCC’s Declaration so its employees to be able to enjoy those facilities, which its commercial condominium fees help to pay for.

 White Snow argued in their appeal that application judge erred in law when he dismissed their application. The Appeals Court disagreed and dismissed the appeal.

Costs
The condo corporation was awarded costs of $10,000 inclusive of disbursements and applicable taxes.

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MTCC No. 596 v. Best View Dining Ltd
Ontario Superior Court of Justice
File number:  CV-17-570473
Before:         Justice Perell
Date:           04 September 2018

Background
MTCC No. 596 is a mixed-use condominium at 81 Church Street in downtown Toronto. It has four commercial units and 76 residential units.

A commercial unit was leased to Best View who undertook a major renovation of the premises for its restaurant (Gyu-Kaku). It spent hundreds of thousands of dollars. Unfortunately, after the restaurant opened, the operation of the restaurant and the use of its equipment disturbed the residents of the residential units in the five-floors above.

In response to complaints from the residential units about the noise emanating from the restaurant, MTCC No. 596 took steps to enforce the provisions of the condominium declaration and its rules which prohibit a unit owner from disturbing other owners by transmitting noise from one unit to another.

The by-laws of MTCC No. 596 provide that owners must hold the condominium corporation harmless against all costs, including legal costs and disbursements, incurred to enforce the Declaration and the Rules.

In September 22, 2017, MTCC No. 596 brought proceedings to enforce compliance with the condominium declaration. It obtained an Order from Justice Akbarali requiring Best View to abate the noise that was disturbing the residential unit owners.

Best View and 2465031 Ontario (the unit owner) consented to Justice Akbarali’s order, save for the matter of costs, which were fixed at $87,810.09. The endorsement dealt with the costs incurred up until September 22, 2017.

After Justice Akbarali’s Order, MTCC No. 596 alleges that the noise problem continued, and in December 2017, MTCC No. 596 brought a contempt motion. It alleged that the Respondents, who had paid the costs of the endorsement, were breaching the substantive provisions of the Consent Order.

On April 24, 2018, Justice Perell adjourned the contempt motion sine die. He also made an interim order requiring more remedial steps to be taken to address the noise problem. He reserved the matter of costs for the return of the contempt motion.

Meanwhile, MTCC No. 596 alleges that from October 17, 2017 to May 3, 2017, it had incurred $38,786.85 in engineering and legal costs that were not dealt with in Justice Akbarali’s endorsement and which Justice perell did not deal with when he adjourned the contempt motion, sine die.

By letter dated May 3, 2018, MTCC No. 596 demanded that Best View reimburse it for its legal costs for legal work associated with the noise problem between November 2017 and April 2018 failing which the expense would be added to 2465031 Ontario’s common area expenses. Best View, in turn, is responsible to indemnify 2465031 Ontario for the common area expenses.

On July 18, 2018, MTCC No. 596’s lawyers wrote the Respondent’s lawyers to advise that, if Best View did not advance $40,175 for common expenses arrears by July 23, 2018, a lien would be registered against the condominium unit for unpaid common expenses.

Best View did not pay, and on July 24, 2018, the condo registered the lien.

Best View then brought this motion for directions alleging that the charge to the common area expenses and the lien were illegal and therefore the lien should be discharged. Best View’s argument is that it was premature until the resolution of the contempt motion for MTCC No. 596 to make charges and to register a lien. By this motion, Best View seeks an order from the court discharging the lien.

Ruling
MTCC’s $40,175 lien for common expenses is a proper lien. Best View’s motion is dismissed. The lien should not be vacated unless paid by Best View, subject to future adjustment, if any, to 2465031 Ontario’s common area expenses.

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BC Supreme Court orders bylaw amendments and unanimous resolutions under s.165
Lesperance Mendes
By Paul G. Mendes, Partner
13 November 2018

Norenger Development (Canada) Inc. v. Strata Plan NW 3271, 2018 BCSC 1690

This news may surprise you, but one of the main purposes of the Strata Property Act (the “SPA”) is promoting the democratic governance of strata corporations. As observed by the judge in this case, through a series of checks and balances, the goal of the SPA is to facilitate community living among people with different interests, financial resources, and life circumstances.

But what happens when the system breaks down, and what happens when those checks and balances might be working to thwart the democratic functioning of a strata?  Can the court “fix it” and order the strata to adopt a solution to the impasse?  Can the court pick one side over the other when democracy fails to produce a solution?

The latest ruling in Norenger v. NW3271 says the answer is a resounding yes.

This case concerns a long-standing dispute between commercial and residential owners in a strata complex in Richmond known as The Richmond Landmark.

The Court had previously found that the strata was incapable of managing its affairs and the strata had been under the authority of an administrator for almost eight years. At issue were contradictions in the bylaws and the fact that the commercial owner refused to vote in favor of any change in the operation of the strata which had the effect of reducing the commercial owner’s control of the strata, or increasing the commercial owner’s contribution to the operating expenses.

The administrator proposed new bylaws and a formula for cost allocation, which failed to pass at a general meeting. The administrator then applied to the Court to have the bylaws and cost-sharing formula approved by the Court.  Although the trial court granted the order, the BC Court of Appeal overturned that decision, holding that absent specific statutory authorization, the court could not override a democratic vote of the owners. The Court of Appeal did leave open, however, the possibility that s. 165 of the SPA might provide the administrator with an avenue for relief.

Section 165 is that section of the SPA which allows a court to make the orders it considers necessary when the strata is contravening the SPA or failing to perform a duty under the SPA.

So the administrator took that cue and brought a new application to the Supreme Court, this time seeking relief under s. 165 of the SPA.  An interesting wrinkle, in this case, was that the commercial owner was also the developer of the strata.  As the developer, the commercial owner had registered the very bylaws that were in dispute between the parties.  To make matters worse, the commercial owner was using its “s. 128 veto” to block any efforts to resolve those contradictions with bylaw amendments.  Section 128 is the section of the SPA that requires all bylaw amendments to be passed by a separate vote resolution of the residential and commercial owners. The s. 128 veto effectively meant that a vote of the owners could never address the developer’s failure to create proper bylaws.

The Court found that s. 165 of the SPA provided an avenue for overriding the voting rights of the owners in very limited circumstances, where doing so would be neither anti-democratic nor contrary to the purposes of the SPA. The Court found that the adoption of the bylaws and cost allocation formula recommended by the administrator was necessary because the strata was in serious disrepair.  In the absence of judicial intervention, the owners would remain incapable of managing the affairs of the strata on their own.

This very important case further expands the court’s power under s. 165 of the SPA.  This precedent will be particularly useful when a strata is failing to meet its obligations under the SPA, and a block of owners is using the “s. 128 veto” to block all efforts to solve the problem.

Lesperance Mendes has been representing strata owners, strata sections and strata corporations since 1997. THIS ARTICLE IS NOT LEGAL ADVICE: This article provides general information and should not be relied on without independent legal advice.

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