Section 134.(5) needs court orders —costs award

PCC No.  231 & [NAME_REDACTED] et. a1.—Costs
[NAME_REDACTED] et. al. v. PCC No.  231
Court File No: CV-14-514873
Superior Court of Justice
Justice F. Myers    (Orally)
Tuesday, May 19, 2015

These two applications came before me on March 5, 2015. The condominium corporation sought compliance orders against [NAME_REDACTED] and her family. Effectively they sought orders requiring the respondents to obey the rules, be quiet, and leave others alone. There was a cross application for the same relief, trying to keep the condominium corporation away from [NAME_REDACTED] and her family. Both sides, it seems sought essentially the same thing—separation and peace—but they could not agree on costs.

Mr. Fine rightly refers to the importance of subsection 134(5) of the Condominium Act 1998 in this matter. The Court of Appeal is clear in Metropolitan Toronto Condominium Corp. No. 1385 v. Skyline Executive Properties Inc., 2005 Carswell Ont 1575, that this subsection gives a broad right of recovery of costs incurred in obtaining compliance orders to condominium corporations. It also gives the corporations a convenient mechanism to collect those costs. It provides for full indemnity of all costs incurred, not just the costs awarded by the judge at the hearing, and it provides that all such costs become added to the unit owners’ common expenses so that they are collectible by lien under the statute. The intention of the subsection is to shift the financial burden of obtaining compliance orders from the corporation and the innocent unit owners who fund the corporation to the owners whose conduct necessitated obtaining the order. The Court of Appeal spoke of shifting the burden from the "innocent" to the "guilty".

“This whole case is about costs.”

Mr. Fine heaps great scorn on [NAME_REDACTED] for having the temerity to fight this proceeding in light of subsection 134 (5). He said she was rolling the dice more than most others are willing to do, and that exposes the problem. A section designed to protect the innocent from the guilty can also become a weapon in the hands of the many to bludgeon the few. This whole case is about costs. No one beat their offers to settle because the only significant item in issue in each of the offers was costs, and I have yet to determine the costs.

Lawsuits are supposed to be fought about damages and relief, not all about costs. But when a condominium corporation believes it is going to get full indemnity costs, it has no governor on its aggression. It needs its costs award because it came into the case expecting it to be cost-free. It turns out it has burdened unit owners with over $150,000 in costs, expecting to be able to collect that from a lien on [NAME_REDACTED]'s unit. But subsection 134(5) only applies if the corporation obtains a compliance order by way of damages or costs. It failed to do so on March 5. Today, therefore, it seeks costs of only $30,000 and offers an undertaking that it will not apply subsection 134(5) to any such order. It seeks costs because it says it was reasonable in bringing its unsuccessful claim. In particular, on its first ground, it says it had no choice but to sue. I disagree. The board is a fiduciary. It has to exercise its business judgment in good faith. Threats were made to it by an owner. But there is no evidence if the threat was real. There was no assessment of whether the threat could be backed up by an owner who could have the power to take on the corporation, or if perhaps, the threat was made by someone who was friendly to the powers that be.

That there were seventeen complaints received, I have no doubt. I said in my prior endorsement what I thought about the evidence of how [NAME_REDACTED] became the target of busybodies. The over-statement of the obligation of the board to sue, creates an incentive to complain, so as to claim an obligation to sue without cost repercussions. It is a giant bully pulpit.

Nothing about the corporation’s acts in this case, however, was reasonable. I have rejected the reasonableness of the ex parte proceeding in my March 5th endorsement. The claim that witnesses were afraid holds no more water today than it did then. The proceeding was public, whether brought ex parte or otherwise. Moreover, no costs are allowed on an ex parte proceeding, presumptively, absent an order of the court.

This case is not the equivalent of the Ramadani case (York Condominium Corporation No. 26 v. Ramadani, 2011 ONSC 6726) where mediation failed and   Justice Strathy (as he then was) said that arbitration had no greater utility than litigation in those circumstances. In my March 5th endorsement, I said that the corporation's tactics of alleging a claim in such a way so as to avoid mediation was aggressive. It undermined its claim of being conciliatory. That is not at all the same as the position of the parties who had already gone through mediation in good faith.

“No fiduciary duty of a Board of Directors requires it to behave like a bully...”

The corporation’s offers to settle throughout contained near full indemnity costs—well beyond the capacity of most individuals. That is not conciliatory. The corporation complains that the defendants' conduct lengthened the case. That is true, if you expect unit owners to roll over, like most do. But a response in face of the plaintiff's aggression cannot be a basis to give costs. It does not lie well in the mouth of the party denied relief that the successful defendant did a good   job fending off the claims. No fiduciary duty of a Board of Directors requires it to behave like a bully or take unreasonably aggressive positions. It is required to exercise reasonable business judgment to manage the affairs of the corporation in good faith.

On the other hand, lest anyone think I am forgetting, it is still clear to me that [NAME_REDACTED] has a low threshold for fear, and her position throughout has been that a good offence is the best defence. She certainly has not behaved as a reasonable condominium neighbour either. The argument that one shows your conciliatory nature by expressing a concern that the case is getting out of hand after response and before reply was transparently tactical.

In my March 5th endorsement I said the following:

I suspect that much driving this litigation turns on the cost consequences of section 134(5) of the Act. The applicant's overkill may be attributed, in a sense, that the respondent will pay full costs under the statute. This is a misalignment of incentives towards disproportionality. Similarly, the vociferousness of the respondent's response is disproportionate to the severity of the historical conduct alleged and more consistent with an effort to create a negotiating platform to avoid the negative costs outcome under section 134(5).

Nothing has changed in my view. In Duca Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, Mr. Justice Cumming described the approach to costs as follows:

In Ontario, the normative approach is first, that costs follow the event premised upon a two-way or loser pay costs approach; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e., within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from one or more of these norms.

It is also important to remember that the Court of Appeal in Boucher v. Public Accountants Council (Ontario), (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291(C.A.) said that costs must be balanced with the objectives of ensuring access to justice. The respondent was entitled to respond, especially where she was successful in doing so. However, [NAME_REDACTED] did not just respond; she brought her own offensive weaponry to bear in her own application, and that application was unsuccessful as well. The Court should not reward [NAME_REDACTED]'s disproportionate behaviour throughout any more than the applicant condominium corporation's behaviour. Accordingly, there is no costs order in the proceeding.

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