Court-ordered termination

CCC 396 terminated due to oppression of minority owners

CCC 396 termination upheld, a director personally responsible for costs

17 Yorkville—Successful injunction to prevent a termination meeting

Dewan v Burdet
Ontario Superior Court of Ontario
Court File No: 01-CV-18977
Heard: Justice Kane
Released: 08 August 2016

Both sides had claims against each other and the plaintiffs requested a court order terminating the commercial condo corporation. As an alternative relief, the defendants also applied for the termination of the corporation.

In 1987 an older warehouse building was converted into a 33 unit commercial/industrial/storage condominium. The Declaration gave basement storage units voting rights and one family used those units to gain and keep control of the condo corporation.

That flaw in voting rights resulted in 28 years of repeated waves of litigation.

The main question was whether one family’s direct and indirect ownership used that voting control since 1997 for their financial gain at the expense of the condominium corporation and whether that constitutes oppression of the Minority unit owners.

Conclusion:

(a)	Mr. Burdet has oppressed the minority unit owners;
(b)	CCC 396 is terminated as a condominium corporation, pursuant to s. 128 or alternative as a remedy for s. 135 oppression;
(c)	Surgeson Carson Associates Inc. is appointed as receiver and manager of CCC 396 to carry out that termination subject to (d) below;
(d)	The interim appointment of CMG as interim Administrator of CCC 396 will continue until the expiration of the appeal period of this decision and during any appeal period and resulting stay of this decision, with the powers and duties specified in the decision of this court dated April 3, 2012, pending the outcome of such appeal accompanied by a stay. CMG’s appointment as interim Administrator otherwise is terminated as of the date hereof;
(e)	The plaintiffs owe CCC 396 common expense arrears and interests, as determined;
(f)	Entreprise Ted Rubac Entreprise' (ETRE) claim as to the December 31, 2001 credit line balance is dismissed;
(g)	ETRE’s claim as to promissory notes 6 and 7 of $20,000 and $30,000, together with interest as determined above, are granted;
(h)	ETRE’s claim as to promissory notes numbered 1 to 5 and 8 are dismissed;
(i)	Mr. Burdet’s claim for his 2001 time charges is granted in the amount of $20,000, together with pre-judgment interest as indicated above;
(j)	All other counterclaims are dismissed.

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Patrick Dewan & Claude-Alain Burdet & CCC No. 396
Court of Appeal for Ontario
Citation: Dewan v. Burdet, 2018 ONCA 195
Docket: C62853
Date: 28 February 2018

This appeal did not go well for Mr. Burdet, the owner of the majority of voting units in the commercial condo corporation. The court found:

Oppression
"The evidence of oppressive conduct on the part of Mr. Burdet is detailed, effectively unchallenged, and overwhelmingly compelling. It includes a long history of self-dealing, lack of financial disclosure, charging CCC396 legal fees for personal matters, failing to declare conflicts, refusing to produce records despite being court-ordered to do so, and implementing an invalid by-law."

Personally liable
"Mr. Burdet submits that the trial judge erred in finding him personally liable. We disagree."

The very recent decision of the Supreme Court of Canada in Wilson v. Alharayeri, 2017 is instructive. There the court found that determining a director’s personal liability under an oppression remedy requires a two‑pronged approach. First, the oppressive conduct must be properly attributable to the director because of his or her implication in the oppression. Second, imposing personal liability must be fit in all the circumstances.

We recognize that Wilson was decided under the Canada Business Corporations Act. However, the holding in Wilson is apt in the Condominium Act context. The Condominium Act grants a judge broad discretion in crafting an appropriate remedy. That subsection permits a judge to make “any order the judge deems proper”.

Where, as here, it is clear that a director is the motivating force behind the oppressive conduct, he or she should be held personally liable. To hold otherwise in the present case would result in the oppressed minority owners being denied their costs or making CCC396 liable for those costs. The latter result would be particularly inequitable, as it would perpetuate Mr. Burdet’s practice of having CCC396 pay the legal costs associated with defending his oppressive conduct.

Terminating the corporation
The appellants submit that the trial judge erred in terminating CCC396. We disagree. The trial judge was well aware that a termination order was a remedy of last resort. However, there was an ample record to support that order in this case. Indeed, it is difficult to imagine a more dysfunctional condominium corporation. It is clear from the evidence, including from the independent court-appointed property manager, that the corporation could not continue. In these circumstances, termination was the most just and equitable order. It was consistent with the scheme and intent of the Condominium Act, was in the best interests of all owners, and protected against unfairness to the minority owners.

Minority owners awarded lower costs
At trial, the minority owners conceded that they owed arrears and agreed to pay same. Consequently, very little trial time was dedicated to the issue of collecting the arrears. In his cost endorsement, the trial judge recognized that the “lengthy trial largely related to other issues, not the determination of this common expense arrears award against the Plaintiffs”.

Disposition
For the foregoing reasons, we dismiss the appeal, grant the minority owners leave to appeal the cost order, allow their cross-appeal with respect to costs, and dismiss the balance of the cross-appeal.

Costs
We are of the view that the trial judge erred in principle in awarding costs that were disproportionate to the cost of collecting the common expense arrears. He should not have ordered the minority owners to pay legal costs unrelated to the collection of arrears. We therefore set aside the cost award made against the minority owners.

In its place, we order that the minority owners are liable for 20 percent of CCC396’s costs below. We further order that the appellants, as the unsuccessful parties at trial, are jointly and severally liable for 80 percent of CCC396’s costs below. We fix CCC396’s all-inclusive costs of the proceedings below at $220,000.

The appellants are jointly and severally liable for the minority owners’ costs of the appeal and cross-appeal, which we fix in the all-inclusive amount of $25,000. CCC396’s costs of the appeal and cross-appeal, in the all-inclusive amount of $15,000, shall be borne 50 percent by the appellants jointly and severally, and 50 percent by the minority owners.

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Romijay Enterprises Ltd. v. 11 Yorkville Partners Inc
Ontario Superior Court of Justice
Court File No: CV-17-572011
Before: Mr. Justice P. J. Cavanagh
Heard: 13 April 2017

Introduction
Yorkville Partners, a developer, owns 83.33% of the units making up TSCC No 1744. There are two residential units, four commercial units and two parking units. The address is 17 Yorkville Avenue. Romijay Enterprises owns one unit.

Yorkville Partners wishes to terminate the corporation under subsection 124(2) of the Condo Act. The Act provides that dissenting unit holders have the right to challenge the sale price and receive monetary compensation if it is found to be insufficient.

There is a meeting of unit owners is scheduled to be held on April 18, 2017 to consider an offer to buy the condo and to vote on whether the offer should be approved.

Romijay opposes the sale of his unit and relies upon the oppression remedy in section 135 of the Act. Mr. Berman, the owner of his tenant, Soul 7, claims a strong emotional ties to the unit he rents and claims that no nearby unit would be suitable.

Yorkville Partners was incorporated on June 10, 2015 to purchase and redevelop several adjacent properties on Yorkville Avenue, including 17 Yorkville. They intend to build a mixed-use development comprised of a 63 story residential tower above a three story commercial podium. This is a major undertaking, with an anticipated budget in excess of $100 million. Yorkville Partners has already spent more than $50 million to acquire the land that will be required to complete the project.

Yorkville Partners began approaching the owners of units at 17 Yorkville in the fall of 2014 and was prepared to pay the unit owners a significant premium for their units. Yorkville Partners was able to buy five of the six units.

Yorkville Partners bought 19 Yorkville Avenue and it has agreed to pay $19.5 million for 19 Yorkville Avenue closing on January 18, 2018. The purchase agreement is firm. Yorkville Partners would not have agreed to purchase 19 Yorkville Avenue if it would be able to invoke the sale right under section 124 of the Act to buy all the 17 Yorkville units.

By February 2017 it was clear that Yorkville Partners and Romijay had reached an impasse. On February 22, 2017, the Purchaser made the offer to purchase TSCC No 1744 for $24,968,789. Since Yorkville Partners owned more than 80 percent of the units, it believed that it would be able to approve the sale in accordance with section 124 of the Act.

In this case, the moving parties (owner & tenant) are seeking a prohibitory injunction that would restrain the holding of a meeting of unit owners to consider the offer until the action has been finally decided on a motion for summary judgment or at a trial.

The judge granted the plaintiffs’ motion for an interlocutory injunction restraining the meeting from being held until the action is finally adjudicated or until other order of this court.

            
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