The Business Judgment Rule
Patterson v. YCC No. 70
File number: CV-17-579334
Date: 08 August 2018
Ms. Patterson sued YYC No. 70 and Olena Myronyuk, the treasurer,
alleging that starting in January 2016 they had
not taken the proper steps to fulfill their obligations as directors
and that they have not acted in good faith or with any diligence,
even though Ms. Patterson has repeatedly asked them to do so.
She alleges that as of the date of the Application hearing, significant
action is needed to “secure financial well-being of the corporation,
protect the physical integrity of the condominium property and to
comply with the Act.” It is argued that because the present Board of
Directors has not fulfilled their obligations pursuant to the Act,
specific mandatory orders and intervention from this Court are required.
The Applicant sought the following specific orders:
|an order forthwith removing Ms. Myronyuk as a member of the
Corporation’s Board of Directors and from the office of Treasurer;
|an order that YCC 70 take immediate steps to increase common expense
contributions payable by the owners by a minimum of 14%, in accordance
with the recommendation found in the June 1, 2016 investigative audit
report of Eagle Audit Advantage Inc., a consultant retained by the
Corporation, and as also set out in the December 13, 2015 Notice of
Future Funding of the Reserve Fund, with Cash Flow Table attached
distributed by the Board;
|an order that YCC 70 take immediate steps to fully fund the
Corporation’s reserve fund, in accordance with the requirements of the
Act and the July 1, 2014 opinion of the Corporation’s independent
auditor, as well as the 2015 Notice of Reserve Funding;
|an order that YCC 70 take immediate steps to repair the deteriorating
underground parking garage as well as complete all necessary work to
replace the leaking roofs of the townhouse units;
|an order that YCC 70 hold its AGM each year by no later than June 30,
as required by s. 45(2) of the Act;
|an order that the Respondents pay to the Applicant her costs of the
application on a substantial indemnity basis; and
|such further and other relief as is fair and equitable in the
The Respondents submit that:
|there have been problems in the
past when the condominium was not properly managed, however the board hired a new management company with expertise in managing
older and troubled condominium corporations.
|as of August 2017, the necessary action has been taken to remedy the problems that
had been caused by the previous mismanagement of the corporation.
Board has hired professionals to start the process of the
major repairs that are needed and that the condominium is properly
|the owners do not have any issues with the way
in which their affairs are currently being managed.
|there is no evidence that the personal Respondent has
personally breached her duties as a director. She is one elected board member of five.
|the Board was
elected to manage the affairs of the corporation and that the courts
should not substitute their own judgment for those of the Board.
there is no evidence on this Application that the common expenses need to be increased.
The judge relied on the Business Judgment Rule.
"I agree with the Respondents’
submissions that it is the Board that is elected to manage the affairs
of the corporation and that the business judgment rule applies. The
Board is, in my view, in a much better position to make decisions
affecting the corporation than this court. Our court should not
substitute its own judgment for those of the Board, which has been
elected by the unit owners.
Of critical importance is the fact that I cannot find, on the basis of
the evidence on the record, that the Respondents have not acted fairly
and reasonably, in good faith, exercising the care, diligence, and
skill that a reasonably prudent person would exercise in comparable
circumstances. Further, I cannot find that court intervention is
required as submitted by the Applicant. This Application is
It seems certain that Ms. Patterson will be paying the Respondents'
legal costs as well as her own. At the time this was written, the exact
amount is unknown.
Ms. Patterson and a second
director were removed from the board in January 2016 by a requisition
of the owners when the board raised the monthly expenses by 14.96%. Two other directors resigned.
It seems that the major repairs were not started until the corporation was served with this Application.
(At the time of writing, the townhouse roofs have been repaired and the
very expensive underground garage repairs have been started.)
The respondents have a good point. The majority of owners support the current board.
That support is dependent on the monthly expenses staying low. The
judge wrote: "...no decisions have been made by the current Board
regarding further increases in common expenses."
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