Declarant ousts board using majority ownership.

The Superior Court of Justice recently heard what appears to be the first reported decision under section 152(6) of the Condominium Act, 1998. Section 152(6) permits a declarant of a phased condominium to request a meeting of owners so it may elect a new board where it owns a majority of the units as a result of the registration of amendments to the declaration and description creating a phase.

In Middlesex Standard Condominium Corporation No. 643 v. Prosperity Homes Limited [2014] ONSC 1193 the declarant brought a motion for an order requiring the condominium to call a meeting of owners so it could elect a new board. The condominium refused the declarant’s request arguing that the declarant was out of time to make the request as he became the majority owner over 2 years prior and was aware of his right to request the meeting since the beginning. The condominium also claimed it was further oppressive conduct as the declarant admitted that it wanted the meeting so it could elect a new board that would discontinue another action (where the condominium claimed damages from the declarant for construction deficiencies in the amount of $750,000.00). The court found that it was not further oppressive conduct or otherwise limited at law and ordered the condominium to call the meeting.The case is interesting in that it appears to suggest that the declarant’s right to call a meeting under section 152(6) of the Act is almost unlimited. As consumer protection legislation it is difficulty to understand how the result in this case is what the Legislature intended when drafting the section. Hopefully it will be revisited as part of the current review process and revised to prevent further injustices from occurring in the future.

Although the judge was not deciding the merits of the condominium’s application for oppression against the declarant, some of the comments made are note-worthy. The oppression remedy was designed to protect the reasonable expectations of the parties. It was created in response to the problem of majorities disregarding the rights of minorities. This case, in my opinion, is a textbook example of oppressive conduct. You have a majority owner using its voting power to force the minority into a course of action that the minority opposes because, according to its experts, it has a “high probability of failure”. The declarant will be able to discontinue the action against it by the condominium, sell its remaining units to oblivious purchasers, and force the remaining owners to bear the costs incurred by the condominium. It is hard to see how this would not satisfy section 135 as conduct that “is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant…”

It will be interesting to see how this one unfolds.