A condominium corporation commenced an application against unit owners seeking orders that they obey the rules, be quiet and leave others alone. The owner commenced a counter-application for the same relief against the condominium. Most of the dispute related to the costs of the proceedings. The condominium insisted upon full recovery, or near full recovery, of all of its costs (about $150,000.00) prior to a ruling by the judge. Neither the condominium or owners were successful in their applications. The condominium sought $30,000.00 in costs.
The ruling on costs is one of many made in the past few years where concerns were raised about a condominium’s aggressive stance toward an owner during a legal proceeding. This aggression seems to stem from the condominium’s confidence that it will be entitled to rely upon subsection 134(5) of the Act to recover all or almost all of its legal costs. Subsection 134(5) states:
Addition to common expenses
(5) 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 and the corporation may specify a time for payment by the owner of the unit. 1998, c. 19, s. 134 (5).
The judge, Myers J., raised many concerns with subsection 134(5) and the condominium’s aggressive conduct toward the owners:
- 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.
- 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 it costs award because it came into the case expecting it to be cost-free.
- In particular, on its first ground, it says that 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 [unit owner] became the target of busybodies. The overstatement 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’s a giant bully pulpit.
- Nothing about the corporation’s acts in this case, however, was reasonable.
- 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.
- 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.
Myers J. also commented that the owners did not act as reasonable condominium neighbours either. They also took an aggressive stance toward the litigation. She “brought her own offensive weaponry to bear in her own application, and that application was unsuccessful as well.”
As a result of their unreasonable and aggressive behaviour toward each other the court awarded no costs to either party.
This is yet another unfortunate reminder that court is not always the best option when it comes to dealing with disputes between condominiums and owners. Mediation can resolve many disputes quicker and at a fraction of the cost. Mediation, unlike court, also allows the parties to come up with the resolution themselves, which generally leads to greater satisfaction with the outcome. Hopefully more people will consider mediation as an option to resolve their disputes in the future, especially condominium disputes where the parties continue to live together as part of the same community.