Canada: Dispute Over Landscaping Repairs Results In Personal Penalties Against Condo Directors And A Fascinating Governance War Story

Last Updated: December 1 2014
Article by Murray J. Perelman and Ronald W. Fichter

Court decisions holding corporate directors personally liable for acting in bad faith tend to be few and far between in Canadian jurisprudence. The recent Ontario Court of Appeal decision in Boily et al v Carleton Condominium Corporation 145 et al, 2014 ONCA 574, did just that. Although at first blush Boily appears to deal with condominium law, it also has some important messages for corporate directors. The decision in Boily is a reminder of the expensive personal consequences that can result from directors breaching their duties as board members – regardless of their level of compensation or the nature of the corporation on whose board they sit.

In 2011, after making extensive repairs to the underground garage of an aging condominium complex, the landscaping of the courtyard above the garage required restoration. The condo board proposed updating the courtyard with a new landscaping design, while a number of owners wanted it to be restored to its original state. The board and the owners could not agree on how to proceed, whether the board required the approval of the owners, and if they did require the approval of the owners, whether it was by a simple majority vote or a 66-2/3-percent approval level. After a preliminary to and fro between the board and the owners, the owners requisitioned a meeting of owners to submit the new landscape design to a 66-2/3-percent vote which the board ignored. Instead, concerned that any further delays would lead to increased costs, the board began the landscaping work and called their own owners meeting at which they intended to seek a simple majority vote approval for the new landscaping design. The owners sought and obtained a court order enjoining the board from authorizing any work and from holding the owners meeting they had called. The two sides then negotiated and entered into a settlement arrangement, which was incorporated into minutes of settlement, that included a requirement for a 66-2/3-percent owners approval of the proposed new landscaping design. That meeting was held and the vote only received the support of 60.5 percent of the owners. That led to the board arguing that the minutes of settlement were unclear and that they were thus not bound by the settlement. The owners obtained a court order confirming that the minutes of settlement were clear and that the board was to reinstate the landscaping to its original state.

In a later proceeding, the owners were awarded costs of that latter proceeding, which confirmed the minutes of settlement, totaling $32,525.84, of which $12,000 were to be paid personally by the four directors.

When the actual work proceeded some months later, it had elements of both the original design and the new landscaping design that had not been approved by the 66-2/3-percent vote. Even after the owners suggested they were not adhering to the Court's order, the board continued with the hybrid restoration. The owners' lawyer communicated with the board in an attempt to resolve the dispute. The board resisted those approaches, which then led to the owners' lawyer warning the board that he had instructions to move for contempt. It was only at this point in the lengthy proceedings that the board finally hired a lawyer. The board's lawyer attempted to justify the board's actions and authority to make some of the changes to the original landscaping that were contemplated in the new design. That then led to a motion by the owners to have the board found to be in contempt.

The board was found in contempt of court and the motion judge ordered that the four directors personally pay any costs necessary to properly restore the landscaping back to its original state, which, based on estimates, would cost the directors approximately $100,000 each.

In finding the board to be in contempt, the Court stated that as reasonable as the board may have been in believing that they knew the best course of action in restoring the landscaping, it did not give them the right to act in defiance of a court order. Reference was made to Sections 17(1) and 37(1) of the Condominium Act 1998, S.O. 1998, c.19. Section 17(1) of the Condominium Act, provides that the Corporation is to "manage the property and the assets... on behalf of the owners". Section 37(1) requires every director, in exercising the powers and discharging the duties of his or her office, to "act honestly and in good faith" and "exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances". Section 134(1) of the Business Corporations Act (Ontario), R.S.O. 1990, c.B.16, as amended (the OBCA) is very similar to Section 37(1) of the Condominium Act, the only difference being that the duty to act honestly and in good faith is modified by "with a view to the best interests of the corporation".

The motion judge concluded that the directors had acted neither honestly and in good faith, nor as a reasonably prudent person. He referred to the history of motions, minutes of settlement, the board's failure to seek counsel or further clarification and the like and concluded that the board had "adopted a narrow and self-serving interpretation of [his] order and chose to reinstate elements that they preferred, despite the decision of this Court". He also concluded that the board could not rely on Section 17(1) of the Condominium Act as "[t]o grant the deference sought by the [condo directors] would be to allow Boards to disregard court orders, regulations and legislation".

The board appealed. On appeal, the board was still found to be in contempt.

The majority in the Court of Appeal pointed to the point in time at which the board lost the 66-2/3-percent vote, attempted to repudiate the minutes of settlement, and were then subject to an order enforcing the minutes of settlement as the time when their conduct went from "ill-advised to contemptuous". The Court used words like "stubbornly", "recklessly", and "[taking] matters into their own hands" to describe the conduct of the board thereafter.

However, the Court looked at the fines levied and sought to determine whether they were appropriate as fines for contempt of court. The Court of Appeal pointed out, as a mitigating factor regarding penalty, that the directors' contemptuous conduct had to be considered knowing that there was no evidence to suggest that their actions were motivated by personal gain, vengeance or any reason other than the directors "felt they knew best". But the Court of Appeal also noted that the directors' failure to seek legal advice until well down the road in the dispute at the point at which they were threatened with a motion seeking to have them found to be in contempt was an aggregating factor. In the words of the Court of Appeal: "[t]hey could and should have retained counsel as soon as the [owners] opposed the [new landscaping design]".

The Court of Appeal also noted that the most important objective of a contempt penalty is deterrence, specific and general. In discussing deterrence, the Court pointed out that context was of particular importance and that the case "engage[d] the broader issue of the governance needs of condominium corporations". The Court of Appeal noted that the directors were volunteer board members of a not-for-profit corporation, and that the penalty imposed needed to be sufficient to deter these directors and other "similarly situated individuals" from "like conduct", but at the same time not be so onerous as to deter condominium unit owners from serving on condominium boards, those owners who step forward being "essential to the functioning of a growing residential population".

The Court also noted that it was important that the penalty fit the crime. In this case, what needed to be addressed was the "seriousness of the disrespect of the Court, not the severity of any resulting harm". The ability of the directors to pay also had to be taken into account.

On that basis (i.e., as penalties for contempt; not as damages for breach of duty), the original penalty was determined to be too high. The personal fine for each director was lowered to $7,500 each.

Section 38 of the Condominium Act provides for indemnification of directors and officers. Of relevance here, Section 38(2) provides that a director is not to be indemnified in respect of any action, suit or other proceeding in which the director is found to be in breach of the duty to act honestly and in good faith. Section 136(3) of the OBCA, while broader, includes a similar limitation. A request for indemnification by the directors in this particular case was met by the Court of Appeal asking: "[h]ow could their deliberate violation of a clear court order be accurately described other than as a failure to act in good faith?"

Even the reduced penalty of $7,500 is still on the high end of the typical range for contempt penalties. If the Court was assessing liability for a breach of fiduciary duty, the directors' personal penalties could have been much higher.

Pending a further appeal, the directors are responsible for paying a fine of $7,500 each and have already personally shared the $12,000 in costs previously awarded to enforce the results of the original vote. These penalties are not insignificant, especially for individuals who are typically volunteers.

The Court of Appeal took pains to point out that, even after a finding of contempt, the parties to this dispute "have the power to settle their differences on their own terms".

Although there was a dissenting opinion in the case, the dissent was solely on whether the order breached was "clear and unequivocal", which the dissenting judge felt was not the case.

So will Boily's personal penalties make directors think twice about joining a board, especially a not-for-profit board where directors are typically not remunerated? While it should make directors think carefully about their actions as directors, the acts complained of in Boily were so over the top that the decision should not put a chill on the ability of corporations to attract new talent to their boards. But Boily does serve at least to help set outer parameters on bad behavior by directors.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Murray J. Perelman
In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions