Canada: Directors – Heed Your Duties Or Beware!

Being elected to the board of a condominium corporation comes with many duties and obligations. Directors have a duty to act in good faith and in the best interests of the all of the owners. The Board as a whole has a duty to ensure compliance with statutory responsibilities, including maintenance and repairs of the common elements. Where board members fail in their duties, unit owners pay the price. Two recent cases highlight this point.

Wu v. Peel Condominium Corporation No. 245

In the case of Wu v. Peel Condominium Corporation No. 245, the complainant owned a unit on the top floor of a high-rise condominium. Her unit was directly under the level which houses the building's mechanical, elevator, and HVAC equipment. She claimed that she started experiencing an unacceptable level of noise and vibration in her unit. Others made the same or similar complaints.

PCC 245 retained experts who confirmed that there was a problem but the board did not take meaningful steps to correct the problem. The problem persisted. The board eventually told the complainant that it would not address the problem because it had determined that an alteration in her unit might not comply with a city by-law. The allegation was factually and legally without merit. The alteration at issue had been done years ago by a current board member and the board's president had knowledge of the alteration shortly after the work had been done. The status certificate issued to the complainant when she purchased the unit did not mention the alteration.

The owner brought an application in court for relief from oppression which PCC 245 vigorously defended. PCC 245 claimed that it simply had not had time to fix the problem, that it had followed its engineer's advice, blamed the complainant for causing the problem, claimed its $400,000 elevator refurbishment program was done to appease the complainant, and, finally, attacked the complainant's credibility.

The court found that PCC 245's conduct amounted to oppression, unfair prejudice, and disregard for the owner's interests. The Court ordered PCC 245 to pay the complainant's damages for oppression in the amount of $30,000 and ordered PCC 245 to return to court to outline its repair plans. In the end, the owners of PCC 245 ended up paying the cost of repairing the elevators (repairs that it had been avoiding for so many years) as well as a $30,000 damage award, its own legal costs, and $20,000 of the complainant's legal costs. The majority of these costs could have been avoided if the board had simply dealt with the problem instead of finding reasons not to.

This and a few recent cases from British Columbia and Alberta show that courts are taking steps to ensure that management and boards of directors carry out their obligations to maintain and repair the common elements.

Ballingal et al v. Carleton Condominium Corporation No. 111 et al

In the case of Ballingal et al v. Carleton Condominium Corporation No. 111 et al, four unit owners brought an application against their condominium corporation relating to enforcement of the single family use provision in the corporation's Declaration. They also applied for oppression remedies against the corporation as well as against individual board members. Despite having a single family use provision in its Declaration, many owners rented out their units to groups of students. There were attempts to pass a rule defining "single family use". The issue was discussed at owners meetings and letters were sent to owners in breach of the rule. Emotions ran high and board members resigned.

The board president was one of the owners who rented out units to students. He vigorously fought and campaigned against the enforcement of the single family use provision.

The court made findings against the board president, holding that he had breached the standard of care as a director by not acting honestly and in good faith. The court found that in his campaign against one of the proposals to define "single family use", the president misled unit owners, undermined the board, and criticised the corporation's solicitor on his website.

The board president claimed that those acts were done in his capacity as an owner and not as the president. The court did not accept this explanation. The court looked at his behaviour as a whole and found that it did not meet the standard of a reasonably prudent director. The court however did not award damages for the conduct.

Being a board member is not easy. It often involves overseeing a large budget and making tough decisions that will affect fellow owners and neighbours. These two cases illustrate the need for board members when carrying out board duties to act in a business-like manner, not to promote their own self-interest, and to ensure that their decisions are made after considering the best interests of the all of the unit owners.

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.

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