Legal

November 3, 2023 Published by Toronto and Area Chapter - By Yulia Pesin

Decisions From the Courts

From the Fall 2023 issue of CCI Toronto Condovoice Magazine.

Unjust Enrichment, the Interplay between Smoke and Nuisance and Record Requests Disputes

Carleton Condominium Corporation No. 519 v. Ottawa- Carleton Standard Condominium Corporation No. 656 et al. 2023 ONSC 1780

Summary of the Facts:
This was an application involving three residential condominium corporations constructed by the same developer. The central issue in dispute was whether the Respondent corporations were under a legal obligation to share in the capital costs of replacing a major piece of electrical equipment (“ESG”). The ESG is located on the Applicant’s common elements but distributes power supply to all three corporations. Failure of the ESG would result in loss of power and heat to all three corporations.

The issue arose in 2021 when the ESG failed twice. By this time, the ESG was over 30 years old and already well past its replacement date. The replacement cost of the ESG totalled $174,000.00. The Applicant argued that the Respondents must contribute their proportionate share of the cost to maintain, repair and replace the ESG on the basis of the doctrine of unjust enrichment, given that one of the ESG’s two circuit breakers was for the exclusive-use and benefit of the Respondents. The Respondents did not contest the need to replace the ESG but argued that the capital costs of replacing, repairing and maintaining the ESG should be borne solely by the Applicant.

The Court’s Discussion of the Doctrine of Unjust Enrichment:
Justice Hackland succinctly summarized the 3-pronged test of the doctrine of unjust enrichment and the relevant considerations under each prong of the test, as follows:

(1) Has there been an enrichment?

• The provision of services will constitute an enrichment in two circumstances:
  1. where the service was performed at the request of the other party (i.e. Respondent); OR
  2. where the Respondents receiving the service has been incontrovertibly benefited. The term “incontrovertible benefit” is defined as an unquestionable benefit which is demonstrably apparent and not subject to debate and conjecture. The benefit must be clear and manifest.

(2) Has there been a corresponding deprivation? and,

(3) Is there a juristic reason for the enrichment (i.e. a reason for the enrichment that makes it fair and just)?

• There is a 2-step analysis to determining the presence or absence of a juristic reason:
  1. the first step is to determine whether there is a juristic reason from the established categories to justify the enrichment, these include: contracts, dispositions of law, donative intent or other valid common law, equitable or statutory obligations. If there is no juristic reason from an established category, then the Applicant has made out a prima facie case under the juristic reason component of the analysis.
  2. Once the prima facie case is made, it can be rebutted by the Respondent if the Respondent can show that there is another reason why the enrichment should be retained including the reasonable expectations of the parties, public policy considerations or any other relevant circumstances of the transaction. Thus, in this prong of the test, there is a de facto burden of proof placed on the Respondent to show the reason that the enrichment should be retained.

In applying the 3-pronged test, Justice Hackland found that the Respondents have been incontrovertibly benefiting from the Applicant assuming responsibility for the repair and maintenance of the ESG, which provides power and heat to the Respondents. The Applicant in turn has suffered a corresponding deprivation by having to solely front the bill for the ESG replacement. Thus, the real issue in this case was whether there are juristic reasons justifying the Respondents' nonpayment for the obvious benefit they receive from their use of ESG.

The Respondent argued the following purported juristic reasons for the enrichment:

(1) the Respondents’ declaration does not require or authorize them to contribute to the capital costs of the ESG, given that the ESG is located on the Applicant’s common elements;

(2) the Applicant’s declaration requires it to maintain its common elements where the ESG is located which, according to the Respondents, requires the Applicant to replace the ESG at its own cost;

(3) the absence of any shared facilities, cost sharing, joint-use or other contractual agreements between the parties imposing an obligation on the Respondents to share in the expenses related to the ESG; and,

(4) the doctrine of promissory estoppel which, according to the Respondents, prevents the Applicant from seeking contribution of costs to replace the ESG given that there were no such requests made for the prior 30 years, when the Respondents enjoyed the benefit of the ESG at no cost.

Justice Hackland was not persuaded by the Respondents' submissions and held, in part:

(1) schedule “E” of the Respondents' declaration, which lists the common expenses payable by the unit owners includes, among other things, all sums of money levied against the Respondents on account of any services and equipment, including hydro and water. Thus, the Respondents' declaration lists the cost of supplying hydro power as a specifically contemplated expense and, accordingly, the cost of contributing to the replacement of the ESG, which supplies power to the Respondents falls within the type of common expense costs contemplated by the declaration;

(2) the Respondents had no right to attempt to enforce or benefit from the Applicant’s declaration. To this end, a condominium corporation’s obligations, as set out in its declaration, to maintain and repair its common elements are obligations it owes to its own unit owners and not obligations it owes to third parties (unless expressly provided in the declaration). There is no provision in the Condominium Act, 1998 or the Applicant’s declaration requiring it to continue to supply benefits to any third parties. Hence, the Respondents, as a third party, cannot rely on the provisions of the Applicant’s declaration in support of the Respondents' position;

(3) the fact that there is no shared costs agreement between the parties means that there is no contractual obligation on the Applicant to continue to supply the benefit of its electrical equipment to the Respondents, free of charge, versus meaning that the Respondents are entitled to continue to enjoy this service, free of charge, in perpetuity. To this end, Justice Hackland specifically disagreed with the Respondents' proposition that the absence of a cost sharing agreement constitutes a juristic reason for enjoying a benefit with no obligation to pay for it; and,

(4) it was not until 2021 when the replacement of the ESG system became necessary and the parties learned, for the first time, of the unusual power distribution system connecting the three corporations. As soon as the parties learned of this system, the Applicant immediately moved to have the capital costs of the ESG equitably apportioned between the parties. Consequently, Justice Hackland concluded that the mere length of the status quo, without anything further, is not sufficient to invoke the doctrines of promissory estoppel or detrimental reliance.

The Disposition:
Justice Hackland found that the Applicant successfully established all three principles of unjust enrichment and concluded that all three condominium corporations must equitably share in the costs to replace the ESG. Justice Hackland further declared that the three corporations will be responsible for their respective equitable share of all capital costs associated with the maintenance, repair and replacement of the ESG and ancillary components, going forward.

The Takeaway:
This is a noteworthy case in the condominium sphere, particularly in the realm of disputes pertaining to shared facilities and services and/or cost-sharing agreements. These agreements are notoriously known for being unequitable and in some cases are structured for the benefit of one condominium corporation over another. This well-known issue stems from the fact that the agreements are prepared by the developer, during the construction phase of the corporations, with minimal, if any interest, in ensuring that the agreements are “fair”. Consequently, corporations that are parties to shared premises, shared facilities or shared services, often find themselves parties to analogous disputes with their sister corporations.

The Condominium Act, 1998 contains certain protections against these types of unequitable arrangements; however, these protections are relatively narrow and subject to strict timelines. For instance, section 113 of the Act allows a corporation to bring an application amending or terminating unequitable mutual-use agreements, but only if such an application is brought within the first 12-months of the turnover meeting. Regretfully, however, bringing this type of application within the short statutory timeline is rarely practicable given that in the first 12 months of turnover, the newly elected board just begins to familiarize itself with the nuances of the corporation’s operations. Rarely, does a post-turnover board become intimately familiar with all the agreements impacting the corporation and the full scope of their implications within the first 12 months of being elected. Consequently, by the time that post turnover board discovers any prejudicial agreements, the protections afforded under the Act have already expired.

The within decision reaffirms the role of equity law in the condominium sphere and provides a firm legal argument that a condominium corporation can invoke to rectify an unjust arrangement it has been subject to. In many respects, this case also stands for the simple proposition that common sense and basic principles of fairness continue to prevail in the Courts.

Zachepylenko v. Toronto Standard Condominium Corporation No. 2680 et al. 2023 ONCAT 42

Summary of the Facts:
The facts of this case reflect a “classic” condominium dispute, while the decision rendered by the Condominium Authority Tribunal (the “CAT”) was anything but conventional, under the circumstances.

The Applicants and the Respondent owners are next door neighbours, in townhome units that share a common partition wall, at Toronto Standard Condominium Corporation No. 2860 (“TSCC 2860” or the “Corporation”). The Respondent owners are three adults that smoke cannabis and tobacco. The Applicants are a family of four and are non-smokers. The Respondents are the original owners of their unit and have smoked inside and immediately outside of their unit, without issue, until the Applicants moved in next door. The Applicants alleged that the smoke from the Respondents’ unit migrates into their unit thereby, among other things, interfering with their use and enjoyment of the unit and creating a nuisance. TSCC 2680 is not a smoke-free condominium. It does not have any rules or by-laws prohibiting smoking inside the units or outdoor common elements.

After expanding substantial funds to mitigate the smoke migration, including personally paying for foam insultation of the two units, purchasing expensive air purifiers and carbon filters and repeatedly complaining to TSCC 2680, the Applicants brought the within application, under section 117(2) of the Condominium Act, 1998 and the provisions of TSCC 2680’s governing documents prohibiting the creation of nuisance. The application was brought against TSCC 2680 and the Respondent owners. The Applicants sought an order prohibiting the Respondent owners from continuing to smoke inside and immediately outside of their unit. They also sought an order against TSCC 2680 for its failure to enforce compliance against the Respondent owners and ensure that they discontinue smoking inside and immediately outside their unit.

Summary of the CAT’s Findings:
There were extensive factual issues in dispute between the parties, including disputes regarding whether the Respondents continued to smoke inside their unit at the time of the application hearing.

The presiding adjudicator made the following factual findings:

(1) the Applicants were non-smokers who detested the pungent stench of cannabis and cigarette smoke, with one of the Applicants suffering from pre-existing respiratory conditions which were exacerbated by exposure to second-hand smoke;

(2) the Applicants moved into their unit during the covid lockdowns which restricted their ability to leave their home. The Applicants reported the smoke migration issue to all the respondents through numerous emails and letters, almost immediately upon moving in. The Applicants spent substantial funds and efforts to mitigate the smoke migration into their unit, but found that nothing helped;

(3) The Respondent owners continued to smoke inside and immediately outside of their unit at the time of the application hearing, albeit there was some evidence to indicate that they restricted their smoking to the basement of the unit;

(4) All three parties, the Applicants, the Respondent owners and TSCC 2680, expanded efforts and resources to mitigate the smoke migration between the units, including, completing several foam insulations inside the units, attempting to insulate and close any gaps in the partition wall between the units, installing multiple air purifiers in both units, installing carbon filters for the Applicants’ HVAC system, finishing the basements in both units etc.; and,

(5) Some smoke continued to transfer from the Respondent owners’ unit to the Applicants’ unit. However, contrary to the Applicants’ reports that the smoke migration was unbearable, the totality of the evidence confirmed that “the situation has improved”.

Disposition:
The pivotal issue in this case was whether the Respondent owners’ smoking caused a nuisance and, if so, whether TSCC 2680 failed to enforce compliance and put an end to the nuisance.

The adjudicator found that “this was far from a straightforward matter with an immediate solution”. According to the adjudicator, the complexity of the case stemmed from the fact that TSCC 2680 was not a non-smoking building. The Applicants acknowledged that they did not review TSCC 2680’s rules about smoking before purchasing the unit, which the adjudicator noted they ought to have done, in light of their sensitivity to cannabis and tobacco smoke.

The adjudicator further held that TSCC 2680 was in a serious dilemma in light of the Applicants’ ongoing complaints and demands that the Corporation prohibit the Respondent owners from smoking inside and immediately outside of their unit, when TSCC 2680’s residents were entitled to smoke in their units and on the Corporation’s outdoor common elements.

Surprisingly, while the adjudicator found that the Applicants continued to experience smoke migration into their unit and that they found this to be unpleasant, she concluded that the smoke migration did not constitute a “nuisance” given that it had “substantially abated” by the time of the application hearing, in light of the extensive and costly measures taken by all parties to mitigate the transmission.

The adjudicator further found that TSCC 2680 had acted reasonably to balance both sides’ interests, given that smoking was permitted at the Corporation. To this end, the adjudicator held, in part:

“…It is not reasonable for them [the Applicants] to expect a complete absence of smoke living in this condominium. It is disturbing to them…I sympathize with the Applicants- they have found themselves in a condominium where smoking is not prohibited… the evidence, viewed as a whole does not support a finding that smoke migration continues on a substantial and unreasonable basis”.

In light of the adjudicator’s findings, the application was dismissed against all respondents without costs.

The Takeaway:
The CAT’s decision, in the author’s view, is rather surprising and, arguably, departs from judicial jurisprudence in analogous cases. Perhaps, procedurally, what distinguished this case from analogous cases by the Courts is the CAT’s narrow jurisdiction. In deciding the case, the adjudicator did not have authority to consider section 117(2) of the Act, pertaining to activities that may likely cause damage to property or injury or illness to an individual. Nor did the adjudicator have authority to consider evidence of extensive structural deficiencies in the partition wall between the units which, according to the Applicants, significantly exacerbated the intensity of the smoke migration. Instead, the adjudicator was limited to considering only section 117(1) of the Act, pertaining to nuisance.

Until recently, a case of this nature would have been heard by the Superior Court of Justice with jurisdiction to consider all the relevant facts and applicable statutory authorities. However, under the current legal framework, unit owners must determine whether they wish for this type of dispute to proceed on the issue of nuisance before the CAT or on the issue of common element deficiencies and/or potential danger to property and/or individuals, before the Court.

Ultimately, finding oneself living in a home that is subject to smoke migration, however mild, can be quite a nightmare for those who are bothered by exposure to smoke. Accordingly, in light of the CAT’s ruling, prospective residents and owners should diligently review a corporation’s governing documents, prior to finalizing a purchase or lease of a unit. Further, the CAT’s decision should also be strongly considered by corporations whose governing documents do not explicitly prohibit smoking, as it may now be more difficult for condominium corporations to rely on their general nuisance prohibitions to redress smoke migration issues between units. Lastly, in light of this decision, in the author’s view, moving parties in analogous cases may wish to consider bringing their applications under section 117(2) of the Act before the Superior Court of Justice, which had previously taken judicial notice that second hand smoke is dangerous, rather than attempting to tackle the issue under the Act’s nuisance provisions.

Persaud v. Peel Condominium Corporation No. 449, 2023 ONCAT 70

Summary of Facts:
This was a records request dispute. The Applicant is an 83-year-old non-resident owner of a unit at PCC 449. She was represented at the application by her daughter, Dawn, who has resided in her unit for over two decades. PCC 449 alleged that it has been subject to a long history of harassment by Dawn. Dawn denied this allegation.

The Applicant’s granddaughter, who is Dawn’s daughter and a lawyer by profession, submitted a Request for Records to PCC 449. The request listed the Applicant as the requester but listed her granddaughter’s email address as the email to where the records are to be sent. The request was submitted together with a typed cover letter purportedly by the Applicant, inviting PCC 449 to contact her directly if it had any questions regarding her Request for Records.

PCC 449 did not dispute that the Applicant was entitled to the requested core records. However, in light of its contemptuous history with Dawn, coupled with the Applicant’s historical lack of involvement in PCC 449’s affairs, the corporation suspected that the Request for Records was made by Dawn and/or her daughter and not by the Applicant as indicated in the request. Consequently, PCC 449 did not provide a Board’s Response to Request for Records within the required 30 days.

Instead, PCC 449 took the position that the request was not made by the Applicant and that if/when it received verification, either in the form of an executed Power of Attorney, an in-person visit, a virtual meeting, or even a phone call from the Applicant, it would provide the requested records forthwith.

The Applicant never followed-up with PCC 449 about the status of her request, prior to commencing her application. Similarly, PCC 449 took no steps to contact the Applicant, until after the application was brought, and was not successful in its efforts.

The application proceeded in writing as is customary at the Condominium Authority Tribunal (the “CAT” or the “Tribunal”). Dawn provided the Tribunal with written authorization purportedly by the Applicant authorizing Dawn to represent her at the hearing. Similarly, Dawn provided the Tribunal with the Applicant’s evidence by way of a written and signed statement. Throughout the course of the proceeding, PCC 449 raised concerns that: (1) the Request for Records was not genuinely made by the Applicant but by Dawn, and (2) that the application proceeding was not genuinely brought by the Applicant but by Dawn. Accordingly, PCC 449 requested CAT to take steps to confirm that the Applicant was a true party to the proceeding.

Summary of CAT’s Findings:
The Tribunal found that PCC 449’s concerns regarding proof of the Applicant’s identity were rooted in its history of friction with Dawn. However, it held that PCC 449’s allegations that Dawn had a history of attempting to fraudulently misrepresent herself as the unit owner were overdrawn.

The Tribunal concluded that the Applicant’s written testimony was credible. It accepted the Applicant’s written evidence that she relied on her granddaughter for her electronic communications. This was supported by the fact that PCC 449 did not have an email address for the Applicant in its records. Further, the Tribunal held that the Applicant was in her right to list her granddaughter’s email address in the Request for Records, as doing so is authorized under section 13.3(1) of O.Reg.48/01, and further held that the Applicant was not required to provide authorization to use her granddaughter’s email address for the delivery of the requested records.

Disposition:
Based on the Applicant’s written evidence as submitted by Dawn, the Tribunal concluded that: (1) the Applicant was the requester of the records, (2) she was entitled to the records requested, and (3) she was entitled to have the records delivered to her granddaughter’s email address as indicated in her request.

Accordingly, the Tribunal found that PCC 449 breached its statutory obligations as it failed to deliver a Board Response to Request for Records form, within 30 days of receipt of the Records Request as specified in section 13.3(6) of O.Reg.48/01.

In rendering its decision, the Tribunal appeared to place notable weight on the fact that PCC 449 had made no attempt to contact the Applicant upon receipt of her Request for Records until after commencement of the application.

To this end, the adjudicator stated, in part: "having suspicions about a requester’s identity is not a reasonable excuse to refuse to provide records when no attempt to authenticate the request is made. Any suspicion PCC 449 had that Dawn … was the actual requester, and/or any concerns it may have had about communication using her granddaughter’s email address, could have been addressed by contacting Norma directly".

Notably, however, the adjudicator had placed no weight on the fact that the Applicant had not followed up with the Corporation on the status of her Request for Records prior to commencing the application. The Tribunal only briefly noted that while a follow-up by the Applicant may have resolved the entire proceeding, “her [ the Applicant’s] lack of follow-up does not obviate the responsibility of the corporation to respond to a Request for Records”.

Ultimately, the Adjudicator concluded that PCC 449’s lengthy delay in responding to the Request for Records coupled with its lack of timely action to address its suspicions about the true identity of the requester, constituted an effective refusal to provide the records. Accordingly, the adjudicator ordered PCC 449 to produce the records, pay a penalty of $1000 and reimburse the Applicant the CAT filing fee.

The Takeaway:
This case highlights some of critical procedural steps that corporations must take when addressing a Request for Records, including the requirement to provide the Board’s Response to Request for Records form within 30 days. However, this case is also important for arguably highlighting some of the procedural gaps at the CAT.

The CAT’s decision remains peculiar in that the Tribunal had essentially taken no steps to verify that the Applicant’s written statements and evidence, were in fact made by her. The facts of this case were rather unique in that the Applicant is an elderly non-resident owner who is in poor health and purportedly has her adult daughter and adult granddaughter complete certain tasks relating to the Corporation, on her behalf. One would have presumed, that in a case such as this, where one party vehemently disputes the true identity of an opposing party, the CAT would have at least ordered a procedure by which the parties could verify their identities (i.e. order for the hearing to take place virtually). In the author’s view, this case highlights some of the procedural gaps in the legislation and at the CAT, that may potentially result in tenants or other non-authorized third parties being able to take steps or commence applications in the names of unit owners.

In light of this decision, corporations may wish to consider implementing identity verification policies when dealing with records requests or any other requests that can only be made by the registered owners, mortgagees or purchasers of a unit.

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Yulia Pesin
Deo Condominium Lawyers