Legal

July 20, 2018 Published by Toronto and Area Chapter - By Jason Rivait, Caleb Edwards, Natasha Smith

Decisions From the Ontario Courts - Vexatious Litigant

From the Summer 2018 issue of the CCI Toronto Condovoice Magazine. Sennek v. Carleton Condominium Corporation No. 116

How much does it cost to remove a flowerbox that does not comply with the corporation's governing documents? In Sennek v. Carleton Condominium Corporation No. 116, 2018 ONSC 1921 ("Sennek"), the Superior Court of Justice decided it was over $100,000.00.

The case began when Carleton Condominium Corporation No. 116 ("CCC 116") removed a flowerbox that Ms. Sennek had installed. She objected to this removal and to CCC 116's failure to trim trees that hung over her unit. She also complained that her parking spot was too narrow.

CCC 116 registered a lien against Ms. Sennek's unit in the amount of $763.14. Ms. Sennek and her bank, Laurentian Bank of Canada ("LBC"), were both informed of the lien. Although it had the right to pay the lien and add it to the mortgage it held on the property, LBC did nothing. Ms. Sennek decided to contest the lien rather than pay under protest.

The litigation quickly spiralled out of control. Ms. Sennek fought over her legal name and asserted privacy concerns with respect to its use. She contested the lien in Small Claims Court and then directly in Superior Court. She brought claims against CCC 116's counsel directly and then a claim to the Law Society of Upper Canada.

In response, CCC 116 sought to have Ms. Sennek undergo a capacity assessment. She resisted and simply ignored orders to undergo one. Finally, CCC 116 brought a successful Vexatious Litigant Application. Ms. Sennek's appeal of the decision was dismissed.

All of this took time and money. CCC 116 sought costs from Ms. Sennek on a substantial indemnity basis (or higher) for all of this litigation. CCC 116 also sought to add the costs for everything except the Vexatious Litigant Application to its lien against Ms. Sennek's property.

In fixing the costs, Justice Sheard noted that sections 85(1) and 85(3)(c) of the Condominium Act, 1998 permit a corporation to include all reasonable legal costs and reasonable expenses incurred in connection with the collection or attempted collection of the unpaid amount. With these principles in mind, the Court went through the various costs of the motions. In general, Justice Sheard awarded costs on a full indemnity basis. Where she departed from full indemnity, it was generally because the dockets included time that was not related to the motion or dispute. Even then, Justice Sheard noted that she was awarding more costs to the corporation than if she had simply considered the factors set out under Rule 57.

The only exception to this pattern was the Small Claims Court Action, in which Justice Sheard awarded $5,000 plus disbursements, despite a claim for $18,946.16. Even this was above the maximum generally permitted in Small Claims Court (15% of the amount claimed).

The Court noted that Ms. Sennek and LBC had been given notice of the lien as was required. LBC protested that it could not expect that a $700 lien could balloon to over $100,000. The Court took the position that LBC could have paid the initial amount of the lien and added the amount to its mortgage. That would have protected it from the additional costs. LBC's complaints were fair, but the law put them second to CCC 116's rights to recover from Ms. Sennek.

The Court made two exceptions to this. CCC 116's costs incurred in the Vexatious Litigation Action against Ms. Sennek and those incurred in defending Ms. Sennek's Small Claims Court Action were not added to the lien because they were not part of obtaining the compliance order.

Author's Note: Corporations can rely on strong protections when they seek to enforce compliance orders. This decision shows that even where the outcome seems inequitable, the Court will be willing to follow the logic of the Condominium Act, 1998 and permit corporations to recover their costs in connection with the collection or attempted collection of common expense arrears. Corporations should also note, however, that not all costs are 'costs of enforcing compliance orders'. Although it was awarded costs for the Vexatious Litigant Action and for defending the Small Claims Court Action, CCC 116 was forced to recover these from Ms. Sennek herself rather than as an amount pertaining to the lien (or the collection or attempted collection of common expense arrears).

Metropolitan Toronto Condominium Corporation No. 723 v. Reino, 2018 ONCA 223

In 2004, Dante Reino's mother purchased a condominium unit operated by Metropolitan Toronto Condominium Corporation No. 723 ( "MTCC 723"). At the time of purchase, Mr. Reino's mother was issued a "clean" status certificate from MTCC 723 establishing that the unit was not in violation of MTCC 723's by-laws or declaration. In 2013, Mr. Reino purchased the unit from his mother and requested a status certificate from MTCC 723 and was also issued a clean certificate.

When Mr. Reino decided to sell the unit in 2016, he requested another status certificate from MTCC 723 and this time around was not issued a clean status certificate. The 2016 status certificate stated that the unit was in breach of MTCC 723's declaration as the unit had been altered by adding a second bedroom and relocating the kitchen without the consent of the board of directors of MTCC 723. Mr. Reino contented that, contrary to the status certificate, neither him nor his mother had carried out any alteration to the unit. Further, Mr. Reino noted that representatives of MTCC 723 visited the unit many times over the course of his occupancy and no one ever mentioned that the layout had been altered.

Mr. Reino commenced an action against MTCC 723 and in April of 2017, the Superior Court of Justice ruled in his favour. The Court concluded that MTCC 723 was bound to the previous clean status certificate it issued. Therefore, MTCC 723 was precluded from issuing its 2016 status certificate. The Court ordered that MTCC 723 provide Mr. Reino with a declaration that the infractions cited in the 2016 certificate were not applicable to his unit.

Following the Superior Court of Justice decision, MTCC 723 successfully appealed. The Court of Appeal overturned the lower Court decision on the basis that the lower Court erred in concluding that MTCC 723 was unable to issue anything other than a clean status certificate in the circumstances of this case.

Although the Condominium Act, 1998 has an important role as consumer protection legislation, the Superior Court concluded that it did not follow that MTCC 723 could not issue anything but a clean status certificate after becoming aware of the unit's non-compliance with its declaration. If a condominium corporation becomes aware, after issuing a clean status certificate, of circumstances that it is required to disclose according to the Condominium Act, 1998, it must do so when issuing the next status certificate.

The reasoning of the Court of Appeal was linked to the purpose of the Condominium Act, 1998 as consumer protection legislation. Had MTCC 723 been precluded from issuing anything other than a clean status certificate in 2016, it would be misleading prospective purchasers of Mr. Reino's unit.

Author's Note: Mistakes happen. Although a mistake with a status certificate may negatively impact the saleability of a unit, the Court has made it clear that the consumer protection purpose of the Condominium Act, 1998 is also intended to protect prospective owners. A prospective owner needs to be aware of the bargain they are striking, otherwise, it would be unfair to hold them to it.

White Snow and Sunshine Holdings Inc. v Metropolitan Toronto Condominium Corporation No. 561, 2018 ONCA 196

White Snow and Sunshine Holdings Inc. ("White Snow") was a unit holder in Metropolitan Toronto Condominium Corporation No. 561 ("MTCC 561"). The building is located close to the city's bustling downtown. At the time of the proceedings, White Snow was the only commercial unit owner in the building of 102 residential units.

MTCC 561 comes equipped with recreational amenities including a swimming pool, a gymnasium, a library, and a squash court that form part of the common elements of the building. White Snow had about 45 employees working at this location who were prohibited from accessing these amenities. The board stated that MTCC 561's declaration reserved the right to use the recreational facilities to the owners/residents of the residential units. When White Snow's request proposing an amendment to the declaration was denied by MTCC 561's board of directors, White Snow initiated legal proceedings.

White Snow challenged the declaration stating that it did not conform to s. 7(2)(f) of the Condominium Act, 1998.

Section 7(2)(f) of the Condominium Act, 1998 requires the declaration to provide "a specification of all parts of the common elements that are to be used by owners of one or more designated units and not by all the owners." White Snow argued that the declaration violated legislation because Schedule "F" of the declaration did not note that the amenities/ facilities were restricted to residential unit owners.

MTCC 561 responded that its restriction was in Article I(7) of the declaration. That article limited access to the recreational facilities to owners of residential units.

The lower Court agreed with MTCC 561. In its view, s. 7(4)(b) of the Condominium Act, 1998 provides a route for corporations to limit general access to common elements, while s. 7(2)(f) provides a route to note where specific units have exclusive access to elements like patios or terraces.

White Snow also asked that its contribution towards the building's common expenses be reduced as it did not have access to certain amenities/facilities.

The lower Court found that although it may seem unfair to unit owners, there was nothing preventing a corporation from requiring payments that are not directly related to its actual costs. MTCC 561 was successful in having the application dismissed and was awarded costs in the amount of $11,000.

White Snow appealed the decision of the lower Court. The Ontario Court of Appeal dismissed the appeal and upheld the decision of the lower Court, confirming that the restriction on the recreational common elements need not be listed in Schedule "F" of the declaration. Further, the Court of Appeal held that there was no error in law in interpreting the Condominium Act, 1998 and MTCC 561 was awarded costs in the amount of $10,000.

Author's Note: While Schedule "F" of the declaration will set out the exclusive use common elements that are appurtenant to the units, the entire declaration should be read to determine the rights of a particular unit owner. Although it may seem unfair for unit owners to contribute to costs for amenities/facilities it cannot access, this case confirms that unit owners cannot exempt themselves from the provisions of a declaration.

Special thanks to Pritika Deepak and Yasir Samad for their assistance with these summaries.