Legal

October 19, 2016 Published by Toronto and Area Chapter - By Brian Horlick, Timothy Duggan

Decisions From the Courts

From the Fall 2016 issue of the CCI Toronto Condovoice Magazine.

Toronto Standard Condominium Corp. No. 1816 v. Greco (Ontario Superior Court of Justice, June 15, 2016)

The condominium corporation brought this application seeking an order that Ms. Greco, a unit owner, and her daughter had breached the Condominium Act, 1998 and the corporation's declaration and rules. The complained-about behavior included allowing the dogs belonging to Ms. Greco and her daughter to run free and soil the common elements; vandalism and damage to the common elements; aggressive behaviour toward the corporation's staff and other unit residents by Ms. Greco's daughter and her friends; and, most significantly, persistent loud screaming, shouting and fighting in the unit that disturbed other unit residents' comfort and quiet enjoyment of their respective units.

The corporation made efforts to address the conduct of the Grecos by, among other things, having its property manager send two letters and its lawyers send a further three letters. However, far from ceasing the complained-about behaviour, the conduct of Ms. Greco and her daughter seemed to escalate with each letter that was sent. Among other things, after letters started being sent to the unit, Ms. Greco's daughter made threatening remarks toward the other unit residents who had complained about the noise and other issues caused by the Grecos.

As a result of the conduct of Ms. Greco and her daughter, the corporation sought, among other things, an order that Ms. Greco and her daughter permanently vacate the unit, and an order that the unit be listed and sold. Despite the seriousness of the order that the corporation sought, Ms. Greco did not file any materials in response to the corporation's application, nor did she (or anyone on her behalf) attend the hearing of the application.

At the hearing of the application, the court reviewed the extensive record of complaints about the Grecos' behaviour, including more than three dozen separate noise complaints. The court considered the fact that the Grecos' behaviour had not ceased despite two letters from the corporation's property manager and three more letters from the corporation's lawyers. Although the court recognized that ordering Ms. Greco to list and sell her unit, and ordering her and her daughter to permanently vacate the property, were drastic remedies, the court was satisfied that those orders were warranted in the circumstances. As such, the court ordered that Ms. Greco and her daughter permanently vacate the property within 30 days, and that the unit be listed and sold within 90 days. The court also awarded substantial indemnity costs of $28,000.00 to the corporation.

Author's note: it is rare for a court to make an order that a unit be listed and sold. Such an order is typically only made either in circumstances a) where the owner has engaged in serious violent behaviour, such that there is a risk of serious harm to other unit residents if the owner is permitted to remain in the building, or b) where, as here, the owner engages in persistently antisocial behaviour that shows a complete disregard for other unit residents and fails to correct that behaviour despite repeated efforts by the corporation. It may be that the court regarded Ms. Greco's failure to respond to the application as a further indication that her and her daughter's behaviour would not change if they were permitted to remain in the building; to this end, it is worth considering whether the outcome of this case would have been different had the Grecos responded to the corporation's application or to any of the corporation's efforts to address their behaviour.

N.K.P. Painting Inc. v. Boyko (Divisional Court, May 4, 2016)

This was an appeal by a painting contractor. The respondent condominium corporation had retained a general contractor in connection with a common element corridor refurbishment. The general contractor then entered into an agreement with the appellant, as a subcontractor, for the appellant to provide painting services as part of the corridor refurbishment.

The total cost of the corridor refurbishment was $285,760.00 plus applicable taxes. The corporation paid this amount, less the 10% holdback required by the Construction Lien Act, to the general contractor. For its part, the appellant rendered invoices totalling $28,928.00 to the general contractor for its painting work, but these invoices were not paid. Eventually, the general contractor declared bankruptcy without having paid the appellant for its painting work. The appellant then sought to recover these monies from the corporation (which was still holding $23,893.74 in respect of the statutory holdback) in the Small Claims Court on the basis of unjust enrichment. At trial, the Small Claims Court dismissed the appellant's claim on the basis that the appellant's contract was with the general contractor, and the appellant would not reasonably have expected to be paid by the corporation. The appellant then appealed to the Divisional Court.

On appeal, the Divisional Court held that the Small Claims Court had erred in dismissing the appellant's claim. In making this determination, the Divisional Court set out the four factors for a claim for unjust enrichment, and held that the appellant had satisfied all four factors:

• Defendant has been enriched: the court held that the corporation had been enriched by obtaining 100% of the corridor refurbishment work for 90% of the cost of same • Plaintiff has suffered corresponding deprivation: the enrichment to the corporation corresponded to the work done by the appellant in providing the painting services for the corridor refurbishment • Lack of juristic reason for the benefit and corresponding deprivation: the court held that there was no contractual or other basis for the corporation to have benefitted and the appellant to have suffered • Reasonable expectations of the parties: the court held that the appellant had a reasonable expectation that it would be paid for the work that it did, and that the corporation would have had a reasonable expectation to pay the full agreed-upon price for the corridor refurbishment work

Given that the appellant had satisfied the test for unjust enrichment, the Divisional Court held that the appellant was entitled to judgment. Although the appellant's claim was for the jurisdictional maximum of the Small Claims Court (being $25,000.00, or somewhat less than the value of the unpaid invoices), the court held that the corporation's liability was limited to the amount by which it had been enriched (being the statutory holdback funds of $23,893.74 that it was holding).

Author's note: it is interesting to note that, in this case, the appellant could have registered a construction lien on title to the corporation's lands and pursued recovery in that manner. The decision is silent on the reasons that the appellant did not register the construction lien, but the Divisional Court did make a point of stating that the failure to register a construction lien did not prevent the appellant from pursuing its Small Claims Court claim for payment.

Beyond that, it is interesting to consider what the result would have been if the corporation had not held back monies pursuant to the Construction Lien Act. If all monies payable under the contract with the general contractor had been paid to the general contractor, the corporation would not have been enriched by receiving 100% of the corridor refurbishment for 90% of the cost. Based on the court's analysis in this case, this could have led to the appellant's claim for unjust enrichment being dismissed (due to the corporation not having been enriched).

Carleton Condominium Corp. No. 396 v. Burdet (Court of Appeal for Ontario, May 25, 2016)

The unit owner, Mr. Burdet, owned (or controlled entities that owned) 23 of the 33 units in the corporation. Mr. Burdet and the corporation (which was under court-appointed administration for much of the relevant period) had been in litigation that had, in one form or another, been going on since 1999. In this latest edition, the corporation had obtained judgment against Mr. Burdet and the entities that he controlled for nearly $500,000.00 for unpaid common expenses for the Burdet units, plus nearly $800,000.00 for costs. Mr. Burdet appealed this judgment to the Court of Appeal for Ontario.

On appeal, Mr. Burdet raised a variety of arguments. Among other things, Mr. Burdet argued that the court had erred in granting judgment for unpaid common expenses. According to Mr. Burdet, the only way for the corporation to recover common expenses was by way of the lien procedure set out in the Condominium Act, 1998. Mr. Burdet argued that the corporation's failure to register a lien in a timely manner disentitled it to recover these monies, and that the corporation was not entitled to sue for these monies. The court disagreed. In reviewing this matter, the court noted that, while the Act set out the obligation to pay common expenses (on the part of a unit owner) and the right to register a lien for unpaid common expenses (on the part of the corporation), section 136 of the Act was clear in stating that nothing contained in the Act restricted the corporation from the other remedies that would generally be available to it. The court held that it would be unreasonable to interpret the Act as requiring unit owners to pay common expenses, but extinguishing the rights of the corporation to collect unpaid common expenses if a lien was not registered in a timely manner. As a result, the court dismissed Mr. Burdet's appeal.

Author's note: this decision further confirms what has long been the author's view, namely that a condominium corporation that is out of time to register a lien in respect of unpaid common expenses may commence a claim for those common expenses. While this claim would typically be in the Small Claims Court (which has a monetary jurisdiction of up to $25,000.00), in certain extreme cases such as this one it may be necessary to proceed in the Superior Court of Justice.

It should be noted that, by losing the right to a lien for the common expense arrears, the corporation would also lose its right to priority in respect of the arrears, and would rank behind other encumbrancers (e.g., the mortgagee of the unit) if the unit was to be sold and the arrears paid from the proceeds of sale. In this regard, it is worth wondering whether the corporation in this case will be able to recover monies from the sale of the Burdet units (assuming that same are sold), or whether there are other encumbrancers who have priority and whose claims would exhaust the equity in the units.