Where a condominium owner brings an action against a condominium corporation for breach of the Condominium Act (the “Act”), the court will consider whether the breach was merely a technical breach not giving rise to any actual prejudice and/or harm in deciding whether to award a remedy.
In a recent decision, Tharani Holdings Inc. v. Metropolitan Toronto Condominium Corporation No. 812 the Court of Appeal considered challenges to the administration of a condominium. The Metropolitan Toronto Condominium Corporation No. 812 (MTCC 812) is a condominium corporation consisting of 65 commercial units and common appurtenant elements located in Toronto. The affairs of the MTCC 812 are governed by a board of directors comprised of five volunteer directors.
Remedy sought for breaches of legislation, condominium by-laws and procedures
Tharani Holdings Inc. owns three of the units in the building. Tharani Holdings Inc. commenced an application against MTCC 812, five of its current and former directors and its property for numerous alleged breaches of the Act and MTCC 812’s by-laws and board election procedures. The appellant sought, among other things, the removal of the respondent directors, the appointment of an inspector, the application of the oppression remedy, and damages.
In particular, Tharani Holdings sought the following for alleged breaches:
- declaring the automatic disqualification of MTCC 812’s directors for not complying with disclosure requirements under s. 29 of the Act and ss. 11.6 and 11.10 of O. Reg. 48/01
- a compliance order under s. 134 of the Act
- the appointment of an inspector under s. 130; or relief under the oppression remedy section, s. 135
The application judge dismissed the application, noting that the appellant’s arguments were stripped to their core concerning various alleged technical breaches of the Act or other regulations. As the application judge stated, they lacked a “central, overarching focal point” and were comprised of “what appear to be formalistic errors made by the [MTCC 812] board that amount to little substance.” The application judge found that the court must not just consider whether there was, in fact, a breach of the rules but the effect (or non-effect) of any such breach. In considering the appellant’s allegations of a breach, on the whole, the application judge found that they did not demonstrate any evidence of substantively harmful conduct by the respondents.
Application judge’s finding of technical breaches upheld
In addition to alleging apprehension of bias, Tharani Holdings brought an appeal because the application judge failed to conduct the necessary analysis in refusing to grant a remedy.
In considering the evidence, the Court of Appeal found no merit to the bias allegation, concluding that the application judge demonstrated that he was “open to hearing” the appellant’s substantive complaints that would give rise to a remedy.
Concerning the submissions concerning the application judge’s failure to impose certain remedies for the MTCC 812’s breaches, the Court of Appeal concluded that there was no reason to interfere with the application judge’s decision that no remedy was warranted for what were essentially technical breaches.
In considering the evidence, the application judge concluded that there was no evidence of any actual harm or prejudice to Tharani Holdings. Therefore, it was reasonable for the application judge not to award any remedies. It was important to note that on appeal, Tharani Holdings Inc. did not argue that the application judge had overlooked or ignored evidence of actual harm or prejudice it had sustained as a consequence of any irregularities in MTCC 812’s administration.
While the directors may not have formally disclosed their identities and the fact that family members or their personal corporations owned some units, the appellant did know the identity of the directors. As the appellant knew the directors’ identities, there was no actual harm to Tharani Holdings, and it was therefore within the application judge’s discretion to decline to disqualify the respondent directors. It was reasonable for the application judge to conclude that an order disqualifying MTCC 812’s directors and requiring a new election could put the corporation’s affairs into disarray.
Likewise, given there was no evidence of any harm or prejudice to Tharani Holdings, there was no basis for the application judge to consider invoking the oppression remedy, making a compliance order, awarding damages, or appointing an inspector.
Remedial provisions under the Act are permissive, and it is reasonable for a court to consider complaints cumulatively. In evaluating the condominium corporation’s actions, the application judge was critical of MTCC 812 irregularities and its “lackadaisical attitude toward the rules governing its operation,” which promoted Tharani Holdings to bring an action. However, there was no evidence overall of “substantively harmful conduct by the Respondents.” There was no evidence that any of MTCC 812’s irregularities were ongoing or causing real prejudice. Further, the application judge pointed out that the auditing of financial statements was underway and that there was no practical value in auditing previous fiscal years without cogent evidence indicating a reason to do so.
The Court of Appeal concluded that the application judge was entitled to exercise his discretion to refuse the remedies sought by Tharani Holdings on the ground that the grievances raised on technical breaches of the Act and therefore did not warrant a remedy.
This case demonstrates that it is not enough for a condominium owner to simply show a breach of the Act, regulation or condominium governing documents to warrant a remedy. Rather, a condominium owner must also show the actual prejudice and harm, on the whole of the circumstances, arising out of any breach for the court to make an order pursuant to the Act.
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