COURT OF APPEAL FOR ONTARIO

DATE: 20001016

DOCKET: C33368

FINLAYSON and CARTHY JJ.A. and SIMMONS J. (ad hoc)

BETWEEN:

) John A.M. Judge
SHEILA EBERTS ) and Adrian C. Lang
) for the appellant
Applicant )
(Respondent in Appeal) )

• and - )
  ) Kenneth Radnoff
  ) and Beverly Johnson
  CARLETON CONDOMINIUM ) for the respondent
  CORPORATION NO. 396, )
  MARCEL BRAUN and )
  JEAN-CLAUDE LELIÈVRE )
  Respondents )
• and ­‑ )
  CLAUDE-ALAIN BURDET IN TRUST )
  Respondent )
  (Appellant) )

Heard: September 15, 2000

On appeal from the judgment of Justice Roydon Kealey dated November 19, 1999.

FINLAYSON J.A.:

[1] The appellant, Claude-Alain Burdet in Trust (the "Trust") appeals the judgment of the Honourable Mr. Justice Kealey declaring that 18 condominium units, 16 of which are presently owned by the Trust, are entitled to a total of three votes instead of the 18 stipulated by s. 22(1) of the Condominium Act, R.S.O. 1990 c. C. 26.

Facts

[2] Condominium Corporation No. 396 ("Condo 396") was developed in 1987 by 648578 Ontario Inc. (the “developer”). It is a 33 unit commercial condominium complex located at 112 Nelson Street in Ottawa with units on Levels A, 1 and 2. The respondent, Sheila Eberts ("Eberts"), purchased one unit in 1987 and has since leased it out as commercial space. The Trust purchased 18 units in 1997 and has since sold two of those units to third parties. The 16 units currently owned by the Trust are located on Level A, which is the basement. The trustee, Dr. Burdet, personally owns an additional three units located on Levels 1 and 2.

[3] When Condo 396 was first advertised for sale, the development application of February 2, 1987, described the 33 units as "15 industrial commercial units and 18 storage units". However, when Condo 396 was first registered by Declaration, it provided that the 18 Level A units were unrestricted in use which entitled each unit to one vote in accordance with the Condominium Act. At that time, all 33 units were owned by the developer.

[4] Before title to any of the units was transferred, an amendment to the Recitals of the Declaration was made on December 10, 1987 and registered in Land Titles. It clarified that Condo 396 contained 33 commercial units. Notwithstanding this change in the Recitals from when she purchased her unit in 1987, Eberts proceeded to close the sale without objection and without exercising her right of rescission. The trial judge found that she was not aware of the clarification made to the Declaration but it is clear from her cross-examination on her affidavit that she did concede that she was aware of the change. In any event, since the change to the Recitals was registered under the Land Title system, she is deemed to have knowledge of it.

[5] In December 1987, the developer entered into agreements of purchase and sale for all 33 units. Eberts was one of the purchasers, acquiring unit 1 on level 2. On December 11, 1987 the 18 Level A units were transferred to 685310 Ontario Inc. in trust for Soloway, Wright, a law firm. These basement units were used to store files and records. On January 25, 1988, Soloway, Wright entered into an undertaking stipulating that as long as it remained the owner of the Level A units, it would not exercise more than three votes.

[6] On May 20, 1988, Condo 396 brought an application pursuant to s. 3(8) of the Condominium Act, against the developer in the Ontario Court (General Division) for a declaration that the Level A storage units did not have voting rights. During the hearing of the application, Susan Gibson, a lawyer at Soloway, Wright, gave evidence that her firm was not prepared to restrict its ability to pass title to the 18 units, each with a separate vote. Ms. Gibson also gave evidence that the undertaking was provided to demonstrate the firm's "good faith" that it had no intention of controlling Condo. 396. No consideration was given for Soloway, Wright's voluntary limit to its voting rights.

[7] The application was denied by Flanigan J. on June 14, 1988. In his brief endorsement, he stated:

[This is] not an inconsistency envisaged by the Condominium Act. This amendment if executed would clearly change the interest of the owners of the basement in the land. This is not what section 3(8) contemplates. Such changes should only be granted in clear cases and this is not one such case. Application dismissed with costs.

[8] After the application failed, on January 25, 1989 Soloway, Wright entered into a settlement stipulating that it would take steps to permanently reduce the voting rights of the Level A units from 18 to three if all the necessary consents were obtained from the unit owners and the Declaration amended. However, the necessary consents were not obtained, the settlement letter was not registered on title against the Declaration or included in the archives of Condo 396, nor was it appended to any minutes of the unit owners' meetings.

[9] On June 30, 1989 Condo 396 registered By-Law No. 4 against the Declaration which purported to reduce the 18 Level A voting rights to three. By-Law No. 4 was registered despite the fact that it had not been approved by the unit owners at a special meeting as required by s. 28(2) of the Condominium Act and consents had not yet been obtained from all unit owners. The By-Law could have no effect until an amendment to the Declaration was registered on title with the necessary consent of all unit owners, in light of s. 28(1) of the Condominium Act, which stipulates that a by-law must not be "contrary to this Act or to the declaration".

[10] Over a period of several months in 1990, Dr. Burdet personally purchased two units on Level 2. In both instances, Dr. Burdet received an estoppel certificate with no mention of the purported changes to the 18 Level A voting rights. There was evidence that Dr. Burdet was present at the annual general meetings from 1991 to 1995 where the change to the voting scheme was approved. He attended his first meeting on April 18, 1991. At that meeting, Eberts contends that the minutes of the meeting reveal that all signatures had been previously obtained to amend the Declaration but, because they had been misplaced, the signatures had to be obtained again. In his affidavit, Dr. Burdet claims he did not receive all of the necessary signatures from the owners and mortgagees. In addition, he asserts that none of the documents he received were originals. Thus, he alleges that he did not, nor did anyone else, have the proper authority to register the amendment to the Declaration.

[11] On January 31, 1997, Dr. Burdet's Trust acquired the 18 Level A units from Soloway, Wright. At the annual general meeting on February 26, 1997, Dr. Burdet took the position that he held 18 votes for the units and became the president. No amendment was made to the Declaration to limit the voting rights of 18 Level A units. In 1997, the Trust sold two Level A units to third parties.

[12] Eberts brought an application to amend the Declaration to provide that the voting rights of all 18 Level A units be permanently reduced to three votes, that alternatively the “settlement” with Soloway Wright be enforced, and in the further alternative that the respondent Trust and the owners of its units from time to time be prevented from exercising more than three votes.. On November 19, 1999, Kealey J. granted the application and ordered the voting rights of the 18 Level A units be reduced to three.

Reasons of the applications judge

[13] In ordering that the voting rights of the Level A units be reduced to three votes, the applications judge found that Soloway, Wright's settlement agreement was binding on all present and future unit owners. He also found that Dr. Burdet, a director of Condo 396, accepted responsibility for completing the formalization of the January 1989 agreement to reduce the voting rights of the basement units to three votes. He further found that the appellant Trust’s conduct was unfair and that equity required the court’s intervention under s. 3(8) of the Condominium Act to invoke the doctrine of proprietary estoppel. He reasoned that the Trust had notice of the reduction of voting rights for the 18 Level A units as arranged in the settlement agreement. He further held that it would be unfair to allow the 18 basement storage units (which made up 16 percent of the common elements) to have the power to control the entire condominium.

[14] These additional findings were made by the applications judge:

Burdet’s action or inaction which thwarted the amendment to the declaration repeats the initial wrongfulness by the developer and re-activates the detriment to the applicant insofar as her proprietary interest is concerned. The applicant and other unit holders ceded their rights to fully litigate the developer-owners December 1987 conduct in exchange for the agreement of limited voting rights for Level A. Burdet, as an owner director of the Corporation, further lulled the applicant and others by apparently accepting the responsibility of completing the formalization of the January 1989 agreement, while he did nothing for a year. Then, in direct conflict with such a commitment, he with the express intent of controlling the Corporation, purchased the 18 basement units and voted himself in as president.

Generally, equity is available to avoid injustice and protect the interests (property or otherwise) of society and individuals especially where such injustice arises as a result of unfair, unscrupulous and opportunistic conduct which accords advantage to the actor over the reasonable, fair and lawful expectancy of another when all is taken into account. Here, in my view the doctrine of proprietary estoppel applies to the facts.

Issues

1. Can the express provisions of the Condominium Act be overridden by principles of contract or equity to reduce the number of votes for the 18 Level A units to three?

2. Do the principles of proprietary estoppel apply?

Analysis

Issue 1: Application of principles of contract and equity to condominium voting rights

[15] The application under appeal is misconceived. Condominiums are creatures of statute. The rights of the parties are governed by the documents authorized by the Condominium Act and can be changed only in the manner provided for therein. In this case there were a number of attempts to change the ratio of voting rights to condominium units without complying with the provisions of the Condominium Act. They all had to fail.

[16] The first was the undertaking given by Soloway, Wright which was a unilateral agreement between a unit owner and the condominium corporation. This was ineffective because s. 60 of the Condominium Act provides that the "Act applies despite any agreement to the contrary."

[17] The second attempt was the ill-advised application before Flanigan J. which he properly dismissed on the ground that the requested declaration exceeded his jurisdiction under s. 3(8) of the Act. Subsection 3(8) is restricted to amending a declaration where the motions judge "is satisfied that an amendment is necessary or desirable to correct an error or inconsistency in the declaration arising out of the carrying out of the intent and purpose of the declaration."

[18] The third attempt was the passing of By-Law No. 4 which could not prevail because it was inconsistent with the Declaration.

[19] The fourth attempt was the application under appeal which should have been dismissed for the same reason as the one before Flanigan J. Private agreements cannot override the provisions of the statute and equity can only prevail over an express statutory scheme in the rarest of circumstances of which this is not one. Moreover, s. 3(8) of the Condominium Act allows a judge to amend a declaration, but only for a collective purpose. The section cannot be used to enforce against third parties agreements between individual unit holders. Nor can the equitable doctrine of proprietary estoppel be utilized in the face of clear statutory direction.

[20] In this case, the Declaration stipulated that there are 33 units. Subsection 22(1) of the Condominium Act provides:

All voting by owners shall be on the basis of one vote per unit and, where two or more persons entitled to vote in respect of one unit disagree on their vote, the vote in respect of that unit shall not be counted.

The wording of s. 22(1) is clear. To simply reduce the voting rights of the 18 Level A units to three would be contrary to s. 22(1). What is necessary is an amendment to the Declaration re-classifying the controversial units as storage space so as to make it clear that they are not units at all within the meaning of the Act.

[21] Section 60 of the Condominium Act makes clear that regardless of the equitable nature of Soloway, Wright's settlement agreement, or the “unfair, unscrupulous and opportunistic” conduct of the appellant Trust, the agreement cannot supercede the express provisions of the Act: Carleton Condominium Corp. No. 347 v. Trendsetter Developments Ltd. (1992), 1992 7700 (ON CA), 9 O.R. (3d) 481 at 490 (C.A.). Furthermore, ss. 3(4) and (5) of the Condominium Act provide that any amendment to a declaration that is inconsistent with the terms of the Act will be void and of no effect:

3(4) Subject to subsection (5), the declaration may be amended only with the consent of all owners and all persons having registered mortgages against the units and common interests.

3(5) Where any provision in a declaration or by-law is inconsistent with the provisions of this Act, the provisions of this Act shall prevail and the declaration or by-law is deemed to be amended accordingly.

[22] I accept the appellant's submission that the combined effect of ss. 3(4), 3(5), 22(1) and 60 reflect the underlying policy of the Condominium Act which embraces the principle of one vote per unit. This right is fundamental and necessary to prevent any abuse that would be caused if contracting out of the Act were otherwise permitted.

Issue 2: Application of principles of proprietary estoppel

[23] Proprietary estoppel is a form of promissory estoppel. It is commonly supposed that estoppel cannot give rise to a cause of action, but proprietary estoppel appears to be an exception to that rule: see Lord Denning in Crabb v. Arun District Council, [1976] 1 Ch. 179 at 187-188 (C.A.). But there must be an estoppel. The basic tenets of proprietary estoppel are described in McGee, Snell’s Equity, 13 ed. (2000) at pp. 727-28:

Without attempting to provide a precise or comprehensive definition, it is possible to summarise the essential elements of proprietary estoppel as follows:

(i) An equity arises where:

(a) the owner of land (O) induces, encourages or allows the claimant (C) to believe that he has or will enjoy some right or benefit over O’s property;

(b) in reliance upon this belief, C acts to his detriment to the knowledge of O; and

(c) O then seeks to take unconscionable advantage of C by denying him the right or benefit which he expected to receive.

(iv) The relief which the court may give may be either negative, in the form of an order restraining O from asserting his legal rights, or positive, by ordering O to either grant or convey to C some estate, right or interest in or over his land, to pay C appropriate compensation, or to act in some other way.

[24] One has only to look at the above to understand that estoppel has no application to the facts of this case. This is a claimant (Eberts) who is an owner of one unit attempting to obtain relief against another owner (the Trust) based on some representations said to have been made by the Trust’s predecessor in title (Soloway, Wright) to the developer of the condominium project; a representation, if it amounted to anything, that was not made to Eberts and on which she did not rely nor act to her detriment. Eberts bought her unit in 1987, long before Dr. Burdet or the Trust was involved and as the record seems to indicate, even before Soloway, Wright acquired its title. Accordingly, there was no inducement or representation made by the developer or Soloway, Wright to Eberts upon which she could have acted to her detriment. Furthermore, the representation was simply that Soloway, Wright would not vote its full units while it remained an owner of the units in question. It did not purport to be binding on its successors in title. As a conclusionary point, this issue was litigated before Flanigan J. and was terminated adversely to Eberts. This judgment, if not res judicata, is at least issue estoppel against Eberts.

[25] Eberts attempts to circumvent this basic problem about the lack of evidence of her changing her position at all, much less to her detriment, by raising a new claim in estoppel. She maintains that she abandoned her appeal against the judgment of Flanigan J. because of the “settlement” with Soloway, Wright, which she maintains Dr. Burdet had undertaken to implement. She was abandoning nothing. Her appeal was hopeless. It would have been restricted to the original undertaking restricting voting rights of Soloway, Wright while it was the owner, not the subsequent conditional settlement which was intended, if completed, to bind successors and assigns. Dr. Burdet had no ability to carry out the settlement between Soloway, Wright and Condo 396. At best, he could only undertake to make his best efforts to obtain the unanimous consent of the unit owners other than himself and the Trust.

[26] In his reasons, the applications judge held that “Burdet’s action or inaction repeats the initial wrongfulness by the developer and reactivates the detriment to the applicant and other unit holders insofar as her proprietary interest is concerned”. This finding is in error on a number of levels. The developer had not wronged Eberts. If it had, Dr. Burdet had nothing to do with it. There was no detriment to Eberts to re‑activate. Ebert’s proprietary interest remained unchanged from the day she signed her application to purchase her unit to the present day.

[27] In my view of the facts of this case, the respondent Eberts appears to be convinced that she was somehow misled by the developer at the time she purchased her unit. This is all water under the bridge. Her grievance, whatever its merits, cannot be visited on Dr. Burdet who was operating under the rules laid down by the Condominium Act.

[28] Accordingly, for the reasons stated, I would allow the appeal, set aside the judgment below and enter a judgment dismissing the application. The appellant should receive its costs, here and below.

Released: OCT 16 2000 Signed: “G.D. Finlayson J.A.”

GDF “I agree J.J. Carthy J.A.”

“I agree J. Simmons J. (ad hoc)