COURT OF APPEAL FOR ONTARIO

2012 ONCA 447

DATE: 20120626

DOCKET: C54568

Lang, Epstein and Hoy JJ.A.

BETWEEN

Louie Mazzon and Fennell Property Management Ltd.

Plaintiffs (Appellants)

and

Wentworth Condominium Corporation No. 102, Precision Management Services Inc., Patricia Kummer, John Downes, Sara Jane Griffin, Sean McKeag and Gina Downes

Defendants (Respondents)

Patrice A.J. Côté, for the appellants

Thomas M. Muir, for the respondents

Heard: April 4, 2012

On appeal from the judgment of Justice James A. Ramsay of the Superior Court of Justice dated October 27, 2011, with reasons reported at 2011 ONSC 6036, reasons for costs reported at 2011 ONSC 6430, and supplementary reasons for costs reported at 2011 ONSC 6787.

Hoy J.A.:

OVERVIEW

[1] The appellants, Louie Mazzon and Fennell Property Management Ltd., appeal the October 27, 2011 judgment of the motion judge dismissing their action against Wentworth Condominium Corporation No. 102 (the “Corporation”), John Downes, Sara Jane Griffin and Sean McKeag (collectively, the “Respondents”) and Precision Management Services Inc., Patricia Kummer, and Gina Downes (collectively, the “Other Defendants”). The appellants also appeal the motion judge’s awards of $56,000 in costs to the Respondents and $33,000 in costs to the Other Defendants.

[2] Mr. Mazzon is a former owner of a condominium unit in a 20-unit condominium complex. Fennell Property Management, a corporation incorporated by Mr. Mazzon, provided management services to the Corporation between August 1987 and December 1990 and is a former mortgagee-in-possession of several units in the condominium complex. The Respondents are the condominium corporation and three former directors. The Other Defendants are the Corporation’s former management company and other directors.

[3] The appellants and the Corporation have been involved in litigation with respect to the condominium complex since 1991. In 1997, an arbitrator determined that the appellants owed significant amounts to the Corporation. Leave to appeal the arbitration award was subsequently denied.

[4] The appellants commenced an application under the Condominium Act, R.S.O. 1990, c. C.26 (the “Old Act”) against the Corporation, its management company and several directors seeking an order directing the Corporation’s auditors to investigate the handling of the Corporation’s financial affairs, restricting the use of the reserve funds and requiring the Corporation to call an election for a new Board of Directors.

[5] On October 30, 1998 – nearly a year after the final arbitration award – the Corporation collected the amounts owed through garnishment. On the same day, it disbursed most of the funds collected (the “Funds”).

[6] The appellants took issue with the Corporation’s disbursement of the Funds, alleging that they were improperly paid to or expended for the benefit of the directors. In particular, they argue that they should have been approved by a majority of the directors, and were not, and should not have been made in the face of the appellant’s application.

[7] On December 5, 2005, on consent, the application was combined with a counter-application commenced by the Corporation, and was re-constituted as an action. Fennell Property Management was added as a plaintiff. In their amended statement of claim in this action, the appellants claim quite different forms of relief from those advanced in the application. Notably, they claimed reimbursement to them of the Funds. They based this claim on unjust enrichment, damages for negligence, fraudulent conversion of condominium assets and civil conspiracy. In their reply, the appellants waived their right to common law damages and, introducing the concept of waiver of tort, claim compensation in equity, restitution, and assert a constructive trust over the Funds.

[8] The Respondents brought a motion for summary judgment dismissing the action on the ground that the appellants do not have standing to advance the claims advanced in the re-constituted action. This argument was based on the fact that at the time of the motion neither of the appellants had any interest in the assets of the Corporation. At the time the Corporation disbursed the Funds, and at the time he commenced his application, the appellant Mr. Mazzon owned one unit. He ceased owning a unit on December 12, 1999. The appellant Fennell Property Management became a mortgagee of units only after the Funds had been disbursed, and was no longer a mortgagee at the time of the motion.

REASONS OF THE MOTION JUDGE

[9] The motion judge granted summary judgment dismissing the action against the Respondents and the Other Defendants, and awarded costs in favour of the Respondents and the Other Defendants. The essence of his reasoning, that there is no genuine issue for trial based on standing, is contained in paras. 9 and 13 of his reasons:

Fennell Property Management [Ltd.] was never an owner within the meaning of the [Condominium Act.] Louie Mazzon owned one unit when the proceedings were commenced. It is conceded that he would have had standing to bring an oppression application[^1], which is essentially what he did in the application that started the present proceedings. In my view he would have had a statutory and common law right to a remedy for misuse of the corporation’s funds, proportionate to his interest. When he filed new pleadings, however, he took a completely different approach. He claimed to be entitled to repayment of assets [that] were seized from him by the condominium and then wrongly taken from the condominium.

It is common ground that when the assets were supposedly misappropriated, they were assets of the condominium corporation. If Louie Mazzon had pursued and amended his original application, whether as an application or an action, he might have been able to claim an accounting for the benefit of the corporation or the owners, or a tort claim for monetary compensation to himself proportionate to his interest and proven loss, but he abandoned pursuit of any such remedy. He now plainly seeks repayment of the money that was awarded by the arbitrator to the corporation on the basis of the way it was spent. He has no standing to seek restitution of money that was taken from someone else.

ISSUES

[10] The appellants raise three grounds of appeal:

(1) Did the motion judge err in dismissing the action on the basis that the appellants do not have standing, and in failing to provide adequate reasons for doing so?

(2) If correct in dismissing the action against the Respondents, did the motion judge err in also dismissing the action against the Other Defendants?

(3) Did the motion judge err in his disposition of costs?

ANALYSIS

(1) Dismissal of action and adequacy of reasons

[11] I agree with the motion judge that there is no genuine issue requiring a trial. All of the claims – including the restitution-based claims – fail, ultimately, for the reason identified by the motion judge, namely that the Funds are the Corporation’s, to which neither appellant is entitled.

[12] The use of the term “standing” in some respects confuses the analysis. At the time that Mr. Mazzon commenced his application, he had “standing” to seek the relief then sought. He was the owner of a condominium and raised an issue as to how the Corporation’s reserve funds were being spent. Both the Old Act, at s. 13(2), and the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”) now in force, at s. 18(2), provide that the “owners” share the assets of the corporation in the same proportions as their common interests in accordance with the Act, the declaration and the by-laws.

[13] I agree with the motion judge that, as recast, the appellants’ claims are certain to fail, because they have no direct interest in the Funds, as owners or otherwise.

[14] I note with interest that while the appellants take issue with the authorization of the payments made by the Corporation to or for the benefit of certain directors, Mr. Mazzon and his family members who owned units were not entitled to vote to defeat a resolution authorizing the payments. Their indebtedness to the Corporation, which consisted primarily of amounts owing in respect of common elements fees, was extinguished almost contemporaneously with the impugned payments. Section 22(5) of the Old Act, which was in force at the time, provides as follows:

(5) Except where, under this Act or the by-laws of the corporation, a unanimous vote of all the owners is required, an owner is not entitled to vote at any meeting if any contributions payable in respect of the owner’s unit are in arrears for more than thirty days prior to the meeting.

[15] In my view, the motion judge was correct in granting the Respondents summary judgment and dismissing the appellants’ claims against them, and his reasoning, which hinged on the fact that neither of the appellants has an interest in the Funds, was sufficient.

(2) Relief in respect of the Other Defendants

[16] The appellants argue that, even if correct in dismissing the action against the Respondents, the motion judge err in also dismissing the action against the Other Defendants. I agree. The Respondents brought the motion for summary judgment for dismissal of the action against them. The Other Defendants did not seek relief and did not participate in the summary judgment motion. It was an error for the motion judge to dismiss the action against the Other Defendants and to award them costs.

(3) Costs disposition

[17] I also agree with the appellants’ submission that the motion judge erred in his disposition of costs.

[18] The appellants had pleaded fraud. The motion judge determined that the Respondents were entitled to costs on a substantial indemnity scale. The motion judge assumed that the bill of costs submitted by the Respondents was prepared on a substantial indemnity scale and ordered the costs sought in the bill of costs. The Respondents acknowledge that the bill of costs was prepared on a full indemnity basis; the costs ordered amount to full, as opposed to substantial, indemnity.

[19] While the Respondents provided a copy of their bill of costs to the appellants, they inadvertently did not provide a copy of the cost submissions they made to the motion judge to the appellants. Unaware of this, the motion judge fixed costs. When counsel became aware of this omission, they asked the motion judge to reconsider his costs award in order to allow the appellants an opportunity to respond to the Respondents’ cost submissions. He declined to do so.

[20] In my view, the motions judge erred by ordering full indemnity costs and by not affording the appellants an opportunity to respond to the Respondents’ cost submissions.

DISPOSITION

[21] In the result, I would set aside the judgment and the costs award as it affects the Other Defendants, and the costs awarded. I would return the issue of the costs against the Respondents to the motion judge for determination based on new submissions to be made by the parties. I would otherwise dismiss the appeal.

[22] I would award costs of the appeal to the Respondents, in the amount of $5,000, inclusive of disbursements and applicable taxes. This was the amount the parties agreed the successful party of this appeal would be entitled to and the Respondents were largely successful on this appeal.

Released: June 26, 2012

“GE” “Alexandra Hoy J.A.”

“I agree S.E. Lang J.A.”

“I agree G.J. Epstein J.A.”

[^1]: At the time Mr. Mazzon commenced his application, the Old Act was in force. Section 49(1) thereof provided that, “Where a duty imposed by this Act, the declaration, the by-laws or the rules is not performed, the corporation, any owner, the bureau, or any person having a registered mortgage against a unit and common interest, may apply to the Ontario Court (General Division) for an order directing the performance of the duty.” On May 5, 2001, the Old Act was repealed and the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”) came into effect. Pursuant to s. 135 of the Act, an owner may make an application to the Superior Court of Justice for an order that the conduct of an owner, a corporation, a declarant or a mortgagee of a unit is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant and an order rectifying the matter complained of.