Court of Appeal for Ontario
CITATION: O'Brien v. Blue Heron Co-operative Homes Inc., 2015 ONCA 858
DATE: 20151208
DOCKET: C60575
Sharpe, Cronk and Miller JJ.A.
BETWEEN
Stephen O’Brien
Applicant (Appellant)
and
Blue Heron Co-operative Homes Inc.
Respondent (Respondent on appeal)
Stephen O’Brien, acting in person
Joseph Jebreen, for the respondent
Heard: December 3, 2015
On appeal from the judgment of Justice Douglas Rutherford of the Superior Court of Justice, dated May 5, 2015.
By the Court:
[1] The appellant is a member of the respondent Blue Heron Co-operative Homes Inc. (“Blue Heron”), a not-for-profit housing corporation incorporated under the Co-operative Corporations Act, R.S.O. 1990, c. C.35 (the “CCA”) and situated in the City of Ottawa. The appellant brought an application against Blue Heron for: i) an order under s. 146 of the CCA appointing an inspector to investigate and conduct a forensic audit of Blue Heron’s business and affairs; and ii) an order under s. 178 of the CCA compelling Blue Heron, its directors, officers and employees to comply with Blue Heron’s by-laws and the CCA. By order of the Superior Court dated May 5, 2015, the appellant’s application was dismissed.
[2] The appellant now appeals to this court. He argues, principally, that the application judge erred:
by failing to apply the civil standard of proof to the determination of the matters raised by the appellant;
by ignoring the appellant’s evidence and submissions, instead preferring those of the respondent without appropriate scrutiny;
by misapprehending or ignoring relevant evidence;
by misinterpreting ss. 146–48 of the CCA;
by failing to apply or misapplying s. 135 of the Condominium Act, 1998, S.O. 1998, c. 19; and
by failing to deliver reasons that accord with R. v. Sheppard, 2002 SCC 26, [2002] S.C.J. No. 30.
[3] We conclude that this appeal must be dismissed.
A. Overarching Ground of Appeal
[4] As argued at the appeal hearing, the appellant’s main complaint concerns an alleged pattern of mismanagement of Blue Heron, over an extensive period of time and by successive boards of directors. The appellant says that this mismanagement is reflected, for example, in Blue Heron’s failure to retain election ballots for the requisite time set out in its by-laws; its failure to enact by-laws of the type urged by the appellant; its alleged failure to adopt proper business practices; and its alleged sanctioning of unauthorized entries into members’ units to investigate fire alarms.
[5] The evidence before the application judge bearing on these issues included the following. First, similar complaints by the appellant to the Financial Services Commission of Ontario (“FSCO”) had been investigated by that agency and it had declined to appoint an inspector to investigate Blue Heron’s affairs. FSCO also concluded that any by-law infraction or inadequacy by Blue Heron had been remedied by corrective measures.
[6] Second, the City of Ottawa, which acts as Service Manager to Blue Heron under the applicable co-operative housing programs in Ottawa, confirmed that Blue Heron had met its reporting requirements since it opened in 2006.
[7] Third, Blue Heron’s independent third party auditors, in a letter accompanying Blue Heron’s 2013 financial statements, indicated:
Testing during our audit did not reveal any illegal, improper or questionable payments or acts, nor any acts committed with the intent to deceive, involving either misappropriation of assets or misrepresentation of assets or misrepresentation of financial information.
[8] The application judge considered the appellant’s complaints in the light of this evidence and concluded, on the record before him, that the appellant had not met his burden to proffer satisfactory evidence of any specific instance of mismanagement or malfeasance by Blue Heron’s management or of any on-going non-compliance by Blue Heron with applicable statutory or by-law requirements.
[9] The trial judge concluded, at para. 18:
I have reviewed the materials filed and the submissions made and have reached the conclusion that there is no sufficient basis to warrant my ordering the appointment of an inspector to investigate the affairs and management of Blue Heron. There is nothing to indicate that there is any need to further audit the accounts and records of the Co-Op. … Failures to abide by clear directions in by-laws or written policy appear to have been addressed and corrected by the Co-Op.
[10] We see no error in these conclusions or in the application judge’s reasoning in support of them. In particular, we note that there are two prerequisites to the appointment of an inspector under s. 146 of the CCA: i) the application for the appointment of an inspector must be brought in good faith; and ii) the appointment must be in the interests of the co-operative or the holders of its securities. On the findings of the application judge, which were open to him on the record, the second prerequisite was clearly not met in this case.
[11] Similarly, the application judge did not err in refusing to make an order under s. 178 of the CCA, as the appellant failed to establish any specific instance of non-compliance with the statute or the by-laws that would justify a court order for compliance.
[12] Accordingly, this ground of appeal fails.
B. Other Grounds of Appeal
[13] We will comment briefly on the other grounds of appeal raised by the appellant.
[14] First, the suggestion of the wrong standard of proof. The application judge referred to the need for “substantial” evidence of intentional malfeasance or serious and continued mismanagement by the directors of a CCA co-operative in order to ground court intervention in the internal affairs of the co-operative. Contrary to the appellant’s argument, we do not read these comments as importing a standard of proof higher than the applicable civil standard of proof on a balance of probabilities. In our view, the application judge’s impugned remarks simply reflected the need for clear evidence, rather than bald assertions, to support the serious allegations, including allegations of criminal conduct, levied by the appellant against Blue Heron’s management.
[15] Second, we do not accept the appellant’s claims that the application judge misapprehended the evidence and ignored or discounted the appellant’s evidence. The first claim appears to relate to the application judge’s failure to refer to case law provided by the appellant. This does not constitute a misapprehension of the evidence.
[16] Nor, in our opinion, do the reasons support the appellant’s assertion that the application judge applied a higher level of scrutiny to his evidence and submissions than that applied to those of the respondent. We view the application judge’s treatment of the evidence as thorough and even-handed.
[17] Third, the appellant’s submission that the application judge’s reasons are deficient must be rejected. The reasons easily meet the standard for sufficiency of reasons identified in Sheppard and related cases. They provide a clear pathway to the application judge’s decision and, hence, permit meaningful appellate review. No more is required.
[18] Finally, we see no error in law in the application judge’s interpretation or application of ss. 146 and 178 of the CCA. These were the operative statutory provisions at issue before the application judge. The application judge was not obliged to accept the appellant’s construction of these sections or his invocation of other, inapplicable statutory provisions.
C. Fresh Evidence
[19] The appellant seeks to adduce fresh evidence on appeal that he says is relevant to the issues that were before the application judge and that was not available at the time of the application hearing.
[20] We disagree. The proposed fresh evidence relates to issues and relief that formed no part of the initial application, in particular, the legality of the appellant’s removal from Blue Heron’s board of directors on June 22, 2015. The proposed fresh evidence is not relevant to the issues raised in the application and the appellant cannot expand the application by attempting to introduce fresh evidence.
D. Disposition
[21] Accordingly, the appellant’s motion for leave to file fresh evidence on appeal is dismissed, as is the appeal. Blue Heron is entitled to its costs of the appeal, fixed in the amount of $1,500, inclusive of disbursements and all applicable taxes.
Released:
“RJS” “Robert J. Sharpe J.A.”
“DEC -8 2015” “E.A. Cronk J.A.”
“B.W. Miller J.A.”