2012 ONSC 3441

Oshawa COURT FILE NO.: 66993/10

DATE: 20120615

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN

DURHAM CONDOMINIUM CORPORATION NO. 45

Plaintiff

— and —

LESLIE ARTHUR SWAN

Defendant

COUNSEL:

Edmund Chan, for the Plaintiff

Howard Wright, for the Defendant

HEARD: Trial – April 10, 2012

Sosna, J.

REASONS FOR JUDGMENT

[1] The Applicant, Durham Condominium Corporation No. 45 (DCC 45) seeks the following Orders against the Defendant, Leslie Arthur Swan (Swan). Pursuant to the Courts of Justice Act R.S.O. 1990, Chapter C.43 (Justice Act), DCC 45 seeks that:

(a) Swan be found a vexatious litigant, that

(b) DCC 45’s Board of Directors has the authority to enter into contracts for third party management of the condominium, that

(c) The present property management contract with MCD Enterprises (MCD) is binding, and

(d) An Injunction prohibiting Swan from having any contact with DCC 45’s Board of Directors, MCD, and its principal, Catherine Debbert.

[2] Pursuant to the Condominium Act, 1998, S.O. 1998, c.19 (the Act) DCC 45 seeks:

(a) A declaration finding that Swan as a Director with DCC 45 failed to carry out his duties and exercise the care and diligence required of that office.

(b) An order that Swan remove, at his expense, the satellite dish installed on the common elements appurtenant to his unit and to restore, at his expense, the common elements to the condition they were in prior to the installation of the satellite dish.

[3] Swan submits the Court has no jurisdiction to grant the orders sought. In the alternative, he argues that DCC 45’s applications be dismissed.

[4] In a cross-application pursuant to the Act, Swan seeks the following orders:

(a) A declaration that Tammy Goan and Letitia Wise breached their duty of care as Board members of DCC 45;

(b) The removal of Goan and Wise from the Board;

(c) His reinstatement as Director and President of the Board;

(d) The appointment of an interim Director pending a meeting to elect new Directors; and

(e) Return of all documents to DCC 45 held by MCD.

[5] Swan further alleges oppression under the Act arising from conduct by Board members of DCC 45 and MCD.

[6] DCC 45 and MCD deny any breaches of the Act including the allegation of oppression.

Narrative History – Board of Directors

[7] DCC 45 is a non-profit condominium corporation created pursuant to the Condominium Act. DCC 45 was created for the purpose of controlling, managing and administering the assets and property of the condominium development comprised of 33 residential townhouse units, and appurtenant common elements, all located in Pickering, Ontario. DCC 45’s Board of Directors is comprised of three members.

[8] Swan is the registered owner of Unit 10 in DCC 45 (the Unit), and is a former member of the Board of Directors of DCC 45 (the Board) being elected to the Board at DCC 45’s Annual General Meeting on June 30, 2009.

[9] Tammy Goan was a member of the Board for DCC 45 and had held that position for approximately five years.

[10] Letitia Wise is a unit owner and was elected a Director of the Board after Swan was removed as Director.

[11] Samuel Metham (Metham) was a Director of the Board and also served as its Secretary Treasurer.

[12] Catherine Debbert (Debbert) is the principal of MCD Enterprises (MCD), DCC 45’s property management company.

[13] On or about December 15, 2008, MCD was retained by DCC 45 to perform property management services including managing the day-to-day operations of DCC 45. Thereafter, DCC’s files, records and contracts were kept and retained by MCD at its site.

[14] Shortly after being elected to the Board, Swan opposed the Board contracting its property management duties to MCD. He insisted that DCC 45’s records maintained by MCD be returned to the Board, arguing that corporate records are typically maintained by the Secretary/Treasurer (Metham). Swan objected to MCD’s attendance at Board meetings, and on numerous occasions demanded that Debbert return DCC 45’s records to the Board.

[15] Swan’s views regarding the duties of DCC 45’s Board and MCD’s property management role were opposed by other Board members including Tammy Goan. In a series of emails sent to Goan, Swan insisted that MCD return DCC 45’s records to the Board and on a number of occasions questioned whether Goan was properly performing her duties as Director.

[16] Goan considered the tone and nature of Swan’s emails to be insulting, threatening and confrontational. She asked that they stop. At the following Board meeting, Swan again demanded that MCD return the records to DCC 45. Both Swan and Metham disagreed and opined that MCD should maintain the records as per their contractual arrangements with MCD.

[17] At a Board meeting held on July 22, 2009 with Goan absent, Swan nominated himself as President and was voted into that position by himself and the other Director, Metham.

[18] Continuing to maintain that MCD should not be privy to the affairs of DCC 45’s Board, on July 27, 2009 Swan emailed Goan advising that disclosure to MCD of the Board’s business was a breach of privacy laws for which she could be held liable. In that email he cautioned, “You have been warned.”

[19] On August 4, 2009 Goan circulated a requisition under Section 46 of the Act to convene a meeting of the unit owners to remove Swam as a Director. The reasons cited were that Swan as Director failed “…to act honestly and in good faith” and that he failed “…to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” That meeting was scheduled for September 17, 2009.

[20] On August 11, 2009 Swan commenced a Small Claims Court action naming DCC 45 as Defendant. He sought $10,000.00 in damages claiming that Goan as a member of the Board defamed him by alleging amongst other things he failed to act honestly and in good faith while being a member of the Board.

[21] Subsequently Swan accepted service of this claim on behalf of the Board. On September 2, 2009, he advised the Board that it had been served with this action and that DCC 45 was potentially in default since it had not filed a defence within the 20 days as set out under the Small Claims Court rules. No earlier defence was filed since it was Swan who accepted service.

[22] On August 14, 2009 absent Board resolution, Swan sent an email to MCD terminating their contract with DCC 45 and instructing MCD to return all DCC 45’s property held by them.

[23] On August 17, 2009 Swan commenced a further Small Claims Court action against Goan personally claiming that Goan defamed him in the requisition she launched to remove him as Director.

[24] On August 31, 2009 without knowledge of the Board and naming DCC 45 as Plaintiff, Swan commenced two actions against Debbert, the President of MCD. The first action sought damages claiming that Debbert defamed him. In the second action punitive damages for conversion were sought, claiming that Debbert wrongfully withheld DCC 45’s corporate records.

[25] The two claims against Debbert were later discontinued since they were initiated by Swan without Board approval. However on January 21, 2010 Swan, as Plaintiff, filed a further claim against Debbert alleging defamation.

[26] At the scheduled September 17, 2009 meeting, Swan was removed as Director.

[27] On the same date September 17, Goan was served with a further Small Claims Court action with Swan alleging defamation and seeking damages. Swan claimed that Goan’s requisition letter for his removal as Director and the Notice of the Meeting pursuant to the provisions of the Condominium Act distributed were defamatory. He also commenced an action against Letitia Wise for defamation claiming that it was Wise who delivered copies of the notice of meeting and requisition to remove as Director. He contended those materials were libellous.

[28] Five Small Claims Court actions seeking $25,000.00 in damages each were dismissed at trial on November 25, 2010. Swan has since appealed all five decisions. The appeals have yet to be heard.

Narrative History – Satellite Dish

[29] On or about July 12, 2009, DCC 45 advised all unit owners were advised not to append anything to the common element roofs of their unit.

[30] Despite being apprised of the notice Swan attached a satellite to the roof of his unit. It remained affixed to the roof even after Swan was elected as Director and President of the board. Swan has since removed the satellite dish.

Findings Made

[31] Contrary to Swan’s submission I find the Court does have jurisdiction under the Act to determine the merits of the relief sought by DCC 45. I reject Swan’s submission that the issue of compliance in the present application requires prior mediation and arbitration as set out in Section 132 of the Act. Section 132 deals exclusively with the resolution of disputes raised by private parties over agreements and has no application to the question of compliance under the Act.

[32] Dealing with the Orders sought by DCC 45 I make the following findings:

Vexatious Proceedings

[33] DCC 45 seeks a declaration that Swan by initiating his five Small Claims Court actions be found to be a vexatious litigant.

[34] Section 140(1) of the Courts of Justice Act states:

Vexatious proceedings - Where a judge of the Superior Court of Justice is satisfied, on application, the person has persistently and without reasonable grounds,

(a) instituted vexatious proceedings in any court; or

(b) conducted a proceeding in any court in a vexatious manner, the judge may order that,

(c) no further proceeding be instituted by the person in any court; or

(d) a proceeding previously instituted by the person in any court not be continued,

except by leave of a judge of the Superior Court of Justice.

[35] Although Swan has initiated five separate claims alleging defamation against the Board and its associated members, the claims in and of themselves cannot be found to be vexatious. Although disturbing and undoubtedly aggravating to the named defendants, there is insufficient evidence on which to find the actions were intended to harass or oppress the named parties. Furthermore, none of the actions have been previously before the Courts or were reinstituted by Swan after the Court’s had made determination on their merits.

[36] All citizens have the right to obtain redress from the Courts and appeal decisions not found in their favour. Swan’s claims against the defendants may be intemperate, ill informed, and ill advised. If the claims prove to be unsuccessful, the defendants may be awarded costs. However, their lack of success does not render them vexatious.

[37] For these same reasons I also decline to order pursuant to Section 140 of the Act that any further proceedings against the defendants instituted by Swan be barred except with leave of the Court. Furthermore, I decline to order that the present appeals instituted by Swan be set aside.

Director’s Duties

[38] Section 134(1) of the Condominium Act states:

Subject to the subsection (2) an owner, and occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium Corporation of a mortgagee of the unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this act, the declaration, bylaws, the rules or an agreement between two or more corporations for the mutual use, provision or maintenance or the cost sharing of facilities or services of any of the parties to the agreement.

[39] Section 37(1) states:

Every director and every officer of the Corporation in exercising the powers and discharging the duties of the office shall,

(a) act honestly and in good faith; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

[40] DCC 45 seeks a Declaration pursuant to Section 134 that Swan as Director breached Section 37(1).

[41] Having reviewed the materials filed and submissions made I make the following findings.

[42] After elected to the Board of Directors, Swan concluded that DCC 45 was not operating according to the Act and its own by-laws and declarations. Swan demanded that the Board follow the Act, the declarations and the by-laws of DCC 45. The Board disagreed with Swan and chose to carry on its affairs as it had done in the past. Swan then assumed a confrontational approach and made unilateral decisions without consulting the other board members by:

(a) Sending an undated letter as President on the Corporation’s letterhead to the unit owners stating that the current Board disregards the rules and regulations applicable to the proper management of the condominium and that the Board was dysfunctional.

(b) Commencing two separate Small Claims Court actions against MCD in the name of DCC 45 without the authorization of the Board of Directors of DCC 45.

(c) While President of the Board of Directors of DCC 45, commencing a Small Claims Court action against DCC 45 and misleading the other members of the Board by purporting to have accepted service of the claim on behalf of DCC 45 despite the fact that he was the plaintiff.

(d) Unilaterally and without the authorization and knowledge of the Board purportedly terminating the property management contract with MCD and demanding delivery to him of the records of DCC 45.

(e) Sending harassing and insulting emails to other Board members and MCD, and confronting both Goan and Debbert on numerous occasions in an aggressive and verbally intimidating manner when they disagreed with his interpretation of the condominium by-laws and the management of the condominium.

(f) Installing and maintaining while a Director of the Board a satellite dish on the common elements of DCC 45 appurtenant to his unit, without the approval of the Board, and contrary to the written notice that the satellite dish be taken down. The satellite dish has since been removed by Swan and the Declaration sought by DCC 45 that the satellite dish be removed is now moot.

[43] These actions amongst others by Swan rendered the Board divisive and dysfunctional. I reject his submission that because of his comprehensive and fulsome review of the Condominium Act and DCC 45’s bylaws, he had a duty to correct the historical mismanagement of the Board which arose from its lack of knowledge of the by-laws and the Act. I further reject Swan’s submission that by contracting with MCD, the Board was abdicating its management responsibilities and, as such, he was duty bound absent the authorization of the Board to purportedly cancel the contract with MCD.

[44] I find contrary to Swan’s submission, the by-laws did provide the Board with authority to contract with MCD to perform property management services on its behalf. I further find that the contract between DCC 45 and MCD is valid and binding. I reject Swan’s contention that the annual $8,000 fee paid by the Board to MCD was improper and unauthorized.

[45] I find that Swan alienated the rest of the Board as evidenced in his arbitrary decisions as Director, in the derogatory statements expressed in his emails, and in his confrontational interaction with the Board and MCD. That interaction was inflexible, dogmatic and ultimately counter-productive. By rendering the Board dysfunctional, Swan put the property management of the condominium at risk.

[46] Section 37(1)(a) of the Act requires more of a Director than to act “honestly and in good faith” as Swan submits he did. The section also requires that in discharging his duties the Director must “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances”. Swan’s confrontational inflexibility and misguided assessment of his duties as Director failed to meet this second requirement.

[47] Accordingly, as submitted by DCC 45, I find that Swan’s conduct both as Director and President of the Board breached Section 37(1) of the Condominium Act.

[48] Swan is no longer a member of the Board. However, he remains a resident of the condominium. Despite the Court finding that he breached his duties as Director, I decline to grant the permanent and interim injunctions sought by DCC 45 that Swan refrain from having any direct or indirect contact with members of DCC 45’s Board, it’s employees, Tammy Goan, Letitia Wise, Sam Metham, and further that he be prohibited from entering onto the units of the aforementioned parties and the property of MCD and its principal.

[49] This relief as sought by DCC 45 is too sweeping and would paint Swan with a “scarlet letter” while remaining a resident of the condominium. However, it should not be construed that this finding gives Swan license to disrupt the proper management of the condominium and its occupants. Should similar conduct continue, if necessary, such conduct can be appropriately addressed and deterred by this and other Courts.

Swan’s Cross-Application

[50] Swan submits that Tammy Goan and Letitia Wise as Directors breached Section 37(1) of the Condominium Act and seeks a declaration finding the same. He seeks an order that they be removed as Directors of DCC 45 and that he be reinstated as Director and President. In the interim, he seeks an order that DCC 45 appoint an interim Director for the purposes of achieving a quorum, until such time as an owner’s meeting be convened and new directors elected.

[51] Regarding Goan and Wise, Swan seeks an additional declaration that they and DCC 45 have unfairly prejudiced him and disregarded his interests, this conduct amounting to oppression contrary to Section 135(1)(2)(3) of the Condominium Act.

[52] Swan seeks two additional orders, namely that the Defendant, Catherine Debbert, the principal of the MCD return all DCC 45’s property, documents, and chattels to DCC 45; and an order directing DCC 45 to abide by the Condominium Act, Declaration and By-laws that inform DCC 45.

[53] The last two orders sought by Swan require only brief review. I have already found that the property management contract between DCC 45 and MCD is valid and binding. Therefore, I dismiss Swan’s application that MCD return all of DCC’s property, documents, and chattels to DCC 45. Additionally, for reasons to follow, no order is required that DCC 45 abide by the Act and its own declaration and bylaws.

[54] In submitting that Goan and Wise as Directors breached Section 37(1) of the Act, Swan argues 37 grounds. I have reviewed and considered them all. Many of the grounds allege procedural and technical breaches of the By-law and the Act by Goan and Wise. As numerous as those grounds are, in light of Swan’s global submission that the bad faith and dishonesty of Goan and Wise successfully led to his improper removal from the Board, a review of each ground raised is not required.

[55] For the following reasons, I reject Swan’s submissions that Goan and Wise breached Section 37(1) of the Act.

[56] I have already found that Swan as Director breached Section 37(1) of the Act placing the management of the condominium at risk. Section 37(1) provides the grounds that protect the interests of the corporation and its unit owners.

[57] Sections 46(1), (2), (3), and (4) of the Act provides unit owners the authority to convene a meeting including a meeting for the removal of a Director. I reject Swan’s submission that in disseminating correspondence to unit owners seeking his removal from office and in relying on the grounds as set out in Section 37(1), Goan acted “dishonestly and in bad faith”. Goan did no more than cite the very language of Section 37(1) in seeking Swan’s removal. The issue whether those grounds constitute libel as submitted by Swan is before another court to consider.

[58] I reject Swan’s submission that the September 17, 2009 meeting for his removal as Director did not comply with the procedural requirements of Section 46. I am satisfied that proper notice was provided, that the required number of unit owners supported the call of the meeting, and despite Swan’s strident and objectionable conduct at the meeting, his removal from office was procedurally proper. I reject his submission that Goan conspired with others to take over the September 17 meeting and orchestrated an illegal vote for his removal.

[59] Having already found that the by-laws provided the Board the authority to contract out property management services, I reject Swan’s submission that Goan, and Wise as Directors, breached Section 37(1) by transferring those duties to MCD.

[60] With respect to Letitia Wise, Swan’s contention that she “acted dishonestly and in bad faith” by circulating defamatory literature seeking his removal from office, that she did not properly notify the corporation of her intention to run for office, and that she was elected at an illegally constituted meeting for the position of Director; I find these assertions to be as self-serving and baseless as Swan’s allegations against Goan. Wise did no more than seek Swan’s removal as Director and herself be elected at a properly constituted meeting for that purpose. There is no evidence in which to find any bad faith or procedural misconduct by Wise as alleged by Swan.

[61] As Goan and Wise are no longer members of the Board, Swan’s requested relief that they be removed from their positions is moot. Further, having found no procedural errors in Swan’s removal from the Board, Swan’s submission that he be reinstated as Director and President, and that in the interim a Director be appointed for the purposes of convening a meeting for the election of Directors, is also dismissed.

[62] Lastly, I reject Swan’s submissions that either DCC 45 or MCD treated him in an oppressive manner contrary to Section 135 of the Act.

[63] Section 135 of the Act in part states:

(1) An owner, a corporation, a declarant or a mortgagee of a unit may make an application to the Superior Court of Justice for an order under this section.

Grounds for order

(2) On an application, if the court determines 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 interest of the applicant, it may make an order to rectify the matter.

[64] The conduct complained of in Section 135 must fall under one of three categories:

(1) To be oppressive it must be coercive or abusive, or conduct amounting to “an abuse of power which results in an impairment of confidence in the probity with which the company’s affairs are being conducted.”

(2) Unfair prejudice “has been found to mean a limitation or an injury to a complainant’s rights or interests that is unfair or prejudicial.”

(3) Unfair disregard is “to ignore or treat the interests of the complainant as being of no importance.” (Hakim v. Toronto Standard Condominium Corp. No. 1737 [2012] O.J. No. 21 Ont. Superior Court of Justice paras. 32-35)

[65] The test of find oppression must meet two requirements. Firstly, it must be demonstrated that there has been a breach of reasonable expectations. Only if that test is met, must the court consider whether the conduct complained of amounts to “oppression”, “unfair prejudice”, or “unfair disregard”. (Hakim supra para 42)

[66] I find that Swan has not made out the first requirement, namely a breach of reasonable expectations. Swan’s submission that he was attacked for being a whistle blower and singled out for different treatment by the other Directors because of his determination to enforce the by-laws and provisions of the Act is groundless. His further submission that individuals associated with the Board conspired to improperly remove him from office is equally without merit. As held in Hakim supra para 40:

It must be recognized that the Board is charged with the responsibility of balancing the private and communal interests of the unit owners, and their behaviour must be measured against that duty. The court does not look at the interaction between the Board and the applicant in isolation. The conduct of the corporation must be viewed in light of the behaviour of the applicant.

As already found, Swan’s inflexible and strident interpretation of the duties of the Board put the proper management of the condominium at risk.

[67] For these same reasons, Swan’s further submission that he was the recipient of oppressive treatment when, after refusing to forward his common expense cheques to MCD directly, a lien was put on his condominium with a threatened power of sale of the unit, is also dismissed.

[68] All unit owners were instructed to either forward their common expense cheques to MCD or to arrange to have the funds taken directly out of their bank accounts. Despite those instructions, Swan insisted that the by-laws mandated that the deposits only be made to the Corporation. As a result, he deposited his June through September 2010 common expense cheques with Letitia Wise, then a Board member of DCC 45. Those cheques were returned to Swan but not forwarded by him to MCD. As a result, a lien was placed on Swan’s unit but later vacated after the payments were received by MCD.

[69] Section 135 protects legitimate expectations and not individual wish lists (Hakim, supra para. 38), or as in the present matter, individual agendas. Having found no breach of Swan’s reasonable expectations either as an Officer of the Board or as a unit owner, it is not necessary to consider the second test whether the conduct complained of amounts to “oppression”, “unfair prejudice” or “unfair disregard”.

[70] Therefore, Swan’s claim for oppression is dismissed.

[71] If the parties cannot agree on costs, the Plaintiff DCC 45 is to forward to the Court to the attention of the Trial Coordinator written submissions within 30 days of release of this Judgment. The Defendant, Swan, shall have 15 days thereafter to respond. The Plaintiff shall have 10 days thereafter to Reply.

The Honourable Mr. Justice A. Sosna

DATE RELEASED: June 15, 2012