Court File and Parties
COURT FILE NO.: CV-21-00659451
DATE: 20211001
ONTARIO SUPERIOR COURT OF JUSTICE
RE: BOND LAKE CAPITAL GROUP INC. et al., Applicants
-and-
BLAKE et al, Respondents
BEFORE: F.L. Myers J.
COUNSEL: Stephen Brunswick and Jennifer J. Lake, for the applicants.
John David Martin, for the respondent Denise Audrey Blake.
HEARD: September 29, 2021
ENDORSEMENT
Background
[1] The applicants move for an order holding the respondent Denise Audrey Blake in contempt of court due to her failure to comply fully with the terms to which she agreed in a consent order dated June 7, 2021.
[2] For the reasons that follow, I find that it is not necessary or appropriate to hold Ms. Blake in contempt of court at this time. The remedies sought against her flow as liquidated damages pursuant to the terms of the consent order itself and as costs. I can also address the one outstanding matter of performance without resort – yet – to contempt proceedings.
Facts
[3] The case involves YRCECC 1219, a common element condominium corporation in Richmond Hill. YRCECC 1219 holds the common elements for two groups of units. There are 12 units together at 9 Old Colony Road and another 99 units at 15 Old Colony Road.
[4] Denise Audrey Blake was the president of the condominium until recently. She lives at 9 Old Colony Road.
[5] It appears that, for a number of years, water charges have been billed to unit owners in such a way that the owners at 9 Old Colony have paid more per volume measure of water used than did the owners at 15 Old Colony Road.
[6] In 2020 the board was looking installing individual water meters at each unit and other questions concerning the fairness of historical water charges. There is no evidence supporting Ms. Blake’s assertion that the board made a decision by resolution at a duly called meeting to implement any change in the pre-existing process. But the need to discuss and study the issue were plainly on the table in 2020.
[7] In January, 2021, Ms. Zhou resigned from the board leaving it without a quorum. In fact, she left Ms. Blake as the sole director.
[8] Ms. Blake purported to appoint a replacement director. However, as confirmed in the consent order, as set out below, Ms. Blake has agreed that the appointment was void as she did not have a quorum to authorize it. It is not open to Ms. Blake to contest that issue now.
[9] Ms. Blake then proceeded as if she was entitled to conduct the business of the corporation. There are no minutes of any properly constituted board meetings or resolutions for the following:
[10] Ms. Blake decided to charge until owners at 15 Old Colony about $55,000 in the aggregate to make up for prior water charge inequities. Ms. Blake retained Mr. Martin to act for the condominium to register liens against the applicants’ units for their share of the water charges that she decided to reclaim from the owners at 15 Old Colony.
[11] Although she did not disclose this until later, as also discussed below, Ms. Blake also decided to refund about the same aggregate sum of $55,000 to nine of the owners at 9 Old Colony to address her view of the proper resolution of the water issue. (Apparently the three other units at 9 Old Colony are tenanted and Ms. Blake did not decide how they were to be dealt with).
[12] Ms. Blake then paid out over $7,000 to each of the nine owners at 9 Old Colony including herself. As funds have not been collected from the owners in the other building, to fund the payments, Ms. Blake withdrew about $55,000 from the statutory reserve fund and deposited it into the condominium corporation’s operating account. She then used those funds to make the payments.
[13] Mr. Martin fairly concedes that the funds paid out of the operating account by Ms. Blake to herself and the others in her building were directly traceable to the condominium’s reserve fund.
[14] Ms. Blake also tried to retain Fine & Deo, a defunct law firm that used to specialize in condominium law, to act for the corporation in response to complaints by the applicants who had been resisting her proposed changes for some time. Ms. Blake gave the lawyers a $5,000 retainer that she also took from the corporation’s statutory reserve fund. The law firm ultimately was not retained and it may have refunded $2,500 to the condominium corporation.
[15] Ms. Blake also retained a paralegal, Mr. Barnabic, to assist the condominium corporation with proceedings brought by the applicants before the Condominium Authority Tribunal.
[16] While both Mr. Barnabic and Mr. Martin were ostensibly retained by the condominium corporation, much of this proceeding has been aimed at Ms. Blake personally. The corporation is named as a respondent to bind it. But the applicants seek no relief against it. The applicants asserted that Ms. Blake improperly withdrew corporate funds to retain counsel for herself personally. Mr. Barnabic and Mr. Martin are aware of the issue and will deal with their billings in due course.
[17] The applicants make the more fundamental point that without a functioning board of directors, Ms. Blake had no authority to carry on the busines of the corporation or to retain or use corporate funds to pay any lawyers. Whether she had authority as president to manage and pay for the day-to-day operations and whether this included retaining counsel is not before me in this contempt of court proceeding.
[18] Mr. Barnabic testifies to having a great deal of experience in the condominium industry. He is the author of a book titled The Condo Bible. He says that where a reserve fund appears to be overfunded, condominium corporations often remove excess funds. He does not claim however that a president has unilateral authority to use funds in the reserve fund for purposes beyond the statutory purposes with no board resolution or notice to owners under s. 97 of the Condominium Act, 1998. Despite Ms. Barnabic’s evidence that funds can in some circumstances be withdrawn from an overfunded reserve fund, Ms. Blake has no evidence to show that she complied with any of the statutory requirements to reduce the corporation’ assets let alone to remove and spend trust funds from the reserve fund.
[19] I do not need to decide whether any of these listed acts taken by Ms. Blake was unlawful. Between the proceedings before the tribunal and then these court proceedings and the weight of responsibility of management that she had assumed, Ms. Blake came to find the acrimony overwhelming. With assistance from Mr. Martin, she agreed to settle this application and back away from management.
[20] The parties negotiated the wording and agreed on a consent order that I signed on June 7, 2021. Mr. Martin consented on behalf of both respondents Ms. Blake and the condominium corporation.
[21] The important terms of the order for today’s purposes are:
THIS COURT ORDERS THAT, effective June 7, 2021, Denise Audrey Blake and Havjin Haghghoo shall be removed from the Board of Directors of York Region Common Elements Condominium Corporation No. 1219 ("YRCECC 1219"), the latter on the basis that there was no quorum of the Board to appoint him.
THIS COURT ORDERS the Board of Directors for YRCECC 1219 shall consist of Kirill Kalinitchenko for a three year term commencing on June 7, 2021 and Yan Chen for a two year term commencing on June 7, 2021. As YRCECC 1219 is a 3 person Board, Kirill Kalinitchenko and Yan Chen shall appoint a third Director for a one year term in accordance with the Condominium Act.
…
THIS COURT ORDERS THAT by no later than 5 p.m. on June 9. 2021, Denise Audrey Blake shall provide the password for the YRCECC 1219 Email Address of infoyreecc1219@gmail.com, which password will thereafter be changed by the remaining Board Members, and Denise Audrey Blake undertakes not to access or use the YRCECC Email Account or Email Address thereafter.
THIS COURT ORDERS THAT, by no later than 5 p.m. on June 9. 2021, Denise Audrey Blake shall provide the Applicants with a sworn Statutory Declaration deposing that:
a) during her tenure as a Board member of YRCECC 1219 she did not appropriate, direct, use or transfer YRCECC 1219 funds for her personal benefit, or for the personal benefit of any other individuals or companies;
b) during her tenure as a Board member she is not aware of any financial impropriety with respect to YRCECC 1219; and
c) she understands and acknowledges that the Applicants are relying upon the Statutory Declaration to resolve the Application.
13.THIS COURT ORDERS that the Notices of Lien dated March 21, 202 [ ("Notices") in relation to the 9 units owned by Bond Lake Capital Group Inc, which were sent out on Denise Audrey Blake's instructions are deemed invalid and no liens may be registered in relation to those Notices. Bond Lake Capital Group Inc. shall provide a copy of this Court Order to its mortgagees.
- THIS COURT ORDERS THAT if Denise Audrey Blake fails to comply with any term of this Order, or provides any information which is later revealed to be inaccurate or untrue, the Applicants shall be entitled to immediately and without notice have Judgment issued against her personally for payment in the amount of $125,000.00 payable to Bond Lake Capital Group Inc. for costs of the Application and this Court Order shall suffice as a Consent to Judgment and the Applicants shall be entitled to pursue enforcement immediately thereafter, in addition to any other available remedies.
18.THIS COURT ORDERS THAT, provided there is full compliance with this Order, the Application shall be discontinued without costs and the August 10, 2021 hearing date shall be vacated. [Bolded emphasis added.]
[22] The consent order reflects an agreement between the parties to settle the case. The liens against the applicants’ units are invalidated. Ms. Blake resigns and a new board is appointed. Ms. Blake agreed to turn over the email account, other records and bank accounts (that I did not mention above), and to swear a declaration that she took no corporate funds for her personal benefit.
[23] What followed is unfortunate. First, although the terms of the statutory declaration had been negotiated with counsel, agreed to, and enshrined in a court order on consent, Ms. Blake, with legal advice, determined that she could not sign the declaration as agreed and ordered. After the order was made, Ms. Blake disclosed to the applicants the payment of $55,000 to herself and the other eight unit owners at 9 Old Colony that she made with funds initially removed by her from the reserve fund. She feared that the applicants would see this as a transfer of funds “for her personal benefit”. She therefore refused to sign the declaration that she had not taken funds to her benefit.
[24] Mr. Martin tried to negotiate a term to have Ms. Blake say that she did not benefit “improperly” as she was wiling to swear that she properly paid the trust money to herself. The applicants did not agree.
[25] Many days later, well past the agreed and ordered deadline, Ms. Blake provided the sworn declaration. But now it is apparent that it is false at least in respect to the $7,000 that she took.
[26] The applicants argue that Ms. Blake committed contempt of the order by being late with her statutory declaration. They also argue it is a contempt of court that the declaration provided is false. Or, arguably, Ms. Blake was in contempt by entering into the consent order knowing that she could not perform or at least not truthfully so.
[27] As a separate issue, Ms. Blake agreed to provide the password to the corporation’s email account so it can be changed over to new management. Ms. Blake agreed as well that she would not access the account thereafter.
[28] Ms. Blake initially provided a wrong password. By the time she provided the correct password, Google had locked the account due to too many attempts to log-in having been made with wrong credentials. Google required Ms. Blake to utilize a two-step security protocol to regain access to the account.
[29] At first, Ms. Blake refused to provide any further information needed so that the new board could access the account as anticipated by the consent order. She argued that she had provided the password and that was all that was required of her.
[30] Subsequently, Ms. Blake said that the account was her personal account. She had conducted corporate business in the account but she did not want to hand over her personal account and personal emails. Under cross-examination Ms. Blake said that she did not believe that the condominium corporation needed its entire email history to carry on business.
[31] The applicants say that Ms. Blake is in breach of para 4 of the consent order. The email account is named in the corporate name (Yinfoyreecc1219@gmail.com) and is agreed in the consent order to be “the RCECC 1219 Email Address”. If Ms. Blake intermingled her own emails with the corporate account that is of no consequence under the consent order.
[32] The applicants also submit that it clear from the consent order that access is to be provided to the new board so it can change the password and that Ms. Blake is not to access the account again. The spirit of the order, if not its words, requires her to cooperate to provide access to the email account to the new board
[33] Ms. Blake accessed the account in August to send an email that is in the record. Mr. Martin had no submissions as to how she was able to do so or why she did not turn the account over from June until then. Sometime after early August, Ms. Blake claims that the email account was hacked so she cannot access the two-step authentication or turn the account over to the new board.
[34] There is no evidence of any efforts by Ms. Blake or others on her behalf to engage with Google to regain access to the account.
Contempt
[35] The parties agree on the law. The three step test from Carey v Laiken, [2015] 2 S.C.R.17 governs. The principal goal of civil contempt proceedings is to coerce compliance with the court’s order.
[36] The order is clear. In my brief endorsement accompanying the consent order, I emphasized the need for timely performance by Ms. Blake as she had agreed. I wrote:
The parties settled and have presented a consent order that provides for the regularization of the management of the business and affairs of the condominium. Ms. Blake has taken on disclosure obligations that should be met on a timely basis in order to avoid further proceedings.
[37] I said this because I recognized the need to strike while the iron was hot in light of the personalities involved. Everyone acknowledged the difficulties being experienced by Ms. Blake that she was finding personally overwhelming. The risk of her changing her mind or behaving erratically was apparent and I urged her to make the necessary disclosures to comply with the settlement as she had agreed quickly.
[38] Mr. Martin confirms that Ms. Blake knew of the terms of the order.
[39] There is no doubt about Ms. Blake’s intentionality in falling to perform. Despite her agreement to the precise words of the statutory declaration, she did not execute it or deliver it on a timely basis. Instead she made a disclosure that she could not truthfully live up to the obligation she undertook.
[40] But now, there is nothing left to do on this issue. The disclosure has been made. The statutory declaration is signed and delivered albeit late and with one apparent falsehood. Whether Ms. Blake will face liability for her removal of funds from the reserve account is not before me.
[41] There is no longer a question of coercing compliance with the court’s order in relation to the statutory declaration. The only question is whether Ms. Blake’s conduct should be found to amount to contempt of court and whether Ms. Blake should be penalized.
[42] The password issue is different. I find that the agreement as enshrined in the consent order required Ms. Blake to carry out good faith steps to provide access to the new board to the listed email account and to refrain from accessing it herself. She has not lived up to either obligation. Neither her subsequent claim that it is her personal account or that the board does not need it bear on the ongoing obligation to perform.
[43] But before holding Ms. Blake in contempt of court, in my view, it would be appropriate to bring home to her the absolute necessity that she comply. It is no longer open to her to change her mind. She made an agreement and provided for enforcement through a consent order of the court. She is bound to comply.
[44] But Ms. Blake says she cannot comply because her account was hacked. I could order her to communicate with Google to regain access to the account. That would require supervision but it is a logical first step.
[45] However, Mr. Martin advised at the hearing that Ms. Blake had a very recent head injury that has renders her unable to respond meaningfully at least for the next couple of months. Mr. Martin provided no evidence to support this statement. He did not tell his colleagues opposite about it before court so that they might have inquired further. Be that as it may, taking Mr. Martin’s statement at face value, it would be a waste of time to order Ms. Blake to comply. It would just invite further proceedings.
[46] In my view, it would be more appropriate to vest in the condominium corporation ownership of whatever rights Ms. Blake has to use the email account Yinfoyreecc1219@gmail.com. I do so and declare that the condominium corporation, its new board, and their lawyer are empowered to act in the name of Denise Audrey Blake to take all steps and do all things made necessary by Google to obtain access to the email account and to alter its password and access particulars. If counsel needs assistance dealing with Google, I may be contacted on notice to Google.
Liquidated Damages
[47] Para. 18 of the consent order provided for a dismissal of the proceedings without costs in the event that the settlement was implemented as written. That represented a significant compromise by the applicants and ought to have been a significant carrot to encourage Ms. Blake to perform.
[48] In para. 15, Ms. Blake agreed to a liquidated damages payment of $125,000 as a partial reimbursement of the applicants’ costs in the event that she failed to comply with the consent order as agreed and ordered. There is no doubt that the costs are due under the terms of the consent order.
[49] The costs payment is not a sentence for contempt of court. I have not held Ms. Blake in contempt. There is no need for a sentencing hearing. I am simply enforcing a settlement agreement.
[50] There is no basis for Ms. Blake to deny that the amount was a genuine pre-estimate of the loss suffered by the applicants. It does not defray their full costs. Moreover, I can see just from the material filed how difficult this proceeding has been due in large measure to Ms. Blakes’ conduct in her overwhelmed state. I have no reasons to doubt the reasonableness of the payment amount as agreed with counsel on both sides.
Discretion
[51] The parties agree that the law provides that a contempt of court finding is a last resort. Even where, as here, the three part test is made out beyond a reasonable doubt, the court still considers whether the case is one that needs to be dealt with by jumping straight to DEFCON 1.
[52] In my view, this case is not yet one that ought to be resolved by a contempt finding. As noted at the outset, the relief sought by the applicants, the $125,000 payment for prior costs and the costs of this motion process are both available without a contempt finding. Moreover, Ms. Blake’s emotional state would normally demand that she be given at least one opportunity to comply with a stern and clear warning.
[53] But here, there is no compliance issue remaining on the statutory declaration as discussed above. By vesting Ms. Blakes’ interest in the Google email account in the corporation and empowering it to act on her behalf with Google, there should be no more need for her to take active steps to comply.
[54] Ms. Blake should understand clearly and distinctly that she is prohibited from doing anything or having anyone on her behalf do anything that interferes in any way with the efforts of the applicants, the new board, the condominium corporation, or counsel from having the email account transferred from her to the corporation.
[55] Nothing in this order reduces the applicability of the terms of the consent order. Ms. Blake remains ordered to comply with the various disclosure terms and to provide access to the email account as agreed.
[56] Nothing herein limits the rights, if any, of the condominium corporation or anyone from acting upon the movements of funds from the condominium corporation’s reserve fund by Ms. Blake to fund payments to legal advisors and unit owners at 9 Old Colony.
Costs
[57] The applicants may deliver no more than five pages of costs submissions through the Civil Submissions Online portal and by uploading them to Caselines by October 8, 2021. Ms. Blake may respond in the same manner by no later than October 15. Parties may also file any offers to settle on which they rely for costs.
F.L. Myers J.
Date: October 1, 2021