Irving Investments Limited v. York Condominium Corporation No. 21

COURT FILE NO.: CV-21-00669570-0000

DATE: 2022-11-24

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: IRVING INVESTMENTS LIMITED, Applicant

AND:

YORK CONDOMINIUM CORPORATION NO. 21, Respondent

BEFORE: Madam Justice A.P. Ramsay

COUNSEL: Jonathan H. Fine, for the Applicant

Megan Mackey, for the Respondent

HEARD: April 20 and 21, 2022

ENDORSEMENT

I. Nature of the Relief

[1] The applicant, Irving Investments Limited (“the applicant”), commenced this application for, inter alia, an order for oppression remedy relief pursuant to s. 135 of the Condominium Act, 1998, S.O. 1998, c. 19, on the basis that an amendment to the declaration of the respondent condominium corporation, York Condominium Corporation No. 21 (“YCC 21”), is oppressive, unfairly prejudicial, or unfairly disregards the applicant’s interests. In the alternative, the applicant seeks $670,000 in damages if the declaration were amended to change the cost sharing of the unit owners.

II. Overview

[2] The late Irving Ungerman (“Mr. Ungerman”) was a developer of the residential condominium project located at 2600 Bathurst Street. When it was built in 1970, it was lauded as the first of its kind: a luxury condominium. The condominium was registered on October 13, 1970 (“the Declaration”), thereby creating the non-profit condominium corporation, YCC 21, pursuant to the Condominium Act, R.S.O. 1970, c. 77 (the 1970 Act) for the purpose of managing the condominium, consisting of twelve (12) residential dwelling units together with its appurtenant common interest. Of the five limited companies who were the declarants, one was Irving Ungerman Limited.

[3] The declarants transferred the units over to the unit owners, including Irving Ungerman Limited, who purchased the Penthouse unit (“the unit”). Since the beginning, the unit has been owned either by Mr. Ungerman, Mr. Ungerman and Sylvia Ungerman, or one of his companies. In 2008, title to the unit was transferred to Irving Investments Limited (the applicant), the current owner. Mr. Ungerman’s widow currently lives in the unit.

[4] The Condominium has 13 floors and 12 units. All units, except the Ungerman unit, occupy one floor plate (a full floor) and are the exact same size. The applicant’s unit occupies the two top floors and has two floor plates. The applicant disputes that its unit has two floor plates because of the existence of a huge ceiling, and a stairway up to a ramp. Counsel for the applicant indicated that they did not know the difference in size to the other units.

[5] YCC 21 proposed several amendments to the Declaration, which have now been consented to by 90% of the unit owners. The amendments are now in place and are in abeyance pending a determination of the court as to whether the new costs sharing amendment, which is the only portion that the applicant objects to, is oppressive. In short, YCC 21’s amendment has altered the percentage cost sharing of common expenses requiring all unit owners to contribute to the common expenses according to the size of each unit.

III. Background

[6] Irving Ungerman Limited is one of the declarants of the condominium.

[7] YCC 21 was registered on October 13, 1970. There are five corporate declarants in total.

[8] Schedule “C” of YCC 21’s Declaration sets out each unit’s percentage contribution to common expenses and percentage common interest. Pursuant to Schedule C of YCC 21’s Declaration, each unit has a percentage common interest equal to 7.6923% except for the applicant’s unit, which has a 15.3847% ownership interest. Each unit owner is obligated to contribute to common expenses in the amount of 8.3333%, except for a slight deviation with respect to the applicant’s unit which is noted as 8.33337% which ensures the numbers add up to 100%. The section reads as follows:

Each owner shall contribute to the common expenses in the proportions shown opposite each unit number as set out in Schedule “C” attached hereto.

[9] YCC21’s board approved an amendment to the Declaration. The board then sought the consent of the owners in accordance with s. 107 of the Condominium Act, 1998; Specifically, s. 107(2)(d) requires that, to amend the Declaration, YCC 21 must obtain the consent in writing of the owners of at least 90 per cent of the units at the time that the board approved the proposed amendment. The provision refers to s. 7(2)(d), which provides that a declaration must include a statement of the proportions, expressed in percentages allocated to the units, in which the owners are to contribute to the common expenses.

[10] Initially failing to secure the 90% threshold consent by unit owners, YCC 21 resorted to the court. By Notice of Application dated April 1, 2021, YCC 21 sought an order pursuant to s. 109 of the Condominium Act, 1998 to amend Schedule “C” of its Declaration to change the percentages of contribution to common expenses with respect to all units. Section 109 (1) of the Act provides that “(t)he corporation or an owner may make an application to the Superior Court of Justice for an order to amend the declaration or description.” YCC 21 took the position that the proposed amendment was to correct an inconsistency in the Declaration.

[11] The applicant issued a Notice of (Counter) Application on October 1, 2021, requesting an order for oppression remedy relief pursuant to s. 135 of the Act.

[12] The applicant’s counter application was to be heard together with the respondent YCC 21’s application and, as a result, the evidence from both applications were to be used at the hearing, with cross examinations on affidavits common to both hearings. However, YCC 21 having obtained the consent of eleven of the twelve owners of the units abandoned its application.

[13] In turn, the applicant amended its counter application to seek, among other things, an order restraining YCC 21, an order restraining YCC 21 from proceeding with the amendment, a declaration that the amendment was ineffective to amend the original percentage proportion of contribution to common expenses for all units, and an order permanently restraining YCC 21 from further attempts to amend the Schedule “C” percentages of the Declaration in so far the applicant’s unit was concerned, and, in the alternative, a claim for damages.

[14] YCC 21 ultimately agreed to await the outcome of the application before implementing the new cost sharing amendments in the amended declaration.

IV. The Issues

[15] At issue is whether the amendment, which would result in a doubling of the applicant’s contribution to the common expenses, is oppressive and unfairly prejudicial to the applicant. And, if so, whether the applicant is entitled to the remedy of damages if the amendment was made.

V. Position of the Parties

a. Position of Applicant

[16] The applicant submits that the amendment would result in 1) a doubling of its common expenses from about $39,600 to about $73,11043, 2) a corresponding benefit to the other eleven owners of units, and 3) a loss of market value of the unit of about $670,100. 44. The applicant argues these impacts are oppressive, unfairly prejudicial to the applicant and/or unfairly disregard the applicant’s interests.

[17] The applicant submits that a majority of the unit owners have ganged up on the minority in changing the Schedule “C” percentages to their benefit and to the detriment of the applicant, notwithstanding that the majority accepted title to their units and the Schedule “C” percentages without objection.

[18] The applicant argues that a declarant has total control over a condominium project. The applicant indicates that there was no, and still is no, statutory guidance as to the manner in which a declarant determines the percentages of contribution to common expenses paid by a unit owner, or the percentages of common interests. The applicant submits that there was not, and still is not, any requirement under the condominium legislation that such percentages have any direct correlation with the actual cost of maintaining and repairing the common element areas of the condominium or otherwise. The applicant further submits that there was not, and still is no, requirement under the condominium legislation that the contribution to the common expenses of a unit has any direct correlation with its common interests with respect to all the units. Further, the applicant submits that while a condominium corporation’s by-laws and rules must be reasonable, there is no similar requirement for a declaration.

[19] The applicant submits that this determination was solely in the discretion of the declarant. The applicant submits that it is the declarant, as developer of the property, who defines the content, character and structure of the condominium project, through the filing of the declaration creating the condominium corporation. The applicant further submits that, in this case, the original determination of the Schedule “C” percentages was in the total discretion of YCC 21’s declarant. The applicant further points to the other factors in support of its position:

[20] The applicant filed a factum objecting to a large swath of the evidence filed by the respondent.

b. Position of YCC 21

[21] YCC 21 submits that the condominium was conceived of, developed, and built by the late Mr. Ungerman, who never let go of the condominium until his death. After it was built, the building was registered as York Condominium Corporation No. 21, with one of Mr. Ungerman’s companies as a declarant. Eleven of the twelve units are about the same size. The unit owned by the applicant is about twice the size of the other units. All owners paid around the same common expense fees. YCC 21 amended the Declaration after obtaining the consent of a super majority of unit owners to do so.

[22] YCC 21 states that the current cost-sharing scheme is inequitable as the applicant’s unit occupies two floor plates, yet the applicant pays a half-share of condominium expenses.

[23] YCC 21 submits that ownership shares are tied to the area occupied by each unit, with all other condominium units having only a 1/13 (7.5%) ownership interest in the condominium whereas the applicant has a 2/13 (15%) ownership interest. It argues the allocation of ownership interest to all units is equitable and consistent with the size of each unit, but the percentage of common expense contributions is not, as each unit pays the same share of common expenses, that is, 8.33%, regardless of the size of the unit.

[24] YCC 21 argues that requiring unit owners to pay common expenses in accordance with the unit size or ownership interest is not oppressive. It disputes the applicant’s claim for damages which it denies would result from any amendment, especially as the Condominium is a luxury condominium, and in the circumstances where the applicant’s unit has paid, what it maintains, is a half-share of common expenses for more than half a century.

[25] YCC 21 submits that Mr. Ungerman controlled much of the decisions made and the management of the condominium. Mr. Ungerman had effectively been the property manager of the Condominium, managing the day-to-day operation of the building. He stayed on the board as director and manager until his death. YCC 21 obtained a signed reserve fund study, which complies with the Act, only after Mr. Ungerman died. YCC 21 argues that it was only after his death that the cost sharing was uncovered. YCC 21 had a major restoration project to repair balconies, which extended over five years. The reserve fund was depleted. YCC 21 had to levy a special assessment.

[26] YCC 21 argues that the proposed cost-sharing distribution accords with ownership interest and points to the fact that in the event that there were to be insurance proceeds paid out, the applicant would receive almost twice as much of the insurance proceeds, which reflects its ownership interest.

VI. Disposition

[27] While it may have been reasonable for the applicant to expect that the cost sharing arrangement would continue indefinitely, I do not find that the amendment to the Declaration to apportion the cost sharing of the common expenses based on the size of the unit (which mirrors the unit’s ownership interest in the condominium corporation), is oppressive, unfairly prejudicial, or unfairly disregards the applicant’s interest.

[28] I would dismiss the application and the claim for damages for the reasons set out below.

VII. Analysis

[29] The applicant seeks remedies under s. 135 of the Condominium Act, 1998, which came into force in 2001. Sections 135(2) and (3) provide:

(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 interests of the applicant, it may make an order to rectify the matter.

(3) On an application, the judge may make any order the judge deems proper including,

(a) an order prohibiting the conduct referred to in the application; and

(b) an order requiring the payment of compensation.

[30] In McKinstry v. York Condominium Corp. #472 (2003), 2003 CanLII 22436 (ON SC), 68 O.R. (3d) 557, at para. 33, Juriansz J., as he then was, commented on powers of the then relatively new provision:

This new creature of statute should not be unduly restricted but given a broad and flexible interpretation that will give effect to the remedy it created. Stakeholders may apply to protect their legitimate expectations from conduct that is unlawful or without authority, and even from conduct that may be technically authorized and ostensibly legal. The only prerequisite to the court’s jurisdiction to fashion a remedy is that the conduct must be or threaten to be oppressive or unduly prejudicial to the applicant, or unfairly disregard the interests of the applicant. Once that prerequisite is established, the court may ‘make any order the judge deems proper’ including prohibiting the conduct and requiring the payment of compensation. This broad powerful remedy and the potential protection it offers are appropriately described as ‘awesome’. It must be remembered that the section protects legitimate expectations and not individual wish lists, and that the court must balance the objectively reasonable expectations of the owner with the condominium board’s ability to exercise judgment and secure the safety, security and welfare of all owners and the condominium’s property and assets.

[31] Under the 1970 statute, the information to be disclosed in a declaration was much more limited. The relevant section provided, in part, as follows:

3. (1) A declaration shall not be registered unless it is executed by the owner or owners of the land and interests appurtenant to the land described in the description and unless it contains,

(a) a statement of intention that the land and interests appurtenant to the land described in the description be governed by this Act;

(b) the consent of all persons having registered encumbrances against the land or interests appurtenant to the land described in the description;

(c) a statement, expressed in percentages, of the proportions of the common interests;

(d) a statement, expressed in percentages allocated to the units, of the proportions in which the owners are to contribute to the common expenses; and

(e) an address for service.

(2) In addition to the matters mentioned in subsection 1, a declaration may contain,

(a) a specification of common expenses;

(3) The declaration may be amended only with the consent of all owners and all persons having registered encumbrances against the units and common interests.

[32] Pursuant to the Act at the time, the declaration did include a statement setting out the percentages of proportions of the common interests as well as the percentage contribution of the owners of the common expenses. The former Act required the consent of all owners and mortgagees to amend the declaration. Unlike the current statute, discussed below, the 1970 Act is silent with respect to the requirement to disclose any difference in the size of the unit where the contribution to the common expenses is the same. On this application, the applicant disputed that the unit was almost twice the size of the other units but could not advise the court of the size of the unit.

[33] Under the Condominium Act, 1998, the relevant provisions are contained in section 7:

7 (1) A declaration shall not be registered unless the declarant has executed it in the manner prescribed by the Act under which it is to be registered.

(2) A declaration shall contain,

(d) a statement of the proportions, expressed in percentages allocated to the units, in which the owners are to contribute to the common expenses

[34] The applicant relies on King Day Holdings Ltd. v. the Owners, Strata Plan LMS 3851, 2020 BCCA 342, to support its argument that the amendment to the declaration is unfair. I do not find King Day helpful, as it examined a different statutory regime that allowed a strata corporation unit owner to apply to the court under s. 164 of the Strata Property Act, S.B.C. 1988, c. 43, to determine if an action was “significantly unfair”. The jurisprudence in Ontario establishes that the test for oppression under the Condominium Act, 1998, is the same as the test for oppression in the corporate context.

[35] In BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, [2008] 3 S.C.R. 560, the Supreme Court described the two-part test for oppression in the corporate law context. This test has been applied in considering s. 135 of the Condominium Act, 1998. First, the plaintiff is first required to show that there has been a breach of reasonable expectations. Second, the plaintiff must establish that the conduct is oppressive, unfairly prejudicial or unfairly disregards the interests of the claimant.

[36] In BCE Inc., at para. 72, the Supreme Court of Canada indicated that to determine whether reasonable expectations exist, courts can consider factors including:

[G]eneral commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders.

[37] In BCE Inc., at para. 58, the Supreme Court of Canada indicated that: “oppression is an equitable remedy. It seeks to ensure fairness — what is ‘just and equitable’. It gives a court broad, equitable jurisdiction to enforce not just what is legal but what is fair”. Consideration of the statutory regime may be a significant factor: Noguera v. Muskoka Condominium Corporation No. 22, 2018 ONSC 7278, at para. 35. In the context of whether it would be “just and equitable” to grant a remedy, the court must determine “whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue, and the entire context, including the fact that there may be conflicting claims and expectations”: BCE Inc., at para. 62.

[38] On the evidence, I find that there was a breach of the applicant’s expectation that the common expenses would remain the same as in the original declaration. However, the question is whether the expectation was reasonable having regard to the facts, the relationships at issue, and the entire context, including any conflicting claims.

[39] As noted by Matheson J. in Noguera, at para. 35, “The concept of reasonable expectations is objective and contextual. The actual expectations of a particular stakeholder are not conclusive.”

[40] And, while the caselaw also establishes that the reasonable expectations ought to be determined based on any arrangements that existed between the shareholders or unit owners of a corporation: see Naneff v. Con-Crete Holdings Ltd. (1995), 1995 CanLII 959 (ON CA), 23 O.R. (3d) 481 (C.A.); Walia Properties Ltd. v. York Condominium Corporation No. 478, 2007 CanLII 31573, at para. 24 (Ont. S.C.), aff’d on appeal, there is a body of cases in the condominium law context which establishes that “the court must balance the objectively reasonable expectations of an owner with the condominium board’s ability to exercise judgment and secure “the safety, security and welfare of all owners and the condominium’s property assets”: Hakim v. Toronto Standard Condominium No. 1737, 2012 ONSC 404, 1 B.L.R. (5th) 159; see also McKinistry at para. 33. The percentage that the applicant is to contribute was set out in the original declaration. The applicant has been contributing the same percentage for almost 50 years. The applicant therefore had an expectation of continuing to contribute the same percentage towards the common expenses. However, the applicant’s expectation is not conclusive and there are other important considerations: the history of how the percentage was established and Mr. Ungerman’s involvement on the board and in the property management aspect of the Condominium. Mr. Ungerman, as the principal of one of the declarants (company), a board member, and hands-on property manager, had a hand in creating the cost sharing arrangement. As counsel for the applicant indicated, the declarant has sole discretion.

[41] As a declarant, Mr. Ungerman’s company was not necessarily looking out for the interest of the corporation or potential unit owners. This is best summarized by Rouleau J.A. in Toronto Standard Condominium Corporation No. 2095 v. West Harbour City (I) Residences Corp., 2014 ONCA 724, at para. 30:

In implementing the structure determined by the declarant, the initial directors are not acting as fiduciaries for the purchasers of condominium units. Their role is not to try and obtain the best possible agreement for the condominium corporation or for the purchasers of units. As explained in Tedley Homes, at p. 264, their role is to ‘organize the affairs of the condominium in the manner anticipated by the declaration and agreed to by the purchasers of the individual units’, provided of course, that the directors are acting within the limits and constraints imposed by the Condominium Act. [Emphasis added].

[42] However, the “central theme running through the oppression jurisprudence” is fair treatment: see BCE, at para. 62. Similarly, the Ontario Court of Appeal stated recently in Noguera, at para. 18, that: “At its heart, the oppression remedy is equitable in nature and seeks to ensure what is ‘just and equitable’”.

[43] As for the second part of the test, the court must consider whether the conduct complained of amounts to “oppression”, “unfair prejudice” or “unfair disregard”: BCE Inc., at para. 56.

[44] The courts have held that oppressive conduct includes conduct that is burdensome, harsh and wrongful. Unfairly prejudicial conduct has been found to include a limitation on or injury to a complainant’s rights or interests that is unfair or inequitable. Unfair disregard means to unjustly ignore or treat the interests of the complainant as being of no importance: see Niedermeier, v. York Condominium Corp. No. 50 (2006), 45 R.P.R. (4th) 182 at para. 8 (Ont. S.C.) and Consolidated Enfield Corp. v. Blair (1994), 47 A.C.W.S. (3d) 728 at para. 80 (Ont. Gen. Div.).

[45] In this case, the fact that the Condominium Act, 1998, permits YCC 21 to amend the declaration where it receives the consent of 90% of the unit owners to do so (i.e., authorized by law), does not relieve the court of determining whether the amendment would amount to oppression of the applicant’s interest.

[46] It has been held that the term “oppression” connotes an inequality of bargaining power while “unfairness” connotes an obligation to act equitably and impartially in the exercise of power and authority: Alldrew Holdings Ltd. v. Nibro Holdings Ltd. (1993), 1994 CanLII 10536 (ON SC), 16 O.R. (3d) 718 at p. 732 (Ont. Gen. Div.). In this case, the applicant’s predecessor company was one of the declarants. The applicant’s unit has been owned by Mr. Ungerman (and his wife at one time) or one of his companies. Before his death in 2015, Mr. Ungerman was involved on the board, and I accept he was also involved in some of the day-to-day management of the condominium corporation. The applicant has not advanced an argument that there is an issue of inequality of bargaining power.

[47] In Hakim at paras. 33–36, B. O’Marra J. describes what constitutes oppression, unfair prejudice or unfair disregard as follows:

[33] Oppression is conduct that is coercive or abusive. Oppression has also been described as conduct that is burdensome, harsh and wrongful, or an abuse of power which results in an impairment of confidence in the probity with which the company’s affairs are being conducted.

[34] Unfair Prejudice has been found to mean a limitation on or injury to a complainant’s rights or interests that is unfair or inequitable.

[35] Unfair Disregard means to ignore or treat the interests of the complainant as being of no importance. Niedermeier, supra, at paras. 5-8.

[36] Courts in Ontario have held that the use of the word ‘unfairly’ to qualify the words ‘prejudice’ and ‘disregard’ suggest that some prejudice or disregard is acceptable provided it is not unfair. Niedermeier, supra, at para. 9.

[48] The oppression remedy is broad and flexible, allowing any type of corporate activity to be the subject of judicial scrutiny. However, as noted in the jurisprudence, the legislative intent of the oppression remedy is to balance the interests of those claiming rights from the corporation against the ability of the corporation to manage and conduct business in an efficient manner: McKinistry, at para. 31; Hakim, at para. 37. On the evidence before me, not only was YCC 21 required to carry out a multi-year balcony restoration project which depleted its reserve fund, but it also faces increased costs associated with the maintenance of a unit that occupies two floors as opposed to one floor. It has a statutory obligation to ensure that it maintains an adequately funded reserve fund and to manage the assets of the corporation.

[49] The courts have given deference to decisions made by boards as a result of the so-called “business judgment rule”. This rule recognizes the autonomy and integrity of corporations, and the fact that directors and officers are in a far better position to make decisions affecting their corporations than a court reviewing a matter after the fact: UPM-Kymmene Corp. v. UPM-Kymmene Miramichi Inc. (2004), 2004 CanLII 9479 (ON CA), 250 D.L.R. (4th) 526 at para. 6 (Ont. C.A.); Brant Investments Ltd. v. KeepRite Inc. (1991), 1991 CanLII 2705 (ON CA), 3 O.R. (3d) 289, at p. 320 (C.A.).

[50] As the court noted in 3716724 Canada Inc. v. Carleton Condominium Corporation no. 375, 2016 ONCA 650, at para. 51:

Moreover, the rationale underlying the business judgment rule in the corporate law context is also applicable to condominium corporations. As representatives elected by the unit owners, the directors of these corporations are better placed to make judgments about their interests and to balance the competing interests engaged than are the courts. For instance, in this case the security concerns arose in part as a result of the condominium’s location, and the Board members’ knowledge of that area is clearly an advantage that they enjoy over any court subsequently reviewing their decision.

[51] A court will not second-guess a decision rendered by a board as long as it acted fairly and reasonably: Maple Leaf Foods Inc. v. Schneider Corp. (1999), 1998 CanLII 5121 (ON CA), 42 O.R. (3d) 177, at p. 191 (C.A.).

[52] A condominium board has several duties imposed by the Condominium Act, 1998. The board of directors must manage the affairs of the corporation and is obliged to oversee and manage the common elements of the condominium: s. 27(1) of the Condominium Act, 1998; Carleton Condominium Corporation, at para. 10; MTCC No. 985 v. Vanduzer, 2010 ONSC 900, at para. 28.

[53] Section 1 (1) of the Condominium Act, 1998, defines “common expenses” as “the expenses related to the performance of the objects and duties of a corporation and all expenses specified as common expenses in this Act, in the regulations or in a declaration”. Under the 1970 Act, in force when the declaration was registered, clause (j) of section 1(1) provided as follows:

(j) "common expenses" means the expenses of the performance of the objects and duties of a corporation and any expenses specified as common expenses in a declaration”. The current Act has therefore expanded to include expenses specified in the Act or in the regulation.

[54] A part of the contribution by unit owners to the common expenses is contributed to the corporation’s reserve fund. The amount that any unit owner contributes to the condominium corporation's common expenses and the reserve fund may be determined by the declaration and the corporation’s annual budget. In this case, one of Mr. Ungerman’s companies, as declarant, had a hand in setting the percentage contribution of the unit owners to the common expenses. As a member of the board, the late Mr. Ungerman also had statutorily imposed duties, including, ensuring that there was an adequately funded reserve fund. The applicant does not challenge that the reserve fund was depleted in carrying out the major repairs.

[55] In Carleton Condominium Corp. No. 279 v. Rochon (1987), 1987 CanLII 4222 at para. 37 (Ont. C.A.), the Court of Appeal noted that a condominium corporation is a creature of statute and has no greater authority than as set out in the Condominium Act.

[56] Pursuant to section 17(1) of the Condominium Act, 1998, the “objects of the corporation are to manage the property and the assets, if any, of the corporation on behalf of the owners.” Section 17(2) provides that the corporation has the “duty to control, manage and administer the common elements”.

[57] Section 27(1) of the Condominium Act, 1998, provides that: “A board of directors shall manage the affairs of the corporation.” The standard of care of the board of directors is set out in s. 37(1) and requires that the directors act honestly and in good faith in the discharge of their duties. The relevant provision states:

37. (1) Every director and every officer of a corporation in exercising the powers and discharging the duties of 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. 1998, c. 19, s. 37 (1)

[58] YCC 21 and the board of directors of the corporation must comply with the Condominium Act. The relevant section, s.119(1) of the Condominium Act, 1998, the provides that:

A corporation, the directors, officers and employees of a corporation, a declarant, the lessor of a leasehold condominium corporation, an owner, an occupier of a unit and a person having an encumbrance against a unit and its appurtenant common interest shall comply with this Act, the declaration, the by-laws and the rules.

[59] In addition, in Hakim, at para. 39, B. O’Marra J. provided some of the duties of a condominium corporation as follows:

i. The corporation has a duty to control, manage and administer the common elements and the assets of the corporation. s.17(2)

ii. the corporation has an obligation to enforce the Act, Declaration, bylaws and rules against owners and occupiers of a unit. s.17(3)

iii. The corporation, the directors, officers and employees of a corporation, a declarant, the lessor of a leasehold condominium corporation, an owner, an occupier of a unit and a person having an encumbrance against a unit and its appurtenant common interest shall comply with the Act, the declaration, the bylaws and the rules. s.119(1)

[60] A condominium corporation is statutorily required to create and maintain a reserve funds pursuant to section 93(1) of the Condominium Act, 1998. Reserve funds are defined as such based on the purpose for which they are collected. Subsection 93(2) sets out the purpose for which reserve funds are collected, and the Act expressly provides the purpose for which they can be used; that is, “reserve fund shall be used solely for the purpose of major repair and replacement of the common elements and assets of the corporation.” A condominium corporation is required by the statute to carry out periodic reserve fund studies to ensure that the reserve fund it is adequately funded.

[61] Section 94 (1) of the Condominium Act, 1998, requires the corporation to conduct periodic studies to determine whether the amount of money in the reserve fund and the number of contributions collected by the corporation are adequate to provide for the expected costs of major repair and replacement of the common elements and assets of the corporation. Section 93(4) of provides that: “The corporation shall collect contributions to the reserve fund from the owners, as part of their contributions to the common expenses.” The reserve fund is required to maintain an amount prescribed by the Act and the regulations. Where the reserve fund is underfunded or the funds are inadequate to support the expenditures under the Act, for which the funds are to be used, subsection 93(2) of the Act gives the board discretion to levy a special assessment against the units.

[62] On the evidence, it was falling concrete from balconies that necessitated urgent major restorative work and a multi-year project. The funds in the Reserve Fund were depleted to complete those balcony repairs. It was during this process that the respondent discovered that the reserve fund was underfunded. YCC 21 levied a $1,200,000 special assessment requiring each unit owner to pay $100,000, including the applicant. YCC 21’s uncontested evidence is that it discovered that there had never been a Reserve Fund Study in compliance with Condominium Act. In its discretion, the board initiated the process for amending the declaration to address what was perceived to be some inequities in the cost sharing of common expenses and to replenish the reserve fund.

[63] In Walia Properties at para. 23, Harvison Young J., as she then was, referenced the description by Audrey Loeb in explaining the meaning of the same terms in area of condominium law as follows:

…” unfairly prejudicial” more appropriately describes deception, or different treatment for what may seem to be similar categories, whether financial or otherwise. ‘Unfairly disregards,’ however, may more accurately describe an alleged failure to take into account a legitimate minority interest or viewpoint: see Audrey M. Loeb, Condominium Law and Administration, looseleaf (Scarborough, Ontario: Thomson Carswell, 1998) at 23-23. [Emphasis added].

[64] In this case, there is no deception. YCC 21 is not treating the applicant differently from other unit owners. Indeed, all unit owners are being treated the same – that is, each unit owner is now required to contribute to the common expenses based on the size of their unit. That is, similar categories of units are being treated the same.

[65] The applicant argues that there is no evidence that there is or was any error with respect to the determination of the Schedule “C” percentages, and no evidence as to how the Schedule “C” percentages were determined. The applicant submits that the other unit owners had notice of the difference. The applicant appears to be correct in its viewpoint. But the court cannot simply consider the applicant’s viewpoint in isolation. In my view, the history is also relevant in the analysis.

[66] In amending its declaration, the board of directors appears to have acted honestly and in good faith and exercised the care, diligence, and skill that a reasonably prudent person would exercise in comparable circumstances in accordance with the requirements of the Act. In doing so, the board determined that it was appropriate to treat the same “categories” of unit the same, and effectively, to treat all owners of units the same by requiring a contribution to the common expenses based on the size of the unit. On the evidence, the board appears to have taken into account the minority viewpoint of the applicant and in doing so, considered the history of how the costs sharing came to be in existence, but determined that there was a more equitable solution.

[67] The applicant maintains that there was no guidance to calculate the common expenses at the time the original declaration was registered and there is still none. The applicant relies on White Snow and Sunshine Holdings Inc., v. Metropolitan Toronto Condominium Corporation No. 561, 2017 ONSC 4558, aff’d on appeal, 2018 ONCA 196; Walia Properties Ltd., aff’d on appeal,2008 ONCA 461; and 1240233 Ontario Inc. v. York Region Condominium Corporation #852, 2009 CanLII 1 (ON SC), 57 B.L.R. (4th) 88, (Ont. S.C.), which all deal with commercial unit owners. The applicant also refers to a passage in Audrey Loeb’s text cited by Lederer J. in White Snow. The excerpt, however, was taken from the section of the book entitled “Purchasing A Commercial Condominium”, which deals with a mixed-use condominium, and in fact the applicant was a commercial unit owner.

[68] Although neither side addressed this issue, it is interesting to note that unlike the 1970 statute, in the current reiteration of the Condominium Act, 1998, it is now a statutory requirement to disclose, to potential purchasers, a difference in the contribution towards common expenses if the variation is more than 10%, for units of the same size. Clause 9 of section 72(4) describes that the declaration in such a case must include: “A statement whether the proportion, expressed in percentages, in which the owner of any unit or proposed unit is required to contribute to the common expenses differs in an amount of 10 per cent or more from that required of the owner of any other unit or proposed unit of the same type, size and design”. That requirement is telling. In my view, it suggests that the legislature wanted to ensure that there was transparency so purchasers could make an informed decision. In this case, the applicant’s unit is said to be almost twice the size of the other units. The applicant does not dispute that it has almost twice the ownership interest in the condominium corporation. In the result, if there was judgment or insurance proceeds, the applicant would be entitled to receive almost twice the amount of the proceeds as against all other unit owners, all of whom would receive the same amount due to having the exact same percentage of ownership interest.

[69] The jurisprudence establishes that the board’s balancing of the interests of a complainant under s. 135 of the Act against competing concerns should be afforded deference. If the decision reached by the board is within a range of reasonable choices, it cannot be said to have unfairly disregarded the interests of a complainant. The Act allows YCC 21 to amend the declaration, including the cost sharing, if it obtained the consent of 90% of the unit owners. In this case, YCC 21 obtained the consent of eleven of the twelve owners of units, that is over 90% of the unit owners. But that does not end the enquiry.

[70] As directed by BCE Inc., at para. 72, the court must consider the following factors:

i. general commercial practice;

ii. the nature of the corporation;

iii. the relationship between the parties;

iv. past practice;

v. steps the claimant could have taken to protect itself;

vi. representations and agreements; and

vii. and the fair resolution of conflicting interests between corporate stakeholders

[71] In 1240233 Ontario Inc., citing re Alldrew Holdings Ltd. v. Nibro Holdings Ltd. (1993) 16 O.R. (3d), at p. 718 (Ont. Gen. Div.), aff’d on appeal, Alldrew Holdings Ltd. v. Nibro Holdings Ltd., 1996 CanLII 2850 (Ont. C.A.), the court provided a non-exhaustive list of factors to consider at para. 37. The applicant relies on the factors in set out in Alldrew Holdings Ltd. set out by MacKenzie J. as follows:

(i) the history and nature of the corporation;

(ii) the type of interest affected;

(iii) general commercial practice;

(iv) nature of the relationship between the complainant and the alleged

oppressor;

(v) the extent to which the impugned acts or conduct were foreseeable;

(vi) the expectations of the complainant;

(vii) the size, structure and nature of the corporation; and

viii) the detriment to the interests of the complainant.

[72] As the applicant relies on Alldrew, the court will use the factors identified by MacKenzie J. as, for the most part, they encompass the factors set out in BCE Inc.

i) the history and nature of the corporation/ the type of interest affected

[73] These issues are dealt with elsewhere.

ii) general commercial practice

[74] The applicant argues that there are no guidelines as to how the Schedule “C” percentages are to be determined, nor is there any requirement under the Act that such percentages have any direct correlation with the actual cost of maintaining and repairing the common element areas of the condominium. The applicant has provided a Utilities Cost-Sharing Report. The author of the report was not aware that the applicant’s unit had twice as many balconies as the other units, nor other costs associated with the unit. The Utilities Report did show that applicant’s unit consumes more utilities than units half its size.

[75] During oral submission, counsel for the applicant indicated that there is no general commercial practice. In contrast, Gerald Fialkov, and deponent on behalf of YCC21, is the President of Falco Properties, a family real estate business that owns and manages residential, commercial, and industrial properties. Mr. Fialkov deposes that he has many years of experience, which is unchallenged, and indicates that costs should be paid based on the building floorplate – just like the ownership interest is calculated. In R. v. Graat, 1982 CanLII 33 (SCC), [1982] 2 S.C.R. 819, the Supreme Court of Canada held that lay witnesses may provide opinion evidence, which may include an expression of opinion or conclusion, if it is one that persons of ordinary experience may make, and the person has the ordinary experiential capacity required to draw the conclusion or make the opinion. According to Mr. Fialkov, the general commercial practice is to base the calculation on the size of the unit. Aside from challenging Mr. Fialkov’s ability to provide the opinion, the applicant has not delivered any evidence to contradict his evidence, or to support counsel’s oral submission that there is no general commercial practice.

iii) nature of the relationship between the complainant and the alleged oppressor

[76] Although the applicant is a corporation, its principal, Mr. Ungerman, now deceased, was a developer and builder of the Condominium. Mr. Ungerman’s company was a declarant. As a declarant, it was able to define the content of the Declaration. The applicant indicates in its factum that the declarants had control over the content of the declaration. The unit has always been owned by Mr. Ungerman, Mr. Irving/and Sylvia Ungerman, and/or one of Mr. Ungerman’s company.

[77] The applicant does not dispute that Mr. Ungerman was an active member of YCC21 board up until he died. He served as President of the board and its chairman. While the current president’s views on Mr. Ungerman’s management style and influence on the board and the day to day operations of the condominium corporation is largely unhelpful as Mr. Ungerman is not able to respond, there are certain aspects of the evidence before me that establish that the late Mr. Ungerman perhaps bore some responsibility, as well, for the predicament that YCC 21 found itself in after he passed away, and major repair work had to be carried out. As a member of the board, it would also have been his duty, as well as the other board members, to ensure that YCC 21 had a reserve fund that complied with the Condominium Act and was adequately funded. I accept the evidence of the current president that none had been completed. On the evidence, the underfunding of the reserve fund, which was depleted by the balcony reservation project, precipitated a $1.2-million-dollar special assessment, to be borne by the 12 units. And, even though the applicant’s unit occupied two floors, and the applicant’s unit had almost twice as much balcony as all the other units, which cost more to repair, it paid the exact same amount as all the other units.

[78] The court must not only review the interaction between the board and the applicant in isolation. The conduct of the corporation must also be viewed in light of the behaviour of the applicant: Orr v. Metropolitan Toronto Condominium Corporation No. 1056, 2011 ONSC 4876, at paras. 158-160, 165 & 166, rev’d on other grounds, 2014 ONCA 855; Hakim at para. 40.

iv) the extent to which the impugned acts or conduct were foreseeable

[79] The applicant argues that the amendment was not foreseeable. It points to the fact that, prior to the 2001 amendments to the Act, the previous legislation required the consent of all owners and of all persons having registered mortgages against the units and common elements, and the applicant expected that the Schedule “C” percentages would be honoured. I do not accept that it was not foreseeable that the Schedule “C” percentages could not be amended, even with the passage of time. While the previous amendment had a more onerous requirement to amend the declaration, nonetheless, an amendment was contemplated. It is understandable, though, that the applicant took comfort in the fact that the status quo would continue given the passage of time. Accordingly, the applicant expected the status quo to continue. Nonetheless, the current Act permits the amendment to be made, subject, of course, to the plaintiff being relieved against any oppressive conduct.

[80] In the wake of the major repairs, and the underfunding, and to balance the equitable contribution to the common expenses, which includes a contribution to the reserve funds, the YCC 21 board has moved ahead to amend the declaration. The possibility of the declaration being amended always existed, though it was more onerous under the former legislative regime. This condominium corporation has a smaller pool of owners to collect funds from to manage and carry out the business of the corporation. The Supreme Court noted in BCE Inc. that a court reviewing a board’s decision must show some deference, at paras. 40 and 111-112.

v) the expectations of the complainant

[81] As noted by Matheson J. in Noguera, at para. 35, “The concept of reasonable expectations is objective and contextual. The actual expectations of a particular stakeholder are not conclusive.” The question is whether it would be “just and equitable” to grant a remedy, and whether the expectation is reasonable having regard to the facts of the specific case, the relationships at issue and the entire context, including the fact that there may be conflicting claims and expectations: BCE Inc., at para. 62. The applicant’s expectations are not looked at in isolation. The jurisprudence establishes that in exercising its discretion, the court must balance the reasonable expectations of an owner with the duties of the Board to the ownership at large: Orr, at para. 171; Hakim, at para. 40.

[82] While the authority establishes that there is a strong presumption of validity of declarations, the statute, both the former and the current statute, contemplate that a declaration may be amended. The evidence before me is that the YCC 21 now has a reserve fund study which complies with the Act. I see no unfairness in requiring all unit owners to contribute to the common expenses in accordance with the size or ownership interest in the condominium corporation. Where the reserve fund is inadequate, as was the case here, the Condominium Act 1998, requires that the board remedy the situation. Having regard to the history in this case, the applicant’s expectations cannot be said to be reasonable. In my view, the board’s business decision is entitled to deference.

vi) the size, structure and nature of the corporation

[83] As was recognized by Hoy A.C.J.O in Carleton Condominium Corporation, at para. 8, citing Re 511666 Ontario Ltd. et al. and Confederation Life Insurance Co. (1985), 1985 CanLII 1950 (ON SC), 50 O.R. (2d) 181 (H.C.J.), at pp. 189-190, “a condominium is a form of property ownership which combines individual property interests, exclusively owned by individual ‘unit owners’, and common elements that are jointly owned by all unit owners as tenants in common”. Section 11(2) of the Condominium Act provides that: “The owners are tenants in common of the common elements and an undivided interest in the common elements is appurtenant to each owner’s unit”. The common elements are owned and managed by the condominium corporation, a corporation of which the unit owners are shareholders. It is the owners of the units and not the corporation who own the common elements: Cheung v. York Region Condominium Corporation No. 759, 2017 ONCA 633, 139 O.R. (3d) 254, at para. 70. In this case, the applicant ownership interest (percentage of common interest), is almost double that of every other unit owner: that is to say, the applicant has 15.3847% as compared to 7.6923% for all other units. As the Supreme Court of Canada noted in BCE Inc., the oppression remedy seeks to deliver a “just” and “equitable” remedy. An increase in common expense fees does not necessarily constitute oppression: Harvard Developments Inc v. Park Manor Condominium Corporation, 2018 SKCA 81, at paras. 46–50. As noted by the Saskatchewan Court of Appeal in respect to s. 99.2 of the Condominium Property Act, 1993, S.S. 1993, c. C-26.1, which the court noted, at para. 29, is similar to s. 135 of Ontario's Condominium Act, 1998:

In this case, the appellants described their reasonable expectation as being that the unit factors or apportionment scheme would not change fundamentally. The Chambers judge concluded that was not a reasonable expectation in the circumstances because the Act and the Regulations set out methods for amending unit factors and for a condominium corporation to amend its bylaws to implement new schemes of apportionment. Those provisions do not restrict the changes contemplated to minor changes; rather, the provisions envision change generally regardless of whether that change is minor or fundamental.

In BCE, the Court identified some factors that may be used to determine whether a reasonable expectation exists: ‘general commercial practice; the nature of the corporation; the relationship between the parties; past practice; steps the claimant could have taken to protect itself; representations and agreements; and the fair resolution of conflicting interests between corporate stakeholders’: BCE, at para 72.

…..The legislative framework formed only part of the contextual analysis. The Chambers judge also needed to consider other factors such as those identified in BCE to determine whether the expectation alleged by the appellants existed and, if so, whether it was reasonable. However, in my view, that error did not affect the ultimate correctness of the Chambers judge's decision. I say this because there was no evidence to support a conclusion that the appellants had a reasonable expectation that the scheme of apportionment would never change fundamentally. The fact the scheme was in place when the appellants purchased their units and was allegedly fair does not constitute a reasonable expectation that the scheme would never change. No representations were made to the effect it would not be changed. There is no evidence that was the practice among condominium corporations nor does the evidence suggest maintaining the scheme of apportionment would balance the conflicting interests of the unit owners. In short, as the Chambers judge correctly concluded, the appellants did not meet the onus of establishing their expectation was reasonable.

[84] This residential condominium building has only twelve residential condominium dwelling units. The condominium corporation is required to comply with the requirements of the Condominium Act, 1998 and the regulation. The board carries out the business of the condominium corporation, maintains the common elements and ensures the reserve fund is adequately funded in compliance with the Act, by virtue of the common expenses it collects from the owners of the unit. Despite having two floors, while all other units have one floor, the applicant contributes the same amount to common expenses.

[85] On the evidence filed, the applicant’s unit consumes more utilities, has two floors, whereas all other units have one, and has more balcony than the other units. By paying the same amount for common expenses, the other unit owners have been effectively paying a disproportionate share. The applicant does not dispute that as result of its ownership interest, in the event of a judgment or apportionment of proceeds of insurance, it would receive almost twice the amount of as the other owners. Requiring all unit owners to pay common expenses commensurate with their size or ownership interest (that is, treating all categories the same) appears to be, just, equitable and fair. As noted in the case law, some prejudice or disregard is acceptable, if it is not unfair: Niedermeier; Carleton Condominium Corporation, at para. 31.

vii) the detriment to the interests of the complainant

[86] YCC 21’s declaration has existed for over 50 years. The applicant submitted that it is the declarant, as the developer of the property, who defines the content, character and structure of the condominium project. The applicant argues that the original percentages were in the total discretion of YCC 21’s declarant. The applicant argues that there was not (and there is not) any requirement under the condominium legislation that such percentages have any direct correlation with the actual cost of maintaining and repairing the common element areas of the condominium or otherwise. The applicant further submits that there was not (and there is still not) any requirement under the condominium legislation that the contribution to the common expenses of a unit has any direct correlation with its common interests with respect to all the units. The applicant submits that the amendment will result in a doubling of the common expense fees and a loss of market value of the unit.

[87] However, in this case, Mr. Ungerman was a signing officer of Irving Ungerman Limited, one of the declarant companies. I can therefore infer that Mr. Ungerman would have had some input in establishing the cost sharing between the unit owners, which, the respondent now argues is inequitable.

[88] Thus, it was not reasonable for the applicant to expect that the percentages in the Declaration which set out their contribution to the common expense fees would never change. Both statutes contemplate that the Declaration could be amended. In any event, having regard to the factors set out in BCE Inc., on the evidence before me, I do not find that the amendment by YCC 21 constitutes oppression.

VIII. Conclusion

[89] The applicant owns the unit previously held by Mr. Ungerman. The original Declaration placed the owner of this unit in a beneficial position, when compared to all other unit owners. Mr. Ungerman was actively involved in the corporation, had some role in setting up the proportions of ownership interests (as principal of one of the declarant companies), and likely bore some responsibility for the shortage in the reserve fund. The length of time the old percentages was in place would undoubtedly lead the applicant to believe that they would remain. However, this belief is not supported by the ability to amend the declaration both under the former and current legislation. The board acted within its authority to exercise its judgment and change this arrangement to secure the safety, security and welfare of all owners and the corporation’s property and assets.

[90] I must show deference to the board’s decision, and I find that its decision was reasonable given the needs of the corporation and the history in this case. The applicant’s expectations, however, cannot be said to be reasonable. That the declaration could be amended was always contemplated.

[91] Further, I was provided little evidence of the general commercial practice. The applicant did not provide any evidence on this issue.

IX. Applicant’s Claim for Damages

[92] The applicant argues that the amendment results in an annual increase of common expenses from about $39,600 to about $73,110, to the detriment of the applicant, with a corresponding benefit to the other eleven-unit owners, and a loss of market value to the applicant’s unit of about $670,100.73. For the reasons below, I do not accept the opinion of either experts and, in the result, I do not accept that the applicant’s unit would experience the stated loss of market value.

[93] Given my finding that the amendment is not oppressive, I would dismiss the applicant’s claim for damages but, nonetheless, will comment briefly on the expert reports.

[94] Both sides filed expert reports. The applicant filed a report from an appraiser retained to determine the difference in market value of the applicant’s unit before and after a change in the obligation to pay common expenses. Both parties’ reports are based on assumptions, hypotheticals, and were circumscribed limiting conditions. It is not surprising that there is a dispute between the experts as even the parties are not able to agree on the facts (there was supposedly no agreement on the facts by request to admit or otherwise) such that even the size of the applicant’s unit, areas that should be included, whether the unit is a luxury unit or, of particular importance, whether the condominium was considered a luxury condo. YCC 21’s expert opined that the increase in monthly common expenses from $3,300 per month to $6,097 per month would not affect the market value of the unit, stating that the condominium fees for luxury units has a nominal effect on market value.

[95] While counsel for the applicant argues that the building may have been a luxury building at one point but is no longer considered to be, I agree with the respondent that a two-story penthouse with two complete floors would likely be considered a luxury condominium, even today. That being said, the I do not accept Vincente Gamboa’s conclusion that the present value of the applicant’s unit reduction in market value amounts to $670,000 for the reasons stated above including the general disclaimer that: “The above value estimate is based on an exposure period of three to six months, assuming the basis of a transaction involving cash to the vendor, and is subject to the Extraordinary Assumptions, Hypothetical Conditions and Extraordinary Limiting Conditions as detailed within the Terms of Reference section of this report, in addition to the Ordinary Assumptions and Limiting Conditions contained in the Addenda.”, and especially in light of the following limitations:

14. The legal description of the property and the area of the site were obtained from the GeoWarehouse. No survey of the property has been made. Any plans and sketches contained in this report show approximate dimensions only and are included solely to aid the recipient in visualizing the location of the property, the configuration and boundaries of the site and the relative position of the improvements on the said lands. It is unreasonable to rely on this report as an alternative to a survey, and an accredited surveyor ought to be retained for such matters.

15. Unless otherwise noted, the estimated market value of the property referred to is predicated upon the condition that it would be sold on a cash basis to the vendor subject to any contractual agreements and encumbrances as noted in this report as-is and where-is, without any contingent agreements or caveats. Other financial arrangements, good or cumbersome, may affect the price at which this property might sell in the open market.

16. Because market conditions, including economic, social and political factors, change rapidly and, on occasion, without notice or warning, the estimate of market value expressed, as of the effective date of this appraisal, cannot be relied upon as of any other date except with further advice from the appraiser and confirmed in writing. [Emphasis added].

[96] Moreover, Mr. Gamboa’s damages calculation appears to be based on determining the present value of the amount that the applicant would have to contribute to common expenses (what he calls the annual cash flow of -$33,508 based on a discount rate of 5%), which does not appear to be a loss of market value of the unit, but rather, indirectly recovering annual common expenses that the applicant would have to pay into the future, today, as damages.

[97] Aside from that, as indicated above, no evidence was filed on this application as to the general commercial practice, a factor which the Supreme Court of Canada indicated should be taken into consideration in BCE Inc., and even the case that the applicant relied upon regarding the factors to be considered by the court, Alldrew Holdings Ltd.

Costs

[98] If the parties are unable to resolve the issue of costs within 30 days, submissions in writing, limited to 5 pages may be sent to Ms. Diamante.

A.P. Ramsay J.

Date: November 24, 2022