We have previously written about the remedy of oppression, and how it applies to the actions taken by a corporation that cause harm to individual shareholders, officers, directors, creditors or debtors. The remedy applied will depend on the type of oppressive conduct, but can include restraint fo the conduct, removal of officers or directors, and monetary damages.
The Oppression Remedy and Condominium Corporations
Section 135 of the Condominium Act contains an oppression remedy provision introduced by the legislature in 1998 and which came into effect in 2001. Section 135(2) and (3) provides:
(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.
The Ontario Court of Appeal (ONCA) recently reviewed the section and provided clarification on the remedy.
Condo Owner Received Board Approval for Renovations
N and his spouse were the owners of a condominium unit in Muskoka. They became aware that the adjoining condominium unit to theirs was going to become available for purchase. N wanted to renovate and connect the two units by a doorway, making one much larger unit. They sought and received permission from the Condominium Board. N was ordinarily a Board member but did not vote on his own proposal. The approval was subject to the following conditions:
- that the unit owner pay all the costs;
- that the alteration not affect the use and enjoyment of other unit owners;
- that the alteration not affect the symmetry of the building;
- that the alteration not affect the Condominium’s budget;
- that all the necessary engineering and town approval be given before the work commenced;
- that the wall would be returned to its existing state if the unit owner (N) was to sell one of the two units and at no cost to the Condominium; and,
- that the two units “could never be sold as one unit.”
Section 98 of the Condominium Act required the condominium corporation to register the agreement with N on the title to both units before they made “an addition, alteration or improvement to the common elements.” Consistent with its long-standing past practice, the condominium neglected to do so. Despite this, all necessary steps were taken by the condominium and N to proceed with the purchase and complete the renovations. The work was then completed by early 2018.
Subsequently, the composition of the Board changed. The new Board was much less friendly to N. The Board learned of their past failures to properly document such structural changes by other owners and N and decided to ratify the past omissions by creating and registering new Section 98 agreements for each instance where owners had made renovations to common elements. All of the agreements were identical except for N’s, which contained the following addition:
The Improvements shall be removed by the Unit Owner, at the Unit Owner’s sole expense, before the Unit is sold. Specifically, the Unit shall be restored to the condition before the Improvements were made, including but not limited to the reinstallation of the common element demising wall within the Unit and any changes that were made by the Unit Owner related thereto.
Condo Owner Claims Oppression Due to Onerous S. 98 Agreement
N commenced an Application objecting to the clause under Section 135 claiming the clause was a form of oppression, requiring remedial work to anything but the common elements. The application was successful. The Section 98 agreement was to contain only the following:
The changes to the demising wall should be removed by the Unit Owner, at the Unit Owner’s sole expense, before the unit is sold. Specifically, the Unit shall be restored to the condition before the demising wall was altered.
N was also awarded $10,000 in damages for the oppression they suffered. The condominium corporation appealed.
ONCA Reviews Test for Oppression
The ONCA held that the test for oppression under section 135 is similar to the test in corporate law based on Metropolitan Toronto Condominium Corp. No. 1272 v. Beach Development (Phase II) Corporation, 2011. That test follows the guidance provided by the Supreme Court of Canada (SCC) in BCE Inc. v. 1976 Debentureholders, 2008.
That test is as follows:
- the claimant must establish that there has been a breach of reasonable expectations; and,
- the conduct must be oppressive, unfairly prejudicial or unfairly disregard the interests of the claimant. The subjective expectation of the claimant is not conclusive; rather the question is “whether the expectation is reasonable having regard to the facts of the specific case, the relationship at issue, and the entire context, including the fact that there may be conflicting claims and expectations”.
The remedy is equitable in nature and seeks to ensure what is just and equitable. In a case such as this one, relevant considerations include the board’s statutory duties and the conduct of the parties.
The ONCA concluded with the following:
The Condominium had provided s. 98 agreements to the other unit owners who had completed alterations but the one prepared for [N] to sign was both onerous and different. It is not surprising that the application judge declined to give effect to the Condominium’s argument. The evidence supporting her view is overwhelming. The application judge’s remedy served to rectify the Condominium’s oppressive conduct, which seeped through all its actions, including its approach to this litigation. The Condominium’s real interests were entirely protected by the s. 98 agreement ordered by the application judge, which simply incorporated the conditions imposed when the Board originally approved [N’s] proposal.
At Milosevic & Associates, our team of Toronto corporate commercial lawyers regularly represent clients in complex commercial litigation matters ranging from straightforward contract and partnership disputes to complex multi-party commercial claims including dealing with claims of oppression. Over the years, our team of exceptional litigators has seen it all and has successfully fought for our clients’ rights. Our impressive track record speaks for itself. Call us at 416-916-1387 or contact us online for a consultation.