Tuesday, July 5, 2011

Board Decisions and Judicial Deference

When might a Court exercise its discretion in place of the discretion exercised by a Board of Directors?  Amongst other sections in the Condominium Property Act (Alberta) [the “CPA”], section 67 of the CPA allows the Court of Queen's Bench of Alberta to review decisions of a Board of Directors and grant relief to an aggrieved party.

Boards of Directors are creatures of statute; that is, the CPA allows for the delegation of authority for the operation of a condominium corporation to the Board of Directors (without limitation see section 28, 37, 38, and 39).  The overarching principal is that "Every member of a board shall exercise the powers and discharge the duties of the office of member of the board honestly and in good faith".  This authority is usually amplified by the bylaws of a condominium corporation (see section 32).  In legal terms the CPA and the bylaws are the governing documents which grant authority and limit the conduct of a Board of Directors.  Policy passed by Boards of Directors, though enforceable, does not carry the same weight as a bylaw and invites scrutiny of the Court and application of section 67; see Maverick Equities Inc. v. Owners: Condominium Plan 942 2336, 2008 ABCA 221.

Section 67 of the CPA has been interpreted by the Court of Queen’s Bench of Alberta to be analogous to section 242 of the Business Corporations Act (Alberta).  That is, “improper conduct” as indicated in section 67 of the CPA is analogous to conduct which in a corporate context is “oppressive or unfairly prejudicial”; see 934859 Alberta Inc. v. Condominium Corporation No. 0312180, 2007 ABQB 640.  Thus section 67 of the CPA imposes an obligation on Board of Directors, among other parties, to not act in a manner which is oppressive or unfairly prejudicial to owners of condominium units; that is to not act improperly.

The application of section 67 of the CPA must be balanced against the general rule that the Court should provide considerable deference to decisions made by a Board of Directors. Hence, the application of section 67 of the CPA begs the question as to what types of decisions made by Boards of Directors will attract the scrutiny of the Court? The obvious answer is when a decision of a Board of Directors is improper or otherwise oppressive or unfairly prejudicial to an owner of a condominium unit.  However, this is not a clear answer because the conduct of Boards of Directors is not obviously improper or oppressive or unfairly prejudicial and is usually open for argument.  I declare my conflict in this regard because as a lawyer I benefit from this uncertainty and ambiguity.  Following this paragraph I have made reference to a few cases which illustrate some of the responses of Courts to an application by an aggrieved owner and provide guidance to the limits of Board action (the provisions in provinces other than Alberta are not identical but similar enough to be applicable).
  • Master L.A. Smart in the case Condominium Plan No. 772 1806 v. Gobeil, 2011 ABQB318 applied section 67 of the CPA to impose an obligation on a Board of Directors to reconsider a decision which directed on owner remove a shed which had been built.
  • In Chan v. Owners, Strata Plan VR-151, 2010 BCSC 1725 the Honourable Mr. Justice N. Smith of the British Columbia Supreme Court dismissed an application of an owner who sought an order barring the strata corporation from having a tree cut and seeking a declaration that she has been treated unfairly.
  • The Honourable Madam Justice D.L. Shelley in the case Owners Condominium Plan 7722911 v. Marnel, 2008 ABQB 195 ordered an owner to remove the bronze-tinted film which the owner had placed on the owner's windows failing which the condominium corporation was authorized to enter the owner’s unit upon seven clear days’ notice for the purpose of effecting the removal of the bronze-tinted film.
  • Sometime the Court is not as sympathetic to condominium Boards.  In The Owners: Condominium Plan No. 8111679 v. Elekes, 2003 ABQB 219 the Honourable Mr. Justice Peter M. Clark refused to find that an owner who had installed a satellite dish had acted improperly.
It behooves Boards of Directors to act with an even hand when exercising their authority.  If the decisions of a Board of Directors comes before a Court to be reviewed Boards of Directors will always be best served if every member of the Board of directors has exercised their power and discharged their duties as a member of the board honestly and in good faith, in accordance with the bylaws, and in the best interests of all of the owners in the condominium.