Directors' Liability

This is a good article from a few years ago relating to condominium directors liability; this will be even more salient once the amendments to the Condominium Property Act (Alberta) are proclaimed.

https://issuu.com/lsgraphics/docs/cci-t-condovoice-spring2014/45?e=1206437/7747339

When an ethic minority becomes the ethnic majority; a Vancouver Board speaks Mandarin and refuses to speak English

http://www.calgaryherald.com/news/national/english+speaking+condo+owner+files+human+rights+complaint/11608348/story.html

The Calgary Herald reported that a very curious thing happened the other day in Vancouver, British Columbia. A gentleperson named Andreas Kargut made a complaint to the Human Rights Tribunal in British Columbia because he claimed he was being discriminated against by the Board of Directors of the  condominium corporation in which he owned a unit.

The Board of Directors of the condominium corporation was composed of individuals who spoke Mandarin. The Board made a decision that it would be in their best interests that the board meetings be conducted entirely in Mandarin.  Mr. Kargut  took issue with us and asked the Board to speak English; to which request the board refused.  As a result of the refusal of the Board of Directotrs, Mr. Kargut approached the Human Rights Tribunal and made a complaint against the Board of Directors.

It is ironic that a white English-speaking individual would approach the Human Rights Tribunal  suggesting that he was discriminated against.  However based on the multi-cultural (or perhaps better stated ethnic-cultural) mosaic which has been built in Canada it is not surprising to see ethnic minorities becoming ethnic majorities (at least contextually) and now the proverbial “shoe is being worn on the other foot”.  It will be interesting to see how this matter is resolved by the Human Rights Tribunal.

It continues to be my understanding of the law in Alberta that the Human Rights Tribunal of Alberta does not have jurisdiction to deal with complaints in respect of condominium corporations in Alberta. However this may change given the rapidly changing political environment that we are experiencing these days.

Deficiencies in Common Property, Technical Audits and New Home Warranty Insurance

I always enjoy hearing Michael Ball, P.Eng. from Morrision Hershfield speak.  On January 22, 2013 Mr. Ball presented on the topic of "Technical Audits" at the CCI-SAC luncheon.

This topic has become more timely as a consequence of the changes being proposed by the Alberta Government to require all developers and builders of condominium projects to obtain insurance through a New Home Warranty Programs.  Mr. Ball made it abundantly clear to those present that failure to conduct a timely technical audit leads to it being a strong possibility that condominium corporations will be outside of the tight timelines imposed by the New Home Warranty Programs (1 year for all but structural issues and 5 years for structural issues) to make a claim on this insurance.  The proposed changes by the Alberta Government may also extend these timelines but in no way will these changes diminish the importance of a condominium corporation vigourously assessing the state of the common property. This is what a technical audit does.

Property Managers should be mindful of the possibility that failure to recommend in writing to Boards of Directors of condominium corporations to conduct a technical audit may lead to owners and others affected alleging that the Property Manager was negligent in not so advising.  More significantly, Boards of Directors should also understand the seriousness of the deadlines imposed by the New Home Warranty Programs and understand that the failure to conduct a technical audit could very well leave a condominium corporation on the wrong side of the deadline and leave Board Members exposed to similar allegations.

Imposing Fines Against Owners in a Condominium

A more illustrative case of how NOT to impose fines may not be found.  In the case
Condominium Corporation No. 042 5636 v. Chevillard, 2012 ABQB 131 Master Smart denied a condominium corporation the right to collect fines imposed and legal fees incurred in respect of fines imposed based on an owner's not cleaning up after the owner's dog.  Amng other things, Master Smart took issue with the failure of the condominium corporation to follow its bylaws.  Particularly, Master Smart stated that the Board of the condominium corporation was required to and failed to:

1. Pass a resolution declaring the owner in default of the bylaws based on the owner's failure to clean up after the owner's dog;
2. Provide written notice to the owner to rectify the breach of the bylaws; and
3. Check to see if the dog had been removed prior to filing its Application in the Court of Queen's Bench.

As a result of these three failures Master Smart dimissed the application and did not award costs to the condominium corporation for the legal fees incurred by the condomnium corporation.  Hence, how does a condominium corporation properly impose and collect fines?  The following list is suggested as good practice:

1. Make sure the condominium bylaws comply with section 35(2) of the Condominium Property Act (Alberta); 35(2)  A bylaw under which sanctions are imposed must (a) set out the sanctions that may be imposed, and (b) in the case of monetary sanctions, set out the amount of the monetary sanctions   or the range of monetary sanctions that may be imposed.
2. Look to both the Condominium Property Act  and the bylaws of the condominium corporation for guidance.
3. The Board of Directors should gather the evidence that an owner has breached the bylaws; this should be done in writing and it is not sufficient, in this blogger's opinion, to rely on verbal/spoken evidence.
4. The Board of Directors should meet to discuss the allegation of breach and review the evidence which has been gathered; the Board of Directors should then make a decision whether the bylaw has been breached and evidence this by way of resolution in the Minutes of the Board of Directors (the resolution should reflect a summary of the nature of the complaint and the conclusion of the Board.
5. The Board of Directors should be guided by the requirements of the bylaws; many bylaws require that the condominium corporation give the offending owner notice of the breach and an opportunity to rectify the breach before proceeding with fining an owner.  The bylaws may be even more detailed in respect of steps which need to be taken prior to collecting the fines (this blogger suggests that condominium corporations obtain independent legal advice on the requirements of their specific bylaws to avoid a result such as occurred in the Chevillard case).
6. The Board of Directors should be sure to inspect the unit or common property prior to proceding to Court and the Board of Directors should utilize the services of a lawyer familiar with the area of condominium law.

Managing the Risks of Board Responsibility for Deficiencies in the Common Property; Requesting Reports In Contemplation of Litigation

A Board of Directors of a condominium corporation is, with some limited exceptions, responsible for the common property located within their condominium project.  This obligation is created both pursuant to the Condominium  Property Act  (Alberta) and the bylaws of the condominium corporation.  When concerns arise with elements or aspects of the common property it is prudent for the Board of Directors, usually through the assistance of the condominium corporation's property manager, to have a third party contractor assess the elements and aspects of concern.  It is best if the contractor who provides the report is not also offering to do any required work and perhaps quoting on doing the work.  The addition of the prospect of being hired to do the work creates can create a conflict of interest and can lead self interested contractors to exaggerate the conclusions reached simply to scare the Board of Directors into hiring the contractor.


When an independent contractor inspect the elements and aspects of concern in the common property the contractor will usually produce a written report or summary of the results of the assessment.  The third party contractor report will often include recommendations in respect of steps which could or should be taken to deal with the elements of the common property which are of concern.   The provision of the report by the contractor provides knowledge to the Board of Directors.


This transition from a Board of Directors with a concern about the common property to one with knowledge of a deficiency usually brings with it a concomitant obligation.  That is the Board of Directors must follow the recommendations in the report or they run the risk that they have breached their fiduciary duty which they owe to the owners in the condominium corporation.  If the Board of Directors acts on the recommendations and remedies the deficiencies then the obligation of the Board of Directors has been satisfied.  However, what happens if the Board of Directors ignores the recommendations and does nothing to remedy the deficiences?  The recent case of Guenther v. The Owners, Strata Plan KAS431 out of the Supreme Court in British Columbia demonstrates this dynamic well.


The failure to follow the recommendations could give rise to the Board of Directors and individual Directors being sued by owners or mortgagees.  In this legal action the report of the third party contractor is required to be disclosed by the Board of Directors and forms the basis of the evidence which supports the allegation of breach of fiduciary duty.  In this regard the report is usually discussed at a meeting of the Board of Directors and the Minutes of that meeting will usually make reference to the report.  This process of receipt by the Board of Directors and reflection in the Minutes creates a record, available to all owners and mortgagees, that the Board of Directors are now aware of the deficiencies with the common property. 


It is not prudent for a Board of Directors to put themselves in this situation.  In legal actions the obligation to disclose documents is limited if a document is protected by privilege.  For those of you interested in exploring privilege beyond the scope of this blog entry you may wish to review the recent report prepared by Adam Dodek B.A., J.D., LL.M., of the University of Ottawa for the Canadian Bar Association.  One of the types of privilege which would be helpful to a Board of Directors is to retain the third party contractor to assess the elements and aspects of the common property in contemplation of litigation.  This form of privilege is associated with the general proposition that consultation by a client with the client's lawyer is protected communication.  To come within this type of privilege the Board of Directors should consult with a lawyer about the potential legal issues related to the elements and aspects of the common property of concern.  Following from this the Board of Directors should instruct their lawyer to retain the third party contractor on behalf of the Board of Directors.  The third party contractor then delivers the report to the lawyer.  The lawyer in turn provides the report to the Board of Directors.  When the report is discussed at the meeting of the Board of Directors this context is clearly stated in the Minutes and the Board would be wise to go in camera (that is off the record) to discuss the report.  This minimizes the reference to the report in the Minutes and makes it clear that the Board of Directors will be treating this report as privileged.


The result of this process and treatment is that the Board of Directors can argue that the report need not be disclosed if litigation is commenced from a failure of the Board to remedy the deficiencies. Moreover, the protection of the document allows the Board of Directors to respond to the recommendations in a more orderly manner rather than becoming panicked by strong recommendations of the third party contractor or even worse by a self interested contractor.


In situations where there is a possibility that a Board of Directors will not follow or not follow the recommendations provided by an independent contractor in a timely manner, Directors and Boards of Directors would be wise to consider retaining a lawyer to do their best to cloak the production of the contractor's report under the privilege of the report being made in contemplation of litigation.

Consequences of Allegations of Improper Conduct of a Board Member

A report in Canadian Lawyer Magazine, canadianlawyermag.com, advises that a dispute in a condominium in Ontario over a condo-fee increase grew  into a "bitter feud" that resulted in the Board member "facing a number of criminal charges, including four counts of criminal harassment, intimidating a witness, and threatening death".  The consequences on the Board member was that he was prevented from joining the legal profession which he had trained for.  The Board member is now appealing the decision that "he wasn’t of good character" to a Law Society of Upper Canada panel.  Board members should always be civil in their demeanor and in their communication.