By: Jonathan Keslassy
The directors of a condominium corporation often have the unpleasant responsibility of enforcing the rules and by-laws of their community. In doing so, the board must be cautious of the costs and carefully spend their “taxpayers” dollars.
The courts are given broad discretion to award a successful party with costs as a contribution towards legal fees, whether on a partial or substantial indemnity basis. In other words, cost awards generally only reimburse a portion of legal fees as opposed to the actual costs incurred during the process. However, where a condominium corporation obtains an order against a unit owner or a tenant for the enforcement of the Condominium Act, the declaration, by-laws or rules, the award – together with any “additional actual costs” incurred in obtaining the order – can be added to the common expenses of that unit. The Act simply shifts the financial burden of enforcing the rules from the condominium corporation, and ultimately the innocent unit owners, to the unit owner whose conduct necessitated the court order.
In MTCC No. 1385 v. Skyline Executive Properties Inc., the Ontario Court of Appeal confirmed that an award of costs refers to the portion of costs that the court orders one litigant to pay the other litigant. However, the “additional actual costs” referred to in the Act encompasses all legal costs incurred as between the corporation and its own lawyer. If the corporation can demonstrate that the additional actual costs were reasonable and necessary to obtain the compliance order, the corporation can take steps to recover the costs in excess of those awarded by the court.
In determining what costs are reasonable, the courts will consider the concept of proportionality, that is, the time and expense devoted to a proceeding ought to be proportionate to what is at stake. The Rules of Civil Procedure provides a framework for courts to consider in exercising their discretion. For example, in TCECC No. 1508 v. William Stasyna, the court found it appropriate to decrease the cost award to the successful condominium corporation because the corporation insisted on litigation instead of attempting to resolve the dispute through mediation, which was available to it on several occasions.
Aside from the provisions of the Act, indemnification clauses in a corporation’s declaration or by-laws can prove to be helpful in recovering costs. The courts will interpret the scope of the indemnification strictly and expressly by the wording of the provision. Case law demonstrates that, unless the indemnification provisions are clear and specific for the circumstances for which they are claimed, the court may disregard them entirely. In Pearson v. CCC No. 178, the corporation was self-represented in defending a small claims court action. It later tried to lien the unit owner for the cost of the legal advice it obtained throughout the process and relied on the indemnification provision that covered all costs incurred “in taking any action” against a unit owner. The court interpreted the provision strictly and denied the corporation’s claim since the costs were incurred in defending an action as opposed to “taking an action”.
While the Act, declaration and by-laws provide a corporation with broad powers to recover its legal costs, it must be careful to ensure that its conduct and the costs are reasonable in any given circumstance.