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April 26, 2019 - By Elia Associates

Should the Government Expand or Eliminate the CAT? The Middle Way

Before they took flight, the father warned his son to fly the middle course. Icarus ignored his father's warning and flew too high. The sun melted the wax which held the wings together and he fell in the sea. Daedalus however flew the middle course and reached the other shore.

In the condominium industry, there is an ongoing debate about whether the Condominium Authority Tribunal of Ontario (the “CAT”), set up by the previous Liberal government, should expand its current jurisdiction from simply handling disputes over records requests to other types of disputes in condominiums – or whether the current Conservative government should eliminate the CAT altogether.

Battle lines are being drawn in the sand, and each side is beginning to rally their troops towards advocating for either the expansion or the elimination of the Tribunal.

We’d like to instead, offer a middle way forward.  As the condominium law firm in Ontario with the most reported litigation experience with the Tribunal, our on-the-ground experience with the CAT hopefully offers both the pro-CAT and the anti-CAT factions a compromise solution.

Pro-CAT: Expand the Tribunal’s Jurisdiction

Supporters of the CAT welcome the expansion of the Tribunal’s jurisdiction, as originally envisioned by the Ontario government when the CAT was originally set up.  In September of 2013, as the government was first considering making amendments to the Condominium Act, an expert panel convened by the province had recommended that the CAT’s jurisdiction should eventually be expanded to encompass different types of condominium disputes – not just records requests.

Even prior to the Tribunal taking jurisdiction over records request disputes from the Small Claims Court on November 1st 2017, many condominium industry professionals – condominium lawyers included – disliked having to go to the local Small Claims Court in-person to argue over what essentially amounted to a $500 records request.  An online Tribunal that provides quick, efficient access to justice that resolves disputes over records was a welcome relief to the lawyers, their paying clients, and even the judges and administrative staff of the Small Claims Court.

The counter-argument might be that the CAT is too easy for unit owners to take condominiums to task over records requests.  However, vexatious litigants who file multiple records requests in an attempt to overwhelm a condominium corporation would have filed those same requests anyway, and taken the condominium to the Small Claims Court – even if the Tribunal did not exist at all.  In fact, one of the most oft-cited examples of such a vexatious unit owner, Mr. Lahrkamp, actually did begin his protracted years-long records dispute against his condominium with multiple legal proceedings in the Toronto Small Claims Court, the Ontario Superior Court of Justice, and the Ontario Court of Appeal. 

At least with a single Tribunal for the entire province (instead of various courts and courthouses scattered throughout Ontario), the CAT’s front-end administrative staff can consult a centralized database when reviewing a new Application that comes in – to see if the unit owner has filed an Application with the CAT before, or if they have been declared a vexatious litigant and thus need special permission to file.  Unlike the various court registrars and administrative staff in siloed locations throughout the province, the centralized CAT personnel meet regularly to discuss and review its affairs.

The Ontario Regulation 179/17 (the “Condominium Authority Tribunal Regulation”) can easily be amended by the Minister of Government and Consumer Services, to include more categories of disputes that can be brought before the CAT for Stage 1 Negotiation, Stage 2 Mediation, and Stage 3 Adjudication.  It would also only require a relatively minor upgrade to the existing technology behind the Tribunal’s ODR system to accommodate an expansion of the CAT’s jurisdiction.

Anti-CAT: Eliminate the Tribunal Altogether

With the implementation of new licensing requirements for Condominium Managers in Ontario, the continued evolution of the laws that both govern Managers and that Managers are required to know, the introduction of additional reporting obligations for condominium corporations to various authorities, and the ever-changing body of knowledge that a Manager needs to be familiar with in order to manage the maintenance and repair of various assets, it’s no surprise that Condominium Managers are feeling over-burdened these days.

Condominium Managers are already in short supply. According to recent estimates, there are less than 3,000 licensed Managers in Ontario for the 11,000 or so condominium corporations in Ontario – and more condominiums are expected to be built.

It’s not difficult to imagine that most Condominium Managers, when they first decided to become Managers originally, never expected that they would be forced to represent condominium corporations in an online Tribunal.  Legal advocacy before an adjudicative body is not what most Managers entered the industry to do.

But that’s exactly the role that Managers are being forced to perform now by their condominium clients.  Most Boards are comprised of volunteer homeowners who have their own full-time day jobs to worry about, and who may not have the knowledge or confidence to adequately represent the condominium corporation at the CAT.  So when the condominium corporation is notified of an impending case against it at the Tribunal, the Board instructs their existing on-site Condominium Manager (or another member of their Management team) to represent them instead.  This Condominium Manager also already has a full-time day job of their own: managing the condominium corporation (and perhaps more than one at a time).

If this was any other lawsuit brought by a unit owner against the condominium corporation, the Board would simply hand off the litigation to the condominium’s legal counsel.  But here, due to the CAT’s general prohibition against awarding legal costs even to an entirely successful party (discussed further below), Boards may be reluctant to engage their counsel for the legal expertise and advocacy services that the law firm was retained to provide.

Accordingly, some anti-CAT proponents point to this extra burden on already-overwhelmed Condominium Managers who have been forced to pick up the slack in this “missing middle” of representation at the Tribunal, as a reason for eliminating the CAT altogether and reverting all condominium disputes back to the court system.

The Middle Way: Award Legal Costs to Successful Parties in the CAT

Great thinkers from both the East and the West have long philosophized that the middle path between two extremes is the best way forward.

Now that we’ve seen the CAT in action for more than a year now, it’s become clear that condominium unit owners and condominium corporations may prefer to have their legal counsel represent them at the Tribunal – even if it will cost them an arm and a leg at the end of the day.

Even in a relatively “minor” dispute over records where the disclosure of records and $5,000 are all that’s at stake, parties may tend to prefer to have a lawyer representing them.  Especially in a Stage 3 Adjudication at the Tribunal, wherein the parties are put into an adversarial system and, ideally, the best argument prevails.

Given parties’ need for legal representation at the Tribunal, the legal costs of same have become a dire issue.  While we do not believe that a CAT proceeding should end up costing a single condominium corporation $21,299.94 for two lawyers on the same Tribunal file, we do believe that where a unit owner or a condominium corporation are ultimately vindicated by the CAT Adjudicator as having been correct in their position throughout the proceeding, the successful party should be entitled to their legal costs.

Section 1.44(2) of the Act requires the CAT to make an order for legal costs in accordance with the Tribunal’s own internal Rules of Practice.  The very last Rule of the CAT’s Rules of Practice, Rule 33.1, explicitly states:

                  Legal Fees Generally Not Recoverable

                  33.1   The CAT will not order one User to pay to another User any fees charged by that User’s lawyer or paralegal, unless there are exceptional reasons.

The decisions rendered by the CAT so far have relied on this Rule to avoid awarding any significant amount of legal costs to the successful litigants.  Not a single one of the Tribunal’s 23 decisions thus far, have awarded any party with their full legal costs – thus forcing parties to bear their own expenses, regardless of how frivolous the CAT application was to begin with.

If/when the jurisdiction of the Tribunal is expanded to encompass other, even more contentious types of disputes (e.g. AGM election results, validity of Requisitions, chargebacks for damage, etc.), both unit owners and condominium corporations are even more likely to prefer to have their legal counsel represent them.

In addition to Condominium Managers simply not having the time, energy, or resources to effectively advocate for a condominium corporation at the Tribunal, an additional argument could also be made that Managers who represent a party at the CAT are running afoul of Section 26.1 of the Law Society Act, R.S.O. 1990, c. L.8 (the “LSA”), which prohibits non-lawyers and non-paralegals from providing legal services to the public. 

Section 1 of the LSA stipulates that any person who “Represents a person in a proceeding before an adjudicative body” or who is “Engaging in any other conduct necessary to the conduct of the proceeding” is providing legal services.  Moreover, the Law Society of Ontario’s By-law No. 4 explicitly notes, at Section 28, that an individual who is representing a party before an adjudicative body is still deemed to be practicing law or providing legal services (and therefore, must be licensed by the Law Society).

Where a Condominium Manager is representing an Applicant or a Respondent at the Tribunal, it could be argued that said Manager is practicing law without a proper license from the Law Society of Ontario.

But if Condominium Managers aren’t allowed to represent condominium corporations at the Tribunal, then the parties will either be entirely self-represented or have to be represented by legal counsel.  If the CAT’s jurisdiction is expanded, or even maintained at its current level in only dealing with records requests, then the latter involvement of counsel is more likely. 

Because a condominium corporation is not a real live “person”, if it is self-represented at the Tribunal then an individual Board member will be the one representing the condominium.  In addition to directors typically being volunteer homeowners, a Board member’s directors & officers (D&O) liability insurance does not usually take into account the director serving as the “legal” representative of the condominium corporation at the Tribunal – and if D&O insurance did, D&O insurance premiums would likely increase.

Perhaps the Ontario government, when it first envisioned the CAT, believed that a general prohibition on legal costs awards would invite the introduction of specialized paralegals into the system, similar to the Landlord and Tenant Board (LTB) or the Human Rights Tribunal of Ontario (HRTO) where parties are typically represented by licensed paralegals.  Given that paralegals’ hourly rates are often lower than the hourly rates of condominium lawyers, a unit owner or a condominium corporation who is seeking legal representation at the CAT may be more inclined to retain a paralegal instead.

But there is currently little or no business case for paralegals or junior lawyers to step into this new practice area with the Tribunal, since their legal costs are not likely going to be awarded by the CAT even if they are 100% successful for their clients.  Paralegals and lawyers have the proper legal insurance to represent parties at the administrative Tribunal, but there is little or no economic incentive for them to get involved with the CAT, due to Rule 33.1’s general prohibition against awarding costs.

Therefore, Rule 33.1 should be abolished, or at least significantly amended, if the CAT’s jurisdiction remains the same going forward – and even more so if the CAT’s jurisdiction is expanded to include more contentious areas of dispute, which will further underscore the need for parties to have specialized legal representation at the Tribunal.

Even in the Small Claims Court where “access to justice” is a paramount value, judges have often recognized that despite the general 15% limitation on legal costs award under the Courts of Justice Act, condominium litigation is unique from other types of civil litigation.  In the context of a non-profit condominium corporation, the other “innocent” unit owners should not be forced to pay for legal costs of enforcing against the “guilty” unit owner’s breaches of the Act or the condominium’s governing documents.  Accordingly, both the Small Claims Court and the Ontario Superior Court of Justice have awarded successful condominium corporations with 100% of their legal costs, above and beyond the usual limitations on costs.

In a Tribunal that hears exclusively condominium litigation, this case law from the courts of Ontario should hold persuasive weight.  On the condominium side of the ledger, it would be unfair for the other unit owners to have to bear the legal costs of one owner’s intransigence. On the unit owner side of the ledger, it would be unfair for a successful Applicant to have to bear their own legal costs in holding their Respondent condominium accountable.

Rule 33.1 of the CAT’s Rules of Practice should be amended, so that each CAT Adjudicator retains greater discretion to award legal costs to a successful party at the Tribunal.  Doing so will not only be in the interests of justice, but will also help Condominium Managers get out of being forced to perform the legal advocacy work that most of them likely did not sign up to do when they first decided to become Managers.

Allowing parties to retain legal counsel and have their legal costs awarded if they are successful, will also save time and resources for the Tribunal itself.  Condominium litigators are often better able to narrowly focus on the pertinent issues in the dispute – instead of going all over the place and submitting other extraneous information to the CAT (like how the Respondent must be a terrible condominium in all respects, because it did not respond quickly enough to a noise complaint 5 years ago). When self-represented unit owners and Board members do not know what information is relevant or helpful to their case, everything plus the kitchen sink tends to get thrown at the Tribunal, for the CAT Adjudicator to have to sift through and sort out.

The abolishment of the CAT’s presumption against awarding legal costs would help ensure the Tribunal’s legitimacy, get more paralegals and lawyers involved in assisting parties, make the parties feel more adequately represented and heard by the Tribunal, lighten Condominium Managers’ already-overburdened workloads, and support the proper development of the rule of law.

For us, this is the Buddhist middle way, the Aristotelian golden mean, and perhaps the best way forward for the new Tribunal.

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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