Managers Are Not Allowed To Represent Condos At The CAT, And Other Reasons Why The CAT Should Award Costs: Part 2

In our previous article, we discussed why the Condominium Authority Tribunal of Ontario (the “CAT”) should revise its Rules of Practice so that a Stage 3 Adjudicator has greater discretion to award legal costs to a successful party.  Currently, CAT Stage 3 Adjudicators are extremely reluctant to award legal costs to anyone, given that Rule 33.1 of the CAT’s Rules of Practice only allow for costs to be awarded if there are “exceptional reasons”.

In this article, we provide additional reasons as to why the CAT should be awarding legal costs to successful litigants, on a less stringent basis than only in “exceptional circumstances”.

On Monday November 4^th 2019, the CAT posted a draft version of the Revised Rules of Practice, and is seeking the public’s input about these proposals (please email your feedback to CATinfo@condoauthorityontario.ca with the words “Rules Feedback” in the subject line).  Unfortunately, however, Rule 33.1 remains largely unchanged, and keeps the high threshold against awarding legal costs as-is under what-will-be Rule 46.1 of the revised Rules of Practice.

How Bad Is It Out There Now?

As of the date of this article, only 2 of 64 reported decisions of the CAT awarded a party with its legal costs for involving a lawyer or paralegal to represent them. One of the two cases was only because the condominium had agreed to pay for the unit owner’s legal costs as part of a settlement agreement that was breached; the settlement agreement constituted the “exceptional reason” that the CAT awarded legal costs.  The second case was where a condominium was awarded $2,500 in costs because the unit owner was found to be vexatious – but the condominium had originally asked for $21,299.94 in legal costs to be awarded.

In August, the CAT refused to award a condominium corporation with its legal costs of $14,901.88; despite the Tribunal acknowledging that the time spent by the condominium’s lawyer “on this application and hearing and the amount claimed seem reasonable in the context of this hearing.” 

As recently as last month, the CAT refused to award a condominium corporation with its legal costs of $15,120.53; despite the Tribunal acknowledging that many of the unit owner’s “questions he submitted in cross-examination were repetitive and/or not relevant to the issues to be decided”, it “undoubtedly took a significant amount of time” for the condominium’s lawyer to address various objections, and the unit owner’s “closing arguments were unnecessarily lengthy.” 

In any other court, those types of behaviours by an unsuccessful litigant would be considered under the Rule 57.01 of the Ontario Rules of Civil Procedure to be factors in favour of awarding the successful party with at least some of its legal costs.

Yet in both of the aforesaid cases, the Tribunal refused to award legal costs to the condominium corporation due to the extremely high threshold for awarding costs as mandated under Rule 33.1 of the CAT’s Rules of Practice.

Well, Why Can’t Managers Represent Condos at the CAT Instead of Lawyers?

As we discussed in our previous article, Section 26.1 of the Law Society Act, R.S.O. 1990, c. L.8 (the “LSA”) prohibits non-lawyers and non-paralegals from providing legal services to the public.  As such, Condominium Managers – even fully licensed ones – are prohibited from representing condominium corporations in the CAT.

In fact, this issue – or at least one that is highly analogous to the condominium context here – has already been tested by the Law Society of Ontario (formerly called the Law Society of Upper Canada) in court not-too-long-ago.

A few years ago, the Law Society brought a court application for a permanent injunction against Enzo Vincent Chiarelli, a professional Property Manager who provided a wide range of landlord services to his landlord clients – some of them apartment buildings – which included representing his landlord clients in the Landlord Tenant Board (the “LTB”) of Ontario.

In 2013, Justice Goldstein of the Ontario Superior Court of Justice (a judge who is now familiar with condominiums) ruled, in The Law Society of Upper Canada v. Chiarelli, 2013 ONSC 1428, that Mr. Chiarelli was providing illegal services to his clients by appearing on landlords’ behalf before the LTB without a license to practice law.  Mr. Chiarelli unsuccessfully tried to argue that he was merely acting as an agent under the authority of the landlord itself – because the landlord was a commercial entity and not a real individual person, he was only acting as the personal embodiment of the landlord at the LTB.  Essentially, the landlord via Mr. Chiarelli was representing itself at the LTB.

Justice Goldstein disagreed, and ruled that being a landlord’s agent does not extend to conducting hearings before an administrative Tribunal (like the LTB, and like the CAT).  His Honour ruled that:

“Appearing before an administrative tribunal as a paid representative to make submissions, examine witnesses, and cross-examine witnesses is quintessentially legal or paralegal work. […] [Mr. Chiarelli] is a property manager. He may also be a landlord’s agent for some purposes set out in the Residential Tenancies Act. It is irrelevant, however whether or not [Mr. Chiarelli] is a property manager. The prohibition is not on property managers. The prohibition is in respect of unlicensed legal professionals. […] [if Mr. Chiarelli’s argument] is correct, then any paid person could appear before the [Landlord Tenant] Board without meeting the licensing requirements. As noted, that is clearly contrary to the intent of the Law Society Act.”

Ultimately, the Court held that Mr. Chiarelli, in acting as the agent of his landlord clients, ought to retain a licensed legal professional to represent the landlord at the LTB – instead of appearing on his own and attempting to play the role of a lawyer or paralegal himself.  Justice Goldstein consequently granted the Law Society’s permanent injunction against Mr. Chiarelli and prohibited him from representing clients at the LTB.

Mr. Chiarelli appealed Justice Goldstein’s ruling to the Ontario Court of Appeal, in The Law Society of Upper Canada v. Chiarelli, 2014 ONCA 391.  The Court of Appeal ruled that:

“A review of the evidence before [Justice Goldstein] clearly supports his finding that the appellant has been providing unlicensed legal services. There can be no doubt that these services, including participating in a mediation and attending hearings, qualify as the provision of legal services under the Law Society Act.”

Additionally, the Court of Appeal ordered that Mr. Chiarelli pay a $6,000 legal costs award to the Law Society for bringing his failed appeal.

In view of this saga of cases in Chiarelli, we are of the opinion that a Condominium Manager is prohibited by the Law Society Act from representing a condominium corporation at a Stage 2 Mediation or at a Stage 3 Adjudication/Hearing in the CAT.

Practically speaking as well, Managers these days are overwhelmed with work already – most Managers do not wish to suddenly put on their lawyer hat and become entangled in examining witnesses, cross-examining witnesses, and making legal submissions in an online CAT Hearing anyway.  A Manager’s liability insurance may also not cover such legal/paralegal activities as well, given that such activity is outside the scope of their lawful duties as a Manager – even if a Board of Directors insists on their Manager doing so.

Only time will tell whether the Law Society of Ontario will start enforcing against Managers who provide such unlawful services to their condominium corporation clients.

OK, Why Can’t A Director Represent their Condo at the CAT then?

We discussed this in our previous article too.  In addition to directors typically being volunteer homeowners who are already putting themselves in service of their communities, 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 CAT – and if D&O insurance did, D&O insurance premiums would likely increase.

Fine. Then the Condo will Ignore Any CAT Proceedings Altogether!

As more and more cases are being decided by the CAT and more and more condominium corporations are being forced to incur significant legal costs in defending themselves against meritless Applications by unit owners, condominium corporations might be asking themselves: Why bother?

In fact, we are starting to see some condominium corporations who may be deliberately instructing their Managers and their legal counsel to intentionally ignore any CAT Notice of Case that comes their way, notifying them that a unit owner has commenced a CAT Application against the condominium.

The maximum financial penalty that a condominium currently faces at the CAT in a records request matter, is $5,000 pursuant to Section 1.44(3) of the Condominium Act.  $5,000 is certainly much less than the $14,901.88, $15,120.53, or $21,299.94 that the condominiums spent in legal costs in the cases referenced above, fighting the unit owner in the CAT at the Stage 3 Hearing.  Even if the condominium is 100% successful in its defence at the CAT, Rule 33.1 of the CAT’s existing Rules of Practice makes it extremely unlikely that the condominium will see a penny of that money back.

As such, the CAT’s extremely high bar against awarding legal costs, may actually be causing condominium corporations to refuse to participate in the CAT’s proceedings at all.

Take a look at the publicly-reported CAT case of Tonu Orav v. York Condominium Corporation No. 344, 2019 ONCAT 18.  In Orav, the condominium’s lawyer refused to take part in the Stage 3 Hearing beyond April 11^th 2019 – the very 1^st day that the Stage 3 Hearing commenced.  The CAT ultimately ruled that the condominium corporation must provide the requested records to the unit owner, and ordered the condominium to pay a $2,000 penalty and the Applicant’s filing fees of $200.  The overall financial loss for the condominium corporation was therefore the $2,200 amount that the CAT ordered the condominium to pay within 30 days; which is very likely a much lesser amount than the total irrecoverable legal fees that the condominium would’ve had to pay their lawyer.

Yet the condominium corporation may have had a good case against the unit owner in Orav, if the condominium had its legal counsel participate fully in the Stage 3 Hearing instead.  The CAT Member himself acknowledged in Orav that:

"the Applicant continually and frequently submitted more records requests. This complicated matters. It confused what was being requested and placed an unfair burden on the condominium corporation. This conduct does not promote healthy condominium communities. It represents conduct that should not be encouraged.”

By instead (presumably) instructing its legal counsel to withdraw from participating in the CAT proceeding, the condominium corporation allowed the unit owner to obtain a legal ruling in his favour that likely emboldened this particular unit owner to continue making, if not records requests, then at least more demands of the condominium.  Very rarely does a successful unit owner simply stop being who they are, when awarded with a favourable $2,200 judgment that shows, in their eyes, that they were correct the entire time.  With no offense meant to the respected CAT Member who decided Orav, his well-intentioned cautions to the unit owner in his ruling may have simply fallen on deaf ears, plugged by wads of 110 green Queen Elizabeth’s.

By ignoring a CAT Notice of Case and not responding to a CAT proceeding whatsoever, the condominium corporation could financially come out ahead, given the CAT’s existing Rules of Practice – even if the condominium community overall suffers from an emboldened unit owner with a successful judgment in hand.  Accordingly, it is only a matter of time before condominiums throughout Ontario simply stop participating in the CAT process altogether, unless Rule 33.1 is amended to allow for condominiums to hire competent legal counsel who specialize in condominium law and to recover their legal costs of doing so when the condominium corporation is successful in defending against a unit owner’s Application.

Having one party – the Respondent condominium corporations throughout Ontario – refuse to participate whatsoever in the CAT process cannot be in accordance with the CAT’s Guiding Principles commitment to “dispute resolution and adjudicative excellence”.  How can a dispute be resolved or an adjudication be excellent, if every Application is missing the primary Respondent and simply becomes a default judgment process instead?

So… What Now?

If the CAT’s jurisdiction is being expanded – and rumour has it, it eventually will be – to encompass even more contentious disputes than records requests, then Rule 33.1 should be amended.  An expansion of the CAT’s jurisdiction into hot-button issues like chargebacks and owners’ meetings will only further underscore the need for both sides to have specialized legal representation at the CAT.  Overworked Managers and volunteer Directors should not be forced to bear the burden of representing the condominium corporation in a Tribunal, in addition to their everyday duties and the demands of existing day jobs and personal/family commitments.  Specialized lawyers and paralegals not only have the necessary expertise in these condominium matters, but also have their own legal insurance coverage for this very purpose – representing clients before administrative tribunals and courts of law.

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.  Otherwise, condominiums will simply drop out of the CAT process altogether.

This is not a call for carte blanche discretion to be given to CAT Adjudicators to award legal costs whenever they feel like it.  Instead, this is a renewed call for the CAT and the CAO Board of Directors to help ensure the Tribunal’s legitimacy, get more paralegals and junior lawyers involved with the CAT by creating business incentive to do so with costs awards, 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.

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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