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Expensive Lessons Due to CAT's Default Presumption Against Costs
You should never try to install your own braces without the assistance of a licensed dentist, because if the braces are not properly installed, then your teeth might become too seriously misaligned for a subsequent dentist to correct – no matter how good of a dentist they might be.
Similarly, no matter how good of a condominium lawyer your condo corporation might have hired, sometimes the situation is already beyond fixing. Yet because the Condominium Authority Tribunal (the “CAT”) has a default presumption against awarding any party with their legal costs, some condo Boards are trying to save on legal fees by representing the condo themselves (or using their Condominium Manager to represent the condo) in a CAT Stage 1 Negotiation and Stage 2 Mediation – before handing it off to a lawyer or paralegal for the CAT Stage 3 Hearing.
A recent CAT Decision highlights how risky such a move might be. Although we were fortunate enough to salvage the case in Stage 3, the case might not have arisen in the first place if not for a binding Settlement Agreement that the self-represented condo corporation agreed to in Stage 2, without obtaining prior legal advice.
Hiring a lawyer or a paralegal to represent the condo corporation in the CAT might be expensive – but so is not hiring one, as several examples from the CAT also show.
Settlement Agreement is Binding Forevermore
In Manaj v. York Condominium Corporation No. 228, 2023 ONCAT 57 (“Manaj”), the condo corporation was concerned about incurring legal fees, so the Board President had represented the condo corporation in a prior Stage 1 Negotiation and Stage 2 Mediation in the online CAT portal. During the Stage 2 Mediation, the CAT Mediator proposed a Settlement Agreement to both sides, and did not warn or advise the parties to seek their own independent legal advice. Instead, the parties agreed to the Settlement Agreement, without the benefit of any legal advice, and the CAT Case was closed.
In Manaj, the applicant unit owner brought a breach-of-settlement Application to the CAT, alleging that the condo corporation had violated the terms of the Settlement Agreement. The unit owner alleged that the condo corporation violated paragraphs 4 and 5 of the Settlement Agreement, which stated:
[4] At future virtual meetings where directors of the condominium corporation are being elected, York Condominium Corporation No. 228 will allow the owners to see, directly on the screen, the voting results, including the total number of votes cast for each candidate, as and when generated by the system.
[5] At future meetings where directors of the condominium corporation are being elected, York Condominium Corporation No. 228 will strive to ensure that there are least two owners in the condo corporation who are not involved in the election appointed as scrutineers to observe and ensure fairness in the voting process. If no volunteers offer to act as scrutineers, York Condominium Corporation No. 228 will select the scrutineers.
Regarding paragraph 4, the virtual meeting services provider (“GetQuorum”) had displayed the vote tally outcomes for each candidate on the shared screen during the virtual Annual General Meeting, after the final tallies were reviewed and approved by the AGM Chairperson (the Board President). The unit owner alleged that such a shared screen display by GetQuorum was not compliant with the wording of paragraph 4 of the Settlement Agreement (“… allow the owners to see, directly on the screen, the voting results, including the total number of votes cast for each candidate, as and when generated by the system”).
Regarding paragraph 5, the 2 unit owner scrutineers for the virtual AGM were sitting in the on-site Management Office with the Condominium Manager and although they reviewed the hardcopy proxies that were submitted, they did not have access to the online back-end of GetQuorum’s voting system. The unit owner alleged that the limited role of the 2 scrutineers was not compliant with the wording of paragraph 5 of the Settlement Agreement (“… will strive to ensure that there are least two owners in the condo corporation who are not involved in the election appointed as scrutineers to observe and ensure fairness in the voting process”).
Fortunately, once the unit owner’s breach-of-settlement CAT Application was brought to a Stage 3 Hearing, the condo corporation retained legal counsel (our office) to defend.
The current jurisdiction of the CAT does not include condo disputes over AGMs, Board elections, the display of election results, or unit owner scrutineers. But because the self-represented condo corporation had agreed to a binding Settlement Agreement in a CAT Stage 2 Mediation (without any legal advice), that brought this dispute about the virtual AGM hosted by GetQuorum within the CAT’s jurisdiction over breach of Settlement Agreements.
Although the CAT ultimately found that there was no breach of the Settlement Agreement by the condo corporation, the CAT decided not to award legal costs to the condo corporation, due to the CAT’s default presumption against awarding legal costs to any party.
Moreover, the wording of the Settlement Agreement’s paragraphs 4 and 5 are still binding on the condo corporation, into perpetuity. For each and every AGM going forward forevermore, the condo corporation must abide by paragraphs 4 and 5 of the Settlement Agreement – even though the condo corporation was under no legal obligation whatsoever to agree to those terms in the Settlement Agreement at all. The Settlement Agreement went further outside of the “sandbox” of the CAT’s jurisdiction than it needed to.
Why Hire Counsel? “Bad Cop” Needed
What may have motivated the Board President in Manaj to agree to the Settlement Agreement proposed by the CAT Stage 2 Mediator was a genuine desire to be “nice” to that unit owner, and amicably resolve the dispute with his neighbour. However, in doing so, the condo corporation was opened up to the possibility of the unit owner trying to strictly enforce the broadly-worded language of the Settlement Agreement through the online CAT – which only costs the unit owner a $25 CAT filing fee and an internet connection to file against the condo corporation. Even though the CAT Stage 3 Hearing ultimately exonerated the condo corporation, it still costed the condo corporation thousands of dollars in legal fees to get there.
Sometimes, you need the lawyer or paralegal retained by the condo corporation to be the “bad cop” (or the “jackal”), so that the Board members and the Condominium Manager can remain the “good cops” on good terms with the unit owner. After all, it is the Board members and the Manager who often have to continue dealing with the unit owner in the future, instead of the outside legal counsel. An outside lawyer or paralegal can take a harder line or harsher stance to protect the condo corporation’s interests, than the Board or Manager might be willing to express. As outside counsel, the lawyer or paralegal is also less likely to have the same “blinders” on that the emotionally-invested Board or Manager might have.
In Manaj, because the condo corporation tried to represent itself and was trying to be nice to the unit owner, the condo corporation ended up agreeing to terms in a Settlement Agreement that were not necessary and ended up biting them later – whereas an outside lawyer or paralegal might have refused those outside-the-sandbox terms in the first place.
Why Hire Counsel? Settlement Agreements Should Be Limited in Scope
In McDonald v. Peel Standard Condominium Corporation No. 683, 2022 ONCAT 138, the condo corporation was represented by its Condominium Manager in the CAT. In the Stage 3 Hearing, the condo corporation tried to argue that the applicant tenant was not a unit owner, and therefore, lacked legal standing to bring the CAT Application against the condo corporation.
However, the CAT Stage 3 Member ruled that it was too late for the condo corporation to challenge the applicant tenant’s lack of legal standing, because the condo corporation had already agreed to a binding Settlement Agreement with the applicant tenant in Stage 2 Mediation, and the condo never raised this challenge as an issue before the Stage 2 Mediator.
Once a condo corporation agrees to a binding Settlement Agreement in the CAT, then any party to that Settlement Agreement – whether they are a unit owner or a tenant – can bring a breach-of-settlement Application to the online CAT.
Perhaps if the condo corporation had been represented by a condominium lawyer or paralegal who was well-versed in Section 1.36(2) of the Condominium Act, the condo might not have agreed to the Settlement Agreement in the first place, and instead, brought an early Motion in the CAT Stage 2 for the dismissal of the CAT Application on the basis of the tenant’s lack of legal standing.
Why Hire Counsel? Settlement Agreement Should be Properly Drafted
In Sakala v. York Condominium Corporation No. 344, 2022 ONCAT 113, the Settlement Agreement was not drafted to account for the possibility of the Board Meeting Minutes having to be amended at a subsequent Board Meeting and needing to be signed by Board members. Instead, the Settlement Agreement stipulated that the Minutes of the Board Meeting must be signed and then posted to the condominium community’s online portal “within 7 days” of Board approval.
This deficiency in drafting caused the applicant unit owner to bring a breach-of-settlement CAT Application against the condo corporation.
Even though the condo corporation was represented by a condominium lawyer in the Stage 3 Hearing, the CAT ultimately found that the condo corporation had failed to comply with the Settlement Agreement, and ordered the condo corporation to pay $125 to the unit owner.
So not only did the condo corporation in Sakala have to pay $125 to the unit owner, but the condo corporation also did not recover any of its legal fees incurred in its defence in the CAT Application – a CAT Application that might have been entirely avoided, if the original Settlement Agreement had been better drafted.
Perhaps even more concerningly, even though the CAT currently does not have any jurisdiction to compel a Board to sign and post their Minutes within a certain timeframe, the condo corporation in Sakala is now bound forevermore by the 7-day timeline that it agreed to in the Settlement Agreement. From now until the end of time, that condo corporation must have its Board members sign and post the signed Board Meeting Minutes within 7 days of the Minutes being approved.
Why Hire Counsel? Understanding What Should be Alleged and What Should Not
In Bridglall v. York Condominium Corporation No. 202, 2022 ONCAT 132, the condo corporation was represented by its Condominium Manager in the CAT. The condo alleged that the applicant unit owner was harassing and discriminating against the purported noise-making family above her. The Manager appeared to allege such harassment and discrimination on a “without prejudice” basis, since the condo corporation’s Notice to Residents had a “Without Prejudice” label at the top of the letter.
The CAT took issue with the Manager’s allegations against the applicant, and noted that simply labeling an accusation as “without prejudice” does not magically blanket such an accusation with immunity against legal consequence.
Here, it appears that the condo's “Without Prejudice” Notice to Residents was taking an overly-cautious approach in trying to discourage people from harassing the young family who was purportedly making noise, since the Ontario Human Rights Code prohibits discrimination on the basis of family status. Yet in doing so, the CAT found fault in the condo corporation’s unsubstantiated accusations against the applicant unit owner who was complaining about the family’s noise disturbances.
Perhaps input from a legally-trained advocate like a lawyer or a paralegal might have been useful here, in reviewing the Notice to Residents before it was sent out – because even the best condominium lawyer in the world might not have been able to claw back the consequences of that Notice to Residents after it had already gone out.
CAT’s Default No-Costs Presumption Should be Changed
As the above cases demonstrate, and as this author has noted repeatedly before, condo corporations in Ontario are stuck between a rock and a hard place, due to the CAT’s default presumption against awarding any party with their legal costs.
Because of the CAT’s refusal or reluctance to award a condo corporation with their legal costs even if the condo is ultimately successful on the merits of the dispute, condo Boards in Ontario are often resorting to themselves or their Condominium Managers – very few of whom are legally trained and/or insured to provide legal services – to represent the condo corporation in the CAT.
This self-representation could cause a potential problem for the Board and the community of unit owners, since the condo corporation might agree to an improperly drafted, outside-the-sandbox Settlement Agreement with a party in Stage 1 Negotiation or Stage 2 Mediation, even if that party and/or the CAT does not have the legal power in the first place.
The problematic Settlement Agreement also binds all future condo Boards to its terms, so that decades into the future – and who knows what changes in technology might bring in this century, the next, or even further – a unit owner can still bring a breach-of-settlement Application to the online CAT against the condo corporation. Even if the condo corporation is successful in defending against the CAT Application, the condo corporation is still likely to be out-of-pocket for thousands of dollars in legal fees.
That is, of course, unless the CAT in the year(s) to come, eliminates or significantly softens its default no-costs presumption.
If you have any specific inquiries, please feel free to contact our office or the author of this article at vyee@elia.org or 1-866-446-0811.
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 article is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.
