Costs Awards by The Small Claims Court in Condominium Matters

Condominium corporations across Ontario often find themselves named as defendants in unnecessary lawsuits brought by unit owners who may be unhappy with the decisions of their Boards of Directors. Despite the full indemnification provisions found in many condominium corporations’ declaration, by-laws and/or rules, courts are often extremely reluctant to make a full costs award (or at least, a significant one) for a successful defendant to recover their legal costs in successfully defending against such a lawsuit. 

This is particularly so in Small Claims Court, where the overall goal of Small Claims Court is to provide wider access to justice for the public. Consequently, significant costs awards – even against unsuccessful plaintiffs – are typically seen as contradictory to such a public policy objective, as they may discourage litigants from coming forward and using the Small Claims Court system to resolve their disputes.

While condominium corporations defending against actions brought in the Ontario Superior Court of Justice can apply for summary judgment, the Small Claims Court seldom exercises its authority to summarily adjudicate a matter prior to a full Trial. Instead, condominium corporations are often forced to either settle the Small Claims Court litigation in order to minimize its legal costs irrespective of the merits of the lawsuit, or take it to Trial and hope that they receive a favourable costs award in the end.

Costs Awards by the Small Claims Court

However, condominium corporations are further hampered by the Rules of the Small Claims Court, which effectively limits any costs award for a successful defendant to 15% of the total amount claimed by the plaintiff in the Plaintiff’s Claim. If the defendant made an Offer to Settle that was still open for acceptance at trial and was not accepted by the plaintiff, and the defendant received a judgement at trial that was equal to or better than its Offer to Settle, then the defendant may be entitled to recover its costs of up to 30% of the total amount sought in the Plaintiff’s Claim. Finally, the Rules of the Small Claims Court gives the Court the power to order that a party pays compensation to the other party if that party unduly complicated or prolonged an action or acted unreasonably – but the Court rarely does so.

Most Small Claims Court judges do not typically go above and beyond the 15% rule in making costs awards (or 30% where there was an Offer to Settle), even for successful defendants who are non-profit entities like condominium corporations. Judges in the Small Claims Court can go above the 15% (or 30%) threshold only if it is in the “interest of justice”. A recent decision by the Small Claims Court in Ottawa should help condominium corporations recover more of their legal costs spent on successfully defending against meritless Small Claims Court actions brought by a unit owner.

Carleton Condominium Corporation No. 28 v. Wexler

In Carleton Condominium Corporation No. 28 v. Wexler (“Wexler”), our office successfully argued, on behalf of the condominium corporation in a lawsuit brought in Small Claims Court, that:

“If the condominium corporation is not awarded full indemnity as to costs when defending an action successfully, the cost of defending that action is actually to the detriment of all other unit owners. That is where an injustice lies if the condominium corporation cannot obtain full indemnity for the costs of successfully defending an action.”

In Wexler, the plaintiff had unsuccessfully sought $2,525.14 in her Plaintiff’s Claim against Carleton Condominium Corporation No. 28 (“CCC 28”). This amount consisted of $255.00 for a chargeback by CCC 28, $270.14 for the plaintiff seeking advice from her own legal counsel regarding said chargeback, and $2,000.00 for alleged harassment by CCC 28.

On December 18, 2015, the judge of the Small Claims Court in Ottawa ruled that even if the tort of harassment exists in common law, CCC 28 did not commit such a tort, as the plaintiff failed to present evidence sufficient to satisfy any of the elements of a presumed tort of harassment. Moreover, the Court found that CCC 28’s conduct was not outrageous or recklessly disregardful – it was merely exercising its statutory duties under the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”).

The Court further held that CCC 28 was entitled to charge back the plaintiff for the cleanup of the mess she caused on her neighbour’s balcony, and because CCC 28 was entitled to the chargeback, the plaintiff was also not entitled to reimbursement for her costs of obtaining legal advice regarding same. Accordingly, the Court dismissed the Plaintiff’s Claim in its entirety.

With respect to costs, the Court ordered on February 19, 2016 that the plaintiff pay a costs award in the amount of $20,000, which was well in excess of the 15% (or 30%) guidelines aforementioned, on the basis that the plaintiff’s conduct had unnecessarily prolonged the 3-day trial, CCC 28 was “unnecessarily sued”, and CCC 28’s Declaration contained an indemnification clause that provided for full indemnity.

The judge of the Small Claims Court also took into account the fact that the plaintiff had made allegations of bad faith and/or misconduct by CCC 28, but had failed to prove these accusations at trial; therefore, a higher amount of costs was warranted.[1]

Takeaways for Condominium Corporations

As the Small Claims Court found in Wexler, a condominium corporation’s entitlement to recover its legal costs under the Act is not necessarily limited by the costs provisions under the Rules of the Small Claims Court. Small Claims Court judges, on occasion, recognize that it would be unfair for the other unit owners to bear the costs of enforcing the condominium corporation’s governing documents against a non-compliant unit owner, particularly where that unit owner had necessitated the condominium corporation’s incurring of legal costs in the first place by bringing an unnecessary lawsuit and driving up the legal costs in the proceeding due to their conduct.

[1] As found by the Ontario Superior Court of Justice in Carleton Condominium Corporation No. 396 v. Burdet, 2014 ONSC 7411, at paragraph 94.

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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