the Rogue Board, the Rogue Director - Association of Condominium ...

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corporation’s auditor, lawyer and condominium manager. Three such meetings were held to fully explain the need for substantial additional owner contributions. As soon as notice of the increase in common expense contribution was sent to owners, a requisition meeting to remove the board was initiated and the board was removed – a new board from the new ethnic majority being elected. The new board fired the engineer, auditor and lawyer. The manager resigned. The assessment increase was reversed and the professional advice ignored. There are no condominium police, and there was no owner willing to incur litigation costs personally to force the new board to comply with the law. It is unknown whether the new auditor qualified the audit of the annual financial statement, nor the inevitable negative impact on unit resale values when purchasers became aware of the underfunded reserve and noted the state of disrepair of the building. However, in my experience such a condominium will enter a downward spiral of community dysfunction and reduced unit values from which it is difficult to recover. Appointment of a condominium administrator under section 131 of the Act is beyond the scope of this article but will often add yet another burden of expense on unit owners further reducing unit values. While recovery is possible, it is long and owners will suffer significant hardship. In this case it is clear that the due diligence is to rely on professional advice, swallow the bitter pill of common expense increases, reverse the decline of building standards and underfunded reserve to preserve and increase unit values in the short to immediate term. ■ The Rogue Director What condominium director has not received an earful of complaint/ criticism from a unit owner? It is very tempting for that elected director to take responsibility for the problem, despite the fact that the sole legal authority of a director is to inform him/herself and make DEL Acmo 1/2 Ad 2007:Layout 1 1/24/08 5:47 PM Page 1 decisions at duly constituted meetings of the board (officers have some additional authority between board meetings). The proper response to an owner is accordingly that the matter will be brought up at the next meeting of the board of directors if it cannot be handled by management in the interim. The matter may even require an emergency meeting of the board, but an individual director can do little or nothing. In fact, if a director purports to act for the condominium corporation in responding to the owner, the result can be an undermining of the authority of the board of directors and its contract property manager. If an individual director takes action to deal with a perceived problem, not only is the governance of the condominium undermined, but the corporation could incur legal liability, as could the individual director. In one case a condominium director believing an owner’s complaints to be justified, circulated an owner survey (omitting the other directors and known supporters) inviting THE LEADER IN CONDOMINIUM MANAGEMENT! ® PROPERTY MANAGEMENT INC. Our experienced, professional Condominium Management Resource Team will protect your investment and enhance your lifestyle. ® Delivers • Integrity • Performance • Innovation • We invite you to join our many satisfied clients. 416-661-3151 E-mail: info@delcondo.com Facsimile: 416-661-8653 4800 Dufferin Street, Toronto M3H 5S9 www.delpropertymanagement.com Winner of the Real Estate Management Industry’s Award as the Premier Condominium Organization in Canada. Selected Corporate Member of the Year By The Association of Condominium Managers of Ontario. ■ 50 ■ CM Condominium Manager Magazine, Fall 2008
owners to express their opposition to the board’s policy. Some owners did respond as invited, and others responded with anger that the board’s authority was being undermined, and concern of the impact that this action would have on the community as a whole. Very worried of the governance dysfunction that could result from a divided community, the board of directors held an owner information meeting and sought legal advice on how to restore understanding and respect for the checks and balances inherent in a properly functioning governance structure. It was felt necessary to re-affirm to owners their right to provide input through proper channels, and that a reasonable and timely response to issues raised would be given. Without an atmosphere of respect and confidence from owners as well as among the directors, creativity and responsiveness of the board could be replaced by mistrust and anger. A paragraph of the advice provided to that board is useful to restate here: “Every director brings a different perspective to board meetings and is fully entitled to take every reasonable opportunity to impress upon his/her fellow directors the importance and correctness of that director’s position. Once the discussion is completed and the matter determined by majority vote, then the decision is a decision of the corporation and may be relied on by members of the corporation and third parties. In the event of a dissenting vote, the dissenting director would have the right to have his/her dissent noted in the minutes of the board meeting, although this is usually an extraordinary event. It would not be appropriate for any director to relate to other owners the confidential discussions and presentation of points of view by individual directors or officers unless so disclosed in the minutes.” ■ The Law In 1986, Buock J. in Dixon v. Deacon et al stated: “There is a dearth of case law on the issue of duty of care, and accordingly it is difficult to say precisely to what depths one must sink in order to be liable in negligence. Conduct unbecoming a director would seem to include deliberately ignoring the affairs of the corporation and also transfer of control to persons whom one knows to be dishonest or irresponsible. Lesser sins are likely to be forgiven on the basis of the ‘business judgment’ rule provided that the individual responsible can plausibly claim to have acted in good faith.” Section 122 of the Canada Business Corporations Act and section 134 of the Ontario Business Corporations Act both echo the wording of the Ontario Condominium Act requiring: “the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” As a result of the identical wording, case law from the business corporation world apply to condominium corporation directors. I had reviewed cases that found: • relying on a trusted manager protected credit union directors from liability for losses; • bank directors were liable for losses caused by an employee be- CM Condominium Manager Magazine, Fall 2008 ■ 51 ■
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