Part 46 published on 01/05/14
Developer entitled to hold a meeting to replace the Board
This is a phased townhouse condominium. The last phase was declared in March 2011. The developer still owned 19 (57%) of the condominium’s 33 units. The condominium corporation had started a court action against the developer and others, seeking $750,000 in damages for an alleged defective weeping tile system.
At the condominium’s 2013 annual general meeting, a motion to approve borrowing of $500,000 (to repair the alleged deficiencies) was defeated because the developer voted against the motion. In January 2014, the developer requisitioned a meeting for the purpose of electing a new Board, under Section 152(6) of the Condominium Act, 1998. The developer’s intention was to take control of the Board and repair the deficiencies in a manner chosen by the developer. The condominium corporation asserted that this demand (for a meeting) was subject to a 2-year limitation period, which had expired. The condominium corporation also asserted that such an election would be oppressive, given the conflict between the developer and the condominium corporation.
The Court ruled in favour of the developer, and ordered that the requested meeting go ahead. The Court said that the normal two-year limitation period did not apply to the developer’s demand (and right) to have a meeting. The Court’s decision included the following:
It is not lost on me as to the impetus and driving forces behind Prosperity’s request for a s. 152(6) meeting. Effectively, Prosperity wants to oust the current members of the board of directors in favour of replacing them with their own representatives who would likely be favourable to its position with respect to the remediation work required and the ongoing litigation.
…
Indeed, current members of the Board may be replaced, litigation may be stayed, and remediation efforts may proceed against the wishes of the minority. Nevertheless, while I am not adjudicating on the merits of the main action, I am not satisfied on the material filed that such control will result in further conduct that is oppressive, unfairly prejudicial, and disregards the other unit owners.
[Editorial Note: I was surprised by this decision. The developer was clearly in a conflict of interest and expressed its intention to promote its interests when in control of the condominium corporation. In my view, condominium developers are in a unique fiduciary role vis-a-vis the purchasers, and should not be permitted to vote in a way that might promote the interests of the developer over the interests of those purchasers.]