



COURT OF APPEAL FOR ONTARIO

CITATION: Noguera v.
    Muskoka Condominium Corporation No. 22, 2020 ONCA 46

DATE: 20200127

DOCKET: C66412 and C66413

MacPherson, Pepall and Lauwers
    JJ.A.

DOCKET: C66412

BETWEEN

Michael Noguera and Victoria Noguera

Applicants (Respondents)

and

Muskoka Condominium
    Corporation No. 22

Respondent
    (Appellant)

DOCKET: C66413

AND BETWEEN

Muskoka Condominium Corporation
    No. 22

Applicant
    (Appellant)

and

Michael Noguera and Victoria Noguera

Respondents (Respondents)

Erik Savas, for the appellant

Megan Mackey, for the respondents

Heard: October 21, 2019

On
    appeal from the judgments of Justice Wendy Matheson of the Superior Court of
    Justice, dated December 11, 2018, with reasons reported at
2018 ONSC 7278
.

REASONS
    FOR DECISION

[1]

The Nogueras purchased Unit 210 in Muskoka
    Condominium Corporation No. 22 (the Condominium), a lakeside condominium
    development, in May 2014. In February 2016 their immediate neighbour, Don
    Mitchell, advised them that Unit 211 was to be sold. The Nogueras were
    interested in purchasing, but only if they could make an opening from their
    unit into the adjoining unit.

[2]

Before making an offer on Unit 211 and without
    committing to buy it, Mr. Noguera asked the Condominiums board of directors
    for permission to make the alterations. This request was addressed at the board
    meeting on March 25, 2016. Mr. Noguera was then a director as was Mr. Mitchell,
    the seller of Unit 211. Mr. Mitchell absented himself from the meeting but Mr.
    Noguera remained. The board approved the proposal with several conditions. Mr.
    Noguera did not vote on the proposal. We note in passing that with respect to
    Unit 211, Mr. Noguera was not an owner, and the board could have refused his
    request to consider the proposal. But it proceeded as it was entitled to do.

[3]

The minutes of the meeting were set out in the
    application judges decision at para. 9. The board imposed seven conditions on
    the approval, set out by the application judge at para. 54:

(1)

that the unit owner pay all the costs;

(2)

that the alteration not affect the use and
    enjoyment of other unit owners;

(3)

that the alteration not affect the symmetry of
    the building;

(4)

that the alteration not affect the Condominiums
    budget;

(5)

that all the necessary engineering and town
    approval be given before the work commenced;

(6)

that the wall be returned to its existing state
    if the unit owner (Mr. Noguera) was to sell one of the units and at no cost to
    the Condominium; and,

(7)

that the
    two units could never be sold as one unit.

[4]

Section 98 of the
Condominium Act, 1998
,

S.O. 1998, c.
    19

(
Condominium Act
)
required the
    Condominium to enter into and register on the title to the units an agreement
    with the Nogueras before they
made an
    addition, alteration or improvement to the common elements. Consistent with
    its long-standing past practice, the Condominium neglected to do so.

[5]

The respondent
    Nogueras provided the property manager with a copy of the plans in April 2016.
    They showed an opening on the main floor and a door on the second. The Condominium
    gave a letter to the Town on June 6, 2016, confirming the boards approval and
    stating that All conditions have been met to the [b]oards satisfaction.

[6]

Based on the boards approval, the Nogueras bought
    the adjoining unit.  They signed an offer to purchase on June 16, 2016 and the
    transaction closed in August 2016.  Renovations began in the summer of 2017 and
    were completed in early 2018.

[7]

The membership of the board of directors changed,
    and the new board sought to unravel all that had gone before regarding the two
    units owned by the Nogueras, largely on the basis that there was no s. 98
    agreement covering the alterations. The new president of the board also advised
    the Nogueras that they could not use the lakeside path based on unproven
    allegations of window peeping.

[8]

The controversy between the parties alerted the
    Condominium board to a problem. The evidence was that the Condominium had
    consistently neglected to enter into agreements required by s. 98 of the
Condominium
    Act
, from the Nogueras or from anyone
    else who had made an addition, alteration or improvement to the common
    elements.
The application judge noted, at para. 10, that [m]ost
    of the unit owners had previously made structural changes, and none had been required
    to enter into the statutorily-required s. 98 agreement.

[9]

The board decided to validate retrospectively
    the changes made by unit owners by what was termed blanket s. 98 agreements. The
    Nogueras agreed to sign a s. 98 agreement and were told that others who had
    made structural changes would sign one too. The s. 98 agreements provided to
    the affected unit owners were identical, except for the one provided to the
    Nogueras. Their s. 98 agreement, as proposed by the Condominium board contained
    the following additional language in clause 5:

The Improvements
    shall be removed by the Unit Owner, at the Unit Owner's sole expense, before
    the Unit is sold. Specifically, the Unit shall be restored to the condition
    before the Improvements were made,
including but not limited to the
    reinstallation of the common element demising wall within the Unit and any
    changes that were made by the Unit Owner related thereto
. [Emphasis added
    by application judge.]

[10]

Two board meetings were held without notice to Mr.
    Noguera even though he was a director.

[11]

The Nogueras brought an application under s. 135
    of the
Condominium Act
for an oppression remedy on the basis that they
    were targeted after their relationship with members of the new board began to
    break down: at para. 23. The indicia were described by the application judge,
    at para. 72, and signal considerable animosity on the part of some members of
    the new board towards the Nogueras, who consequently asked for the following
    relief:

(1)

that the Condominium be foreclosed from
    re-opening the approval process as it has requested in its cross-application;

(2)

that the operative s. 98 agreement be that
    proposed by the applicants;

(3)

that the applicants may use the lakeside path
    again; and,

(4)

that the
    applicants receive damages for their loss of enjoyment of their property.

[12]

In response, the Condominium sought extensive
    relief. The relief sought, which the application judge outlined at para. 75,
    included:

a cease and desist
    order regarding the structural change (even though the work has been
    completed), more plans (even though the plans were provided long ago), consent
    to obtain the Towns files (even though it confirmed to the Town that its
    conditions had been met long ago), written consent of the current Board, unit
    owner approval by two-thirds vote, its version of the s. 98 agreement, the
    right to impose more conditions and require changes at the applicants expense
    and numerous other orders.

[13]

The application judge dismissed the Condominiums
    cross-application, and granted the Nogueras oppression application, in part,
    on the following terms:

1)

This Court Declares that on March 25, 2016 the board of directors of
    the Respondent approved changes to the demising wall between suite 210 and 211
    to create two openings, one on the main floor and one of the second floor.

2)

This Court Orders that the parties are required to execute the
    Respondents requested form of section 98 agreement. The following terms must
    be added as clause no. 5:

The changes to the
    demising wall should be removed by the Unit Owner, at the Unit Owners sole
    expense, before the unit is sold. Specifically, the Unit shall be restored to
    the condition before the demising wall was altered.

3)

This Court orders that the Respondent shall pay Michael Noguera and
    Victoria Noguera $10,000 in damages for oppression.

4)

This Court orders that Michael Noguera and Victoria Noguera may
    resume use of the lake-front path.

[14]

The Condominium appeals.

[15]

We dismiss the Condominiums appeal because we
    largely agree with the application judges oppression analysis.

[16]

We begin with s. 135 of the
Condominium
    Act
, the oppression remedy provision
    found in the Act. It was introduced by the legislature in 1998 and came into
    effect in 2001. Section 135(2) and (3) provide:

(2) On an application, if the court
    determines that the conduct of an owner, a corporation, a declarant or a
    mortgagee of a unit is or threatens to be oppressive or unfairly prejudicial to
    the applicant or unfairly disregards the interests of the applicant, it may
    make an order to rectify the matter.

(3) On an application, the judge may
    make any order the judge deems proper including,

(a) an order
    prohibiting the conduct referred to in the application; and

(b) an order
    requiring the payment of compensation.

[17]

The test for
    oppression under s. 135 mirrors that for oppression in corporate law generally:
Metropolitan Toronto Condominium Corp. No.
    1272 v. Beach Development (Phase II) Corporation
, 2011 ONCA 667,
285 O.A.C. 372,
at paras. 5-6. In
BCE Inc. v. 1976 Debentureholders
, 2008 SCC 69, [2008] 3 S.C.R. 560, the Supreme Court
    described the two-part test for oppression. First the claimant must establish
    that there has been a breach of reasonable expectations and second, the conduct
    must be oppressive, unfairly prejudicial or unfairly disregard the interests of
    the claimant. The subjective expectation of the claimant is not conclusive;
    rather the question is whether the expectation is reasonable having regard to
    the facts of the specific case, the relationship at issue, and the entire
    context, including the fact that there may be conflicting claims and
    expectations:
BCE
, at
    para. 62. The availability of the oppression remedy largely turns on a factual
    analysis.

[18]

At its heart,
    the oppression remedy is equitable in nature and seeks to ensure what is just
    and equitable:
BCE
, at para. 58. In a case such as this one,
    relevant considerations include the boards statutory duties and the conduct of
    the parties.

[19]

The appellant
    Condominium submits that the application judge cited the law correctly, but she
    erred in its application. It argues that in essence, she disregarded both the
    boards duty to ensure statutory compliance and the expectations of other unit
    owners. In support of its argument, it relies on
Carleton Condominium Corporation No. 279 v. Rochon et al.
(1987), 59 O.R. (2d) 545;
Orr v. Metropolitan

Toronto Condominium
    Corporation No. 1056
,
    2011 ONSC 4876,

11
    R.P.R. (5th) 189, revd on other grounds, 2014 ONCA 855,

327 O.A.C. 228
; and
Toronto Common Element
    Condominium Corp. No. 158 v. Stasyna
,
    2012 ONSC 1504,
18 R.P.R. (5th) 15
.

[20]

We disagree
    with the Condominiums position.

[21]

As the
    application judge correctly observed, the oppression remedy is broad and
    flexible and under s. 135, the court may make any order the judge deems
    proper. She also noted that the statutory regime is a significant factor.
    Citing
Hakim v. Toronto Standard Condominium
    No. 1737
, 2012 ONSC
    404, 1 B.L.R. (5th) 159, she stated at para. 36 that [t]he court must balance
    the objectively reasonable expectations of an owner with the condominium
    boards ability to exercise judgment and secure the safety, security and
    welfare of all owners and the condominiums property assets. Having considered
    these factors, she then went on to conclude that the Condominiums conduct was
    oppressive and unfair.

[22]

The application judge, at para. 83,
    canvassed the instances of oppressive behaviour by the Condominium at some
    length:

The Condominium proceeded in breach of its
    governance obligations by holding board meetings without proper notice. The
    Condominium proceeded as if it had little or no responsibility for the
    circumstances giving rise to the disputed approval and that stance was taken
    even in oral argument before me. There is no doubt that the Condominium was
    responsible for a great deal of what happened here, most notably for an illegal
    past practice regarding s. 98 agreements that was in place before the
    applicants even became unit owners. The approach taken with these unit owners,
    as if the Condominium had little or no role in the prior events, was harsh and
    unfair. This is in stark contrast to the approach taken with other unit owners
    who had also made structural changes with now admittedly defective approvals. I
    recognize that there was a range of types of structural changes, and opening
    the demising wall had not been done before, but the s. 98 requirement applies
    to all of the changes. The Condominium treated the applicants more harshly than
    the other unit owners. Associated conduct by Board members shows targeting and
    ill will toward the applicants. Bearing everything in mind in the exercise of
    my discretion, I would foreclose the Condominiums requested orders.

[23]

She found, at para. 73, that the Condominium
    wrongly disparaged the applicants, especially [Mr. Noguera], wrongly excluded
    them from use of common elements, specifically the path, and wrongly fostered
    an atmosphere that made them uncomfortable. She made the finding, at para. 77,
    that the particular form of s. 98 agreement to which the Condominium would accede
    was abusive and unfair, and prejudicial to the Nogueras. She concluded, on
    the evidence, that the requirements of the oppression remedy under s. 135 had
    been met.

[24]

The application judges view was so strong that
    she added, at para. 81:

I have found that the 2016 approval process
    was not deficient and the Condominium is therefore not entitled to reopen or
    revisit that approval or require that the applicants restore the demising wall
    other than in connection with a sale. However, if I am wrong and there were
    defects, I would grant the applicants request that the Condominium be
    foreclosed from its requested relief of essentially restarting the approval
    process now. I would make that order under s. 135 of the Act.

[25]

These
    conclusions were available to the application judge on the basis of the
    evidence before her. The three cases relied upon by the appellant Condominium
    are quite different.
Rochon
predated the incorporation of the
    oppression remedy into the
Condominium Act
; relief from oppression was never sought
    in
Stayna
and moreover there was a total absence of any
    reasonable expectation; and in
Orr
, the application judge found no
    oppression. Quite apart from those factors, the underlying facts in these three
    cases differed significantly from those in this case.

[26]

The
    Condominium also argues that the board meeting at which the alterations were
    approved was invalid under s. 40 of the
Condominium
    Act
. The Condominium
    argues that Mr. Noguera had a conflict of interest and could not be counted in
    the quorum, as required by s. 32 of the Act. If this argument is correct, then
    the meeting at which the alteration proposal was approved lacked a quorum. Although
    Mr. Noguera was present at the meeting, he did not vote.

[27]

We agree with the application judges
    analysis of the quorum issue.
Section 40
    provides:

40 (1) A director of a corporation
    who has, directly or indirectly, an interest in a contract or transaction to
    which the corporation is a party or a proposed contract or transaction to which
    the corporation will be a party, shall disclose in writing to the corporation
    the nature and extent of the interest.

(2) Subsection
    (1) does not apply to a contract or transaction or a proposed contract or
    transaction unless both it and the directors interest in it are material.

[28]

Section 40(6)
    provides that the director shall not be present during the discussion at a
    meeting, vote or be counted in the quorum on a vote where, as noted in s.
    40(2), the interests of both the director
and the
    Condominium in the contract or transaction are material. If they are not
    material, then the director may be present and may vote.


[29]

The application judge concluded, at para. 47,
    that Mr. Noguera did not have a conflict because the proposal was not material
    to the Condominium. She viewed materiality in functional terms, and noted, at para.
    43:

The change was to
    an interior wall. It would not be used by and was not even visible to anyone
    outside of these two units. There was no financial impact on the Condominium.
    The applicants were paying for the work. The common expenses and other
    financial obligations of each of # 210 and # 211 would not be reduced or
    eliminated. There was no impact on the Condominiums insurance. I find that the
    proposed transaction was properly described in the minutes as a minor
    alteration from the standpoint of the Condominium.

[30]

The application judge rejected the Condominiums
    argument, largely based on the cost of the alteration, that the proposed
    transaction is material to it, in hindsight: at para. 42. The cost was
    initially estimated at between $6,000 and $8,000, but once the Town imposed its
    requirements that the doors in the openings be fire-rated, the cost climbed to
    about $32,000.

[31]

The application judge rejected the Condominiums
    argument that materiality should be judged on the ultimate costs that were
    incurred rather than on the initial estimate. She found, at para. 44, that in
    financial terms, it was not material to the Condominium at the time it was
    approved, and the Condominium has not established that hindsight should control
    the analysis in this case. We agree.

[32]

The Condominium does not dispute that s. 98
    could be available to the Nogueras to retrospectively validate and ratify their
    alterations. The terms required by the application judge in her order would
    comply with s. 98(2), and save harmless the Condominium.

[33]

The Condominium renewed before us the argument
    that the court has no business making an order prescribing the terms of the s.
    98 agreement. The parties should be left to negotiate the terms of the
    agreement with the Condominium retaining its complete discretion. We reject
    this argument. The application judge provided relief from oppression, a remedy
    that is broad and flexible. The application judge described in para. 83 an
    attitude on the Condominiums part that 
shows
    targeting and ill will. The Condominium had provided s. 98 agreements to the
    other unit owners who had completed alterations but the one prepared for the
    Nogueras to sign was both onerous and different. It is not surprising that the
    application judge declined to give effect to the Condominiums argument. The
    evidence supporting her view is overwhelming. The application judges remedy
    served to rectify the Condominiums oppressive conduct, which seeped through
    all its actions, including its approach to this litigation. The Condominiums real
    interests were entirely protected by the s. 98 agreement ordered by the application
    judge, which simply incorporated the conditions imposed when the Board originally
    approved the Nogueras proposal.

[34]

The appeal is dismissed with costs as agreed
    payable by the Condominium to the Nogueras in the amount of $20,000,
    all-inclusive.


