There are limited circumstances where directors of condominium corporations can be personally liable for oppressive conduct under Condominium Act, 1998.
In a recent Ontario Superior Court of Justice decision, the declarant (also a unit owner at a vacant land condominium corporation) sued the condominium corporation and the individual directors. The allegations of oppressive conduct by the condo and directors included exaggerating construction deficiencies and not repairing them at the same time, implementing rules that impeded the declarant’s ability to rent units and adding these issues to status certificates (among other allegations). The condo corporation brought a motion to throw out the claim against the individual directors under the rules of the court.
The court threw out the claim against the individual directors because:
- the declarant did not provide sufficient particulars as to what each individual director is alleged to have done, as differentiated from the condo corporation’s alleged conduct; and
- the alleged conduct of the individual directors did not result in any personal benefit or increase their control in any way; and
- there was no reasonable basis in the claim for the court to decide whether the alleged oppression could be rectified by a monetary order against the directors personally.
The court also reviewed the only case in which personal liability of directors under section 135 of the Condo Act was considered and confirmed that a director should be held personally liable if he or she is the motivating force behind oppressive conduct. In that case, the director had engaged in a long history of self-dealing, charging the condo corporation for personal matters, not declaring conflicts and implementing an invalid by-law, which differed from the present case.
The court added that even though it was alleged that the directors breached their duty to the condo corporation, the specific conduct alleged involved board decisions about managing the condo’s day-to-day affairs. A board may be wrong in their decisions or assessments, but errors in everyday management of the affairs of the corporation, which do not personally benefit the directors, should not result in a personal order against them. The court cautioned that allowing this sort of claim against directors of a condominium corporation would serve as a deterrent to raising deficiencies with developers and properly informing potential purchase of such deficiencies.