The court recently  disallowed compliance costs claimed by a condo corporation because it did not first mediate compliance issues under section 132(4) of the Condominium Act, 1998 (the “Act”).

Mr. Friend is a unit owner who had a long-standing dispute with the board of directors and management dating back to 2011. The condo brought successful compliance applications against Mr. Friend in 2013 and 2019 because he didn’t follow the condo’s governing documents, interfered with contractors and management, and engaged in a campaign of harassment against the board and the condo’s employees. In 2020, the court granted a final injunction prohibiting Mr. Friend from communicating with the condo’s board and employees, except under limited exceptions. Full indemnity costs were awarded against Mr. Friend and he unsuccessfully appealed the 2020 decision, resulting in a further costs award. The condo registered liens to secure the cost awards and other common expense arrears.

The matter was before the court again in 2021 to determine the amounts due under the liens.

While almost all the amounts the condo claimed to be secured by liens were acceptable, the court disallowed compliance legal costs claimed by the condo for its lawyers to communicate with Mr. Friend about rules infractions, including reviewing and responding to emails from Mr. Friend, sending compliance letters, and other minor conflicts about Mr. Friend’s kayak, leaving his boots in the hall and refusing entry to his unit for service providers.

The court noted that there is the obligation to mediate disagreements about rule infractions under section 132(4) of the Act. The court is therefore precluded from making a compliance order until the mediation process has taken place.

In this scenario, the condo did not mediate with Mr. Friend, despite his several requests, because the board viewed such an exercise as being bound to fail and a waste of time due to Mr. Friend’s outrageous demands.

The court was asked to make a compliance order in relation to the claim for legal costs incurred for compliance purposes. But based on section 132(4) of the Act, the court concluded that it could not make an award for compliance legal costs when mediation has not taken place.

The condo argued that compliance legal costs are recoverable under the indemnity provision of its declaration as a common expense, but the court rejected this argument. The court applied Amlani, noting that:

• Compliance legal costs must be recovered in accordance with the Act and based on a court application which must be preceded by an attempt at mediation under section 132(4) of the Act;
• Condo declarations must be interpreted in light of the provisions of the Act, and
• Legal fees incurred to enforce compliance require a court order before they can be levied against an individual unit owner, unless they fall within section 85(1) of the Act.

This case is consistent with other recent cases we blogged about in 2021 regarding mandatory mediation and arbitration under the Act. The common theme – courts will scrutinize condo disputes to ensure that dispute resolution processes are followed, and claims are litigated in the proper venue, be it arbitration or a court application. This affects recovery of costs.