The CAO is investigating if legal costs should be awarded in CAT cases. The effect of CAT’s Costs Rule No. 45 has generally resulted in no costs awards in records cases except in exceptional circumstances. Condos should take advantage of this opportunity to convince CAO to award legal costs to the successful party, for the following reasons.
CAT’s jurisdiction was expanded beyond records cases to include disputes regarding pets, vehicles, parking and storage cases as of October 2020, with some mixed results applicable to recovery of legal fees in some CAT cases. CAT will also assume jurisdiction for noise, odours, smoke, vapour, light or vibration disputes as of January 2022.
Compared to owner-initiated records cases, nuisance cases enforced by Corporations would often involve many kinds of legal concepts. Condos and their lawyers have already developed systems to process various types of scenarios, having careful regard to previous court precedents.
After a manager’s initial efforts have failed to persuade an offending occupant to cease creating a nuisance, a condo’s lawyer issues a demand compliance letter to the offender and often educates boards and managers how to assemble conclusive evidence. Over 90% of rules breaches are resolved (to the relief of neighbours), usually immediately upon receipt of the lawyer’s letter, or through a negotiating process. If lawyers will no longer be encouraged to warn owners and occupants of their obligation to bear legal fees in cases of proven nuisances, then CAT can expect an avalanche of cases.
Typically, condo boards are not eager to incur legal fees, but a condo has a duty to take “all reasonable steps” to enforce compliance with s. 17(3) and s. 119 of the Condo Act, as well as the declaration’s compliance covenant and the specific requirements in the corporation’s own rules.
By the time the condo’s lawyer has sent a demand compliance letter to an offender, it is almost invariably true that the offender did cause a nuisance, because most condo lawyers are circumspect to ensure that the appropriate evidence has been assembled before undertaking legal proceedings. Such a nuisance enforcement case is an entirely different scenario than the dynamics involved when an owner may start a records dispute.
CAT’s Costs Rule 45 deviates sharply from the normal litigation process and the traditional scheme of the Condo Act, whereby, if parties fail to reach a settlement or a mediated result, each side incurs the risk of bearing not only their own legal fees, but also, part of the costs of the opposite party. Section 134(3) and s. 132 (1) of the Condo Act each have been based upon the discretion of the judge or arbitrator to award costs, damages and other remedies in their discretion. That legal cost-recovery regime is a powerful mechanism forcing the parties to wisely consider the implications, to seek objective professional advice, and even when resentment and anger are at a high level, to face up to reality – usually at an earlier stage before commencement of legal proceedings.
Courts have recognized that an offender causing a nuisance should not escape having to pay the piper, because it is unfair for a wrongdoer to impose upon all other unit owners the cost of forcing a recalcitrant occupier to obey communal obligations. People should bear the price of their misbehaviour. A condo’s rules providing written warning of such financial liability would normally prevent an abuser from breaching a rule in the first place, and from repeating an offence once the offender is made aware of rules they probably never read. The prospect of incurring legal fees makes stubborn offenders think twice.
If any disgruntled owner or condo can participate in the CAT process without any jeopardy for legal fees, a much larger number of CAT nuisance claims will need to proceed. Under a non-cost recovery system, offenders would have little incentive to comply with condo requirements. Condo boards might consider it fruitless to waste the time and legal expense to succeed in a meaningless endeavour to prevent future abuses. Innocent unit owners would be penalized by having to bear the legal fees imposed by an abuser within their community.
Owners should continue to remain entitled to rely upon the cost-recovery indemnifications in the condo’s declaration and rules (failing which 11,000 condos would have to revise those standard protections at great expense to reflect an unpopular CAT costs regime).
The current indemnification and rule cost-recovery enforcement mechanisms are the glue that ensures that the occupants all units will follow a communal social milieu where all are singing from the same song sheet. Traditional cost recovery provisions have been held to be reasonable. Courts have made it clear that they should not interfere with reasonable rules promulgated by condo boards of directors. That is especially pertinent because s. 58’s statutory mandate to pass rules is subject to notice to all owners, and their right to requisition a meeting of owners to set aside the rules or to promulgate other rules.
Various condo managers confirm they do not want to fulfill a lawyer’s role to handle a nuisance claim. Managers suffer repeated complaints from angry neighbours complaining that management is doing nothing (while undertaking private steps requiring the offender to refrain from continuing the nuisance and suffering the offender’s abuse, harassment and defamatory statements).
If legal fees are not permitted by CAT, who will handle the intricacies of a nuisance claim? Seldom will a volunteer director want to assume that time and challenge – instead, the board might ask the very manager who had threatened the offender with enforcement proceedings to be the advocate to stick-handle the CAT proceedings – knowing that can give rise to an increased likelihood of a demeaning and expensive CMRAO disciplinary attack by the offender – primarily out of resentment and anger.
It is not an appropriate part of a management company’s contract to oversee such legal proceedings, and the time spent to process a nuisance claim before the Tribunal will detract from the already busy roles fulfilled by most managers.
It sounds nice to do away with legal fees, but loss of that protective enforcement mechanism is a lose-lose-lose for all involved (including CAT). The prospect of suffering legal costs is the poker game which forces the parties to carefully assess the viability of their positions and their chances for success, and also a motivation to carefully tailor a party’s claims or defences to convince the adjudicator. That costs mechanism is the greatest reason cases are resolved at an early stage – usually superseding the need for justice, or retaliation, or principles of personal integrity (which the other party does not care about).
Lacking a typical judicial-style legal costs-recovery rule, CAT will be encouraging itself to bear a heavy nuisance case load and will find itself addressing various defamatory and harassment scenarios as typically occur in rules breaches scenarios. The threat of incurring legal costs would be a powerful means to ensure proper behaviour by the parties. Of course, the existence of legal fees would be a two-way street. A condo which did not substantially succeed in its rule enforcement claim could be forced to suck up its own legal fees and an appropriate share of the occupant’s legal fees.