In the recent Alberta Court of King’s Bench decision, Catterall v Condominium Plan No. 752 1572 (Park Towers), the Court addressed the significant financial implications of condominium disputes. This case serves as a reminder to condominium corporations and owners of the potential financial consequences of legal proceedings and the importance of managing disputes efficiently and amicably.

Background

In the earlier decision Catterall v Condominium Plan No. 752 1572 (Park Towers) 2024 ABKB 329, the Applicant unit owners sought Court intervention for repair and maintenance of the common property, which was prompted by a Safety Codes Order issued by the City of Edmonton which required immediate balcony repairs. The Respondent Condominium Corporation began addressing the issues relating to the Safety Codes Order during the course of the litigation.

The Applicants made several claims, including that the Respondents had failed to maintain many aspects of the common property in a state of good repair, had not properly established or maintained a reserve fund adequate for future repairs, and that the Respondents had engaged in improper conduct. They also sought the appointment of an administrator or investigator to assume management of the Condominium Corporation pursuant to section 58 of the Condominium Property Act, RSA 2000, c C-22 (the “Act”) which permits the Court to appoint an administrator and give the administrator whatever powers the Court considers appropriate in the circumstances.

However, the Court ultimately found that the Applicants failed to prove their case. The Court denied the Applicants’ request to appoint an administrator, finding that the circumstances did not warrant such an extreme remedy. The Court considered the wording of section 58, requiring that there be “cause shown”, reviewed the relevant case authorities, and summarized the factors to consider, including but not limited to, whether the Act or bylaws have been breached as a result of decisions or inaction by the Board, whether the board has failed to manage the affairs of the corporation, whether there has been substantial misconduct, whether irreparable harm is likely to result if an administrator is not granted, and whether there is an alternative, less severe and less intrusive remedy available. The Court concluded the Applicants had not shown sufficient cause justifying the appointment of an administrator.

Further, the Court considered the business judgment rule and reiterated the principle that judicial deference to the judgment of democratically elected boards of condominium corporations applies to applications under both sections 58 and 67, and further, to condominium corporation’s maintenance and reserve fund obligations.

There was insufficient evidence that the Respondents had not adequately maintained the common property, or that they had failed to establish a proper reserve fund or plan. The Court noted that despite the volume of evidence filed in support of their application, including Affidavits and transcripts of questioning on some of the Affidavits (a total of over 2000 pages of evidence), the Applicants had only one (1) piece of direct evidence.

Additionally, the Applicants improperly appended to their Affidavits’ and relied on reports containing opinions from engineers or engineers-in-training without the authors having been properly qualified as experts by the Court.

The Court ultimately found that evidence to be hearsay, reiterating the principle that an affidavit sworn by a different individual attaching an expert report is inadmissible, as the expert has neither sworn the evidence themselves nor can the expert be cross-examined. The Court referenced the proper format to introduce expert evidence on chambers applications as being the same as in trial, where Court requires the qualifications of the expert, the information and assumptions on which the expert’s evidence is based and a summary of the expert’s opinion.

The Court also found no breach of the Condominium Property Act or the condominium’s bylaws, or any oppression by the Condominium Corporation such that there was no improper conduct.

Consequently, the Court dismissed the Applicants’ claims in their entirety. The Court ordered that the parties provide written submissions on costs.

Issue of Costs

As the successful party, the Condominium Corporation was presumptively entitled to a costs award in its favour. At the hearing on costs, the Applicants argued that each party should bear their own costs or, alternatively, that the Respondents should only be entitled to a limited amount of costs based on Schedule C, Column 1 of the Alberta Rules of Court. The Condominium Corporation, on the other hand, sought full indemnity for its legal costs, or at least enhanced costs.

Notably, the Applicants incurred legal expenses of more than $100,000.00, though the actual amount is unknown, and that figure came from a settlement proposal the Applicants sent in or around January 2023, before the final hearing occurred. Defending the application cost the Condominium Corporation $147,121.00 in legal costs.

In finding that reasonable and proper costs ought to be awarded, the Court considered the factors under Rule 10.33(1), including, but not limited to the following: the Condominium Corporation’s degree of success, the amount claimed by the Applicants, the importance of the issues, the complexity of the action, and the conduct of the parties which shortened or prolonged the action.

The Court ultimately ruled that the Applicants had not engaged in improper conduct, nor had they submitted excessive or unnecessary evidence that would justify an award of enhanced costs. It was noted that both parties had the opportunity to resolve the dispute without litigation and could have held the matter in abeyance while the repairs to comply with the Safety Codes Order were being completed. The parties instead opted to take several steps in the litigation, including filing multiple affidavits and engaging in questioning of the affiants.

In the result, the Court awarded costs to the Condominium Corporation based on Schedule C, Column 1, with a 25% increase to account for inflation, which, including disbursements and other charges, was a total of $10,854.27, or roughly 7% of its actual costs incurred defending the Applicants’ claims (costs which must be borne by all the unit owners in the Corporation collectively). Importantly, the Court also ordered that each party bear their own costs related to the hearing on costs.

Takeaways

This case underscores the importance of managing condominium disputes with care and practicality. Here are a few of the key takeaways:

1. Document your efforts: Condominium corporations should ensure that they are maintaining the common property in accordance with the requirements set out in the Condominium Property Act and the registered bylaws. Keep detailed records of inspections, repairs, maintenance, and reserve fund planning to minimize the risk of legal claims by owners and assist in defending claims when they are brought. Condominiums are not held to standards of perfection – just reasonableness, but once disrepair is identified, the burden shifts to the condominium to prove due diligence.
2. Timely action: The Respondents were addressing the repair issues raised by the Applicants during the litigation, which may have influenced the Court’s decision. The Court can and will consider actions and events that occur after the claim is filed. Proactively addressing issues and showing a commitment to resolving problems, even after a claim is filed, can sometimes mitigate legal consequences.
3. Evidence: Ensure that all procedural requirements are followed for the admission of expert evidence. Do not rely on hearsay evidence.
4. Cost implications of litigation: Legal disputes can be costly and this case highlights how costs can add up quickly even though the issues were not complicated. The Court’s decision to award only Schedule C costs to the Condominium Corporation demonstrates the potential financial consequences of litigation, even for the successful party. Both parties have a responsibility to at least try to resolve their issues through alternative dispute resolution methods such as mediation or negotiation.

Condominium corporations must be proactive in managing maintenance issues, reserves, and bylaw enforcement, while also considering alternative dispute resolution options to minimize the potential for costly litigation for which all the owners must pay.  Navigating condominium disputes and understanding the financial risks associated with litigation is complex. Seeking experienced legal counsel early can help ensure that your position is strong, avoid costly missteps, and potentially reduce the financial impact of litigation. Please contact Erin Berney or Maryam Musbah for assistance. 

Link to decision: Catterall v Condominium Plan No. 752 1572 (Park Towers), 2024 ABKB 452