Proving Good Faith of Condo Boards Directors

 May be Personally Liable for a Breach of Statutory Duty

THE LAWYERS WEEKLY (April 19, 2013)

Ontario’ s Condominium Act requires that members of condo boards act in good faith when exercising statutory obligations and discharging their duties of office. Condo directors may be personally liable for a breach of statutory duty where they are unable to show that, when they engaged in the conduct giving rise to a breach, they were relying on a report or opinion of a professional, such as legal counsel.

In the case of MCC 232 v. Owners and Mortgagees of MCC 232 [2012] ONSC 4620, the condo directors were faced with a requisition by unit owners for a meeting to, among other things, remove and replace the board of directors. Requisitioned meetings of unit owners are authorized by the Condominium Act as a way for condo owners to place issues on the corporation’s agenda. In response, the board instructed its legal counsel to apply for a court order to appoint an administrator to manage the affairs of the corporation and for an injunction to derail the requisition meeting. The applications were heard by two different judges, both of whom found that the directors acted in bad faith in taking legal action for the purpose of preventing the unit owners from exercising their statutory rights…