In a previous post, we reviewed a case, Ballingall v. C.C. C. No.111, about an acrimonious dispute between resident unit owners and investor/landlord unit owners regarding the single family restrictions in the condominium documents. As well as considering the law relating to the interpretation of “single family” restrictions in the condominium context, that case also dealt with the standard of care required from a condominium director.
One director, John MacMillan, an investor owner, spearheaded the opposition to the Board’s efforts to prevent the occupancy of units by unrelated occupants not forming a single family. After the Board proposed amending the Corporation’s rules as recommended by the Corporation’s legal counsel, Mr. MacMillan sent letters to the unit owners (excluding Board members who disagreed with him) which misconstrued the issues by erroneously claiming that the Board was trying to enforce a definition of “single family” that was more restrictive than the meaning set out the relevant case law, and counselled the owners not to support the Board’s recommendations. Mr. MacMillan also wrongfully accused fellow Board members of acting in bad faith and unnecessarily incurring legal costs for the Corporation. In those letters Mr. MacMillan identified himself as a director of the Corporation.
Mr. MacMillan sent numerous e-mails to other Board members, which the Superior Court Judge determined were “aggressive, highly critical, and at times, threatening”. The Court also found that Mr. MacMillan had dismissed the legal advice obtained from the Corporation’s legal counsel and gave other Board members his own opinion of the law, even though he was not qualified to do so.
Mr. MacMillan also accessed the property manager’s computer without approval and refused to hand over his key to the management office when requested by the Corporation. In addition, Mr. MacMillan posted on his personal website, without consent of the Board, legal advice from the Corporation’s legal counsel.
After reviewing Mr. MacMillan’s actions and his written correspondence to the owners and other Board members, the Court declared that Mr. MacMillan “did not act in good faith with respect to the Board’s obligation to enforce the single family restriction in the Declaration in a way that took into account the legitimate interests of all the owners”. . . . “A reasonably prudent director would not put his own economic interests ahead of the legitimate interest of all categories of unit owners.” This constituted a breach of the provisions of Section 37 of the Condominium Act which requires directors to act honestly and in good faith and to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
In the Amended Supplementary Reasons re: Costs, the Court ordered that Mr. MacMillan was personally responsible to pay costs to the successful applicants in the amount of $15,000. As the Court found that Mr. MacMillan had not acted in good faith, the Corporation is not obligated to pay for any of Mr. MacMillan’s legal expenses relating to the litigation. A director who breaches the standard of care required by the law should not expect the other unit owners to pay for his misconduct.
This case illustrates that while directors have the freedom to respectfully disagree with other directors, once a decision has been duly and properly passed by a majority of the directors, all directors must support the decision and not attempt to undermine the decision in the eyes of the owners. Hopefully this case will discourage owners from running for the Board of Directors if their primary reason for doing so is to advance their own personal interests.