CAT

CAT evolves in jurisdiction but not costs

Wednesday, November 17, 2021
By Sonja Hodis

The Condominium Authority Tribunal (commonly known as CAT) has gone through quite an evolution since its inception, which occurred as a result of the 2017 changes to the Condominium Act (the Act).

The CAT has seen its jurisdiction expand from being only able to deal with records requests under section 55 of the Act to an ever-expanding jurisdiction, which now includes matters involving pets and animals, vehicles, parking and storage issues, and enforcing settlement agreements made in the CAT process. Starting January 1, 2022, the CAT’s jurisdiction will further expand to include nuisance, annoyance and disruption disputes.

While initially, very few, if any, condo corporations were successful in a records dispute, it appears that with its expanded jurisdiction currently in place the CAT has taken a more balanced approach.

Although many condo corporations have been successful in obtaining orders for compliance with their governing documents, on the issue of costs (i.e. the amount that a condo corporation gets reimbursed when an owner loses his/her case at the CAT), the CAT, while awarding costs in some instances, is leaving condominium corporations with a large part of the expenses incurred to be paid by all owners, not just the offending owner. It does not appear that the “innocent owner” principle the courts have routinely applied in condominium enforcement proceedings has become part of the CAT’s evolution yet.

Prior to the CAT, the courts repeatedly stated that it was not fair for “innocent owners” to pay the costs incurred as a result of one owner who decides not to follow the rules.

If a condo corporation must pay for the costs incurred, this means that all owners are paying for these costs. In most cases, although there are some noteworthy exceptions, the courts have typically granted the condominium corporation the majority (and in some cases even all of their costs) on a successful compliance application.

Unfortunately, although we are seeing the types of cases a court normally hears being transferred to the CAT, we are not seeing the principles regarding costs the court has adopted being transferred and implemented as well.

Case in point

A recent CAT decision released October 1, 2021, may provide an explanation as to why this occurs. In Middlesex Vacant Land Condominium Corporation No. 605 v. Cui, the condominium corporation was successful in enforcing its governing documents and getting some costs.

The condo corporation wanted to enforce a provision in their governing documents regarding pets and nuisance. The condo claimed that the owner’s dogs barked excessively, the owner did not clean up after them and she did not control them on the common elements.

The CAT ordered the dogs to be permanently removed and the owner had to pay $8,273.56, which was about 38 per cent of the total costs claimed. The CAT reaffirmed that in order to ensure protection of the interests of other condominium owners and residents, a condominium must be able to enforce its governing documents.

While the CAT found that the indemnification provisions in the condo’s bylaws and rules were sufficient to cover the breach of the pet provisions, they, despite this finding, did not apply the indemnification provisions to all costs sought. Trying to reconcile the reasoning in the decision is a difficult task as it appears to contradict its own findings and previous CAT decisions. It prompts the question as to why full costs were not ordered if the indemnification provisions in the governing documents applied.

In Cui, the CAT examined costs differently, depending on when the costs were incurred. In terms of costs incurred prior to the CAT process being engaged, the CAT awarded the condo 100 per cent of its costs based on the indemnification provisions. They found that the owner’s refusal to participate in mediation and her continued breach of the rules, despite multiple notices and communications from the condo, warranted an order that the owner pay the full amount of pre-CAT costs.

The CAT took notice that the condo gave the owner plenty of time to achieve compliance. However, in terms of costs incurred during the CAT process, which were in excess of $17,0000, the CAT awarded the condo only 25 per cent of these costs. The CAT took into account the delay of the proceedings the owner caused, which led to increased costs for the condo and characterized this as exceptional reasons. However, it did not see fit to award 100 per cent of the costs claimed as it did with pre-CAT process costs incurred.

In terms of costs, the decision recognized the innocent owner principle used by the courts, but advised that the CAT’s hands were tied in terms of costs awards due to the Act and the tribunal’s rules of practice, which guides their ability to award costs, limiting costs to exceptional circumstances. Is this the explanation of why the CAT ordered full costs incurred pre-CAT process and not during the CAT process?

I am not sure that this provides a complete and satisfactory answer. The CAT’s rules of practice state that no costs are awarded unless there are exceptional circumstances. However, once you have met the “exceptional circumstances” threshold, there are no restrictions on the amount of costs that can be awarded.

Having found that exceptional circumstances existed, it is unclear why the owner was required to pay 100 per cent of costs pre-CAT process and only 25 per cent of costs for the CAT process, especially since the CAT process was where the majority of the costs were incurred.

In addition, since the CAT found that the contractual provisions of the indemnification clauses applied it is unclear why it would apply them to the pre-CAT costs, but not to costs incurred during the CAT process.

Full costs awarded

In fact, in an earlier 2021 CAT case, Peel Condominium Corporation No. 96 v. Psofimis, referenced in the Cui decision, the CAT awarded full costs to the condo corporation against an owner who breached the pet restriction rule. They did not distinguish between pre-CAT costs and costs incurred during the CAT process.

The CAT in Psofimis found that the innocent owner principle applied and awarded legal costs as damages under section 1.44(1)(3) of the Act and as costs under the tribunal’s practice directions. The CAT found that in that case there were exceptional circumstances, as the condo was forced to seek an order from the tribunal because the owner deliberately and repeatedly ignored the condo’s numerous attempts to request voluntary compliance.

It is hard to reconcile the Cui decision in light of Psofimis as it appears that both owners blatantly disobeyed the rules despite many opportunities to voluntarily comply. Both condominium corporations had an indemnification provision in their rules, which were similar. Cui had an additional indemnification provision in a bylaw. Both decision makers awarded costs under CAT’s rules of practice.

The only two major differences between the two cases appear to be the quantum of legal fees sought (the higher quantum was sought in Cui) and the tribunal in Psofimis was also awarded the amount sought as damages as well as costs. Although these factors should not impact whether the costs incurred should be awarded or not, it appears that they may have been influencing factors.

While the jurisdiction of the CAT is forever expanding, it appears that condos and owners need to push for further amendments to the Act and the CAT’s rules of practice. Then, they too can evolve and catch up to the well-recognized “innocent owner” principle the courts have used to award costs to condominium corporations in cases where a condo has been successful in enforcing its governing documents.

This would provide for greater consistency in recouping of costs without having to determine whether the amount is classified as damages or costs. It will also deter frivolous cases from being brought to the CAT because the financial commitment and risk will be more than just the filing fees. It will allow real issues to be heard and avoid rogue owners from abusing the CAT process and causing disruption and unnecessary costs for their fellow neighbours.

Much clearer provisions in the Act and the rules of practice that would allow results like in Psofimis to occur on a routine basis would ensure that “innocent owners” are not footing the bill because of the actions of one disgruntled owner.

Despite the fact that the venue has changed for resolving these disputes, the innocent owner principle should apply equally, regardless of the forum and decision maker assigned to a case. Condos should not have to worry about obtaining full indemnification from offending owners, especially if their governing documents provide for a contractual obligation to do so.

We see many examples in the court system where the contractual provisions between parties trump the court’s practice directions regarding costs, and the courts are willing to enforce those contractual obligations.

It appears that the CAT in Psofimis recognized this contractual obligation in their decision when they granted full costs to the condo corporation. Hopefully, more CAT decision makers will adopt the practice in Psofimis so that the innocent owner principle regarding costs can continue to exist not only in theory but in practice.

Sonja Hodis is a condominium lawyer based in Barrie who practices condominium law in Ontario. She advises condominium boards and owners on their rights and responsibilities under the Condominium Act, 1998 and other legislation that affects condominiums and represents her clients at all levels of court, various tribunals and in mediation/arbitration proceedings. Sonja can be reached at (705) 737-4403, sonja@hodislaw.com or you can visit her website at www.hodislaw.com.

 

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