Tuesday, October 16, 2012

Some Humour in Condominium Litigation

The following is quoted from Supreme Advocacy LLP (E. Meehan) and is quoted here because it is rare to find such good condominium humour.
The Respondent Economical sued the Applicant Crane and claimed $105,195.68 in damages as compensation for damage sustained by its insured in 1994 due to the cracking of a toilet tank manufactured by Crane in 1984 (no word on whether Readers Digest or National Geographic were being read at the time of the crack). Economical argued the crack resulted from a manufacturing defect related to the degree of porosity of the ceramic used to manufacture the tank. In defence, Crane argued Economical was full of it, and that the crack resulted from the improper use or installation of the tank and the tank met the standards in effect in the industry at the time it was manufactured. The Superior Court wiped Crane’s defence, and allowed Economical’s action. Bottom line: it found that the position taken by Economical’s experts should be preferred: it was the variation in the water absorption rate among the various tank walls that had generated the internal stresses that produced the crack, and there was no movement from their position. The variation was [translation] “the result of an inherent weakness in the vitreous china attributable to a defect in the manufacturing of the tank” (para. 91). When the C.A. sat on the matter, they flushed the appeal away on the ground that Crane had not been able to show that the trial judge had made an error of law or fact warranting its intervention.  Crane Canada Inc. v. Economical Insurance Company(Que. C.A., Feb. 13, 2012) (34665)“The application for leave to appeal… is dismissed with costs.”  Link to C.A. decision

A Court Ordered Limit to Bareland Condominiums and the Regime of Managed Property

Post script:  The Alberta Government amended the Condominium Property Act in 2013 ameliorating most of the difficulties which the Maciejko decision solidified:

Reserve fund
38(1)  A corporation shall, subject to the regulations, establish and maintain a capital replacement reserve fund to be used to provide sufficient funds that can reasonably be expected to provide for major repairs and replacement of
                                 (a)    any real and personal property owned by the corporation,
                                 (b)    the common property, and
                                 (c)    any property of an owner in respect of a bare land unit that the corporation is required by bylaw to repair and replace,
where the repair or replacement is of a nature that does not normally occur annually.
(1.1)  If, before the coming into force of subsection (1)(c), a corporation was required by bylaw to repair and replace property of an owner of a bare land unit, the collection and expenditure of funds to repair and replace that property are valid if
                                 (a)    the collection and expenditure occurred on or after the date the bylaw took effect under this Act, and

                                 (b)    the collection and expenditure would have been in compliance with subsection (1) if subsection (1)(c) had been in force at the time the collection and expenditure occurred.

The consequence of this intervention is that the onus is now clearly on all bareland condominiums to ensure that their bylaws clearly identify the obligation of the condominium corporation with respect to what is ususaly defined as and referred to as Managed Property.

There is a dearth of case law dealing with the limits imposed upon owners in a bareland condominium.  The Honourable Mr. Justice A.W. Germain in Maciejko v. Condominium Plan No. 9821495, 2012 ABQB 607 has chipped away at this by providing an interesting overview of the history of bareland condominiums and coming to a surprising conclusion to a dispute between owners at "The Shores" condominium.  Justice Germain states: 
It is now decided clearly that "managed property agreements" are enforceable and like bylaws are legally binding on owners.  However, they cannot be used to allow owners to "precollect" funds for payment of expenses which are not related to common property.  That is, reserve funds are limited to common property and cannot form part of an agreement of owners in a managed property agreement.  Justice Germain stated in this regard:

and as follows:

I have always thought that the "bait and switch" from a bareland condominium to a more ordinary condominim structure would be problematic.  Justice Germain has now concluded that it is.  Let the condominium buyer beware.