In a recent case before the Ontario Superior Court of Justice (TSCC No. 2256 v. Paluszkiewicz), a condominium corporation unsuccessfully attempted to set aside an arbitration decision that concluded that a unit owner’s renovations were in compliance with the section 98 agreement previously entered into between the parties.
After submitting preliminary drawings to the pre-turnover board of directors, the unit owner entered into a Section 98 Agreement with the corporation. The agreement contemplated that no work would be done until the necessary building permits had been obtained and more detailed City-approved working drawings would be submitted to the condominium board for its approval.
The unit owner testified that the pre-turnover board received and approved the detailed working drawings. After the turnover meeting, the new board of directors (which consisted of the owner and two other directors) never asked for a copy of those drawings, although the minutes indicated that the owner had obtained a building permit. After construction proceeded for some months without any opposition, during a board meeting on October 10, 2013, the other two directors expressed concerns about the scope of the exterior work undertaken by the owner, claiming that the work did not correspond with the preliminary drawings attached to the Section 98 Agreement. Following an exchange of e-mails between the board and the owner over the course of a couple of months, the exterior work on the unit was substantially completed.
After the owner completed his term as a director, the corporation’s board of directors subsequently claimed that it had no detailed construction drawings in the corporation’s records and that no such drawings had been provided or approved. The corporation sought an order that the owner be required to remove the additions, alterations and improvements to the common elements that went beyond the drawings attached to the Section 98 Agreement.
The arbitrator dismissed the corporation’s claim on the basis that the Section 98 Agreement incorporated by reference the working and permit drawings submitted to the City and that the work was done in accordance with those drawings. He also determined that the exchange of e-mails following the October 10th board meeting approved all of the alleged variances and treated the e-mails as an extension of that board meeting. After dismissing the corporation’s claim, the arbitrator awarded the owner over $216,000 in costs. As the condominium consists of only four units, this cost award is a substantial financial hit for all of the unit owners, including the owner that was successful in the arbitration!
The corporation sought to set aside the arbitrator’s award on the basis of fraud, claiming that the owner gave false testimony that he had submitted working drawings to the pre-turnover board which had been approved. The Court rejected this request on the basis that the corporation had not satisfied its onus to show that a fraud had in fact been committed. Although two of the pre-turnover directors provided affidavit evidence that they did not receive or approve the working drawings, the Court determined that their evidence was weak having been based on their undocumented recollection of events that transpired approximately five years earlier.
Alternatively, the corporation also sought leave to appeal the arbitrator’s award. The Arbitrations Act provides that an appeal of an arbitrator’s award can only be made on a question of law and only if the court is satisfied that the matter of law will significantly affect the rights of the parties or is otherwise of such importance that justifies an appeal. This request was also rejected. The Court determined that the arbitrator’s interpretation of the Section 98 Agreement to include the working and permit drawings submitted to the City was a matter of mixed fact and law and for that reason there was no right of appeal.
This case illustrates how important it is for both the corporation and the owner undertaking alterations and improvements to thoroughly document and retain the plans and specifications of the work that is approved by the board.