In a previous blog post, we reviewed the Court of Appeal’s decision in Orr v. MTCC 1056, where the condominium corporation and a unit purchaser’s lawyers were found equally liable to the purchaser for damages for negligent misstatement and negligence, respectively, as a result of the purchaser obtaining title to a two-storey unit rather than the three-story unit which the purchaser saw and thought that she was buying. The condominium corporation was held liable because the status certificate that had been delivered to the purchaser incorrectly stated that there were no violations of the condominium documents. In fact, the unit, as described in the declaration and the description, was a two-storey unit, but a prior unit owner had built a third-storey addition on the common elements without approval from the board. The purchaser’s law firm was found to have fallen below the required standard of care by not reviewing the condominium plans with the purchaser, which would have indicated that the unit being purchased was only a two-storey unit. The damages were set as the difference between the value of a two-storey and a three-storey unit.
The Court of Appeal issued a supplementary judgment after the parties sought clarification on the implementation of the Court of Appeal decision and an allocation of the costs of the appeal and the trial, as the parties themselves were unable to agree on who should pay those legal costs.
The trial lasted over three months and there were multiple cross-appeals. The total amount of legal costs incurred by the parties was staggering and exceeded the amount of the damages awarded.
Purchaser’s Legal Costs
The purchaser incurred trial costs of $300,000 and appeal costs of $88,341. The Court of Appeal apportioned liability for these costs equally between the purchaser’s law firm and the condominium corporation.
The purchaser’s law firm had requested that the Court of Appeal reallocate fault by reducing its liability to 25%, but the Court of Appeal declined to do so. The law firm was required to pay the purchaser $150,000 for her trial costs and $44,170 for her appeal costs.
The condominium corporation was also required to pay the purchaser $150,000 for her trial costs and $44,170 for her appeal costs. Whether or not the condominium corporation can look to the condominium manager to reimburse it for these costs is still not settled. The Court of Appeal said that this determination was to be remitted to the trial judge to determine the scope of the manager’s liability for such costs under the management agreement.
Manager’s Legal Costs
The condominium manager incurred trial costs of $200,000 and appeal costs of $45,302. The purchaser was required to pay the condominium manager $100,000 for its trial costs and $22,651 for its appeal costs as the purchaser’s lawsuit against the condominium manager was not successful. (The purchaser had sued its law firm, the condominium corporation and the condominium manager, but the Court of Appeal determined that the manager was not liable to the purchaser for negligent misrepresentation.)
The condominium corporation was required to pay the manager $50,000 for its trial costs and $11,325 for its appeal costs. The purchaser’s law firm was required to pay the same amounts to the manager.
Condominium Corporation’s Legal Costs
The condominium corporation incurred trial costs of $500,000. While the trial judge had determined that the purchaser’s law firm was liable for these costs, the Court of Appeal concluded that there was no basis to hold the law firm liable for any portion of these costs, since the condominium corporation was not a successful defendant.
As the condominium corporation’s appeal costs of $117,312 were determined by the Court of Appeal to be excessive, it set the appeal costs at $84,981. Half of these costs related to the purchaser’s appeal, but as the purchaser was successful on the appeal, the purchaser was not held liable for any of these costs. However, the purchaser’s law firm was required to pay $42,490 for the condominium corporation’s appeal costs.
To date, the purchaser’s law firm and the condominium corporation are the big losers as they each ended up owing $297,987 and $213,005 respectively and had to pay their own costs of the trial and the appeal.
Whether or not the condominium manager will be ultimately liable to the condominium corporation for its trial costs and its costs of the appeal against the purchaser is a determination to be made by the trial judge of the manager’s liability under the management agreement.
Eight years after the purchaser agreed to purchase the condominium unit, the legal proceedings are still not finished. This case illustrates how a mistake can escalate into a time-consuming and costly nightmare.