Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff alleged that condominium directors acted in bad faith to shift responsibility for costly window repairs.

• Court found original pleadings against directors lacked specificity and struck them, but granted leave to amend.

• Amended claim argued directors breached fiduciary duties under the Condominium Act by passing retroactive bylaws.

• Plaintiff’s motion to compel privileged insurance and third-party documents was denied.

• Solicitor-client and litigation privilege upheld despite the involvement of third-party property manager.

• Court found some claims potentially viable and allowed them to proceed, but denied costs due to divided success.

Facts and procedural background

Sunday Irving Holdings Inc. (SIH) purchased two commercial condominium units, believing they were vertically divided, only to discover they were positioned side-by-side and required substantial remediation to meet building code standards. Following this, SIH discovered water damage from leaking windows in the upper unit. The plaintiff sued several parties, including the condominium corporation (Carleton Condominium Corporation No. 397, or CCC397), its individual directors, real estate lawyers, and agents, alleging they misrepresented or failed to disclose that the windows were not classified as common elements and that the plaintiff would be responsible for their repair.

The status certificate, a document meant to disclose legal and financial matters affecting condominium units, did not mention any modifications or owner responsibility concerning the windows. SIH alleged that CCC397 retroactively passed bylaws 8 and 9 to offload financial responsibility for the windows onto unit owners after learning of the water damage and potential litigation.

Motion to strike and leave to amend

The individual directors of CCC397 brought a motion to strike the plaintiff’s claims against them under Rule 21.01(b) of the Rules of Civil Procedure, arguing that the claims failed to plead any distinct personal wrongdoing or separate identity from CCC397. Justice Doyle agreed, finding that the pleadings were overly broad, failed to distinguish the conduct of the directors from that of the corporation, and lacked sufficient material facts to support personal liability.

However, the court granted SIH leave to amend its pleadings. In its amended version, SIH alleged that the directors acted in bad faith and passed the bylaws to conceal their failure to properly maintain the reserve fund. The plaintiff argued that the directors breached their duties under sections 37 and 38 of the Condominium Act, 1998, and acted for personal gain. These allegations, the court held, were sufficiently distinct to justify a trial. As such, while the original claim against the directors was struck, the plaintiff was permitted to proceed with an amended claim.

Motion for production and evidentiary rulings

SIH also brought a motion seeking to compel CCC397 and its directors to produce unredacted documents, insurance-related correspondence with Royal & Sun Alliance, and communications involving Look Property Management Inc., the third-party property manager. The court denied most of this request. It held that communications with the insurer were not relevant and would constitute an improper “fishing expedition.” Moreover, solicitor-client privilege and litigation privilege were upheld for communications between CCC397’s lawyers and Look’s representative, Mr. Lacroix, who had been involved in discussions with CCC397’s counsel.

Justice Doyle ruled that Mr. Lacroix, as a property manager and agent of CCC397, was essential to the legal consultation process. His presence did not waive privilege, and the fact that he was later added as a third party did not retroactively destroy that privilege. The court emphasized that solicitor-client privilege should only be deemed waived in the clearest of cases, which was not the case here.

Outcome and conclusion

Justice Doyle struck the original claims against CCC397’s individual directors but granted the plaintiff leave to amend, allowing the revised claims alleging bad faith and statutory breach to proceed. The plaintiff’s motion for document production was largely unsuccessful. Despite these mixed results, the court declined to award costs, citing divided success and the reasonable legal positions taken by both sides. No clear winner. The plaintiff gained the right to amend and proceed with its claim, but lost on key evidentiary motions. Each side had partial success.