Executive Summary: Key Legal and Evidentiary Issues

• OBD Developments Inc. applied under s. 135 of the Condominium Act, 1998 for an oppression remedy, seeking to compel Muskoka Standard Condominium Corporation No. 79 to sign a resort access licence agreement.
• Standing was disputed, as MSCC 79 argued OBD was not a "declarant" under s. 1(1) of the Act and therefore had no right to apply for relief.
• MSCC 79's declaration expressly obligated it to enter into an agreement with the declarant governing use of the Oak Bay Club and payment of associated membership fees.
• Whether MSCC 79's refusal to sign the proposed licence agreement — and its subsequent amendment of its declaration to remove that obligation — constituted oppressive or unfairly prejudicial conduct was a central issue.
• The court found it was not reasonable for OBD to demand that MSCC 79 sign an agreement on terms solely dictated by OBD, without any opportunity for negotiation.
• Limitation period was also raised, with the court finding the two-year clock began running only when MSCC 79 refused to sign the agreement in June 2023.

Facts of the case

The Oak Bay subdivision in the Township of Georgian Bay was developed beginning in 2006 by Oak Bay Developments Inc. — a corporation related to Eden Oak Homes, whose president is Romas Kartavicius — under a master subdivision agreement with the Township. The development was conceived as a resort community featuring a golf course, marina, pools, saunas, tennis courts, pickleball courts, a fire pit, and other amenities, with disclosure statements representing that all residents would have access to those amenities and would pay fees for their use and maintenance, either directly or through their condominium corporation.

Oak Bay Developments built single-family homes and townhomes that became MSCC 64 before registering MSCC 79 as the third phase of residences. In November 2014, Oak Bay Developments went into receivership, with Romas Kartavicius as the applicant in that proceeding. In April 2015, the receiver registered the MSCC 79 declaration and description on behalf of Oak Bay Developments. In 2016, Mr. Kartavicius incorporated OBD Developments Inc., which then purchased the assets of Oak Bay Developments from the receiver. OBD has since continued to develop the subdivision, accepted liability for prior building deficiencies, and acknowledged its obligation to build the amenities promised to unit owners. When completed, the subdivision is expected to include approximately 535 residential units in total.

OBD sought to have MSCC 79 sign a resort access licence agreement consistent with the obligations set out in the MSCC 79 declaration. MSCC 79 refused. In February 2024, MSCC 79 amended its declaration to remove the requirement to enter into such an agreement. OBD filed this application on March 1, 2024.

Policy terms and contractual clauses at issue

The MSCC 79 disclosure statement provided that unit purchasers would be required to purchase and maintain a social membership entitling them to use and enjoy facilities at the boathouse and lodge, collectively referred to as the "Oak Bay Club." It further provided that the condominium corporation would enter into an agreement with the declarant to pay social membership fees on behalf of unit owners, with those fees collected as part of common expenses. The disclosure statement also contemplated that if the agreement were not terminated under s. 112 of the Condominium Act, 1998 within the first year after turnover, it would govern ongoing use of the Oak Bay Club; if terminated under s. 112, individual unit owners would contract directly with the declarant.

The declaration itself imposed a duty on MSCC 79: "To enter into an agreement with the Declarant governing the use of the Oak Bay Club and the payment of fees by the Condominium for social membership in the Oak Bay Club by Owners of Units in the Condominium … and to comply with the terms of that agreement." The declaration also restricted unit ownership to members of the Oak Bay Club, with membership achieved either through a corporation-level agreement under which the corporation pays fees on behalf of owners, or — absent such an agreement — through individual agreements between each owner and the club operator.

The proposed licence agreement presented by OBD gave OBD the right to set and reset the licence fee on a yearly basis or when further amenities were made available, to make rules and regulations as it deemed necessary, and to close, limit, remove, modify, or substitute any facility in its sole discretion and without prior notice to MSCC 79, all without affecting MSCC 79's obligation to pay the licence fee.

Reasoning and analysis

On the question of standing, the court rejected MSCC 79's argument that OBD was not a "declarant" under the Act. The court found that a successor or assignee of a declarant need not have personally owned the land described in the declaration; it is sufficient that they succeed or are assigned the rights of the person who owned the land at the time of registration. The court drew on Metropolitan Condominium Corporation No. 1250 v. The Mastercraft Group Inc., 2009 ONCA 584, for the proposition that the declarant concept exists to ensure there is always an entity upon which declarant responsibilities can be placed, consistent with the consumer protection purpose of the Act. As a matter of fact, OBD had stepped into the shoes of Oak Bay Developments, was continuing the development in accordance with the original concept, and accepted its inherited declarant responsibilities — a position confirmed under cross-examination by MSCC 79's own president, Jim Bodnaruk, who testified that MSCC 79 "absolutely" expected OBD to build the remaining amenities.

On the obligation to sign an agreement, the court held that MSCC 79 was required by its declaration to enter into a resort access licence agreement. MSCC 79's argument that the obligation was terminable under s. 112 of the Act was rejected, following Lexington on the Green Inc. v. Toronto Standard Condominium Corp. No. 1930, 2010 ONCA 751, which established that s. 112 does not permit a board of directors to terminate obligations arising from the corporation's own declaration. Mr. Bodnaruk himself acknowledged under cross-examination that MSCC 79 was required to sign a licence agreement and that the refusal was driven by the fact that only the pool adjacent to the condominium had been built. The court also rejected the limitations argument, finding the two-year period began only when MSCC 79 refused to sign the agreement presented to it in June 2023, and the application was filed on March 1, 2024, within time.

On the oppression claim, the court applied the two-part test from Noguera v. Muskoka Condominium Corporation No. 22, 2020 ONCA 46: the applicant must demonstrate a breach of reasonable expectations, and the respondent's conduct must be oppressive, unfairly prejudicial, or unfairly disregardful of the applicant's interests. The court found it was reasonable for OBD to expect MSCC 79 to sign some form of licence agreement, but not to sign one on terms OBD had dictated unilaterally. The court noted that most promised amenities had not yet been built, that the disclosure statement's estimated yearly fee of approximately $150 per unit per month was based on a full suite of amenities, that no basis for calculating fees on an amenity-by-amenity basis existed in either the disclosure statement or declaration, and that no precedent agreement existed since MSCC 64's unit owners paid fees directly to OBD rather than through a corporation-level agreement. The court also applied the business judgment rule, finding that MSCC 79's directors had acted honestly, in good faith, and with reasonable care, and were entitled to deference. OBD was found to have made no effort to negotiate the terms before demanding execution of its proposed agreement.

Ruling and overall outcome

The application was dismissed. The court found that while MSCC 79 is obligated to enter into a resort access licence agreement, its refusal to sign the specific agreement as presented by OBD was not oppressive, unfairly prejudicial, or unfairly disregardful of OBD's interests. If the parties cannot agree on the terms, either may submit the dispute to mediation and arbitration under s. 132 of the Condominium Act, 1998. MSCC 79 was the successful party on the primary issue. As for costs, the court's preliminary view was that there should be no order as to costs given the divided success, though it left the door open for written submissions from either party, to be delivered no later than July 10, 2026. No monetary award or damages were granted.