Reliance on Previous Oppression May Restart 2-year Limitation Period

The oppression remedy in condominium law, found under Section 135 of the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”), can trace its legal origins to the oppression remedy provisions under Section 241 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (the “CBCA”) and Section 248 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (the “OBCA”). In fact, the courts of Ontario often draw parallels between the Act’s oppression remedy and the OBCA’s, with the more developed case law from the latter providing guidance to judges presiding over cases of the former.

Section 248 of the OBCA states that a court may make an ameliorative order to rectify any matter that,

“is oppressive or unfairly prejudicial to or that unfairly disregards the interests of any security holder, creditor, director or officer of the corporation”.

Section 135 of the Act states that a court may make an ameliorative order to rectify any matter that,

“is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant”.

Given the substantially similar language between the two sections, judges of the Ontario Superior Court of Justice, who often preside over a wide variety of litigation disputes but who not as often preside over interpersonal conflicts between a condominium corporation and a unit owner, likely find significant comfort in relying on the many more court decisions about shareholders in a business corporation claiming that they were “oppressed”.

The 2-Year Limitation Period for Oppression Claims

Generally, most legal claims are subject to a 2-year limitation period; once a legal cause of action is discovered by a party, that party has 2 years from that date to bring that action against the other side. While some exceptions exist – such as the 10-year limitation period for shared facilities payments where a right to lien upon default of payment is set out in the Shared Facilities Agreement – most disputes in the condominium law context are subject to this 2-year limitation period.

The Ontario Court of Appeal’s recent judgment in Maurice v. Alles, 2016 ONCA 287 (“Maurice”), although decided in the context of the oppression remedy under the OBCA, confirms that courts should disallow any claims for oppression commenced more than 2 years after the oppression was first discovered. However, the Court of Appeal in Maurice also left open the door for judges to find that subsequent oppressive conduct, performed on the basis of the earlier oppression, can serve to re-start the 2-year limitation period.

Maurice v. Alles, 2016 ONCA 287

In Maurice, Mr. Maurice and his siblings owned equal interests in three family businesses. In 2007, Mr. Maurice sold his shares in two of the family businesses, but remained a shareholder of the third business which was a holding company that itself owned shares in the other two family businesses. In 2008, Mr. Maurice’s siblings also wished to sell their shares in the two family businesses, but Mr. Maurice opposed his siblings’ proposed sale, claiming that the sale would require his consent, due to a unanimous shareholder agreement that Mr. Maurice and his siblings had agreed to. Mr. Maurice also claimed that his siblings were required to obtain a formal valuation of his shares in the holding company before the siblings sold their shares in the two family businesses, since the siblings’ sale could negatively affect the value of his shares in the family holding company.

Nevertheless, the siblings sold their shares in the two family businesses that year, and continued to ignore Mr. Maurice’s repeated requests since at least July 25th 2008 to provide him with certain information related to their sale.

On May 13th 2013, the siblings brought an application for a court order appointing a valuator to determine the fair value of Mr. Maurice’s shares in the holding company, essentially seeking to have Mr. Maurice bought out from the family business. Mr. Maurice brought a cross-application against his siblings, claiming that his rights as a shareholder had been unfairly disregarded by his siblings in breach of Section 248 of the OBCA.

The motions judge, presiding over the siblings’ successful motion for a summary judgment of their application, ruled that because Mr. Maurice was aware of the facts giving rise to an oppression claim as of July 25th 2008, his oppression claim in relation to his siblings’ non-disclosure of documents was statute-barred by the 2-year limitation period. The motions judge further held that even if the oppression was ongoing due to the continued refusals of the siblings to disclose the information to Mr. Maurice, this did not serve as an ongoing re-starting of the 2-year limitation period.

On appeal, the unanimous Court of Appeal held that the motion judge was correct in ruling that the ongoing nature of the siblings’ repeated refusals to disclose documents did not re-start the 2-year limitation period. The appellate court ruled:

[48] … this is not a case where there is ongoing oppressive conduct. The sale was a singular event that occurred many years ago. The refusal to produce documents was made known to the appellant in 2008. It is true that no production was made until this proceeding was commenced, but the continuous refusal to produce documents does not operate to extend the limitation period any more than a refusal to pay an outstanding amount in a collection action extends the limitation period until payment is received. As previously mentioned, limitation periods begin when the cause of action arises, not when it is remedied …

[49] Courts must be careful not to convert singular oppressive acts into ongoing oppression claims in an effort to extend limitation periods. [emphasis added]

However, the Court of Appeal also found that a separate, “potentially oppressive act” had occurred when the siblings brought their application on May 13th 2013 seeking court approval of the share valuation process and payout to Mr. Maurice. The appellate court held that the siblings’ reliance on their allegedly-oppressive conduct in 2008, as part of the valuation process in their application on May 13th 2013, could constitute a new act of oppressive conduct. The Court of Appeal ruled:

[52] … courts must have regard to the remedial nature of the oppression remedy and the fact that any threatened or actual conduct that is oppressive, or unfairly prejudicial to, or unfairly disregards the interests of any complainant can constitute a discrete claim of oppression. The oppression remedy section of the OBCA is drafted in the broadest possible terms to respond to the broadest range of corporate malfeasance. [emphasis added]

The Court of Appeal was of the view that the motion judge had erred in failing to examine whether there were any new, discrete acts of oppression that had occurred within the 2-year period prior to Mr. Maurice’s cross-application in the May 13th 2013 motion proceedings. The Court of Appeal ordered that a new trial be held on the issue of whether the siblings’ sale of their shares in the two family businesses in 2008 was oppressive, or unfairly prejudicial to, or unfairly disregarded Mr. Maurice’s interest in obtaining fair value for his shares in the holding company. If so found at the new trial, then the siblings’ court application on May 13th 2013 could constitute a new act of oppression, and Mr. Maurice could seek a remedy in relation thereto.

Takeaways for Condominiums: Records Requests and Oppression Claims

As condominium Property Managers and Boards of Directors know, unit owners who request to examine or obtain copies of the condominium corporation’s records under Section 55 of the Act, will typically issue repeated requests for those records over the span of weeks, months, and sometimes even years. Maurice serves as a reminder to unit owners that unless an action in the Small Claims Court under Section 55 of the Act for the $500 penalty and/or production of those records is commenced within 2 years of the condominium’s first denial of their records request, such an action in relation to those records will be statute-barred – the condominium corporation’s repeated denials of the unit owner’s records request will not each serve to extend the 2-year limitation period from the date of the first request.

However, if each of the requests seek the production of different records of the condominium corporation, then each request may constitute a discrete claim, and the 2-year limitation begins to run from the date that each request is made.

Maurice also confirms by way of analogy that in the condominium context, an application to the Ontario Superior Court of Justice for an oppression remedy under Section 135 of the Act must be commenced within 2 years of date of the act(s) of oppression, unless the plaintiff is subjected to a separate and discrete act of oppression in the furtherance of the previous act(s) of oppression.

Maurice appears to indicate that judges will view a condominium corporation’s commencement of an application for a compliance order under Section 134 of the Act or for an oppression remedy under Section 135 of the Act, where such a court application is premised on allegedly-oppressive conduct against the unit owner in the past, as a separate and discrete act that re-starts the 2-year limitation period. However, simply because a party may successfully argue that their claim for oppression is not statute-barred by a limitation period, does not necessarily mean that the court will agree that the party was indeed oppressed; only that the party may argue that they were subjected to oppressive, unfairly prejudicial, or unfairly disregarding behavior. It is yet to be seen whether Mr. Maurice will be actually successful in persuading the court at the new trial that he was subject to such oppression by his siblings.

Section 135 of the Act is a powerful mechanism for both condominium corporations and unit owners. For condominium corporations, it is a welcome addition to the toolkit that Boards have to enforce against a unit owner who is disrupting the rights of their fellow owners. For unit owners, it levels the playing field for oppressed owners who are only able to form a minority of the condominium corporation and thus do not have the majority needed to ameliorate the oppression through democratic means (e.g. by voting to remove the Board of Directors who were elected by an owner who owns 51% or more of the units).

However, both Boards and unit owners must remember not to “sleep on their rights”, and should immediately seek the assistance of legal counsel in bringing an application for an oppression remedy within the 2-year limitation period once the oppressive, unfairly prejudicial, or unfairly disregarding behavior is discovered. 

All of the information contained in this article is of a general nature for informational purposes only, and is not intended to represent the definitive opinion of the firm of Elia Associates on any particular matter. Although every effort is made to ensure that the information contained in this newsletter is accurate and up-to-date, the reader should not act upon it without obtaining appropriate professional advice and assistance.

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