Ontario court issues injunction restraining condominium corporation from holding meeting to consider termination

20 April 2017

By Kevin Zakreski

In the wake of recent changes to the Strata Property Act, termination has become a topic of interest in British Columbia. A recent case from Ontario, where the Condominium Act, 1998, has a longstanding provision allowing termination and sale of a condominium property when “the owners of at least 80 per cent of the units, at the date of the vote, vote in favour of the sale,” highlights some interesting issues that can come into play when one party has assembled an interest greater than 80 percent of the units and another party refuses to consent to termination and sale.

Romijay Enterprises Ltd v 11 Yorkville Partners Inc, 2017 ONSC 2388, asked the court to decide whether the “plaintiffs should be granted an interlocutory injunction restraining the defendants from holding a meeting of unit owners to consider and, if they so decide, approve the sale of the Property to the Purchaser pending a final adjudication of the issues raised in this action on their merits on a summary judgment motion or at a trial.” After applying the analysis for the granting of an interlocutory injunction, the court decided the restrain the condominium corporation from holding a meeting to consider termination, pending the final resolution of the issues the defendants raised. Those issues, in turn, raise some interesting considerations about the relationship of land assembly to termination and the use of the oppression remedy in connection with termination.

Romijay Enterprises involved an eight-unit condominium, developed in 2006 and located in the Yorkville neighborhood of Toronto. As the court noted, “[t]he plaintiff Romijay Enterprises Ltd. is a holding company that owns one unit. The defendant 11 Yorkville Partners Inc. is the owner of five units (83.33 per cent of the Units).”

The plaintiff purchased its condominium unit in 2007. It was originally intended as office space for a law firm operated by the plaintiff’s principal. His wife was heavily involved in locating and decorating the condominium unit. Her subsequent death from cancer had a profound impact on the plaintiff’s principal:

Mr. Berman’s evidence is that in order to cope with Jayne’s death, he decided that he need[ed] to make major changes in his life, including discontinuing the practice of law. He began to learn more about the world of alternative medicine and in late 2013 Mr. Berman transformed his law firm into Soul 7, an alternative healing centre. Mr. Berman opened Soul 7 in Jayne’s honour and memory in the hope of helping people like her who are in need of immune-boosting therapies.

Mr. Berman has provided evidence that the Romijay Unit, Soul 7 and Jayne are inextricably intertwined and that the Romijay Unit is, thus, unique, irreplaceable and invaluable to the plaintiffs.

When the condominium was developed, the part of Yorkville in which it was located was considered to be “relatively undesirable.” This perception began to change as new developments appeared in the neighborhood. Other parties became interested in the area, including the defendant:

Yorkville Partners was incorporated on June 10, 2015 to purchase and redevelop several adjacent properties on Yorkville Avenue, including the Property. Yorkville Partners’ current intention is to build a mixed-use development comprised of a 63 story residential tower above a three story commercial podium on the Property and adjacent properties. The Project is a major undertaking, with an anticipated budget in excess of $100 million. Yorkville Partners has already spent more than $50 million to acquire some of the land that will be required to complete the Project.

Real estate agents acting on behalf of Yorkville Partners began approaching the owners of units at the Property in the fall of 2014. Since Yorkville Partners planned to incorporate the Property into a larger land assembly and re-develop it, it was prepared to pay the unit owners a significant premium relative to what each unit was worth on a standalone basis. As a result, Yorkville Partners was able to negotiate agreements of purchase and sale with the owners of five of the six units. Yorkville Partners made efforts to reach an acceptable agreement with all of the unit owners, including Romijay. Yorkville Partners knew that Romijay was reluctant to sell its unit when Yorkville Partners entered into purchase agreements with the other unit owners. Yorkville Partners always hoped to reach a mutually acceptable agreement with Romijay and was optimistic that such an agreement could be reached.

Negotiations between the plaintiff and the defendant eventually “reached an impasse.” The defendant sought to resolve this impasse by invoking the termination provisions found in section 124 of Ontario’s Condominium Act, 1998. The plaintiff commenced these proceedings, invoking the oppression remedy found in section 135 of Ontario’s legislation.

The wellspring of this decision was the defendant giving notice of a meeting of owners to consider termination and sale. “In the notice,” the court observed, “of the meeting of unit owners to consider the Purchaser’s offer, Yorkville Partners disclosed that it has a relationship with the Purchaser.”

The plaintiff opposed the termination and sale and asked the court to “enjoin the meeting and prevent the sale that the meeting was scheduled to consider,” pending a final resolution of its claims under the oppression remedy.

Beginning its analysis, the court set out the established test for the granting of an interlocutory injunction:

A party must satisfy a well-established three-part test when seeking an interlocutory injunction: RJR-MacDonald Inc. v. Canada, 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 311 at para. 48. On this motion, the plaintiffs bear the burden of establishing that:

a. there is a serious issue to be tried or, they have a strong prima facie case;
b. they would suffer irreparable harm if the injunction is refused; and
c. the balance of convenience favours granting an injunction.

The bulk of the court’s reasons addressed the first point, whether there was a serious issue to be tried. It began by noting “[t]he threshold to establish a serious issue is low.” In the end, the plaintiff was able to meet this “low” threshold, with the court concluding:

the plaintiffs have satisfied the requirement of showing that there is a serious issue to be tried (that is not frivolous or vexatious) concerning whether the process followed by the responding parties to achieve a sale of the Property to the Purchaser on the terms of the Purchaser’s offer, including the purchase price, amounts to conduct that is oppressive, unfairly prejudicial to or that unfairly disregards the plaintiffs’ interests. In reaching this conclusion, I take into account the decisions in Garfella, Ali and Esso Standard as well as the plaintiffs’ submission that, when their action is finally adjudicated, they intend to tender expert evidence concerning the fair market value of the Property including the extent to which property values have increased in Yorkville between 2015 and today. I also take into account the responding parties’ submission that the Act addresses and resolves the conflict between the plaintiffs’ interests and those of Yorkville Partners. This submission and the evidence that relates to it will be addressed on their merits when the plaintiffs’ claims are finally adjudicated.

The plaintiffs were also able to show that refusing the injunction would result in irreparable harm that couldn’t be compensated by money damages:

Mr. Berman has given evidence concerning his emotional attachment to the Romijay Unit and he has explained why it is unique to him. It may transpire that the Property becomes the subject of development, that the plaintiffs’ wish to remain in the Romijay Unit will be shown not to have been commercially realistic and that, ultimately, they will be compensated in money for Romijay’s interest in the Romijay Unit. However, on the evidentiary record before me, I am not able to reach this conclusion. I am satisfied that, based upon the uniqueness of the property to the plaintiffs, they are likely to suffer irreparable harm if the interlocutory injunction is not granted.

And, finally, the court determined that the balance of convenience favored the plaintiffs:

I have concluded that the status quo favours granting the interlocutory injunction and allowing Romijay to retain the Romijay Unit pending final determination of the action. In my view, the harm to the plaintiffs that will result from a sale of the Property if the injunction is not granted outweighs the harm to the responding parties resulting from a delay in having the action adjudicated. I agree that the undertaking in damages is sufficient to compensate the responding parties for their borrowing costs during the period of time until the final adjudication of the action.

In the result, the court granted “the plaintiffs’ motion for an interlocutory injunction and order that defendants are enjoined from holding a meeting of owners of units in the Property to consider the Purchaser’s offer and vote to approve or not to approve it without the written consent of Romijay until final determination of this action or until other order of this court.”

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