Update: Improper Use of the Indemnification Clause
In July 2016, we wrote a post about Pearson v Carleton Condominium Corporation No. 178, 2012 ONSC 3300, a case where the condominium registered a lien against an owner’s unit for legal costs incurred by the condominium in relation to three unsuccessful small claims court actions brought by the owner. The court found that the indemnity clauses in the declaration that the condominium relied on did not apply to recovering the legal costs and ordered the condominium to discharge the lien. We also noted a Small Claims Court decision where leave to appeal was granted because the judge relied on a general indemnity clause similar to Pearson v CCC No. 178 as authority for the Condominium to charge legal fees to the unit owner. The Divisional Court of the Superior Court of Justice recently released its decision in Wexler v Carleton Condominium Corporation No. 28, 2017 ONSC 5697; the subject of that appeal. While the majority of the decision deals with the standard of review for an award of costs, Justice O’Bonsawin does address the applicability of the general indemnity clause in the declaration for claiming legal costs. Specifically, at paragraph 16, she states, In Pearson v. Carleton Condominium Corporation No. 178, 2012, ONSC 3300, the corporation submitted that the Condominium Corporation's Declaration permitted it to recover all legal costs incurred related to the litigation by adding these costs to the common expenses of Pearson's unit. The language in the Declaration in Pearson is very similar to that of this case. Mr. Justice Smith concluded that the article in the Condominium Corporation's Declaration did not apply in that case because there had been no loss, damage or injury to the common elements caused by any act or omission by Ms. Pearson. I come to the same conclusion in Ms. Wexler's case; Declaration X is not applicable as there has been no loss, costs, damage, injury or liability suffered or incurred with respect to the common elements and/or all other units caused by an act or omission by Ms. Wexler. The provision in the declaration Justice O’Bonsawin referred to above reads as follows: Each owner shall indemnify and save harmless the corporation from and against any loss, costs, damages, injury or liability whatsoever which the corporation may suffer or incur resulting from or cause by an act or omission of such owner, his family or any member thereof, any other resident of his unit or any guests, invitees or licencees of such owner or resident to or with respect to the common elements and/or all other units, except for any loss, costs, damages, injury or liability caused by an insured (as defined in any policy or policies of insurance) and insured against by the corporation. This type of general indemnity clause is often the only indemnity clause found in older condominium corporation declarations. So what is my point? Simply that case law is growing that supports the position that a condominium cannot force an owner to indemnify it for costs incurred without proper authority to do so and a general indemnity clause in the declaration might not be sufficient. Authority may be contained within the Act (see e.g. sections 92(4), 98 (4), or 134(5)), declaration (e.g. like above), or by-law (e.g. insurance deductible). The condominium’s lawyer can assist in determining if there is proper authority in the Act or documents or if there are other legal principles that may allow the condominium to recover the expense from the owner. Finally, still to come with the amendments, is the promise of a new process and new forms for charging costs back to unit owners. Once the amendments are in force only “prescribed additions” may be added to an owner’s common expenses and only once the “prescribed notice” is provided to the owner.