By-law Establishes Procedure for Removal of Director
According to Section 33 of the Condominium Act, a Director can be removed from the Board (before expiration of the Director’s term) by vote of the owners (with the owners of more than 50 percent of all units voting in favour of removal).
But can a condominium corporation pass a by-law to create another procedure for removal of a Director? According to the recent Court decision in the case of Gordon v. York Region Condominium Corporation No. 818, the answer is “yes”.
York Region Condominium Corporation No. 818 passed a by-law stating that a Director ceases to be qualified to be on the Board (and is deemed to have resigned) in certain circumstances. One of the circumstances is as follows: the Director violates the Directors’ code of ethics on three occasions during the Director’s term, and this is confirmed by the Board following an ethics review.
The Court said that this by-law is valid and enforceable, and is not inconsistent with Section 33 of the Act, because it simply provides an additional procedure by which a Director may be removed.
The Court said, however, that the contemplated ethics review process must satisfy “some minimal standard of procedural fairness and the basic principles of natural justice”, because in conducting such a review, the Board is essentially carrying out a quasi-judicial decision-making function, involving consideration of evidence and analysis of possible breaches of the code of ethics.
In this case, the Court concluded that the Board had not followed proper procedure in conducting the ethics review that culminated in the removal of one of the Directors. But the Court declined to undertake such a review (ie. to finally decide the matter). Instead, the Court directed the Board to conduct a fresh ethics review (using proper procedure), whereupon the Director in question might or might not be reinstated to the Board. The Court said: “I do not believe that this court should usurp the powers of the Board entrusted to it by the members of the corporation to conduct a proper ethics review of its own”.
The case is under appeal.