Duty to Act Honestly and in Good Faith

According to Section 37.(1)(a) of the Condominium Act, 1998, condominium Directors and Officers have a duty to act honestly and in good faith.

Condominium Directors and Officers also have a duty to exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; but the duty to act honestly and in good faith is perhaps more ‘serious’, for the following reasons: If a Director or Officer fails to act honestly or in good faith,

(1) the corporation’s D & O insurance may not apply (see Section 39 of the Act); and

(2) the corporation’s duty to indemnify the Director or Officer may not apply (see Section 38 of the Act).

These are obviously important risks.

So, how do you act ‘honestly and in good faith’? This is a complex question, and it’s not possible to provide a short answer. However, you should likely be fine if you are guided by the following principles:

1. Always do your best to base your decisions on fair, sound reasoning, consistent with the objects and duties of the corporation (as expressed in applicable legislation and in the corporation’s Declaration, By-laws and Rules);
2. Do not promote your personal interests instead of, or contrary to, the interests of the corporation; and
3. Where appropriate, declare a conflict of interest and recuse yourself from deliberations and decisions (on such matters).