When Can Condominium Directors Be Personally Liable?

In the case of Matlock v. OCSCC 815, one of the owners asserted various claims against the condominium corporation in relation to the corporation’s alleged failure to properly maintain and repair the common elements. The owner also asserted claims against the condominium’s directors “on the basis of negligent misrepresentation, a breach of the statutory duty of care, and negligence in their failure to take reasonable steps to address the deficiencies detailed in his claim”.

The Court dismissed the claims against the directors. The Court said:

A plain reading of these allegations reveals that these complaints are directed against the individual board members in their role as the directing minds of the Condominium Corporation. There are no pleadings of material facts that make the conduct complained of their own.

This is an important case for condominium directors, because it tells us that condominium directors are generally not personally liable for things that they do strictly in their role as condominium directors. [The condominium corporation may of course be liable for the decisions or acts or omissions of the directors… but the directors won’t generally be personally liable unless they do something that goes beyond their normal roles as directors.]

Here’s a list of other considerations (for condominium corporations and directors and officers) when it comes to liability risks:

1. Every condominium corporation should have a properly-worded by-law provision stating that the condominium corporation must indemnify the directors and officers pursuant to Section 38 of the Condominium Act. This is extremely important protection for the directors and officers (which can apply as long as the directors / officers act honestly and in good faith).
2. Every condominium corporation must obtain Directors & Officers Liability Insurance (if reasonably available) pursuant to Section 39 of the Act. This is in fact particularly important protection for the condominium corporation (because, as noted above, condominium directors and officers are normally entitled to be indemnified by the corporation, and the D & O insurance typically covers any obligation of the corporation to indemnify the directors and officers). Again, the D & O insurance doesn’t apply in the case of dishonesty or bad faith.
3. Be sure to avoid dishonesty or bad faith. What is bad faith? In my view, a Director or Officer is acting in bad faith when they make a decision based on their personal interest rather than based on their sense of the best interests of the corporation. As long as the Director or Officer is trying to make decisions out of concern for the best interests of the corporation as a whole, in my view they have very little risk of personal liability.
4. An excellent way to limit risks of liability (both for the corporation and the directors and officers) is to follow the advice of an expert, as noted in Section 37 (3) of the Act. SO:  When in doubt, don’t hesitate to obtain expert advice.
5. Hiring an independent contractor is also a way to reduce risks of liability to third parties, because (absent a contractual obligation to the third party) a party is not typically responsible for negligence of a contractor that they hire, as long as there was no reason to doubt the contractor’s competence. 
   
   Note that many contractors must also provide a certificate of WSIB coverage. And in many cases it may also be wise to insist that the contractor have liability insurance (on reasonable terms).
6. Condominium corporations with employees can also opt for WSIB registration (which can reduce risks of a claim from any employee of the condominium corporation who is injured on the job).
7. Condominium corporations are of course also obligated to have property insurance covering the common elements and standard units (pursuant to Section 99 of the Act) as well as certain liability insurance coverage (pursuant to Section 102 of the Act).  Note that it is also important to advise the insurer any time you become aware of any “unusual insurance risk” (not previously apparent to the insurer).
8. Also see our recent blog about new provisions of the Occupiers Liability Act applying specifically to claims for personal injury due to snow or ice.

Stay tuned to Condo Law News to keep up to date on the latest developments on condominium law!