Law Times

Law Times • April 15, 2013 Page 11 FOCUS Condominium litigation Are class actions or traditional lawsuits preferable? BY Julius Melnitzer are unit owners at other buildings in downtown Toronto. But experts say they may be watching the wrong ith the prochannel. liferation of "Whether or not a class condominium action is an effective and effidevelopment cient mechanism for redress in Toronto, litigation over a in these situations is unhost of related issues was incertain," says Sharon Vogel evitable. of Borden Ladner Gervais But what form would the LLP's Toronto office. "Cerlitigation take? Individual tainly, remedies under the remedies, lawsuits under Condominium Act should the Condominium Act, and be considered." class actions are all proceThe Condominium Act dural possibilities in today's allows a corporation to bring environment. suit in its own name and on No one, of course, expectbehalf of all unit owners so ed the sky to fall down. And long as they receive notice it didn't. But the glass did rain down at several Toronto loca- 'While class actions are becoming more common, and the corporation adheres tions in 2011, a situation that there are potential time and cost disadvantages to its bylaws. "In effect, the act creates generated enough brouhaha which suggest that a traditional approach is often its own class consisting of to spur a Rick Mercer spoof preferable,' says Sharon Vogel. the unit owners of the buildon the subject. ing without the need to go through the time and Yet litigation seemed avoidable at first. The developers of the Festival tower, the Murano build- expense involved in the certification process," ing, and One Bedford responded by removing the says Vogel. "Over the years, many corporations have sucold glass and replacing it with an improved lamicessfully sought redress in this way for a variety of nate version after the balconies began to shatter. What that meant was no repair costs for the construction deficiencies. The leaky condo litigaunit owners. But as people might expect in an in- tion in British Columbia is a good example." Indeed, at least one class action lawyer who acts creasingly litigious society no doubt abetted by the for plaintiffs appears to be less than sanguine about tendency of the plaintiffs' bar to keep a watchful eye on the news of pain caused to anyone, the unit the claimants' prospects in the falling glass matters. "I think they have a shot at certification," says owners still weren't happy. By June 2012, class actions had begun in rela- Alan Farrer, managing partner at Thomson Rogtion to all three developments. The owners claimed ers. To be sure, litigation under the Condominium damages arising from loss of enjoyment of their units and balconies, disruption of privacy, preju- Act itself poses challenges that primarily relate to dice in the resale of the units, and a reduction of $20 the number of parties and documents involved. "Despite the fact that these actions can be unmillion in rental income. The defendants included wieldy to manage and move forward and are also the developers, architects, general contractors, and sometimes complicated by insurance coverage isthe glass and balcony guard railing installers. Watching the class actions closely, no doubt, sues, they can be an effective way to seek remedies For Law Times W for construction deficiencies," says Vogel. Still, there are circumstances where a class action may be the more appropriate route, particularly if the issues affected only a minority of unit holders, few of them wished to participate in the litigation or the condo corporation is itself a potential defendant. This was the case in Charmley v. Deltera Construction Ltd., a case in which only four of the 500 occupants chose to sue a developer for negligent design and construction and then went on to launch a lawsuit against the condo corporation for failing to advise the builder of the deficiencies. "A class action may also be appropriate when unit owners want to join as part of a larger class, say where unit owners in several buildings are seeking redress from manufacturers or suppliers for a defective product or procedure that is common to all the buildings," says Vogel. A good example is Toronto Community Housing Corp. v. Thyssenkrupp Elevator (Canada) Ltd. Here, buildings that featured a specific type of elevator manufactured by the defendant had to replace more than 2,000 emergency braking devices at a cost of $12,000 each. Class actions typically funded through contingency-fee arrangements also have advantages if the cost of financing the litigation is a significant concern. "In Condominium Act cases, plaintiff unit owners typically bear the legal fees in proportion to their interests in the litigation," says Vogel. "However, there is nothing to stop them from seeking a contingency-fee agreement with a law firm." Contingency-fee arrangements can, however, be expensive in the final accounting. In Windisman v. Toronto College Park Ltd., for example, unit owners recovered approximately $1.5 million in a class action against a developer who had failed to pay interest on purchasers' deposits during the interim occupancy period. "The court approved a contingency fee of $750,000 and the plaintiffs recovered $233,000 from the defendants in partyand-party costs," says Vogel. "The result was that about one-third of the award went to legal fees." So what's the way to go? "Whether to pursue condominium litigation through a traditional lawsuit or through a class action is an important strategic consideration prior to proceeding," says Vogel. "While class actions are becoming more common, there are potential time and cost disadvantages which suggest that a traditional approach is often preferable." LT ISSUE DATE Absolute professionalism and respect for you and your client relationships, and the tenacity required to go the distance in pursuit of the best possible outcome. For proven experience in class actions, count on Lerners. 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