Executive Summary: Key Legal and Evidentiary Issues

• Issue of whether a condominium corporation can levy a chargeback above the insurance deductible as a contribution under the Condominium Property Act (CPA).

• Validity of registering a caveat against the unit in the absence of a judgment or writ of enforcement.

• Determination of whether a slow water leak constitutes an insured peril under the condominium corporation’s insurance policy.

• Applicability of CPA Regulation 62.4 and whether it limits recovery to the deductible amount.

• Whether the condition of the unit breached specific bylaws requiring maintenance and avoiding nuisance or hazard.

• Legality of using a bylaw-based charge to enforce prejudgment remedies like estoppel certificate refusal.

Background and incident

This case arises from water damage caused by a leak originating in a third-floor condominium unit owned by Sandeep Soni but occupied by his brother, Jayant Soni. The leak caused damage extending to the basement. The condominium corporation, Spirit Ridge, undertook repairs costing $83,813.76. Soni’s insurer paid $50,000, representing the maximum deductible recoverable under the Condominium Property Regulation.

The condominium corporation charged the remaining $37,813.76 to Soni’s unit and registered a caveat. When Soni attempted to sell the unit, Spirit Ridge refused to provide a clear estoppel certificate until the chargeback was paid. Soni paid the amount under protest. The caveat was discharged, and the sale proceeded.

Legal proceedings

Soni initiated proceedings claiming improper conduct under section 67 of the CPA and seeking recovery of the $37,813.76, plus $10,000 each in general and punitive damages, along with solicitor-and-own-client costs. Spirit Ridge filed a separate negligence action against Soni, which remained pending and was not consolidated with this proceeding.

Positions of the parties

Soni argued that under the CPA, its regulation, and Spirit Ridge’s bylaws, the only recoverable amount was the $50,000 deductible. He claimed that filing a caveat without a judgment amounted to an improper prejudgment remedy. He also denied negligence and argued that any further claim had to be pursued in personam via the pending negligence action.

Spirit Ridge contended that the leak, which had persisted for possibly a year, caused extensive mould and mustiness, establishing a breach of bylaws requiring maintenance and prohibiting nuisance. It asserted that the damage was not covered under its insurance policy, which excluded slow leaks, and therefore recovery under its own policy would have been futile. Spirit Ridge argued that the additional costs were properly levied as a contribution supported by its bylaws.

Policy interpretation and statutory framework

Judge Summers examined whether the $37,813.76 chargeback qualified as a “contribution” under section 39(1)(a) of the CPA. He referred to his prior ruling in Liberton, where he found that damage repair costs arising from an owner’s act or omission may constitute a contribution, provided bylaws allow it. He reiterated that section 39(2)(b) of the CPA, which would have excluded such claims, was enacted but never proclaimed in force—implying legislative intent to permit such recoveries.

Regulation 62.4 was considered. It makes owners absolutely liable for the deductible when damage originates in their unit, but does not preclude a separate action for other damages due to negligence. Spirit Ridge’s bylaws (notably 40.1 and 40.2) permitted recovery of costs incurred due to breaches of the bylaws and allowed registration of a caveat for such amounts.

The court found the bylaws satisfied the requirements for levying contributions and that the chargeback was valid. While Regulation 62.4 capped recovery for the deductible, it expressly preserved other remedies for negligence or willful damage.

Outcome and judicial reasoning

The court concluded that:

• The damage was not caused by an insured peril, as it resulted from a slow leak.

• The unit was not kept in good repair and constituted a nuisance and hazard to other residents, breaching Bylaws 27.1 and 28.1.

• The chargeback was a valid contribution under section 39(1)(a) of the CPA, supported by the bylaws.

• Registration of a caveat without judgment was lawful under the CPA and bylaws since it constituted an interest in land.

• Soni would also be liable in negligence, based on evidence that Jayant failed to properly secure the tub drain and allowed mould growth.

Judge Summers rejected the argument that this enforcement mechanism created an unjust prejudgment remedy, finding it was consistent with legislative intent to protect the collective interests of condominium owners. He dismissed Soni’s application in full.