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October 16, 2013

By-Law Upheld Enabling Boards to Remove Directors for Ethical Breaches

It is not only a vote of owners that can remove a board member.

The court has upheld a by-law permitting a condo board to hold an ethics review and disqualify a member who breaches the directors’ code of ethics on at least three occasions.

The case, Stanley Gordon v. York Region Condominium Corporation et al., is attached below.

Gordon was disqualified from continuing to serve on the board of directors of his condominium following an ethics review.  He challenged the validity of the by-law and his removal in court.  The condominium responded in court, among other things, asking that its by-law be upheld and, therefore, its right to conduct an ethical review.  This is the first time such a by-law or procedure has been before the court.  While the court did uphold the by-law and the right to conduct an ethical review, it found that the procedure leading up to the ethics review was not fairly done and, accordingly, did not allow the board’s decision to stand.  However, the court declined to “usurp the powers of the Board entrusted to it by the members of the corporation to conduct a proper ethics review” and sent the decision back to the board, allowing them to hold another ethics review within 90 days.

This case is remarkable both in terms of upholding a novel by-law, and deference to the powers of the Board entrusted to it by the members of the condominium.

The case has been appealed.  The outcome of that appeal will also, no doubt, be of great importance to condominiums.

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