June 12, 2014 By:
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Case highlights conflict between confidentiality provisions and disclosure duties

In the recent condo law case of Morley v. London Condominium Corporation No. 2, the Ontario Human Rights Tribunal awarded the claimant $1,000 for the condominium corporation’s breach of a confidentiality provision contained in a settlement agreement between the condominium corporation and the claimant.

The facts are as follows: the claimant had alleged that limitations on access to her unit constituted discrimination on the basis of a disability. In minutes of settlement, the condominium corporation agreed to install a new entrance ramp to the claimant’s unit. The settlement agreement also contained confidentiality provisions, which prevented the condominium corporation from disclosing information relating to the settlement, except to counsel or accountants, or as may be required by law.

In a newsletter, the condominium corporation subsequently advised all owners that it had installed a new entrance ramp at the expense of the corporation, as part of resolution of a human rights matter. The tribunal said that this was a breach of the confidentiality provisions in the settlement agreement and ordered the condominium corporation to pay $1,000 as compensation to the claimant, for resulting “unwanted attention.”

This decision of the Ontario Human Rights Tribunal demonstrates the risks that may come with confidentiality provisions.

That said, this particular decision raises some serious concerns. In this case, the Human Rights Tribunal said that, based upon the terms of the particular settlement agreement, the condominium corporation should have kept confidential the fact that the condominium corporation paid for the ramp. But that doesn’t recognize the fact that a condominium corporation has a duty to provide information to its owners.

A condominium corporation can’t spend money to install a ramp and then not tell owners why the money was spent. Condominium corporations are accountable to all owners for how they spend the owners’ money. Ontario condominium corporations are statutorily obligated to prepare and distribute annual financial statements, to have those statements audited (if the corporation has 25 or more units) and to have the auditor answer questions about the financial statements.

Furthermore, condominium corporations are required to disclose information about legal proceedings and about potential increases in common expenses in status certificates issued to prospective purchasers and mortgagees. Owners generally must also be advised of such disclosure. All of this is statutorily unavoidable or, put simply, is required by law.

In fulfilling their various duties and obligations, condominium corporations must comply with the Human Rights Code. However, there doesn’t appear to be any basic human rights violation in this case. The tribunal’s decision in this case was based strictly upon the alleged breach of the settlement agreement, not upon any other human rights violation.

One supposes that disclosure of information might violate the Human Rights Code in some unusual circumstances. But, again, there was no suggestion of any such violation in this case. This case was strictly about breach of a settlement agreement.

According to section 176 of Ontario’s Condominium Act, the Act applies despite any agreement to the contrary. So, for example, parties can’t agree that a condominium corporation won’t fulfill its disclosure obligations under the Act. In other words, a settlement agreement cannot take precedence over the Act.

In summary:

(a) Condominium corporations must fulfill their disclosure obligations to owners. The only exception would be a case where disclosure would itself constitute a violation of the Human Rights Code, whether or not there is any confidentiality agreement.

(b) Therefore, a confidentiality agreement can’t prevent disclosure required by the Condominium Act unless the disclosure would itself constitute a human rights violation.

(c) This principle was actually expressed in this particular settlement agreement, because it specifically permitted disclosure “required by law.”

In this lawyer’s respectful view, the confidentiality provision in question in Morley v. London Condominium Corporation No. 2 could not prevent disclosure to the owners. For condominium corporations dealing with any confidentiality provisions, one good option (to avoid any argument) is to make it very clear in the agreement that the settlement will be disclosed to the condominium’s owners.

James Davidson is a partner at Nelligan O’Brien Payne LLP, and has been a member of the firm’s Condominium Law Practice Group for more than 30 years. He represents condominium corporations, their directors, owners and insurers throughout eastern Ontario.

[This article originally appeared on the Real Estate Management Industry (REMI) News Network http://www.reminetwork.com/condobusiness]

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.