Conflict in Start-ups

Mongolia Naadam 16

Young jockeys sprint from the starting line of a Naadam horse race. Ugtaal Soum, Mongolia. By Taylor Weidman/The Vanishing Cultures Project

One-size-fits-all advice has its uses, but also limitations. Anyone who wants to lose weight must consume fewer calories than he or she expends in energy. Yet the person who is responsible for feeding a family, the person who travels extensively and often eats out, and the very active person will each have different challenges in maintaining a healthy weight.

From one perspective, conflict in a start-up should not be different from conflict in any other similarly sized organization. And to be sure, some of the same factors that cause conflict in any organization – whether it is a family business or a partnership or a non-profit – can contribute to conflict in a start-up. Yet start-ups also have some unique challenges, and I’ve seen some rather bad advice targeted to them.

Here are some reasons why conflict in a start-up might be different from conflict in a more established organization.

Start-up founders frequently have to make a lot of decisions about a wide variety of things in a short time. They tend not to have established practices and routines to fall back on because, well, they’re just starting up. So decisions about personnel, about purchasing, about corporate culture, about priorities and about the product itself may have to be made in a relatively short time, often without a clear understanding of who should be making these decisions and on what basis.

Start-ups tend to have limited Human Resources support and may not have any. This might be understandable, as HR is a cost center and start-ups with a small staff may not see it as a priority. Yet no or limited HR support might mean that no one in the company has the skills necessary for dealing with difficult employees. Without an HR specialist on hand, founders may not understand their legal responsibilities to employees or the legal liabilities that employee behavior can subject them to. It can also mean that founders spend an inordinate amount of time managing conflict, as employees who are in dispute with one another have nowhere else to turn.

A culture of accepting inappropriate behavior at the top. In the tech world, there are far too many stories about “demanding” bosses like Steve Jobs who inspired employees to do great things and made wild profits. Yet a reluctance to confront abusive behavior can have far-reaching consequences. For every successful abrasive leader we hear about there must be a dozen who demoralized everyone around them, caused high-value employees to leave, became the target of expensive lawsuits, and generally spread misery. We just don’t get to hear about them. If the founders or key members of the management team can only motivate employees by intimidation or do not know how to give constructive feedback, then there are likely to be problem down the road. Everyone charged with managing the work of others – especially highly skilled or creative employees – should be trained to do this effectively and respectfully.

Take all of these factors and throw in a reluctance to ask for help. It takes intelligence and grit to launch a successful start-up. Unfortunately, there can be a tendency among people who are smart in one or several areas of their life to believe that they are smart in all areas and to falsely assume that they do not need to ask for help. This is unfortunate. It is a sign of strength, not weakness, to call for outside help when you recognize that you need it.

Finally, the costs of conflict can be greater for start-ups than for more established organizations. Conflict among founding partners has caused promising start-ups to fold before it was clear whether they could be successful businesses or not. Investors are leery of putting their money into dysfunctional organizations. No one wants to invest in a relationship that is already broken.

Condo Law Digest – May 2014

Photo by Eric Dufresne of Trois Rivières, Canada

Patriarcki v. Carleton Condominium Corporation No. 621, 2014 ONSC 1507
Decision Date: April 15, 2014
http://canlii.ca/t/g6kvx

Ms. Patriarcki brought a claim against the condominium corporation and two contractors (Shields Mechanical and Ideal Combustion) because of ongoing problems with the boiler in her unit from about May to October 2006. The boilers in each unit of the corporation were replaced in November 2006. Shortly after Ms. Patriarcki complained of fumes from the new boiler on start up and requested an inspection by the Technical Standards and Safety Authority (TSSA). The inspector found that fumes were a product of off-gassing of the glues used to install the boiler, that no carbon monoxide was present, and that a complete air quality analysis would be Ms. Patriarcki’s responsibility (not the contractor’s). The corporation made things worse (alleges Ms. Patriarcki) by installing new synthetic carpeting in her unit. (New commercial carpets can produce off-gassing for one to two years.) Ms. Patriarcki claimed that her health suffered as a result of these different irritants, with problems including unmanageable asthma, multiple chemical sensitivities and chronic fatigue syndrome. She supplied medical reports dated 2012 in support of these claims.

In this action, the judge agreed to the defendants’ request for summary judgment dismissal. The medical reports supplied by Ms. Patriarcki did not give evidence of a causal connection between the boilers and her health problems, and she did not provide any evidence linking the boilers with the poor air quality in her unit.

Comment: In asking for submissions on costs, the judge noted that he was sympathetic to the various health difficulties suffered by the plaintiff.

Kim v. Trump, 2014 ONSC 2129
Decision Date: April 22, 2014
http://canlii.ca/t/g6mgf

Between 2007 and 2011 the plaintiffs entered into agreements to purchase units in the Trump Hotel. They took occupancy of these units in February 2012 and entered into the Reservation Program Agreement. According to this agreement, the Trump Hotel Management Corp. would rent out the units and each owner would receive revenue from the rental of their unit, with fees, expenses and charges deducted. The plaintiffs charge that the rental and occupancy rates were lower than they had anticipated and the deductions were higher. They asked to see the financial statements for the entire Reservation Program (rather than just their own units), and these requests were denied. In November 2012 the plaintiffs refused to close the purchase agreements and instead issued a statement of claim. They seek to have the agreements rescinded and their deposits returned, and claim damages for loss of opportunity, misrepresentation and conspiracy.

In this action the plaintiffs name eight defendants and seek an order appointing an inspector to investigate the Reservation Program; in the alternative they seek an order compelling production of financial documents. This motion was dismissed. The Toronto Standard Condominium Corporation No. 2267, named as one of the defendants, sought an order dismissing the plaintiffs’ action on the grounds that they were incorporated only in October 2012 and so the plaintiffs have no cause of action against them. Judge Carole Brown agreed. She granted the defendant’s motion on the grounds that TSCC No. 2267 did not exist when the plaintiffs entered into the purchase agreement.

Comment: The judge provided a number of detailed arguments for dismissing the plaintiffs’ motion.

Another case involving the Trump Tower can be found in last month’s Condo Law Digest (scroll down to the third case.)

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Condo Law Digest – April 2014

by Marlith (Shared under Creative Commons License)

1716243 Ontario Inc. v. Muskoka Standard Condo Corp. No. 54, (with a counterclaim) 2014 ONSC 1848
Decision Date: March 24, 2014
http://canlii.ca/t/g68rp

Judge Gilmore referred to this claim and counterclaim as an “extended and somewhat complex litigation” over an inadvertent error.  The applicant purchased a unit in the condo corporation in February 2012.  The unit included two parking spaces.  The Status Certificate contained an error, in that the calculation of the unit’s common expenses did not include the amount associated with the two parking spaces (about $168/month).  The applicant stopped paying the charge for the parking spaces in May 2012 and argued that the corporation is precluded from pursuing payment related to the parking spaces.  The corporation argued that the status certificate should not be read in isolation and that it bound the corporation only for the fiscal year ending March 2012.  In January 2013 the corporation registered a lien for non-payment of common expenses (amounting to about $6945.00).

In this action, the unit owner seeks a declaration that it is not required to pay common expenses for the parking spots and an order discharging the lien.  The corporation seeks an order requiring the owner to pay the full amount of the lien, interest of 24%, all costs incurred by the corporation and the full costs of both actions, and a declaration that the owner is in breach of the Condominium Act and of the corporation’s by-laws, rules, etc.

The judge ruled that the owner could not avoid payment for the parking places after March 2012 (about $2185 owing with nominal costs award of $750).  He declined to order the owner to pay the corporation’s full costs, since the origin of the matter was an error by the corporation.

Comment:  The corporation spent about $30, 000 to bring this matter to court.  I cannot help but wonder if the parties attempted mediation.

Elbaum v. York Condominium Corporation No. 67, Nathalia Gauto and Miqueias de Oliveira Silva 2014 ONSC 1182
Decision Date: Feb 26, 2014
http://canlii.ca/t/g4n3d

The plaintiff, an elderly woman, owns a unit in the condominium corporation.  In September 2012, during a walk on the common elements of the condominium, she was seriously injured when she was attacked by a dog owned by Gauto and de Oliveira Silva.  (The dog was unleashed at the time.)  She has sued the dog owners under the Dog Owners’ Liability Act and the condominium corporation for common law negligence under the Occupiers’ Liability Act.  The corporation has brought forth a motion seeking to have the plaintiff’s claim dismissed under Rule 21.  To be successful, the corporation would have to show that it was “plain, obvious and beyond all doubt” that the plaintiff could not succeed.

Judge Perell dismissed the motion.  He found that even if the corporation was not the owner or harbourer of the dog (and therefore there was no strict liability under the Dog Owners’ Liability Act), this would not preclude a claim of common law negligence or a claim under the Occupiers’ Liability Act.

Comment:  It is no surprise that there are so many rules and by-laws regarding dogs in condominiums.

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The Tenants, their Dog and the Small Claims Court Decision.

Photo “Behind the Red Wall” by skycaptaintwo

Every month I provide a brief summary of some recent Ontario condominium cases. This small claims court decision from April 2013 (Carriero v Carli, 2013 CanLII 88835) caught my eye as deserving some extended discussion.

The defendants began renting a unit belonging to the plaintiff in March 2010. About a month later the property manager of the condominium sent a letter to the plaintiff, alleging that his tenants were keeping a dog in the unit, drawing his attention to the rule forbidding pets and asking that the dog be removed. The plaintiff got in touch with his tenants who refused to remove the dog. Their position was that the condominium management was “only trying to scare” him.

Comment: Regular readers will know that I believe you should never ignore a letter from the condo board. While the plaintiff did not ignore the letter, there is no indication that he responded in writing, spoke to the condominium management or sought legal advice.

About a week later the defendants’ lawyer wrote to the property management company, stating the view that the “no pets” rule was unenforceable.  The lawyers for the condominium corporation wrote back, stating that the rule was indeed valid, and that they would begin court proceedings against the plaintiff and his tenants if the dog was not removed by May 7, 2010.  The defendants took the view that they would not be “bullied” by the property manager who was enforcing the “no pets” rule on a selective basis.

Comment:  The plaintiff did not seek legal advice at this time, and would only do so months later, in October.  Was he relying on the opinion of his tenants’ lawyer?  If so, this was ill-advised.  Had he consulted a lawyer on his own behalf, the plaintiff might have had a better idea of the possible consequences of inaction.  (See my website for information on the importance of lawyers in mediation.)

Will it surprise anyone reading that the defendants did not remove their dog?  Over the next four months the condominium’s lawyers billed the corporation nearly $13 000 in fees regarding this matter.  The corporation, invoking their legal right to recover costs associated with enforcing the condominium’s rules, registered a lien for this amount against the plaintiff’s unit.

Comment: The provision in the Condominium Act that boards can “charge back” the costs of enforcement to owners who have broken the rules is meant to protect “innocent” owners from the high costs of litigation.  Owners who fail to abide by rules should be aware that legal costs can balloon out of control amazingly quickly. Two recent examples are York Condominium Corporation 345 vs. Qi and Ottawa-Carleton Standard Condominium Corporation No. 671 v. Friend.

In November 2010, as the result of a Superior Court application at Brampton, the dog was ordered removed and the defendants were ordered to pay $2000 in costs.

The plaintiff estimates that he has spent $23 000 in the matter (including around $13 000 legal fees incurred by the condominium.) In this application to the small claims court, he sought to recover these costs from the defendants, arguing that their “defiant” behavior and attitude caused his damages.  In considering his application Deputy Judge Klein noted that: (1) The Condominium Act states that an owner must take “all reasonable steps” to make sure that his tenants, or anyone else in his units, complies with the condominium’s declaration, by-laws and rules. (2) Although the plaintiff is a “victim” here, he should have attempted to mitigate his situation by  ousting the defendants from his unit and/or challenging the amount of fees charged by the condominium’s lawyers.  (3) The fees charged in this case were “excessive and simply out of line.”

The judge also noted that, despite the provision in the Condominium Act that disagreements between the corporation and owners be resolved through mediation or arbitration, there was no evidence that either was attempted.

Comment: Some lawyers take the view that, when the issue is a straightforward violation of rules, there is no obligation to mediate.  Is this a conflict that should have been mediated? (See for example, The Judge’s Dog, The Elusive Parrot or The Sisters Upstairs and the New Hardwood Floors.) I do not have enough information to know whether mediation might have resulted in a better outcome in this case.  My own view is that, while mediation is not advisable in every condominium dispute, it is probably advisable more often than is realized.  See my post on why you might want to keep talking, even if it seems there is “nothing to discuss.”

The judge ruled that although the defendants were at fault (for refusing to remove their dog) the plaintiff must bear some responsibility.  In particular, he should have sought legal advice at an earlier date, attempted to remove the defendants from his unit and challenged the amount of fees charged by the condominium’s lawyers.  The judge awarded the plaintiff $13 000 in damages and $750 in costs.

Comment: You can read the full text of the judge’s decision here.

Condo Law Digest – March 2014

512px-Black_dog_lying_on_the_floor

Photo source: https://flickr.com/photos/lecates/423460439/

 

Butala v. Xia and Chen, 2014 ONSC 932
Decision Date:  Feb 11, 2014
http://canlii.ca/t/g321p

This is an appeal of a small claims court decision.  Xia and Chen live in the unit directly above Butala’s.  In a small claims court decision Deputy Judge J. Hunt awarded damages of  nearly $7000 plus costs to repair water damage to the floor in Butala’s unit.  (Liability was not an issue at trial.)  In this appeal, Xia and Chen submit that the trial judge committed “palpable and overriding” errors and that the decision should be over-turned.  These alleged errors concerned whether the entire floor would have to be replaced and on whether specific or generic products could be used as under pads.  In this appeal Judge Lederman found that the trial judge had broad discretion to admit evidence and that he had indeed based his conclusions on evidence. The appeal was dismissed and the plaintiff awarded costs in the amount $3500.

Comment: Neither party was represented at trial.  The plaintiff’s cost award suggests that she sought legal counsel.

Taite v. Carleton Condominium Corporation No. 91, 2014 HRTO 165 (CanLII)
Decision Date:  Feb 5. 2014
http://canlii.ca/t/g311s

The applicant is a retired firefighter.  His work-related injuries, exacerbated by a subsequent car accident, mean that he has limited neck movement. He drives a Ford F150 truck which allows for good visibility and has been modified with additional mirrors to further enhance visibility.  The applicant also feels that the larger vehicle provides important psychological comfort, since it would provide better protection in the event of another accident.  Unfortunately the applicant’s truck does not fit into the condominium’s underground parking garage.  He requested an above-ground parking space as close as possible to the building’s entrance.  The respondents offered him an above-ground parking spot close to the entrance but the applicant said that it did not meet his needs (as other residents sometimes park there).  After a mediation-adjudication in November 2011 the applicant began using the parking spot, although the matter was not completely settled and the hearing proceeded.  Then followed over two years of procedural delays, adjournments for medical reasons, and allegations by the applicant of reprisals against him (vandalism to the truck and a mischaracterization of his human rights claim as a “lawsuit” at the condominium’s general meeting).

The adjudicator found that the application had no reasonable chance of success.  The applicant failed to establish that his choice of vehicle was more than a personal preference, and that another, slightly shorter vehicle would not have accommodated his disabilities just as well.  The vandalism against the truck, while unfortunate, and the condominium’s failure to ensure the applicant’s exclusive use of his aboveground parking spot, do not constitute “reprisal” under the Code.

Comment:  To establish a case of discrimination based on disability, it is not enough to show a disability-related preference.  To be successful, the applicant would have had to show that the particular truck he purchased was a necessity.

Talon International Inc. v. Jung & Long Ocean Holding Ltd., 2014 ONCA 137 (CanLII)
Decision Date: Feb 24, 2014
http://canlii.ca/t/g3nc1

In 2005 the Respondents purchased units from the Applicant in the Trump International & Tower, Toronto, and a disclosure statement was provided to them.  They took delivery of the units at the end of February 2012, and on May 2012 they received a revised disclosure statement, outlining some changes to the premises.  According to the Condominium Act, a purchaser has two options upon receiving a revised declaration: He has ten days in which to 1) apply to Superior Court to determine whether the changes are material or 2) rescind the agreement of purchase and sale. The Respondents opted to rescind the agreement, but did so a full month after receiving the revised declaration.  In April 2013 Justice R. MacKinnon found in favour of the Applicant that the Respondents were bound by their 2005 agreement, that they had no entitlement to rescind that agreement, and that none of the changes outlined in the revised declaration were material. (See http://canlii.ca/t/fx6r6 for the full text of the judgment.)

In the current action Jung & Long Ocean Holding sought to have Justice MacKinnon’s judgment overturned, and this appeal was dismissed.  Costs of $10, 700 were granted to Talon.

Condo Law Digest – February 2014


Wentworth Condo Corp. No. 34 v. Brendan Taylor and Samantha Johns, 2014 ONSC 59
Decision Date: January 9, 2014
http://canlii.ca/t/g2kcc

Mr. Taylor is accused of aggressive and threatening behaviour towards other residents of the condominium, visitors and contractors. Three residents filed affidavits describing Mr. Taylor’s actions, which include complaints of excessive noise and vandalism. Some of the allegations were supported by police reports and other documentation. Mr. Taylor and Ms Johns (his wife) disputed some of the allegations but admitted others. Ms Johns acknowledged that her husband was “verbally abusive” and said that she had tried to get him to seek help. The applicants sought a Declaration that the respondents had acted in a manner contrary to the Condominium Act and to the Corporation’s Declaration, By-Laws and Rules, as well as Orders requiring Mr. Taylor to keep the peace and to refrain from communicating with or coming within 15 feet of several residents. They also sought to recover their legal costs of over $28 000.

Judge Milanetti granted the application and costs on a full indemnity basis. However he found the fees to be “quite excessive” and reduced them to about $15 000, to be added to the common expenses for the respondents’ unit over the next three years.

Comment: Part of the judge’s reasoning in assigning costs was that the respondents had “plenty of opportunity” to resolve these issues without the expense of court, and that the other owners should not be faced with the legal expense of one intransigent owner. The respondents were not represented.

A follow-up to an earlier case:

Last month I summarized Peel Condominium Corp. No. 98 v. Pereira. Mr. Pereira, the respondent, was ordered to pay costs of over $38 000 on a substantial indemnity basis, payable over four years. The judge commented that the respondent’s actions in the litigation increased costs.

Condo Law Digest – January 2014

Birdhouse (5494542157)
Peel Condominium Corp. No. 98 v. Pereira, 2013 ONSC 7340
Decision Date: November 28, 2013
http://canlii.ca/t/g2b2r

Mr. Pereira has been the owner of a unit in the condominium since 2001.  Since 2003 he has been accused of repeatedly violating section 117 of the Condominium Act (which prohibits activity likely to damage property or cause injury), with more serious incidents occurring after 2010.  Specific complaints against him include that he conducted car repairs in the underground garage, that he made defamatory postings on a website, that he threw cat feces and cat litter from his balcony, that he assaulted a former employee of the corporation (criminal charges were laid and withdrawn after he entered into a Peace Bond), that he transferred a bench from the lobby to the tenant workshop, and that he threatened and used extremely crude language when interacting with staff and other residents.  Some of the accusations were supported by sworn affidavits.

The corporation asked that Mr. Pereira be required to sell and vacate his unit within 6 months and that he remove any animal from his unit within ten days.  Justice Donohue found that while Mr. Pereira had acted in an  “inappropriate and abusive manner” and his actions were “extremely serious and troubling” a forced sale of his unit would be too severe a sanction.  Instead the court ordered him to comply with all provisions of the Condominium Act and with the rules, declaration and by-laws of the corporation.

Comment: Justice Donohue quoted the ruling in York Condominium Corporation No. 136 v. Roth according to which an order of forced sale is “extraordinary relief” and “draconian.”

Welch v. Peel Standard Condominium Corp. No. 755, 2013 ONSC 7611
Decision Date: December 10. 2013
http://canlii.ca/t/g2b4c

In February 2008 Mr. Welch, a resident of the condominium corporation, slipped and fell on an icy sidewalk within the common area of the facility and injured his back. In November 2008 an associate with the law firm retained by Mr. Welch spoke with the adjuster assigned to the case, asked if there were any other maintenance companies involved, and was told that there were not.  (This conversation was confirmed by a handwritten note.) In September 2009 plaintiff counsel placed the corporation and the property management company on notice.  Examinations for discovery were scheduled for June 2010 but did not go ahead because defense counsel were informed by their clients that they had contracted with a maintenance company, Forest Contractors, at the time of Mr. Welch’s injury.  All counsel involved agreed that the plaintiff would add Forest as a defendant.  Mr. Welch’s lawyer provided a draft amended statement of claim in November 2010.  The defendants did not provide their consent until April 2011, and the plaintiffs issued the claim against Forest at the end of August 2011.  The condominium corporation and property management company then cross-claimed against Forest Contractors.

In this action, Forest Contractors brought a motion for summary judgment to dismiss both the plaintiff’s claim and the cross-claim, on the grounds that they exceed the two year limitation period.  They argued that the plaintiff’s limitation period expired in February 2010 and the limitation period for the cross-claim expired in September 2011, two years after they were served with the statement of claim.  Justice Baltman found that the issue of whether the plaintiff had made adequate efforts to learn about Forest Contractors’ involvement before June 2010 could not be resolved on a summary judgment motion.  However he allowed the motion against the condominium corporation and the property management company.

A follow-up to an earlier case:

In the June 2013 Digest I summarized York Condominium Corporation No. 62 v. Superior Energy Management Gas L.P., 2013 ONCA 789.  An appeal was dismissed in December 2013.