Can this Partnership be Saved? (3)

7K0A0938(This is the third in an occasional series.)

Liz and Monica have a successful partnership doing all aspects of design and social media marketing. So far their clients have been small-to-medium sized businesses, but they’re eager to work with bigger organizations. Both women are hard-working and good at what they do. They’re equally committed to the success of the business and both put in long hours. On a personal level they get along well but sometimes see things differently.

For example, they were recently approached by one of the big national payday loan firms to put together a proposal for a complete re-branding project. Liz feels that the payday loan business harms the community. She doesn’t want to bid on the project because she feels that, by working for them, she would be complicit in the harm. Monica believes that “a dollar is a dollar” and that they’re not in a position to be so picky. This job might be their stepping stone to bigger projects. She wants to bid on the job. The two women are at an impasse and it seems there is no way to resolve it.

To my mind, shared core values are the single most important factor in a successful business partnership. Partners don’t need to be best friends; they don’t need to have similar personalities or even much of a shared history. But if they don’t share some basic values, the partnership is doomed.

Can Liz and Monica’s partnership be saved?

Maybe: If Monica is comfortable selling their services to anyone who can afford them, and Liz isn’t, then they two women won’t be in business together much longer.

Yet while Monica might have no problem with the payday loan business, there are likely to be at least some types of organizations she wouldn’t want to support. For example, she might not be comfortable working for certain political parties, or for businesses that test products on animals, or tobacco companies. But thinking this out before every new project and having to debate about every potential client is simply not efficient.

Liz and Monica need to have a conversation and come to an agreement about their business practices. Will they refuse to work with certain kinds of clients? Will they accept all potential business until they reach a certain level of success, and then start to be more choosy? The same causes that are important to Liz might not be important to Monica. They might have different priorities and different moral intuitions. That’s OK – as long as they present a united front, agree to support one another, and jointly reject clients on their “disapproved” list.

For more about business partnerships, see:

Can this Partnership be Saved (1) –  Martin & Eli have different management styles

Can the Partnership be Saved (2)Sam’s idea; John’s work. How will they share the profits?

Condo Law Digest – October 2015

Hands ondiamonds 350.jpg384125 Ontario v The Diamond at Don Mills Developments, 2015 ONSC 5581
Decision Date: September 4, 2015
http://canlii.ca/t/gl108

The 25 plaintiffs are small business owners who purchased condominium units in “The Diamond at Don Mills,” a retail/commercial development. The defendants are the vendor and developer of the condominium in question, and Parallax Investment Co., who initially owned the land and transferred title to Diamond before the Agreement of Purchase and Sale was entered into. The plaintiffs are suing for about 7 million dollars, charging that their purchases were induced by misrepresentations, that they were burdened with unjustified price increases at closing, and that they were overcharged on occupancy fees. The value of the defendants’ assets, as known to the plaintiffs, is about $500,000. According to evidence, the funds from the sale of the last unit were paid out by Diamond to its creditors and investors. In this action the plaintiffs seek an order preventing Diamond Inc. from in any way disposing of or mortgaging their remaining assets.

Justice Mew noted that the law has “a strong disinclination” to permit execution before judgment. The order that the plaintiffs seek requires strong prima facie evidence that the defendant is about to dispose of its assets in a manner distinct from its usual course of business. In the absence of such evidence, the plaintiffs’ motion is dismissed and they are to pay costs of $22,000, fixed on a partial indemnity scale.

Comment: Justice Mew notes that it is an “everyday risk” of civil litigation that a defendant will be unable to satisfy a judgment against it.

Williams Estate v Carleton Condominium Corporation No. 66, 2015 ONSC 5479
Decision Date: September 3, 2015
http://canlii.ca/t/gl104

In 2012 the executor of the Estate of George Williams sued The Carleton Condominium Corporation No. 66 for water damage to the estate’s condominium unit. The water damage originally dates to December 2009. The statement of claim did not specify ongoing problems with water leaks. In this action, the plaintiff seeks to amend substantially the original statement of claim to include ongoing problems and to make claims under the Condominium  Act for breach of fiduciary duty and for an oppression remedy. The defendant resists these amendments on a number of grounds.

Justice Maranger gave permission for the claim to be amended, saying that the core of what is being claimed – the ongoing water damage – should not be a surprise to the defendant, and that denying the amendment could have the result of multiple lawsuits involving the same parties arising from the same issues. He was “strongly inclined” to order no costs.

About the image:
A miner searches his pan for diamonds.
Hands ondiamonds 350” by USAID Guinea. – USAID Guinea.. Licensed under Public Domain via Wikimedia Commons.

Workplace Conflict: The Good, the Bad, and the Ugly

- fighting red kangaroos 2

Although I work in conflict resolution and prevention, I know that not all conflict is bad. In fact healthy, productive conflict is a sign of a flourishing workplace. Conflict can be an engine of creativity and an open, respectful exchange of opinion can bring people together, even if they ultimately disagree with one another.

But how do you know if your workplace is involved in a healthy conflict or a dysfunctional one? Here are some things to consider:

1. First, don’t be fooled by outward appearances: A healthy conflict isn’t necessarily one with calm tones and hushed voices and dysfunctional conflict doesn’t have to mean shouting. What matters more is the level of engagement. If everyone is engaged more-or-less equally, that is a sign that the issues are important to everyone and that people are confident that their opinion matters. If there is an imbalance – if some are passionate about the issues while others seem reluctant to share their views or to “tiptoe” around the problem – then you may have a problem. It could be that people don’t care that much. Even worse, it could be a sign that they don’t feel that their opinion, if they share it, will be valued.

2. The subject matter of a conflict reveals a lot. In a healthy conflict, people have differences of opinion over problems and issues, whether this means small day-to-day matters or an organization’s overarching vision. Dysfunctional conflict, on the other hand, is more likely to be focused on people, their personalities, and on (real or alleged) personal shortcomings.

3. A sense of proportion is often the first casualty of dysfunctional conflict. Comments and small incidents take on an outsize significance. In healthy conflict, people are better able to keep things in perspective.

4. I’m not sure whether this is a cause or an effect, but I’ve noticed that dysfunctional conflicts are more likely to be marked by information asymmetries. That is, parties have different access to information (or believe that they do). When there is an information void, gossip, rumours and confusion are likely to fill it, leaving everyone worse off. In a healthy conflict, there is sharing of information, even if full transparency isn’t possible.

5. In dysfunctional conflicts, phrases like “You always…” or “They never …” are commonly heard. Healthy conflicts focus on specific incidents.

6. A “post-mortem” conversation – in which people examine a failure or worse-than-expected results to see what went wrong – can quickly become a conflict. People tend to see their own possible errors and shortcomings differently than others see them. This is only natural. After all, we know our own intentions, how hard we worked and the difficulties we faced, and we don’t necessarily know the challenges that others have faced. In a healthy post-mortem conflict, the focus is on understanding: Where did things go wrong and what can I do differently in the future?

7. In fact, it is a general feature of healthy conflict that people take responsibility for their actions, past and present. In contrast, scapegoating is a prominent feature of dysfunctional conflict: People work hard to deflect responsibility from themselves and onto other individuals or groups.

It isn’t possible (or desirable) for life and relationships to be conflict-free. However we can always strive to make sure that we’re having healthy and productive conflicts.

About the image: By Dellex (Own work) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Condo Law Digest – September 2015

Balkong, Nordisk familjebok.pngPaus v Concord Adex Developments Corp., 2015 ONSC 5122
Decision Date: August 14, 2015
http://canlii.ca/t/gknk1

In Ontario, a Class Action suit must be “certified” by a judge before it can proceed. In this ruling Justice Perell has allowed a Class Action suit by owners at “The Matrix” (361 & 373 Front St. W. in Toronto). When the railing fell off the balcony of a unit in spring 2011 it was discovered that all the balconies needed remedial work. Engineers engaged by the Corporation determined that the railings as installed did not meet the requirements of the Ontario Building Code then in force and recommended that all existing railings be replaced. Access to the balconies was restricted until September 2014. Paus, an owner since 2002, is one of the proposed representative plaintiffs in this action for damages. The Defendants, the condominium developer (declarant), the general contractor responsible for construction, and the condominium Corporation (TSCC No. 1438) consented to the certification.

Ballingall v Carleton Condominium Corporation No. 111, 2015 ONSC 4129
Decision Date: August 19, 2015
http://canlii.ca/t/gknk5

This is a decision on costs in Ballingall v. Carleton Condominium Corporation No. 111 (which I summarized in the May 2015 Condo Law Digest.) The successful applicants asked for costs in the amount of $76,523 on the basis of substantial indemnity, with 60% assessed against the Corporation and 40% against John Macmillan, one of the Board members. Justice Aitken noted that the Applicants made four offers to settle before trial, when the Respondents made none. He ordered costs to the Applicants in the amount of $50,000 with the Corporation responsible for $35,000 and Macmillan for $15,000.

The judge made two remarks in closing: First, that “being stubborn and unwilling to compromise” is costly and unwise; and second, that condominium owners must seek leaders who can work constructively and effectively with all owners.

Comment: I do not know if mediation was attempted in this case. Had the parties worked together to come to a collaborative solution, it is likely that costs would have been significantly lower.

About the image:
Balkong, Nordisk familjebok“. Licensed under Public Domain via Wikimedia Commons.

Can this Partnership be Saved? (2)

(This is the second in an occasional series. Don’t miss the first installment.)

Sam and John are working together on an app they hope will dominate in its category on iTunes. Actually, John is doing most of the work. Sam is more an “ideas” guy. He also put up some capital to seed the project. Besides, Sam doesn’t have the time to do the actual development work. He has a family, a full-time job, and plays guitar in a pick-up band on the weekends. This collaboration with John is just one of several side projects. John is the “execution” guy. He’s single, has a part-time job to pay the bills, and spends the rest of his time on the app.

At the start, Sam and John agreed that they would share future profits from the app on a 50/50 basis. A couple of months in, both are unhappy about the arrangement although neither has said anything to the other. Sam is frustrated that the app isn’t ready yet and feels that John hasn’t worked hard enough. He also believes that, since the idea for the app was his and he put up the initial investment, his profit share should be greater than 50%. John feels like he is the one doing all the work and that Sam is treating him like an employee rather than a partner. He doesn’t see why Sam should be eligible for half of the profits, based solely on the strength of his idea and a little start-up money. Neither has any idea that the other is unhappy with the arrangement.

Can Sam and John’s partnership be saved?

Probably not, and almost certainly not without some drastic change or an outside intervention. Sam and John have two major challenges to overcome: Differing ideas as to what is “fair” and a pattern of conflict avoidance.

The perception of unfairness is one of the main sources of workplace conflict that I see. The idea that one person is working less hard or less effectively than someone else in the same role, or that rules are being applied in an arbitrary manner, can be corrosive of workplace relations. Similarly, the perception that a partnership structure is unfair, if not addressed, is likely to result in the dissolution of the partnership.

Sam and John are making different kinds of contributions to their business, and different kinds of contributions are notoriously difficult to measure against one another. Each of us has a bias towards thinking that our own contribution is the more valuable. So Sam thinks that ideas are the core of a successful business, and John thinks that the elegant software  development is the key to success. And if they were to join forces with a designer or marketer, that person would likely believe that her contribution was the most significant. This is only natural. Each of us knows how hard we’re working and what kind of a contribution we’re making. And we all too often have little insight into the work that goes into contributions made by others.

Now, this difficulty in itself can be overcome. There are lots of successful partnerships where the partners make different kinds of contributions and they’re able to come to a distribution of profit that seems fair to all. But it is unlikely that Sam and John will be able to overcome their differences and come to a shared understanding of what is fair if they continue to avoid the issue.

I can think of at least three ways in which their story might end.

1) Sam and John continue their pattern of non-confrontation. Neither tells the other how he feels. Sam doesn’t talk about his frustration that his ideas aren’t yet a reality. John doesn’t talk about how he feels undervalued. Resentment builds on both sides. John stops working on the app and the friendship deteriorates. Sam looks for another developer and chalks up the loss of time and money to experience.

2) Sam and John continue their pattern of non-confrontation until the app gets built and is a huge success. Money starts coming in. John’s friends tell him that the deal he made for half the profits wasn’t fair and advise him to get a lawyer. The lawyer files suit. Sam is outraged and hires his own lawyer. The former friends now only speak through their lawyers. A large portion of the money that the app has brought in goes to pay legal fees.

3) John tells his girlfriend about his frustration with Sam and with bringing the app to market. She advises him to confront Sam and tell Sam what he’s been feeling. She reminds him that not speaking up has cost him in the past. John realizes that, as much as he dreads conversations like the one he needs to have with Sam, knowing how to handle them is important. Another friend puts him in touch with a coach. They work together. When Sam finds out how John has been feeling, he’s pretty taken aback. Yet the two of them are able to sit down and work out a new delivery schedule and a profit sharing agreement that works for both of them.

Which ending would you rather see?

Can this Partnership be Saved? (1)

(This is the first of an occasional series.)

Martin and Eli are co-owners of a growing software company with about twenty employees. They met in university when Eli was dating one of Martin’s room-mates. They’ve been in business together for nearly ten years and have very different management styles. Martin is very detail-oriented and sometimes impatient. He can be abrasive when he feels that someone hasn’t met his high standards. Eli is more easy-going and laid-back. He expects people to work hard, and he also wants everyone to get along and even have fun.

Martin has two young children and spends most of his free time with his family. Eli is still single; he spends his free time at the gym or socializing with other single people in the company. Sometimes, people on Martin’s team hint to Eli that Martin can be difficult to work with. Eli knows that Martin is a good guy underneath it all and that he pushes people because he wants the best for their clients and he wants the company to succeed. Still, Eli has noticed that Martin’s team has a much higher turn-over rate than his. When yet another highly skilled developer on Martin’s team gives her notice, Eli starts to feel frustrated. He wonders if Martin is really the best partner he could have. He knows he needs to discuss this with Martin, but he’s not sure how to do it. In fact, even the thought of having the conversation makes him stressed. Maybe he would do better managing the company on his own.

A business partnership can be a very intense relationship. You have to be able to depend on one another. You invest your time, skill, and perhaps some capital in a business. You succeed or fail, not just by your own actions and decisions, but by your partner’s as well. The consequences of a failed relationship are high: A ruined business, lawsuits, damage to reputations, not to mention stress that invades every aspect of your life.

Clearly, a business partnership is a relationship worth some effort. But how much effort and what kind of effort? A New York Times article about the company Genius reports that the founders have turned to “couples therapy” to help their partnership.

Can Martin and Eli’s partnership be saved?

Maybe: They respect each other and have similar values and an equal commitment to the company’s success. While they aren’t close friends, they get along well enough. Martin and Eli clearly need some kind of help but I doubt that therapy is the solution for them. Martin needs to understand that his management style is hurting the business. He needs coaching to help him find the way to get the best out of his team without alienating them. Eli, his partner and equal in the company, is the best person to give him this message.  If Eli is unable to initiate this “difficult conversation” he may also need coaching. And Eli will need to support Martin as he develops better management skills.

Do you know anyone like Martin or Eli? Tell me about it in the Comments section below.

Condo Law Digest – Mid-summer 2015

Simcoe Condominium Corporation No. 89 v Dominelli, 2015 ONSC 3661
Decision Date: June 8, 2015
http://canlii.ca/t/gjjc6

Simcoe Condominium Corp. No. 89 is a complex of 3-storey residential condominiums with no elevators; a large percentage of the residents are seniors.  In 2005 the Corporation adopted a Rule limiting the weight of a dog that a resident can have in a unit to 25 lbs or less. Mr. Dominelli owns a unit in one of the buildings. In July 2014 his finacée, Ms. Labranche moved into the unit with her dog Peaches. Although the dog weighed more than 25 lbs, the couple did not seek permission for Peaches to reside in the unit. In August 2014 the property manager wrote to Mr. Dominelli, advising him that the dog was in violation of the Condo’s Rules. The couple responded that Peaches was a therapy dog that Ms. Labranche used in her work with autistic children. The couple were advised that, to be accommodated as a service animal, the dog must be a therapy dog for a resident (not just a therapy dog generally). At an Owner’s Meeting in October, the majority of owners voted against removing the 25lb weight restriction for pets. The couple then directed their efforts to showing that Peaches was a therapy dog for Ms. Labranche’s conditions of stress and anxiety, providing letters from a physician in support of this claim. The Board denied her request for accommodation, on the grounds that the doctor had not provided a clear diagnosis or evidence that Ms. Labranche had a disability under the Human Rights Code. Ms. Labranche did not comply with requests for medical documentation, relying on the doctor’s advice that it was not necessary that she disclose personal information.

Justice Quinlan granted an order that Peaches be permanently removed from the unit. He also found that the Corporation had been entitled to seek further information from Ms. Labranche regarding her disability, and that she should have complied with the requests. In a later ruling, he granted costs to the corporation in the amount of $47, 000.

Comment: Just as you wouldn’t seek a medical opinion from a lawyer, don’t rely on the legal opinions of your physician.

Toronto Common Elements Condo Co. No. 2041 v Toronto Standard Condo Co. No. 2051, 2015 ONSC 4245
Decision Date: June 30, 2015
http://canlii.ca/t/gjw5k

The respondent (TSCC 2051) is a condominium with 112 units; the applicant (TCECC 2041) is the common elements corporation for both the land on which TSCC 2051 sits, and the land holding 30 adjacent townhomes. TCECC is responsible for snow clearing, landscaping, visitor parking, and related services. TCECC has the duty to budget for and collect common expenses from all of the unit owners (condominium units as well as townhomes) and to deliver financial statements. From 2009 to 2013 TCECC provided some services, but failed in its obligation to assess and collect common expenses from the unit owners of TSCC 2051. When TCECC realized its error, it had financial statements prepared (yet without proper documentation for all expenses) and tried to collect common expenses back to 2010, including interest at rates set out in the Condominium Act. In this action they claim $127, 500 of which about $50 000 is accrued interest.

Justice Corbett sees this dispute as not being over legal liability, but over the fair adjustment of accounts. For that reason, he has advised the parties to submit their dispute to mediation or arbitration. (For the difference between them, see this short article.) He also suggests that interest be awarded at the rate specified in the Courts of Justice Act (which is considerably lower than the rate in the Condominium Act.)

Comment: I can only heartily endorse the judge’s reminder: “As a final note, the parties should bear in mind that they are in a long term relationship and need to deal with each other fairly and reasonably.” Mediation might strengthen their relationship going forward.

York Condominium Corporation No 41 v Schneider et al., 2015 ONSC 3919
Decision Date: June 25, 2015
http://canlii.ca/t/gjnvl

Carleton Condominium Corp. No. 25 v Patrick Eagan, 2015 ONSC 4353
Decision Date: July 3, 2015
http://canlii.ca/t/gjw3v

Both of these actions involve insect infestations (cockroaches in the first and bedbugs in the second). In both actions, the Condominium Corporations seek relief from unit owners who have failed to cooperate with them and with pest removal contractors. In both cases, respondents were ordered to comply, and the costs of pest removal treatments were ruled as recoverable by the Corporations from the respondents.

In the first case, Justice Brown found that the respondents had failed to comply with an Order set down in a previous legal judgment. She ruled that if they again failed to comply with the order to cooperate with the pest control company, the Corporation would be entitled to seek an order requiring them to vacate and sell their unit, and she granted costs to the Corporation. In the second case, Justice Corthorn granted the respondent 30 days to cooperate with the pest control contractor, and ruled that if he did not comply, the Corporation is granted immediate and ongoing access to the unit to carry out the pest control treatment. She also granted costs of $9700 to the Corporation.

Comment: Pest infestations require remedy throughout a building, and privacy does not trump health and safety.

Condo Law Digest – June 2015

Erfurt Fischmarkt - Haus zum Breiten Herd - Detail 2.JPGWu v Peel Condominium Corporation No. 245, 2015 ONSC 2801
Decision Date: May 6, 2015
http://canlii.ca/t/ghh9f

Ms. Wu purchased a penthouse unit in PCC 245 in 2008. The building’s mechanical, elevator and HVAC equipment are located on the level above her unit. Ms. Wu and her parents lived there without complaint for about 6 months; then the noise and vibration from the elevator became excessive. Ms. Wu reported the problem to the Board, and from 2009 to 2013 she followed up many times. After a mediation in 2013, PCC 245 agreed to resolve the problem. Complicating matters is the fact that Ms. Wu’s unit contains a second bedroom that was illegally partitioned off from the main living room before she purchased it. PCC 245 hired experts to investigate the cause of the noise and have spent more than $31,000 over the years. However the Board did little-to-no work to solve the excessive noise and vibration issues, despite being advised by a lawyer to “just fix it.” Instead they “attempted to put the blame on Ms. Wu” and demanded that she renovate her unit to comply with City By-Laws.

The Corporation has effectively not acted, and Justice Lemon found clear evidence that Ms. Wu had been treated “harshly and wrongly.” The Board has a duty to balance the “objectively reasonable expectations” of individual owners with the safety, security, and welfare of all owners and of the property assets, and they did not provide any evidence of attempting to balance the needs of Ms. Wu with those of the rest of the residents.  Ms. Wu had sought damages in the amount of $150,000 per year for the adverse affects on her and her parents’ health and well-being. However she provided no evidence to support this claim and Justice Lemon assessed damages at $30,000. The Corporation has now agreed to fix the problem and Justice Lemon has asked them to report on their progress.

Comment: Failure to take appropriate action on complaints and attempts to deflect owners tend not to go over well with judges.

Liu v. Metropolitan Toronto Condominium Corporation No. 541, 2015 HRTO 637
Decision Date: May 15, 2015
http://canlii.ca/t/gj1c8

This is an application to the Ontario Human Rights Tribunal for a Contravention of Settlement. In February 2012 Mr. Liu and his wife Ms. Zhang came to an agreement with two property management companies over age restrictions then in place at the recreational facilities of their condominium. (Two property management companies were involved because they alternate responsibilities for the shared facilities management.) The agreement stated that children under the age of 16 would be permitted to use the recreational facilities under adult supervision. A memo was sent to all residents advising them of this change. About one year later,  Ms. Zhang, her son and two family friends were attempting to enter the billiard room and were stopped by a security guard who told them that children were not allowed to use the facilities. She advised him that the rule had been changed. He demanded proof, so Ms. Zhang and her son went back to their unit and returned with the memo about the rule change. As the guard examined the memo, Ms. Zhang called her husband to tell him that the problem had been resolved. However after she hung up, the guard asked to see her residents’ photo ID, although it should have been obvious by that point that she lived in the building. The party left and did not return to the billiard room that night.

The applicants wrote a letter of complaint to the security company. They followed up with the Board of MTCC 541 and with the property management company, asking for a response by March 6. Having no response, the applicants filed an application for a Contravention of Settlement with HRTO on March 25. When the applicants responded, they accused the children of “rowdy behaviour,” and Ms. Zhang of being “rude and abusive” towards the security guard. Later counsel for the respondents wrote to the family, advising that they had failed to execute a waiver of liability regarding the attendance of children at the recreational facilities.

The adjudicator found Ms. Zhang’s version of events to be more credible than that of the security guard, and that there had indeed been a Contravention of Settlement. Noting the respondents’ failure to investigate and to resolve the issue, and their “misguided attempts” to blame the applicants for their difficulties, she awarded the applicants $5000 in general damages.

Comment: This is a great example of how a minor incident, if not handled promptly and with courtesy, can blow up.

About the Image:
Erfurt Fischmarkt – Haus zum Breiten Herd – Detail 2” by Erich Braun – Scan vom Negativ. Licensed under CC BY-SA 3.0 via Wikimedia Commons. (“Allegory of Hearing”)