By Urshita Grover and Adriel N. Clayton

In the decision of York Condominium Corporation No. 76 v 10 The Marketplace Limited, released on August 1, 2024, the Ontario Superior Court of Justice dealt with several issues arising from a lease amendment dispute involving land use in Toronto’s Crescent Town area, including an oppression claim. The applicant, York Condominium Corporation No. 76 (“YCC76”), sought to challenge an amendment made to a 99-year lease held by Crescent Town Club Inc. (“CTC”), a not-for-profit corporation governed by the Ontario Not-for-Profit Corporations Act, 2010 (“ONCA”) and responsible for operating recreational, athletic and daycare facilities for the Crescent Town community. This amendment released CTC’s rights over certain “Disputed Lands” in exchange for $500,000 paid by the property owner, Pinedale Properties Ltd. (“Pinedale”).

The court addressed four main issues. First, YCC76 argued that it had a leasehold interest in the Disputed Lands based on agreements registered on title dating back to the 1970s. However, the court found that no such interest was created, as the relevant agreements and lease terms did not expressly grant YCC76 any rights over the Disputed Lands.

Secondly, YCC76 contested the validity of the lease amendment, claiming that CTC’s board members had not adhered to the ONCA’s conflict of interest rules in section 41 approving the amendment. YCC76 argued that two CTC board members had a non-arm’s length relationship with Pinedale (the company benefitting from the lease amendment) and were present at the meeting, despite their abstention from voting.

For context, section 41 of the ONCA requires a director or officer of a corporation to disclose their interest and abstain from voting where they are either (i) a party to a material contract or transaction or proposed material contract or transaction with the corporation, or (ii) is a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the corporation.

The court ruled that section 41 did not apply and the two “representatives” did not have anything to disclose, as they were neither officers nor directors of Pinedale but only employees, they were not parties to the lease amendment, and did not have a material interest in Pinedale. Regardless, both representatives abstained from voting on the amendment and declared a conflict of interest out of an abundance of caution, meeting ONCA requirements.

Thirdly, YCC76 asserted that the lease amendment required unanimous approval by the CTC Board as a matter of contract. The court, however, noted that CTC’s bylaws required only a majority vote for such amendments, and that the amendment did not require unanimous consent as YCC76 failed to prove any direct prejudice to its position, financial or otherwise. The lease also permitted amendments without YCC76’s consent.

Finally, YCC76 argued that the amendment constituted oppressive conduct under ONCA, alleging that it unfairly disregarded the rights and financial interests of condominium owners by potentially enabling future development on the Disputed Lands.

However, the court emphasized that unlike the Ontario Business Corporations Act (“OBCA”) or Canada Not-for-Profit Corporations Act (“CNCA”), there is no explicit oppression remedy section in the ONCA – only section 174, which directs that a court may order an “investigation” of the corporation, in certain circumstances. Section 174 of the ONCA allows only for an investigation in cases of oppressive conduct but does not offer an explicit remedy to “unwind” decisions, including the lease amendment. The court also stated that “[i]f the legislature had intended the court to have the broad statutory powers under the ONCA as it has under the OBCA and CNCA, then it would have done so clearly as has been done in those Acts.” Further, there was also no caselaw before the court where the ONCA had been interpreted in the broad and unlimited fashion that YCC76 urged upon the court.

In addition, the court mentioned that even if it was wrong in the absence of jurisdiction to grant an oppression remedy under the ONCA, YCC76’s evidence of alleged prejudice was speculative and insufficient, as it failed to establish any reasonable expectation of exclusive recreational use of the lands for the remainder of the lease term.

The court therefore upheld the lease amendment, underscoring the importance of strict adherence to procedural requirements under the ONCA, as well as the limited scope of the ONCA’s oppression related provisions. Regardless of the court’s decision, this case is noteworthy as among the earliest cases addressing oppression under the ONCA.

​Read the October 2024 Charity & NFP Law Update