Gordon vs YRCC 818
Superior Court of Justice—Ontario
Court File No: CV-12-109483-00
Court File No: CV-12-110220-00
Before: The Honourable Mr. Justice J.R. McCarthy
21 August 2013
Stanley Gordon was a director of YRCC 818 from May of 2006 to November
2011. He was removed as a director as the result of an ethics review
held by the other board members on 21 November 21 2011.
The judge found that the bylaw allowing the board to remove a director
after three ethics violations was valid if the bylaw was democratically
passed by the
majority of owners at a meeting of the owners.
Must be fair
Although the judge upheld the right of the board to hold an Ethics
Review, he ruled that the principals of procedural fairness and natural
justice cannot be ousted from such an ethics review.
The board was required to adhere to some minimal standard of procedural
fairness and the basic principles of natural justice. Not to do so
would be unreasonable and capricious.
Reasonable notice of such
an ethical review should have been given to Mr. Gordon in advance of
that date. One business day prior to the review date is simply not
sufficient, fair or necessary.
As well it was unclear whether Mr. Gordon received the witness
statements that the board intended to rely upon. A person facing the
termination of his standing or
office, should be made aware in a fulsome manner of the case which he
has to meet.
The fact that this was a review of alleged
ethical violations which would impact not only on the Mr. Gordon’s
standing as a director but also on the his reputation in the
community, required that Mr. Gordon be provided with some assurance
that he would receive a fair hearing.
It was plain and obvious that director Rotman was looking
to have the Mr. Gordon removed from the board and was seeking to unite
the other board members to effect this removal. Rotman admitted this in
cross-examination and it is made plainly obvious in his e-mails to the
other directors, dated November the 16th, 2011.
The email dated
November the 18th, 2011 from Rotman to the other directors in advance
of the ethics review contains the following statements:
“I would ask you to limit your questions to the decision at hand, to
act on this information for the purpose of voting that Stan Gordon be
removed from his position as a Director of the corporation.”
And this is followed by:
“We must arrive at a decision quickly so that our decision for the
removal of Mr. Gordon can be given to him as quickly as possible when
he returns to the meeting.”
One of the directors resigned in protest over the manner in which the
review was conducted.
It is one of the principles of natural justice and a key element of
procedural fairness that a person who is to be making the decision
should not have predetermined the matter before a review. At the very
least, director Rotman should have recused himself from the review and
desisted from attempting to influence other directors who would be
participating in the review.
guilty before the hearing
It is clear from the letter from counsel for the corporation to the
Stanley Gordon dated 11 November 2011 that a determination of ethical
violations had already been made by the board in advance of the
hearing. The relevant excerpt from that letter reads as follows:
“Your actions clearly establish that you do not act ethically.”
The judge found that the ethics review conducted by the
condo corporation violated principles of fundamental justice,
natural justice and procedural fairness.
The judge ruled that a decision arrived at by a board in good faith is
one thing; however, deference to violations of principles of natural
justice and procedural fairness is quite another.
The decision of the board given following the ethics review and dated
21 November 2011 was set aside. The disqualification of Mr Gordon as a
director was set aside.
The judge was not prepared to order re-instatement of Mr Gordon as a
director as part of the remedy of this court at that time, given that
the vacancy left by the disqualification has been filled.
The board shall be at liberty to conduct a fresh ethics review of Mr
Gordon within 90 days, the results of which shall be minuted by the
board. Director Rotman shall not form part of the board for the purpose
of any further ethics reviews of Mr. Gordon.
Release: 05 November 2013
The parties filed written submissions on the issue of costs. This
was a case of divided success. Mr Gordon won an
order setting aside his disqualification from the board but was
unsuccessful in obtaining the declaration of invalidity of the by-law.
He did not persuade the court that he should be reinstated
pending a further ethics review.
In the judge's view, this is not a case where costs are properly
either party. While violations of principles of natural justice
and procedural fairness are not trifles, the ultimate relief obtained
by the applicant fell well short of what was sought at the outset. The
actual article under which the ethics review took place, and under
which leave to conduct a fresh ethics review was granted, survived the
challenge of validity. Any reinstatement of Mr Gordon is still
dependent upon the outcome of a legitimate ethics review.
from the dark ages
The judge ruled that: “The motion was made necessary by the
respondent’s staging of the ethics review in circumstances which were,
to say the least, unfair to the point of embarrassing. A failure
to disclose the substance of the case a person has to meet in advance
of such a hearing brings to mind justice from the dark ages. That
failure by the respondent weighs heavily on this court’s mind in
considering the merits of their argument on costs.”
Neither side was awarded costs.