On Monday, I showed you a few pending legal matters I dug out of a handful of status certificates for downtown Toronto condos.

Most of these legal matters were marginal, at best.

Put on your court robe, and tell me I’m wrong, but in my opinion, and that of the many lawyers with whom I’ve discussed matters like this over the years, a $25,000 or $100,000 lawsuit in a 300+ unit condo is not significant, or at least not enough to make a potential buyer waver on his or her decision.

The amount of money in a legal action is only part of the issue.  The other half would pertain to the actual legal matter.

If there’s a “slip-and-fall” lawsuit for $10,000,000, that’s a big number, of course!  But if the condominium is insured up to $20,000,000, and the deductible is $10,000, then would this concern you, as a buyer?

Where the intersection of amount of the suit and type of suit become cause for concern is quite subjective, but I recently stumbled upon a suit that I think we’re going to more about.

Here is the summary from the Status Certificate:

The Corporation is currently a party to an action which the Corporation has commenced against its former property management company, Crossbridge Condominium Services Ltd. (formerly known as Brookfield Condominium Services Ltd., also named as a defendant), former property managers, site administrators and regional managers at Crossbridge (specifically, Maria Fine/Stavropoulos/Vieira, John Hickey, Tracy Louise Gregory, Evelyn Arriola, Caroline Suarez, Jenna Lawson and Natalia Velasquez), and former contractors and principles of the said contractors (specifically, JMCC Ltd., GMCC Inc., York Group Ltd., Toronto Construction Repairs Inc., Joaquim/Jack Goncalves, Sonia Peniche, Angela Gialouris, Robert Soares and Raleza Cleaning Consultants).

The Corporation is seeking damages in the amount of $1,400,000; punitive, exemplary and/or aggravated damages in the amount of $500,000; a declaration that it had cause to terminate Crossbridge; and special damages including legal, accounting, investigative, expert and other fees and disbursements.

The claim alleges, amongst other causes of action, that certain employees of Crossbridge together with former contractors of the Corporation improperly received benefits while managing/carrying out services for the Corporation, fraudulently and recklessly engaged in bid rigging, HST fraud, impropriety and theft.

The claim further asserts that Crossbridge negligently performed its duties and breached its fiduciary duty to the Corporation and the management agreement with the Corporation.

The claim is in its initial pleadings stage. The Crossbridge defendants have defended the claim and Crossbridge commenced a counterclaim against the Corporation alleging that its management agreement was wrongly terminated without the requisite notice.

Crossbridge is seeking damages in the amount of $500,000 for breach of contract. The Corporation will be defending the counterclaim. Crossbridge was dismissed with cause, and in accordance with the terms of the Management Agreement.

The contractor defendants (JMCC Ltd., GMCC Inc., York Group Ltd., Toronto Construction Repairs Inc., Joaquim/Jack Goncalves, Sonia Peniche, Angela Gialouris, Robert Soares and Raleza Cleaning Consultants) have defended the claim. JMCC, GMCC and York Group have commenced a counterclaim against the Corporation seeking damages of totalling $131,373.27 for breach of contract and/or unjust enrichment plus $100,000 in punitive damages. The Corporation will be defending the counterclaim.

Depending on the outcome, duration, and process of the action, the Corporation may require additional common expenses increases or special assessments to maintain legal expenses for the ongoing litigation. This may affect unit owners by increasing fees that they will have to contribute to the Corporation’s expenses. However, at this point, the reserve fund is approximately $4.4 million, so it may be sufficient to cover such legal expenses.

Wow.

Read it twice, trust me, you really need to read it a second time to ensure you understand who is accused of what, and who is suing whom.

Basically, they are all suing each other, and I don’t know that this is going to be cleaned up any time soon.

When I said earlier that there’s a time and place to decide if you want to avoid purchasing into a particular condominium, this may fall into that category.

My optimistic side would point to the $4.4 Million in the reserve fund, and the lack of staying-power most lawsuits have, and advise a buyer to let it ride.  But if a buyer tends to sway to the conservative side, this is a case where that buyer might choose to move on.

The above summary provides two topics for conversation today:

1) The concept of collusion, bird-dogging, and bid-rigging.
2) The legal action at hand.

Forgive my cynicism, but I believe that bid-rigging and bird-dog fees happen in every industry, at one point or another.  What am I basing this one?  My belief (or lack thereof) in people.

Thomas Hobbes once said, “Life is nasty, brutish, and short.”

Then what does that say about the people who live those lives?

People are selfish.  People are greedy.  People are motivated by money when they don’t have it, and perhaps motivated even more so when they do.

If you worked for ABC Corp making widgets, and upon looking for a new supplier, one particular supplier approached you and offered to give you $10,000 to put their company’s name atop the list, would you do it?

The easy answer is “no,” of course.  But how does this work in practice?

I believe that many government contracts, in various municipalities around the world, are given to entities that provide somebody with some form of compensation.  Call me wrong to make this statement with no proof, but I’d call you naive for not merely assuming this to be accurate.

Maybe it happens at the township level.  Maybe city.  Maybe province. Maybe country-wide.

But make no mistake, collusion happens.  Envelopes are exchanged.  No, this isn’t a movie.  This is real, and the lawsuit described above alleges that it has happened, at least once, right here in our own backyard.

And I’m cynical enough to believe that for every snow-shovelling contract, every road-paving contract, and every tree-trimming contract, somebody is getting paid.  In fact, I’m so sure of it that it no longer bothers me.  I’ve come to accept that this is how government works, it’s just a matter of how often it happens in different governments.

So let’s extend this to the private sector; should the logic be any different?

If you’re a property manager at a condominium, and you were tasked with either recommending or choosing Cleaning Co A, Cleaning Co B, or Cleaning Co C, would your decision differ if one of those cleaning companies paid you $25,000?  Does it depend on whether you are earning an annual salary of $40,000 or $140,000?  Does it depend on whether you’ve been in the role for six months or thirty-five years?  I’m not sure, to be honest.  But I am sure that somewhere in Toronto, this has happened.  And somewhere in Toronto, this will happen again.

This isn’t the first time we’ve heard stories like this.

Remember the scandal back in 2017?

It started in May of 2017 with this investigative piece by the CBC:

“Condo Clash: Court Battles, Forgery Allegations, And Questions Over Who Controls Toronto’s Highrises”

From the article:

Owners and property managers at several downtown condominium buildings are accusing a group of individuals of hijacking their boards of directors to get control of multi-million dollar budgets and reserve funds.

CBC Toronto has linked a group, made up of three men and some associates, to condo boards in about a dozen highrises in Toronto and Mississauga over the last several years.

In many of these cases, the individuals controlling the boards don’t appear to own units in the building.

Many of us couldn’t figure out how these three men were able to rise to roles on the condominium board without owning in the building, and it seems, without renting units either!

There are no laws saying that a condo board member must own or live in the building, I’m just shocked that residents (apparently) voted in an outsider.

Noted real estate lawyer, Audrey Loeb offered this at the time:

“I have to wonder why they’re running for the board of directors,” Loeb said. “They’re not getting paid, but they’re in control of significant amounts of money.”

Exactly.

Then came this story:

“Condo Board Approved Energy Contract That Benefited A Member’s Colleague”

From the article:

Condo owners at a downtown Toronto tower are on the hook for almost $100,000 in increased costs after the board they elected signed an energy contract that appears to benefit a board member’s associate.

The contracts, one signed in February and the other in October 2013, paid thousands of dollars in commissions to Toronto company Perfect Clarity Inc. Perfect Clarity acts a broker, pairing up businesses, condos and other large consumers of hydro with fixed-price energy providers.

The story doesn’t end there.

In an even more-detailed story in the Globe & Mail, we learned that these three individuals had taken control of the board of directors at 5 St. Joseph Street, 250 Wellington Street, 8 The Esplanade Avenue, 20 Blue Jays Way, and 8 Charlotte Street, and apparently attempted to have a family member take control at 111 St. Clair Avenue.

This story has since fizzled away, but I’d be curious to know what ever became of it.

If you’ve been receiving an unusual amount of spoofing calls to your cell phone lately, you too have to realize that as the world turns, more and more people seek ill-gotten financial gains, and I’m convinced that anywhere there’s money, there’s potential for theft and fraud.

In the current lawsuit against Crossbridge Condominium Services Ltd., I will give them the benefit of the doubt.  I have absolutely zero knowledge of this case, so I too will assume them to be innocent until proven guilty.

Let’s look at the case…

The condominium corporation (it’s a downtown Toronto condo) alleges that the property manager, Crossbridge (formerly “Brookfield” for those that know the name), as well as site administrators and regional managers, conspired to commit fraud, bid-rigging, and theft.

The exact allegations are not provided, but it would seem that the Condo Corp believes that Crossbridge, in its duties with contractors (think: cleaning, maintenance, landscaping, repairs, construction, etc), committed legal offences.  We’re reading into this here, but perhaps there was money exchanged, ie. “hire us for that garage ramp repair, and we’ll give you an envelope full of cash,” or perhaps there was over-billing like the case above with the $100,000 premium paid for HST.

We can come up with other ideas and examples of what could have happened, and what is being alleged, but I think we all get the picture here.  Crossbridge Condominium Services Ltd. is the property manager hired by the Condo Corp, and the Condo Corp believes that Crossbridge acted illegally.

As a result, the Condo Corp has fired Crossbridge, and is seeking $1,400,000 in damages, as well as punitive damages of a further $500,000.  The Condo Corp is also seeking a declaration that it had cause to terminate Crossbridge (you could deem this the “apology” if you wanted), as well as unspecified special damages.

Now ask any lawyer what typically happens here, and you may find that counter claims are common.

As such, there are counter claims from both Crossbridge as well as some of the contractors.

Crossbridge is counter-suing for $500,000, claiming breach of contract.

While all of the contractor defendants have defended the claim, some of the contractor defendants are counter-suing for $131,373.27 for breach of contract, as well as a further amount of $100,000 for punitive damages.

So where does this leave the Condo Corp?

I have to think that they wouldn’t be going down this road if they didn’t have some form of proof.  Keep in mind that every single condominium corporation has a law firm on retainer, and I would assume that they had obtained legal advice before starting this action.  Yes, you might suggest that a law firm looking for billable hours would encourage this suit, but condominium law is a small community in Toronto, and I don’t think it would look good on any law firm to enact a frivolous suit.  Just my two cents.

The $1,400,000 is likely a number with some form of meaning; perhaps this is what they deem could have been stolen, upcharged, and the like.  The $500,000 in punitive damages is just icing on the cake.

This case is in the initial pleadings stages, so if it did go the distance, we could be looking at 2-3 years here.

Where do you think this is going?

What’s your read into all of this?

Perhaps the Condo Corp will ultimately be satisfied by receiving a declaration of cause to terminate Crossbridge, which could represent their moral victory, as well as an assurance that no claims are ever brought against the Condo Corp in the future.

Or perhaps there really, truly is some smoking gun here, and we’ve got five pissed-off board of directors members, and who knows how many residents lined up behind them.

If this case does see the light of a courtroom, let alone results in a court finding, this could open the door to further claims and allegations from other condominium corporations.  At the very least, I have to think it will result in further investigations by other condominium corporations, as awareness is always the first step in identifying problems.

As with every case I mention here on TRB, I will keep an eye on this one, and update you down the line when there’s a resolution.