windward co-op sheldon shuster

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COURT FILE NO.: 590/05DATE: 20070316

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

LANE, MATLOW, AND SWINTON JJ.

B E T W E E N: ))

WINDWARD CO-OPERATIVE HOMESINCORPORATED

Appellant

- and -

SHELDON SHUSTER

Respondent

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)))))))))))

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Bruce D. Woodrow and Kumail Karimjee,for the Appellant

Joseph Kary, for the Respondent

)) HEARD at Toronto: February 21, 2007

SWINTON J.:

[1] The appellant Windward Co-operative Homes Incorporated (“the Co-operative”)appeals from the judgment of Siegel J. dated November 10, 2005 disposing of itsapplication under the Co-operative Corporations Act , R.S.O. 1990, c. C.35 (“CCA”) to

enforce an eviction decision. The judgment declared that the membership and occupancyrights of the respondent were terminated, ordered a writ of possession and adjudged thatthe respondent pay arrears to the Co-operative of $15,103.45 to November 30, 2005.However, the judgment also stayed enforcement of all those terms on certain conditions.The issue in this appeal is whether the hearing judge erred in staying the enforcement ofthe judgment.



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Factual Background

[2] The Co-operative is a democratic organization that provides housing to itsmembers on a non-profit basis. It is governed by a board of directors elected by and fromamong its members and in accordance with by-laws adopted by the board of directors and

confirmed by the membership. Decisions regarding membership and occupancy rightsare governed by the by-laws and provisions of the CCA.

[3] Pursuant to an agreement with Canada Mortgage and Housing Corporation(“CMHC”), the Co-operative receives financial assistance with its mortgage paymentsand funds to allow some of its members to pay a monthly housing charge that is geared toincome. Both types of assistance are received as a fixed monthly payment. The amountof the payment and the portion allocated for each purpose changes when the mortgageinterest rate changes, which happens once every five years when the Co-operative’smortgage rolls over.

[4]

In accordance with the Co-operative’s agreement with CMHC, subsidies must be provided to no fewer than 25 member units. Throughout 2001, the Co-operative receivedsufficient subsidy funds from CMHC each month to cover the requirements of itsmembers who had been allocated a subsidy. When the mortgage was renewed in 2002,the monthly amount available for subsidies fell, as interest rates had fallen, and theamount was no longer sufficient to cover the requirements of the members who had beenallocated a subsidy. As a result, the Co-operative decided to freeze subsidies, as ofJanuary 1, 2002, on the following basis: no increases in existing subsidies would beapproved, even if members suffered a decrease in income; no new subsidies would beallocated to members; and no funds would be available for emergency subsidies.

[5] The respondent moved into the Co-operative on December 1, 2001. He isdisabled and requires the use of a wheelchair. He suffers from complications fromdiabetes, including circulation problems and vision loss, and one of his legs has beenamputated. He signed a Membership and Housing Application on October 4, 2001,which stated that there was no “rent geared to income” subsidy available. At the time,the respondent believed that he needed no subsidy, given his income. He also signed anoccupancy agreement in which he agreed to be bound by the articles, by-laws and policies of the Co-operative.

[6] Subsequently, the respondent suffered a loss of income. In January 2004, henotified the Co-operative of his changed circumstances and offered to pay $395.50 permonth, which was the shelter allowance component of his Ontario Disability Supportincome. After a meeting with the respondent, the board of directors decided not to provide him with a subsidy for various reasons, including the lack of funds available forsubsidies.

[7] From January 2004, the respondent paid the Co-operative only the amount of hisshelter allowance and not the full monthly housing charges of $1,108.00 owing for histwo bedroom unit. On June 30, 2004, the board of directors decided to evict the



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respondent because of his increasing arrears. He did not exercise his right to appeal thedecision to a general meeting of the members of the Co-operative.

[8] The Co-operative then brought an application pursuant to s. 171.13 of the CCA toenforce its eviction decision. At the time of the hearing, which commenced in March

2005, arrears of $10,182.45 were owed.

The Legal Context

[9] After a person’s membership and occupancy rights have been terminated, a co-operative may apply to a Superior Court judge for an order declaring the membership andoccupancy rights have terminated and directing that a writ of possession be issued (CAA,s. 171.13(1)). Subsection 171.13(12) deals with the order that the hearing judge maymake:

After a hearing, the judge shall determine the applicant’s claim and may make an

order declaring the membership and occupancy rights terminated or declaring thatthere is no member occupying a unit or directing that a writ of possession issue orgive judgment for the arrears of housing charges or for compensation undersection 171.10 found due or amounts owing under subsection 171.3 (4), or any ofthem, and in any such order may impose such terms and conditions as the judgeconsiders appropriate.

[10] Section 171.21(1) confers discretion on a hearing judge to refuse to grant anapplication for a writ of possession on the grounds of unfairness:

Upon an application by a co-operative for a writ of possession relating to a memberunit, a judge may, despite any other provision of this Act or the co-operative’s by-laws,

(a) refuse to grant the application if he or she is satisfied, having regard toall the circumstances, that it would be unfair to grant it;

(b) order that the enforcement of the writ of possession be postponed for a period not exceeding one week.

[11] Judges will usually defer to an eviction decision made by a non-profit housing co-operative because of its democratic and self-governing nature ( McBride v. Comfort Living Housing Co-operative Inc. (1992), 7 O.R. (3d) 394 (C.A.) at para. 20; Ryegate

(Tecumseh) Co-operative Homes Inc. v. Stallard , [2000] O.J. No. 5423 (Div. Ct.) at para.32; David B. Archer Co-operative Inc. v. D’Oliveira, [2003] O.J. No. 1469 (Div. Ct.) at para. 5). As A. Campbell J. stated in Ryegate (at para. 35), the case law reflects

a general judicial recognition that the consensual and communitarian nature of theco-operative organization commands deference from the courts in any attempt tosubstitute the view of the court for the democratically governed view of the co-operative and its members.



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As a result, the courts have refused to set aside a decision of a co-operative unless it wasunreasonable, or the co-operative failed to meet the requirements of procedural fairnessin reaching its decision to evict the member ( Ryegate at para. 38).

[12]

While the hearing judge has discretion to refuse to grant an application for a writof possession on the grounds of unfairness, such discretion is to be exercised only inexceptional circumstances (Coady Housing Co-operative Inc. v. Fekete, [1995] O.J. No.4894 (Ont. Ct. (Gen. Div.)) at para. 11).

The Decision of the Hearing Judge

[13] Following a six day hearing, the hearing judge concluded that the Co-operativehad properly imposed the subsidy freeze and that its decision to refuse a subsidy to therespondent was reasonable (Reasons at para. 134). He also held that there was noauthority for the Court to require a co-operative to allocate a new subsidy (Reasons at

paras. 131 and 133), and that there had been no denial of procedural fairness.

[14] The hearing judge ordered that the membership and occupancy rights of themember be terminated effective July 31, 2004, and that a writ of possession should issue.He also ordered payment of arrears of $15,103.45. However, he stayed his order on thefollowing conditions:

1. The respondent must submit an application for emergency subsidy byDecember 31, 2005 and comply with all requirements of the Co-operativefor renewal of such a subsidy until he qualifies for a subsidy in theordinary course in accordance with his order on the subsidy waiting listmaintained by the Co-operative.

2. He must enter into an agreement to relocate to the first accessible one- bedroom unit that becomes available.

The hearing judge also ordered that the enforcement of the order to pay arrears wasstayed so long as the respondent “qualifies for a subsidy under the Subsidy Policy,whether or not he is in actual receipt of such subsidy”.

[15] The hearing judge based his decision to stay the enforcement of his order on s.171.21(1). He concluded that the respondent would suffer hardship if evicted, becausehis personal circumstances would make it difficult, if not impossible, to find alternativeaccommodation appropriate to his needs and with the support network he enjoyed at theCo-operative.

[16] Nevertheless, the hearing judge was aware that s. 171.21(1) requires a balancingof the interests of both the respondent and the Co-operative and its other members. Inconsidering the impact on the Co-operative, he concluded that the Court does not havethe authority under the CCA to compel a co-operative to pay a permanent subsidy



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(Reasons at para. 131). He also reiterated that the board of the Co-operative had areasonable basis for its decision to deny the respondent an emergency subsidy on thegrounds that the Co-operative had decided that no additional subsidy monies wereavailable. He also mentioned that there was at least one other member of the Co-operative ahead of the respondent on the waiting list and, at the time of the hearing,

members in receipt of subsidies whose needs had increased since the freeze in January2002. He noted that since the hearing, the board had approved a subsidy increase forthose already in receipt of subsidies.

[17] He concluded as follows (Reasons at para. 141):

… the hardship to the respondent resulting from enforcement of the eviction orderwould substantially exceed the impact on the Co-op of a decision to refuse therequested relief. The hardship on the respondent extends beyond purely monetaryissues to the quality of his life and his ability to lead a reasonably independentexistence. While a denial of possession of the Unit would impose a financial

hardship on the Co-op that would have to be born [ sic] by its members, thatconsequence can be quantified and, for the reason indicated in the following paragraph, should be of relatively short duration. With respect to existing arrears,whether or not possession is granted, there is no realistic possibility of collectionuntil such time, if ever, as the respondent’s financial situation significantlyimproves. Accordingly, the existence of current arrears is not a factor indetermining whether to exercise the Court’s discretion under section 171.21(1).

[18] Given that the respondent was second on the subsidy waiting list, the hearing judge anticipated that the respondent would become eligible for a subsidy in the ordinarycourse within a relatively short time through the process of attrition. He concluded thathe had the authority to withhold a writ of possession, with the consequential effect ofgranting a subsidy, provided the consequential subsidy was temporary.

Issues on Appeal

[19] The Co-operative has appealed, submitting that the hearing judge erred in twoways: by effectively granting a subsidy to the respondent, despite having concluded thatthe Co-operative acted properly in not providing a subsidy to him; and in staying the writof possession beyond the one week period provided in s. 171.21(1)(b) of the CAA.

Analysis

[20] A judge has a broad discretion under s. 171.21(1) in determining whether it would be unfair to grant a writ of possession. Therefore, an appellate court should not interferewith the judge’s decision unless there is an error in principle or the decision is “clearlywrong” ( McKinnon Industries Ltd. v. Walker , [1951] 3 D.L.R. 159 (J.C.P.C.) at p. 2(Quicklaw)).



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[21] The hearing judge and this Court, on the appeal, were presented with a number ofcases in which a judge has made an order respecting a subsidy. In each case where a judge has ordered a co-operative to pay or reinstate a subsidy, the co-operative had madean error in determining whether an individual was eligible for a subsidy, or it hadmiscalculated the arrears, or the termination of a subsidy was a direct result of an

individual’s health problems. For example, in William Punnett Housing Cooperative Inc.v. Clarke, File 98-CC-196288, November 3, 1998 (Ont. Ct. (Gen Div.)), the judge heldthat the co-operative had erred by treating a portion of a student loan as income becausethe co-operative anticipated that the portion of the loan would be forgiven (at p. 8). Heordered a subsidy reinstated on certain conditions.

[22] In Robert Cooke Co-operative Homes Inc. v. Sen, [2001] O.J. No. 4454 (S.C.J.), aco-operative erred by requiring a member to relocate to a smaller unit and terminating hersubsidy for failure to do so, because the co-operative did not recognize the residency of adependent daughter who lived part of the time with her mother, the member (at p. 18).

[23]

In Lakeshore Village Artists’ Co-operative Inc. v. Leger , Court File No. CV-250902, May 28, 2004 (Ont. S.C.J.), Himel J. refused to order a writ of possession, as shefound that the medical condition of the member had interfered with his ability to takeissue with the erroneous calculation of arrears and to apply for a subsidy. Nevertheless,one of the terms of her order required the member to make payments towards arrears.

[24] In Agincourt Co-operative Homes Inc. v. Edwards, [2006] O.J. No. 2294, (S.C.J.)the judge overturned the removal of a subsidy, holding that the co-operative had unfairlyremoved it for failure to provide adequate income verification without informing themember that his documentation was inadequate. Nevertheless, the judge set a schedulefor the payment of arrears.

[25] In Phoenix Housing Co-operative Inc. v. Viner , [2004] O.J. No. 1476 (S.C.J.), the judge held that a member’s name had been improperly removed from the waiting list fora subsidy. While the judge refused to order a writ of possession, the member was orderedto pay arrears by a certain date. In calculating arrears, the judge held that theunsubsidized amount was owed until the date that a subsidy became available. See also Don Area Co-operative Homes v. Sanford , [2003] O.J. No. 5229 (S.C.J.) at para. 19; Forest City Housing Co-operative Inc. v. Chourbagi, [2005] O.J. No. 707 (S.C.J.); andTolpuddle Housing Co-operative Inc. v. Smieja, [2002] O.J. No. 1476 (S.C.J.).

[26] The present case can be distinguished from those cited above, where there had been an improper removal of a subsidy or an incorrect calculation of arrears. In this case,the hearing judge found that the Co-operative had acted reasonably in denying therespondent an emergency subsidy, and that the board of directors met the requirements of procedural fairness when it reached its decision. At no time up to the hearing was therespondent in receipt of a subsidy. Nor was there any evidence that he was eligible toreceive a subsidy in accordance with the Co-operative’s Subsidy Policy at the time of thehearing judge’s decision. Nevertheless, the hearing judge stayed the enforcement of theorder to pay arrears and, in effect, ordered an indefinite and retroactive subsidy.



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[27] Counsel for the respondent suggested that the hearing judge was required toconsider the disability of the respondent in exercising his discretion whether to order awrit of possession. However, this is not a case where the Co-operative had a duty to

accommodate the respondent’s disability, as in Eagleson Co-operative Homes, Inc. v.Théberge, [2006] O.J. No. 4585 (Div. Ct.). There the Co-operative’s by-law requiringeach member to provide a certain amount of volunteer work resulted in indirectdiscrimination against a member with a disability. In contrast, in this case, there has beenno discrimination on the basis of the respondent’s disability. He is financially unable to pay the charges for his unit because of his income and the lack of a subsidy. However,the fact that he is disabled does not excuse him from paying those charges in accordancewith the by-laws and the occupancy agreement that he signed.

[28] The hearing judge correctly stated that “unfairness” requires a balancing of theinterests of the member facing eviction and the other members of the Co-operative.

However, while the hearing judge stated that he considered the impact of his order on theCo-operative and its members, he failed to properly consider the interests of the membersof the Co-operative and to respect the democratic process of the Co-operative, and thushe erred in principle for the following reasons.

[29] First, the hearing judge erred in ignoring the arrears when considering the impactof his decision on the Co-operative. He found that there was no realistic possibility of theCo-operative collecting the arrears, whether or not the respondent was evicted, and so hedid not consider the existence of the current arrears as a factor in exercising hisdiscretion. However, the effect of his decision was to provide a subsidy retroactive toJanuary 2004 that would run for an indefinite period into the future. That is a significantcost, which will be borne by the other members of the Co-operative.

[30] Second, the hearing judge erred in ordering a subsidy here as it was anunwarranted interference with the democratic decision-making process of the Co-operative. In his reasons, he had correctly stated that he had no authority to order theCo-operative to grant the respondent a subsidy. The Co-operative had made no error indetermining the respondent’s eligibility for a subsidy. Yet the hearing judge effectivelyordered a subsidy to an individual who was not eligible for one under the Subsidy Policyof the Co-operative at the time of his decision, and he did so retroactively when he stayedthe collection of arrears. His order goes well beyond those of the other judges describedearlier.

[31] Third, while the hearing judge believed that the subsidy would be temporary andof relatively short duration, his conclusion is not supported by the evidence. At thehearing, there was evidence that 28 members were in receipt of a subsidy, while the Co-operative was required by its agreement with CMHC to provide no less than 25subsidized units. While there was evidence from the Co-ordinator of the Co-operativethat two members were planning to move out, it was not clear whether they were inreceipt of subsidies. The respondent testified that he knew of another individual who



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would not be needing a subsidy in the future. Thus, while it was evident that somewherein the near future, there might be 25 members in receipt of subsidy, there was noevidence of the typical turnover rate for subsidies.

[32] In support of his conclusion that the respondent would soon be eligible for a

subsidy, the hearing judge relied on a post-hearing letter from counsel for the Co-operative dated June 15, 2005. Counsel stated that the board of directors had decided toapprove a subsidy increase for members currently in receipt of a subsidy who were notreceiving their full entitlement because of the January 1, 2002 freeze. However, that letteralso said that the new policy was still in the process of being implemented. There wereno details of the dollar value of adjustments. Nor does the letter indicate when the Co-operative might be able to provide a subsidy to the respondent. Moreover, there was oneindividual ahead of him on the waiting list. Thus, the evidence does not support theconclusion that the subsidy would be of short duration. Indeed, as it turns out, therespondent did not become eligible for a subsidy until September 1, 2006.

[33]

Finally, the hearing judge failed to address the negative impact on the Co-operative of an order that, in effect, permitted a member to obtain an indefinite subsidythrough self-help by paying at a subsidized rate when not eligible to do so in accordancewith the Co-operative’s by-laws and Subsidy Policy.

[34] In sum, the trial judge failed to properly assess the impact of his order on the Co-operative and its members. While there is no doubt that the respondent would faceserious hardship if evicted, hardship does not equate with unfairness within the meaningof that term in s. 171.21(1) (see, for example, City Park Co-operative Apartments Inc. v. Dubois, [2006] O.J. No. 4428 (S.C.J.) at para. 34). The impact on the Co-operative ofwhat was both a retroactive and indefinite subsidy was very serious and not properlyassessed by the hearing judge. This is not a case where there were exceptionalextenuating circumstances which would make it unfair to order a writ of possession, as inthe cases cited earlier. Therefore, the hearing judge erred in staying enforcement of hisorder.

[35] The Co-operative raised an alternative argument based on s. 171.21(1)(b) –namely, that a hearing judge who grants an application for a writ of possession may postpone the enforcement for a period that shall not exceed one week. It was submittedthat the hearing judge erred in ordering a stay that exceeded one week.

[36] In this case, the hearing judge appears to have refused to grant the application fora writ of possession pursuant to s. 171.21(1)(a) and then turned to s. 171.13(12), which permits a hearing judge to set terms and conditions in an order for a writ of possession(Reasons at para. 139). It is common for a hearing judge to refuse an application on the basis of unfairness, but to set terms with which the member must comply. For example,in Lakeshore, supra, the Court ordered a number of terms, including a schedule for payment of arrears, and ordered that a writ of possession could issue if the terms were breached.



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[37] The hearing judge in this case was following this approach. He refused theapplication for a writ of possession on the grounds of unfairness, but then set terms withwhich the respondent must comply. Therefore, s. 171.21(1)(b) was not in issue, and Iwould not give effect to this ground of appeal.

Conclusion

[38] The appeal is allowed, and the judgment of the hearing judge is varied in thefollowing manner:

1. amending paragraphs 1 and 2 of the judgment by deleting the phrase“, subject to paragraph 4 below”;

2. amending paragraph 2 by changing “Unit #308” to “Unit #806;3. amending paragraph 3 of the judgment by deleting the phrase “, subject to

paragraph 5 below”;4. deleting paragraphs 4 and 5;

5.

adding a new paragraph 4 requiring the respondent to pay to the Co-operative additional compensation from December 1, 2005 to the date ofSeptember 1, 2006 at the rate of $1,130.00 per whole month, or $37.15 perday, or such other rate that applies from time to time as verified by the Co-operative by affidavit.

If the parties cannot agree on costs, they may make written submissions within 21 days ofthe release of this decision.

Swinton J.

Lane J.

Matlow J.Released: March 16, 2007



COURT FILE NO.: 590/05DATE: 20070316

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

LANE, MATLOW AND SWINTON JJ.

B E T W E E N:

WINDWARD CO-OPERATIVE HOMES

INCORPORATED

Appellant

- and -

SHELDON SHUSTER

Respondent

REASONS FOR JUDGMENT

SWINTON J.

Released: March 16, 2007

windward co-op sheldon shuster

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