Condo owners hit by fraud, says court

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Court of Appeal has quashed two separate settlements after finding “that a fraud has been perpetrated on the unit owners” at a Freeport condominium complex.

Appeal Justice John Isaacs, in a May 16, 2017, verdict backed by his two fellow justices, found that the initial consent Order determining who should pay for hurricane-related repairs to doors and windows at the Silver Point Condominium “cannot stand”.

He ruled that Silver Point’s Board had failed to obtain the approval of unit owners, as required by the complex’s byelaws, and therefore lacked authority to enter into the settlement agreement.

Silver Point’s Declaration of Condominium treated doors and windows as part of the ‘common property’, rather than individual units. As a result, Appeal Justice Isaacs found that the original Consent Order’s effect was to allow Silver Point’s Board, “by a sleight of hand”, to shift responsibility for the repairs valued at over $1 million from itself to the individual unit owners.

And the Court of Appeal also quashed an ‘amended’ Consent Order, entered into by attorneys for the Board and one group of apartment owners, which removed the earlier settlement’s assertion that the windows and doors were ‘common property’.

Appeal Justice Isaacs ruled that then-Supreme Court Justice, Hartman Longley, did not have jurisdiction to approve the change to the initial consent Order, thus making the alterations “void and of no effect”.

Setting out the background to the 11 year-old legal dispute, the Court of Appeal said it had its “genesis” in the damage inflicted by Hurricane Frances in 2004.

“An insurance claim was made by the Silver Point Condominium Apartments, and a settlement of the claim was arrived at in excess of $1 million,” Appeal Justice Isaacs said.

“The insurance money was to be used to effect repairs to both the units and the common areas of the condominium.

“Questions arose among the unit owners as to who was to receive compensation, and for what, particularly in relation to doors and windows which had been damaged by the hurricane, as there had long been an issue whether doors and windows constituted a part of the common areas or part of a unit.”

Common areas are those used by all unit owners in a condominium or apartment complex, with costs relating to their maintenance and upkeep shared by all - usually through an annual assessment or levy.

In Silver Point’s case, determining whether the doors and windows were part of the ‘common areas’ or individual units became critically important following Hurricane Frances, as this would decide who paid for the repairs.

Appeal Justice Isaacs noted: “The determination of this question was of particular significance because if the windows and doors were a part of the common area, their repair or replacement would constitute an expense of the body corporate, payment of which would normally be from funds raised on an assessment of all unit owners.

“However, if they were a part of a unit, the individual unit owner would be responsible for their repair or replacement.”

The Court of Appeal added that prior to Hurricane Frances, problems had frequently arisen at Silver Point when unit owners made unauthorised changes to the external appearance of their doors and windows, with the Board forcing the guilty parties to make changes.

Appeal Justice Isaacs said the storm “brought matters to a head’, and a group of six apartment owners, headed by Apollon Metaxides, filed an action on January 14, 2006, to clarify the status of Silver Point’s windows and doors.

The group and the Silver Point Board took three-and-a-half years to agree a settlement, reaching a deal on June 30, 2009, that declared the windows and doors were part of the ‘common areas’.

This, though, was challenged by unit owner Douglas Collins in February 8, 2010, who argued that the Board did not have the authority to enter into the consent Order settling the original action.

This triggered a fresh legal action, with the attorneys for Silver Point and the Metaxides group - Constance McDonald and Edwin Knowles - successfully persuaded Justice Longley to sign an amended Consent Order, despite not having discussed this with Mr Collins’s attorney, Rengin Johnson.

The amended Consent Order eliminated the determination that windows and doors were part of Silver Point’s common areas, and triggered legal action by another group of Silver Point owners led by Johann Swart.

Justice Longley dismissed the Swart group’s action, and the Court of Appeal found their appeal turned on two issues - whether both settlements were “lawfully made”, and if Justice Longley had the ability to approve the second Consent Order.

Finding that he did not in the latter case, Appeal Justice Isaacs said the first settlement had brought the matter to an end.

“The alteration made to the consent Order should not have been sanctioned by the judge,”he wrote. “It was not competent for Justice Longley to entertain the application to vary the consent Order in the circumstances. As such, the amendment is void and of no effect.”

As to the original settlement, Appeal Justice Isaacs said the Swart group’s case was that the unit owners had not authorised the Silver Point Board to settle the Metaxides action, and the consent Order’s terms went beyond the complex’s governing documents.

As a result, they argued that the both settlements were “ultra vires” the Law of Property and Conveyancing (Condominium) Act and Silver Point’s byelaws.

Appeal Justice Isaacs said there was “some merit” to the Swart group’s arguments that the settlements imposed obligations not contained in Silver Point’s Declaration of Condominium - especially since the latter said windows and doors were ‘common property’.

“Consequently, in my view, by virtue of entering into an agreement with the Metaxides group from which the consent Order came into effect, the Board has, by sleight of hand, achieved an advantage over all unit owners with non-conforming doors and windows, to wit, the Board is able to require the appellants to reinstate and pay for the offending windows and doors and, in effect, to pay for the reinstatement of ‘common property’,” the Court of Appeal ruled.

Appeal Justice Isaacs said the fears of the Swart group’s attorney, Fred Smith QC, that the settlement could “be wielded like a club to batter non-conforming unit owners into submission” were ill-founded, as defences were still available to them.

However, given that the consent Orders did not reflect the decision sought in the original Metaxides action, he ruled: “I am persuaded that a fraud has been perpetrated on unit owners.”

Appeal Justice Isaacs said the Board’s failure to get approval from unit owners to enter into the original consent Order violated Silver Point’s byelaws and, since it did not have the necessary authority, he declared both settlements “unenforceable”.

Attorney Krystal Rolle represented the Metaxides group, while Gail Lockhart-Charles acted for the Board.

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