Shangri-La condo power struggle spills into Ontario’s courts

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A power struggle for control of the condominium board at the exclusive Shangri-La hotel and residences has spilled into Ontario Superior Court with residents filing applications arguing the board is no longer a legally constituted governing entity following a raft of resignations.

At stake for the sole remaining elected board member, board president Mario DaMicheli, is control over the building’s $7-million budget and the clout that comes with it. In the year since Mr. DaMicheli took control of the Toronto Standard Condominium Corporation No. 2258 (“TSCC 2258”), he and his board allies have fired and hired multiple condo management firms, and battled with the Shangri-La hotel management – including withholding hundreds of thousands of dollars in payments for water and shared amenities. The condo also now faces a demand from City of Toronto building inspectors to immediately undo unpermitted construction work city staff says threatens critical fire-safety systems.

Internal conflicts over the management of the high-end condo building have simmered for years, but residents who spoke to The Globe and Mail claim a breakdown of normal governance has accelerated in recent weeks. On July 2, Ross Barristers brought an application on behalf building residents Althea Dempsey and Leonard Eisen, alleging the board of directors of TSCC 2258 lost quorum on June 17.

The residents are asking Justice Carole Brown to invalidate three recently appointed directors: Fadi Swaida, James Obaji and Ash Singh. It also seeks to stop the board from making decisions for the corporation until a new board can be elected, and appoint an administrator to run the corporation through to an impartial election process at the annual general meeting (currently scheduled for Aug. 24). A hearing was to take place to this week.

Affidavits filed in the case provide a window into the conflict. The board needs three of its five members present to have the quorum to legally act. The question of quorum centres around the timing of resignations of three members – William Waldman, Vito Romita and Ian Sansom – in mid-June.

Following the publication of a Globe and Mail story about dysfunction at the condo on June 10, Mr. Romita and Mr. Sansom resigned their director roles on June 14 and 15. The application claims that on June 16, 2020, TSCC 2258′s corporate lawyer Carole Dirks advised the board not to appoint any more voting members, but later that night Mr. DaMicheli arranged an emergency board meeting via teleconference and proposed Dr. Swaida, a dentist, as a new voting member.

The affidavits from Mr. Waldman and Mr. DaMicheli agree on some elements of what happened on that call, but their interpretation of the events stand in stark contrast.

According Mr. Waldman, the mention of new directors caused him to interrupt the call to object to any such course of action and then hang up without registering a vote on the proposed candidate, denying the meeting quorum and ending its legal ability to decide corporate matters.

Mr. DaMicheli suggests in his affidavit that Mr. Waldman abstained on Dr. Swaida before hanging up: “Waldman did not voice any objection at that time to Dr. Swaida’s appointment to the Board. As such, in keeping with the board’s standard practice, the decision to appoint Dr. Swaida was deemed to have been ratified.” Mr. Waldman disputes any claim of a vote or an abstention and maintains the board – with only two members (Mr. DaMicheli and recently appointed Arsalan Poorsina) left in the meeting – had no quorum to decide anything after he left the call.

That same night, building property manager Daniel Mousavi of Nadlan Harris Property Management Inc. sent an owners an Information Certificate Update claiming Mr. Swaida had been added to the board.

The next day, June 17, Ms. Dirks sent the board an e-mail warning them “this is not a legal appointment under the Condo Act or By-law No. 3 of TSCC 2258,” concluding this way: “there is a problem now because you have made a public announcement of an appointment that is neither legal or effective. Dr. Fadi has no authority to do anything on behalf of the Corporation in these circumstances.”

Mr. Mousavi responded in an e-mail The Globe and Mail has obtained, chastising the lawyer for not co-ordinating with Mr. DaMicheli or himself and told her not to bill the corporation for this legal advice.

Mr. Waldman resigned from the board the same day, following Ms. Dirks’s e-mail. The application claims the board now only has two legal directors, as Mr. Waldman’s departure from the teleconference deprived the board of quorum to appoint a Dr. Swaida, and his resignation the next day ended the board’s quorum to make any future decisions.

Two more board members – Mr. Singh and Dr. Obaji – were added in subsequent days, and Mr. DaMicheli stated in an Affidavit on July 17 this new board “has not caused TSCC 2258 to enter into or terminate any major contracts.” Despite that assurance, the building’s own minutes from a June 22 meeting show the new board members voted to terminate its largest contract: a $630,000 annual contract with Condor Security. It has also adopted a reserve fund study and raised the condo fees two per cent, approved a window cleaning contract and began negotiations to change the valet service provider.

In recent days bulletins posted in the building and distributed on screens in the elevators have proclaimed the new board is working on a raft of new services for residents. Also, the board has moved the AGM from September to August and has rejected calls for a third-party administrator to run the election for five new members.

“The conduct of DaMicheli, Poorsina and Mousavi [the property manager] since June 16, 2020, demonstrates that these individuals cannot be trusted to manage the corporation’s Affairs,” the application states. “In particular, they cannot be trusted to organize and run a fair AGM in a month,” the application alleges, going further to accuse Mr. DaMicheli of creating a “toxic environment” on the board. None of these allegations have been tested in court, and the resident’s lawyers have not been willing to comment on the proceedings.

“Our firm has a policy of not discussing matters that are before the courts,” said Eric Brousseau, associate lawyer with Ross Barristers.

“Our goal until the AGM election is to unite owners in an effort to find an amicable resolution to the current litigation, in a civil and fair manner, and we invite the Plaintiff to join this approach instead of wasting owner dollars,” Mr. DaMicheli wrote in an e-mailed response to Globe questions. Mr. Mousavi did not respond to a request for comment. Mr. Poorsina could not be reached for comment.

The latest urgent issue to arise is a July 21 directive from city building inspectors which The Globe has obtained.

“I am reviewing the violation orders issued by Toronto Building, and came across the above order that was issued by us on May 15th, 2020 and is still no compliance has been achieved. I am involving Toronto Fire Service also, since it is a serious matter that the Sprinkler room/Mechanical room [1808] has been divided to create an office space,” wrote Surindera Gupta, senior building inspector with the City of Toronto. “Since it is a life safety issue, therefore, compliance has to be achieved immediately without any further delays. You would have two weeks to assist us in achieving compliance, failing which, we shall initiate legal process including issuing tickets for Building code violations.” Mr. DaMichaeli did not respond to questions on this subject.

The corporation’s relations with the hotel have also degraded. In a recent newsletter to owners, the board claimed it was seeking a $300,000 rebate on a water bill, and was withholding another $252,000 from the hotel it is required to pay under a reciprocal agreement that covers the funding of amenities shared by hotel and condo residents. The Globe has obtained a sharp e-mail rebuke from Theo Ong, an executive at Westbank, the developer of Shrangri-La and owner of the hotel franchise. It demands the condo corporation meet its obligations.

“On a few occasions now you have indicated that we have a good working relationship with you and the board. I can unequivocally say that THIS IS NOT TRUE, rather it is the complete opposite,” Mr. Ong writes to property manager Mr. Mousavi. “I am at a point now that I do not even know if we can work with you or your board – as your behaviour is not how a condo corporation should be run.”

Mr. Ong declined further comment.

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