Disgruntled Shangri-La owners threatened with legal action

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After recent reports highlighting confrontational management practices at the luxury Shangri-La residences in Toronto, the condominium corporation has threatened legal retaliation against owners sharing information about the situation.

The luxury Shangri-La building is split between a hotel component of 202 guest rooms and suites and 393 condominium units, which occupy the upper floors. The condos, formally known as Toronto Standard Condominium Corporation 2258 (TSCC 2258), are owned by a cross-section of Canada’s corporate and cultural elite: millionaire investors, entrepreneurs, lawyers, executives as well as sports and media figures. Ian Gillespie, chief executive officer and founder of the building’s Vancouver-based developer, Westbank Corp., owns a unit. There are currently three units for sale in the building: two two-bedroom units and one three-bedroom, for asking prices of between $2.3-million and $3.8-million.

Multiple owners spoke to The Globe and Mail about the situation. The Globe has granted them anonymity because they feared retaliation, and a number expressed worry about the reputation of the building, and the value of their investments.

“When you buy as an owner into a condo community, you never know whether you might be stepping into a massively dysfunctional community led by an autocratic board – which would put your investment at great risk,” said William Stratas, managing director at Eagle Audit Advantage Inc., which specializes in condo board governance and fraud prevention.

A number of owners in the building have previously been sent demand letters alleging “interference” in the condo corporation’s business. A letter from TSCC 2258’s board sent on May 25 further alleges confidential corporation documents have been shared on Google Drive, and demands the drive and its documents be deleted and the board be provided with the names of anyone the documents where shared with. “This will serve as our final demand that you cease and desist from the conduct set out,” states the letter, which was obtained by The Globe. The letter also threatens legal action: "If you fail to comply with the said requirements, and persist in your conduct, then we reserve the right to instruct the corporation’s lawyers to take any appropriate legal steps as are necessary.”

While legal conflicts over the board’s composition go back to at least 2017, residents organizing against the current leadership say three events have heightened the conflict: questions about the May, 2019, election of two new board members, the resignation of the corporation’s treasurer and director Patrick Shaw in late 2019, and the forced removal from the board of its corporate secretary, Allison Scanlan, in 2020.

Ms. Scanlan, who was elected to a three-year term in 2018, says she cannot discuss details of the board’s deliberations that caused her concern while she served on it, but she claims the board has degenerated into an unprofessional and bullying atmosphere.

“I have never experienced anything like this,” Ms. Scanlan said in an interview. Ms. Scanlan worked in the automotive industry for decades, starting at the GM assembly plant in Oshawa, and eventually became a global procurement and purchasing expert. “I have worked in an all-male environment before, I was one of the first women supervisors at the plant. I worked for a great company, and the law protected me. As a volunteer, what protection do I have? Had this happened in a workplace I would still be standing, the other [person] wouldn’t. They would have been walked out.”

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On April 3, a Friday, Ms. Scanlan says she received an e-mail from condo board president Mario DaMicheli that said: “We request and providing … opportunity to you (Mrs. Allison Scanlan) to Resign,” by 8 a.m. Monday April 6, or a teleconference meeting at 8:01 would be convened to remove her. She says she never received the call-in number for the conference, but on April 6 received an e-mail from the property manager that she had been removed. Owners in the building were sent an Information Certificate Update form that removed her name from the list of directors.

Ms. Scanlan, whose role included keeping records of all the corporation’s contracts, hired a lawyer and disputes accusations of ethical breaches asserted but not spelled out in Mr. DaMicheli’s e-mail. “Strictly on a procedural basis, the [corporation’s own] bylaw for a teleconference meeting required the consent of all directors, regardless of substance,” said Shawn Pulver, counsel to Ms. Scanlan. “Not only did she not consent, but I objected … they just proceeded in any event. Any decision made at that meeting is ineffective.”

In response to a request for comment, Carol Dirks, corporate counsel for TSCC 2258, sent an e-mail to The Globe saying, "Ms. Scanlan was requested to resign as a result of what the Board considered to be serious breaches of the Directors’ Code of Ethics,” but it did not spell out those alleged breaches.

A similar event led to the resignation of the condo corporation’s treasurer and director, Mr. Shaw, in October, 2019. Mr. Shaw, an independent advisor to the financial services industry, was sent an e-mail from Mr. DaMicheli warning him that an urgent board meeting was to be held to remove Mr. Shaw from his role. In response, Mr. Shaw says he preemptively stepped down and penned a letter explaining his concerns to fellow owners. He sent a separate letter to the board disputing allegations against him.

“I regret to inform you that I cannot work constructively with the board president Mario … Damiceli and his voting block William Waldman and Vito Romita,” he wrote to a group of owners. “I realized I cannot stand up alongside Vito, Mario and William and lend a veneer of normalcy at an AGM or a town hall. Also I cannot really exercise oversight. For example, I still have not seen the contract and terms of the property management agreement. This makes me feel exposed since director’s liability insurance does not protect me from any breach in fiduciary duty.”

In its e-mail to The Globe, TSCC 2258 would only say of Mr. Shaw’s departure: “His decision was his own and was not at the Board’s request.”

Mr. Waldman and Mr. Romita were elected to the board in May, 2019. In November, 2019, three owners of Shangri-La apartments – Althea Dempsey, Ian Blumer and Nicholas Budd – filed an application in Ontario Superior Court to challenge the results. Court filings show Mr. Waldman secured 127 votes, Mr. Romita 110, and candidates Andrew Shaw and Sean Petrou received 108 and 99 votes respectively. There were multiple methods of voting – in person, electronic proxies, paper proxy forms – and tallies prepared of the votes by the law firm acting for Budd, Blumer and Dempsey and building management arrived at different counts for the methods. The electronic proxy votes favoured Mr. Shaw and Mr. Petrou almost 2-1 over their rivals; the in-person paper ballots results were mixed, with Mr. Petrou at 32, Mr. Waldman 29, Mr. Shaw 27 and Mr. Romita 20; and the paper proxy votes went 54-0 for Waldman-Romita vs. Shaw-Petrou (about 11 paper proxies were disqualified). At the next board meeting, Mr. DaMicheli was voted board president.

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“For decades proxy voting has been abused in condominium elections," said Mr. Stratas, who stresses he has not reviewed the Shangri-La results. Nevertheless, Mr. Stratas said the democratic mechanisms in the Condominium Act, including the power of recall and replacement of director, are the most powerful tools for reform. “Concerned condo owners must empower themselves by political action to bring positive change in their condo communities,” he said.

Within days of the 2019 election, the board voted to replace several of the corporation’s vendors and contractors, including corporate counsel Warren Kleiner of Shibley Righton LLP and Del Property Management Inc., which manged the building and its $7-million budget. A new property manager, Principle Property Management Ltd. (PPM), wasn’t formally hired until September, 2019, but according to an April 14 letter sent to TSCC 2258 by PPM’s lawyers, the company offered its resignation from the contract owing to the board’s “culture and methods of operation.” According to the letter, PPM was promised things would change, and rescinded the resignation. However, by January 14 PPM offered to resign again, this time for good. “After five months, and despite our best efforts, we came to the conclusion that the relationship was not working satisfactorily from our point of view, and we exited the relationship as we were entitled to do. There was no enmity in the parting,” Milos Tosic, PPM’s senior property manager, wrote in an e-mail to The Globe.

Mr. DaMicheli’s own first election to the board, in 2017, was followed by months of code of ethics negotiations regarding his ownership of Advance Group, a company that charged more than $300,000 a year to provide janitorial services in the building then and now. The board pushed him to either resign his seat or divest the janitorial company, while Mr. DaMicheli filed a lawsuit against the corporation to keep his seat and his company. Ultimately, board records reviewed by The Globe show he resigned his seat rather than be voted off the board, but later obtained a court order that allowed him to run in the 2018 board election. Corporate records show that in the years Mr. DaMicheli was on the condo board, the directors of Advance, or 1658410 Ontario inc., changed multiple times: in 2017 Advance’s former general manager, Mohammed Reza Nabhani, was made a director; in 2018 he was removed and Mr. DaMicheli was sole director again until February, 2019.

Lou Natale, of Dale & Lessmann – who had acted as counsel to Mr. DaMicheli in his 2017 fight with the board – was named interim corporate counsel of TSCC 2258 but was later replaced by another lawyer who had also represented Mr. DaMicheli. Minutes from the 2018 Annual General Meeting show that Mr. DaMicheli sought to recover $50,000 in legal costs related to actions he brought against the board. Former board president Paul Marcaccio confirmed that the court order over the 2018 election included a settlement to pay $16,000 to Mr. DaMicheli.

Mr. DaMicheli did not respond to The Globe’s attempts to contact him for comment.

Of Mr. DaMicheli’s status with regard to Advance, TSCC 2258 told The Globe that “Mr. DaMicheli declared his potential conflict and recused himself from all matters in this regard.”

Mr. DaMicheli’s term is set to expire in July, 2020, although no election or Annual General Meeting has been scheduled as of yet. The board has said it will hold an AGM within 90 days of the pandemic state of emergency ending, and some fear the tensions may boil over at that meeting. In the interim, the board has scheduled a digital town hall information meeting for June 17.

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