Board Confidentiality – A Requirement & Responsibility

By: Stan Dulberg, Property Manager, Hamilton
From the WB Condo Connection, Volume 8, Issue 2
Under the Condominium Act, 1998, Section 37, Standard of Care (1): “Every Director and every officer of a corporation in exercising the powers and discharging the duties of office shall (a) act honestly and in good faith; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” 1998,c 19,s.37 (1). This would include maintaining strict confidentiality respecting all matters discussed by the Board of Directors at the Board of Directors’ meetings and/or at any other time that a Director is acting on behalf of the Corporation.
Sadly, too often, Board matters escape from the Board Room and end up within the ears of other owners, contractors, etc. who may or can interpret the information received to something that totally does not resemble the matters discussed at the Board meeting.
Without question, Board confidentiality is a serious responsibility, which, under no circumstances whatsoever, should be deviated from.

“Directors have an obligation and a requirement to act honestly and in good faith. Not respecting Board confidentiality puts…the entire Board at risk”

Only just recently did I become aware of a circumstance, wherein all Board members present at a Board of Directors’ meeting wholeheartedly agreed to confidentiality regarding an extremely serious matter that was to be decided and acted upon once a solicitor’s opinion had been received. Immediately, subsequent to the holding of the Board meeting, did we become aware that this information had been circulated through the building, resulting in the need to call a Special General Meeting.
On another occasion, I attended a Board of Directors’ meeting and discussed with the Board the Corporation’s current aged receivables listing. The very next day, an owner approached me and asked, why are my arrears now a known fact throughout the Corporation? The only way that this information could have become public knowledge was that a Board member, for whatever reason, decided to expose Board confidentiality and publicized this owner’s unfortunate situation. This was an extremely embarrassing condition, and I could only apologize profusely to this owner for this shortcoming.
At numerous times there are matters of strict confidentiality that are discussed at Board meetings. Decisions are made at Board meetings by the Board of Directors, and the disclosure of the results of those decisions should be officially released by the Board as a whole through Management, and not by any one Director in formats of their choice. Official communication is of importance, not just “I think we discussed and decided that…” which is an easy means of communicating misinformation as opposed to fact.
It is extremely important that at the outset of each term of the Board of Directors subsequent to an Annual General Meeting, that each and every Board member sign a Directors’ Code of Ethics. There is no doubt a number of samples of this document available, and the Board should seek advice from their Manager and/or the Corporation’s solicitor as to which format would be best suited for the Corporation’s requirements.
Breaching the Directors’ Code of Ethics not only puts the Board member in question at risk, but the entire Board as a whole. Remember, Directors have an obligation and a requirement to act honestly and in good faith. Not respecting Board confidentiality puts the Board member and/or the entire Board at risk of being sued personally by an aggrieved party, and the Corporation’s Directors & Officers liability insurance may not respond in this instance. If that were the case, the Board member in question, or the Board as a whole, could be placed in the unenviable position of having to defend him/herself or themselves, and bearing the entire cost of a successful claim awarded against the subject Director or the entire Board for not acting honestly and in good faith by virtue of not maintaining Board confidentiality.
Members of the Board act on behalf of all other owners, and should be aware that if any member of the Board breaches Board confidentiality, there may be an opportunity for that Board member being asked to resign by their fellow Directors and/or being removed from the Board by way of a requisition of owners requesting their removal.
Having lived in a Condominium Corporation and having served on the Board for the entire three years of ownership, there is no way whatsoever that I would like to be a part of a Board or work with a Board member who did not feel that Board confidentiality was an extremely important facet of the responsibility of serving on the Board. No Board member, or any Board as a whole for that matter, should ever be placed in the position of being required to explain why a fellow Board member went beyond their responsibility in terms of maintaining Board confidentiality.
It is important that all Board members make themselves aware of Section 38 (2) of the Condominium Act, which states specifically as follows: “No Director or officer of a corporation shall be indemnified by the corporation in respect of any liability, costs, charges or expenses that the person sustains or incurs in or about an action, suit or other proceeding as a result of which the person is adjudged to be in breach of the duty to act honestly and in good faith.”
In closing, any Director that does not wish or want to act honestly and in good faith and maintain confidentiality within the Board, has no business serving on the Board.