Alberta – willingness to undertake legislated arbitration option may impact court costs – #156

In Boardwalk REIT Properties Holdings Ltd v. Condominium Corp No 0822896, 2019 ABQB 40, Mr. Justice Grant S. Dunlop reserved his decision on costs and invited the parties to refer to any proposals to arbitrate provided as a dispute resolution option. In doing so, Dunlop J. signalled to litigants the court’s willingness to adjust its own award of court costs by considering if either of the parties had proposed to engage in arbitration as authorized by the legislation applicable to their dispute.

A large Edmonton condominium development, the Axxess at Terwillegar, consists of three (3) apartment buildings, totalling 275 apartments. Boardwalk REIT Properties Holdings Ltd (“Boardwalk”) owns two (2) of the buildings, containing 164 apartments. Boardwalk claimed it did not have to pay condo fees. The Condominium Corporation (“CC”) disagreed and required that Boardwalk pay.

Boardwalk initiated litigation in Alberta’s Queen’s Bench on January 4, 2017 seeking declarations and other remedies regarding its relationship with CC and its liability to pay the condo fees. CC responded with its own litigation seeking various declarations and remedies.

The applications were heard over several dates in 2017, resulting in two (2) orders issued by the Master which: (a) dismissed Boardwalk’s application, allowed CC’s application to declare that Boardwalk was not a developer and directed Boardwalk to comply with the Axxess Bylaws; and, (b) granted CC’s application and ordered Boardwalk to pay the CC’s costs on a solicitor-client basis.

Boardwalk appealed both orders. In regard to the substance of the appeal, Dunlop J. confirmed, with the parties’ agreement, that the standard of review is correctness. On appeal, the parties filed additional affidavits and undertook cross-examination on those affidavits prompting Dunlop J. to conduct the appeal as a hearing de novo.

In the result, Dunlop J. agreed with the Master, confirming that Boardwalk was not developer and had an obligation to pay the condo fees. As a preface to his detailed reasons, Dunlop J. summarized his findings.

[5] I find that Boardwalk is not a developer as that term is used in the Bylaws. I also find that the Axxess Bylaws were written with the expectation that the entire Axxess at Terwillegar development would be subject to several redivisions ultimately resulting in an individual condominium unit for each self-contained residential dwelling. In that context, the Bylaws exempt the developer owner of the bare land units from liability for condo fees in some circumstances. The condo fee exemption described in the Bylaws is for a finite period. The context has changed, with Boardwalk having no intention of redividing the two buildings it owns into individual condominium units. In this context, the exemption period ended with the redivision of the first building in 2009. Therefore, the Bylaws require Boardwalk to pay condo fees.

At the close of his reasons, Dunlop J. addressed the challenge to the costs order issued by the Master. As with the substance of the dispute, he held that a costs order was subject to a standard of correctness. He determined that he was ready to determine costs up to and including the hearing before him but that the parties had only briefed the court on the costs order up to the orders issued by the Master. “I would be inefficient and possibly unfair for me to decide the costs issue piecemeal. Therefore, I make no finding regarding costs at this time.

He therefore invited the parties, absent agreement, to submit argument on the costs and set out a schedule. In doing so, Dunlop J. signalled the court’s openness to considering the parties’ prior willingness to undertake arbitration instead of litigation.

[123] In addressing costs, the parties may wish to refer to section 42 of the Act and articles 43 and 49(a) of the Bylaws, as well as any reasonable settlement offers and any proposals to mediate or arbitrate this dispute pursuant to section 69 of the Act.

Alberta’s Condominium Property Act, RSA 2000, c C-22 (“CPA”) expressly reminds parties subject to the legislation that any of their dispute can be settled short of instituting litigation. CPA’s Section 69, entitled “Alternate dispute resolution”, refers to other means of resolving their disputes.

69(1) Any dispute respecting any matter arising under this Act or in respect of the bylaws of a corporation may, with the agreement of the parties to the dispute,

(a) be dealt with by means of mediation, conciliation or similar techniques to encourage settlement of the dispute, or

(b) be arbitrated under the Arbitration Act.

(2) Nothing in subsection (1) shall be construed so as to prohibit a dispute from being arbitrated subsequent to an unsuccessful attempt to deal with the dispute by means of mediation, conciliation or a similar technique.

Section 42 of the CPA, entitled “Recovery of costs”, also provides for recovery of legal fees.

42 Where a corporation takes any steps to collect any amount owing under section 39, the corporation may

(a) recover from the person against whom the steps were taken all reasonable costs, including legal expenses and interest, incurred by the corporation in collecting the amount owing, and

(b) if a caveat is registered against the title to the unit, recover from the owner all reasonable expenses incurred by the corporation with respect to the preparation, registration, enforcement and discharge of the caveat.

The invitation made by Dunlop J. should be considered by arbitration practitioners when advising their clients on whether to bypass a legislated option to arbitrate rather than litigate. As Dunlop J. suggests, the omission to undertake litigation – as either party failing to accept the other’s offer to undertake arbitration – may impact the court’s own discretion in the award of costs.