Ontario – A reminder of the “hands off” approach of courts in arbitration even with oppression claims and injunctions – #561

In TSCC No. 2364 v. TSCC No. 2442, 2021 ONSC 7689, Justice Myers affirmed the “hands off” approach courts take regarding disputes that are properly the subject of an arbitration clause. The applicant condominium corporation sought an order by way of an oppression remedy or an injunction precluding the respondent condominium corporation from drawing amounts from a bank account for shared management services. The parties had already been through a lengthy arbitration regarding various disputes between them pursuant to a shared facilities agreement. Justice Myers held that the proper forum for the new disputes was arbitration.

The parties were neighboring condominium towers in the same large development at Yonge Street and Sheppard Avenue in Toronto. They shared some services, which were governed by a shared facilities agreement that created independent sub-committees to manage the relationship. There was a common banking facility between the corporations. The applicant alleged that the respondent had improperly charged it for services that it did not want or need and that it had not approved in a sub-committee budget. Arbitration ensued and the arbitrator ordered, among other things, that backcharges were to be approved in the budget of each subcommittee or invoiced. Disagreements persisted between the parties. The applicant condominium corporation sought a court order under the oppression remedy for compensation for the unapproved backcharges and a permanent injunction restraining the respondents from any and all backcharges unless unanimously approved by the subcommittee. The respondent condominium corporation argued that the disputes should be dealt with in arbitration.

Justice Myers emphasized that an oppression claim under s. 135 of the Condominium Act, 1998, SO 1998 c. C. 19 (the “Act”) is arbitrable. Quoting from Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2021 ONCA 360, Justice Myers held that the language of the oppression remedy under the Act is permissive, not mandatory. The provision does not oust the jurisdiction of an arbitrator to consider the oppression remedy as part of a dispute that falls within an arbitration clause. Justice Myers also grounded his decision in the earlier decision of Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, which elaborated on the limited role of courts in arbitrations: “the “hands off” approach to matters governed by the Arbitration Act is “in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not the courts.”

The applicant condominium corporation argued that it would be oppressive for it to endure another lengthy, expensive arbitration process without access to its funds and that this would be an undue hardship. Justice Myers rejected this argument, finding that the arbitration clause formed part of the parties’ reasonable expectations and so requiring arbitration did not prejudice those reasonable expectations. Rather, the reasonable expectation of the parties was that the agreement containing the arbitration clause would be followed. Furthermore, the arbitration need not be lengthy or expensive. Justice Myers noted that it was open to the parties to work together and with the arbitrator to reduce procedural complexities. 

Justice Myers also acknowledged the limited role of courts regarding injunctions pending arbitration:

“In an appropriate case, the court may consider making interim orders to prevent oppression pending an arbitration of the underlying dispute. […] Injunctions are only granted if, while waiting for the arbitration, the moving party will suffer irreparable harm that cannot be compensated later by payment of money if it wins the arbitration. Injunctions pending later decisions are not granted when all that is in issue is money and there is no question of the other side’s ability to pay if ordered to do so.

Contributor’s Notes:

First, this decision is an affirmation of the limited role for courts where there is a valid arbitration clause applicable to the dispute. Decisions like this uphold Canada’s reputation as an arbitration-friendly jurisdiction where courts will enforce arbitration clauses and give certainty to parties. Even remedies that are closely associated with the courts, like the oppression remedy, can be arbitrable. 

Second, the decision recognizes the flexibility and creativity possible with arbitration procedure. Justice Myers rejected the notion that an arbitration was necessarily lengthy or expensive. Working together and with an arbitrator, parties can develop a tailor-made procedure that efficiently and effectively resolves a dispute between them.

Third, it was also clear to Justice Myers that the parties’ representatives had allowed personal acrimony to infect the commercial disagreements between their respective corporations. He lamented that, “[i] f the parties wish to be represented by people who cannot get along and who, with counsel, cast the nastiest of allegations against each other, that is their right. As discussed below, the representatives’ lack of ability to hear each other’s interests, negotiate, and compromise may lock the condominium corporations into interminable arbitration proceedings.  But until the parties choose to find a way to get along in their mutual best interests, their constating documents provide their desired manner of dispute resolution.” 

He ended his decision with a paragraph all in bold in which he urged the parties to resolve their differences. The paragraph is a reminder that ultimately arbitration is a dispute resolution method to allow parties to move forward and find a way to live together:

“It is perfectly clear to me however, as it was to the Arbitrator, that the boards of directors of the two condominiums should consider whether they are well-served being consigned to endless, expensive battles over grand principles against evil foes. Is it not obvious that instead of tilting at windmills, the parties need to find a modus vivendi [a way to live together]? It is really not that hard for people of goodwill to find ways to fairly allocate relatively small amounts of money so that the members of the community can enjoy top-notch, cooperative, helpful services for the benefit of them all.”