Ontario – court obliges plaintiff to complete legislated mediation and arbitration steps before having access to court – #014

Ontario’s Superior Court dismissed litigation in favour of statute-ordered mediation and arbitration because those two steps were necessary but unmet preconditions to court access.  Peel Condo Corp 166 v. Ohri, 2017 ONSC 6438 determined that each of those steps had neither been attempted by Plaintiff nor waived by Defendant.  The case illustrates how some legislation can impose alternative dispute resolution steps onto some legal relationships, created by contract,  which the parties must attempt before filing litigation.

Such legislated alternative dispute resolution demonstrates a trade off made as a matter of policy.  In exchange for some of the benefits arising from the relationship, policy requires the parties to yield some degree of control over how to solve disputes over their agreements.

The parties to the litigation, a condominium corporation, Peel Condominium Corporation No. 166 (“PCC 166”), and a unit owner, Mr. Narender Ohri, were involved in disputes surrounding a February 2016 election of members to the PCC 166 board of directors.  On August 23, 2016, PCC 166 filed litigation against Mr. Ohri.   The court litigation sought declaratory relief for alleged breaches of and an order for compliance with the Condominium Act, 1998, SO 1998, c 19, certain rules and bylaws of PCC 166.

At an October 14, 2016 hearing, Mr. Ohri raised an objection to the jurisdiction of the court based on section 132(1) of the Condominium Act.  That section deems that a broad list of potential agreements, listed in section 132(2), contain a provision to submit the parties’ disputes with respect to any such agreement (a) to mediation and, (b) unless a mediator has obtained a settlement between the parties with respect to the dispute, to arbitration under the Arbitration Act, 1991, SO 1991, c 17.

Section 134(2) provides that if the mediation and arbitration imposed by section 132 are available, a litigant is not entitled to apply for an order for compliance with the Condominium Act, the declaration, bylaws, rules or any agreement identified in the Condominium Act’s section 132(2), until the litigant has failed to obtain compliance through using those processes.

In the litigation, the parties scheduled cross-examinations, which they conducted, and resumed the hearing on February 22, 2016.  On the latter date, the parties made further arrangements to complete their file but agreed to argue the jurisdictional issue since that could be argued without reference to any cross-examination materials.

Mr. Justice David Price had to determine, as a preliminary issue, whether the court could hear PCC 166’s litigation or whether PCC 166 had failed to fulfill the conditions precedent set out, by section 134(2) of the Condominium Act, for access to the courts.

Price J. determined that a court retains jurisdiction to determine if the litigation, in substance, seeks to obtain compliance with the Condominium Act or whether the dispute concerns a disagreement over the unit holders’ Declaration, by-law, or rules of the corporation.  In this manner, Price J. supports the approach that alternative dispute resolution methods would be reserved or imposed for actual or deemed contractual agreements.  He identified which types of dispute would trigger a litigant’s obligation to undertake mediation or arbitration prior to accessing the courts:

[28] The mediation and arbitration processes provided for in section 132 are available only for disputes regarding the Declaration, By-laws, or Rules of a condominium corporation, not disputes regarding the Act itself.  For this reason, the court has found that a party may apply to the Superior Court for enforcement of the Act without first attempting to achieve a resolution of the dispute through mediation or arbitration.

Price J. cited an earlier decision which sketched the reasoning behind the division of jurisdictions.  That decision, Metropolitan Toronto Condominium Corporation No. 747 v. Korolekh, 2010 ONSC 4448,  ranked the access to the court on the basis of the importance of the issues to the parties and described the right to litigation as being ‘broader’ and the duty to mediate applying to ‘lesser disputes’.

[49] Two points are noteworthy about the statutory scheme.  First, the right to bring court proceedings pursuant to s. 134 is broader than the duty to attempt mediation under s. 132.  An Application to this Court can be brought to enforce “compliance with any provision of this Act” whereas the duty to mediate applies only to lesser disputes concerning “the declaration, the by-laws, the rules or an agreement”.  Second, s. 134(2) contemplates the existence of circumstances where mediation is not attempted, prior to bringing court proceedings, as it begins with the conditional conjunction “if” in relation to the mediation that is available under s. 132.  As already noted, s. 132 has no application to breaches of the Act, itself.

Price J. asserted the court’s unfettered ability to analyze the litigation to determine its substance.  In remarks preceding his reliance on Non-Marine Underwriters, Lloyd’s of London v. Scalera, [2000] 1 SCR 551, 2000 SCC 24, he stated that “(i)t is not the language used in an Application that determines the nature of the claim and, hence, whether or not the court has jurisdiction over it”.  The Supreme Court of Canada in Non-Marine Underwriters, Lloyd’s of London v. Scalera had already drawn the lines clearly in that regard:

[50] Determining whether or not a given claim could trigger indemnity is a three-step process.  First, a court should determine which of the plaintiff’s legal allegations are properly pleaded.  In doing so, courts are not bound by the legal labels chosen by the plaintiff.  A plaintiff cannot change an intentional tort into a negligent one simply by choice of words, or vice versa.  Therefore, when ascertaining the scope of the duty to defend, a court must look beyond the choice of labels, and examine the substance of the allegations contained in the pleadings.  This does not involve deciding whether the claims have any merit; all a court must do is decide, based on the pleadings, the true nature of the claims.

Price J. determined that in the jurisdictional issues raised before him, he would adopt a similar approach.  He declared that the courts are not bound by any labels used by the litigants and noted that sometimes a litigant’s particular wording “is simply framed in that manner as a means of avoiding the obligation to submit the dispute to mediation or arbitration in accordance with s. 134(2).

Limits exist to the legislated obligations to engage in mediation and arbitration and Price J. noted the distinction between those two options.

[37] Where a respondent is unwilling to engage in mediation or arbitration, the applicant is relieved of its obligation to engage in mediation, a voluntary process whose effectiveness may depend on the willingness of both parties to participate.  It is not, however, relieved of its obligation to submit the dispute to arbitration.

The reasons for judgment then include a robust review of the facts in the case which lead Price J. to conclude that the litigation involves a dispute over the election of the members to the condominium corporation’s board of directors.  In addition to extensive facts summarized in the reasons regarding the internal conflicts, the reasons include a demand letter send by the condominium corporation’s lawyer to Mr. Ohri which only references a failure to comply with its rules.  No mention is made of a breach to the Condominium Act.

A further review of the allegations lead Price J. to conclude that there was no support for the claim that Mr. Ohri refused to engage in mediation.  As a fact, Price J. found that Mr. Ohri had not waived his right to have the dispute mediated or arbitrated.   In addition, he found that PCC 166 took no steps to have the dispute mediated or arbitrated prior to applying to the court.  Despite activity in the litigation to conduct cross-examinations, Mr. Ohri had promptly raised his jurisdictional objection at the onset of the litigation and was deemed not to have waived his right to mediate or arbitrate by advancing the litigation after having raised the jurisdictional objection.

In closing his reasons, and without further comment, Price J. reserves the last few paragraphs to a citation of another colleague’s comments in Couture v. TSCC No. 2187, 2015 ONSC 7596.  The cited comments flag two things: the benefit of mediation in preempting unnecessary litigation; and, the “skewed incentive” section 134(5) in the Condominium Act, a cost-recovery provision, might give for a successful litigant.  The latter cost-recovery “unfortunately incentivizes recalcitrant, litigious behavior.”

Price J. dismissed PCC 166’s litigation for failure to comply with section 134(2) of the Condominium Act.