Ontario – Defendant to stayed action may commence arbitration – #684

In Star Woodworking Ltd. v. Improve Inc., 2022 ONSC 5827, the defendant condominium corporation sought an order that the Court appoint an arbitrator to hear and resolve the plaintiffs’ claims against it. The plaintiffs had originally commenced actions in the Ontario Superior Court of Justice, and a number of claims were stayed as they were required to be brought in arbitration pursuant to the Condominium Act, 1998, SO 1998, c 19, and the Arbitration Act, 1991, SO 1991, c 17. Justice Myers rejected the plaintiffs’ argument that they could not be forced to be claimants in an arbitration if they did not wish to do so. Justice Myers held that the arbitration was properly commenced pursuant to section 23 of the Arbitration Act, 1991

In 2018, two groups of plaintiffs (represented by two different counsel) brought four lawsuits alleging they were misled by a developer to buy commercial condominiums and that the defendant condominium corporation adopted unlawful bylaws and rules as a result of the misconduct of the developer, including the improper use of common areas and illegally enforced some of the improper rules and bylaws against the plaintiffs. The defendant condominium corporation moved for a stay of the claims against it in favour of arbitration. On July 13, 2021, in 2021 ONSC 4940, Justice Myers granted the stay and held that the plaintiffs’ claims against the condominium corporation were required to be resolved through arbitration pursuant to the Condominium Act, 1998, SO 1998, c 19 and the Arbitration Act, 1991, SO 1991, c 17 (the “Stay Decision”). That decision of Justice Myers was summarized in Arbitration Matters Case Note: Ontario – Court refers part of dispute to arbitration despite concluding dividing the issues was “unreasonable” in the circumstances – #520.

Over a year passed since the Stay Decision and the plaintiffs did not proceed with an arbitration. During this time, the condominium corporation proposed three arbitrators to plaintiffs’ counsel, however, the parties were unable to agree. As such, on July 14, 2022, the condominium corporation brought a case conference before Justice Myers, who made the following endorsement: 

“[Counsel for one set of plaintiffs] is directed to advise the counsel above of his clients’ choice of arbitrator on or before July 29, 2022. If [his] clients do not want any of the three on [defendant’s counsel’s] list, then he may submit three names of his own to me and I will choose from the two lists. Counsel for the three sides in the proposed arbitrations may also send one page of submissions objecting or stating a preference for any proposed arbitrator with point form reasons. I am to receive counsels’ submissions, if any, by August 5, 2022. 

Counsel will then discuss scheduling of the arbitrations in light of the status of the actions. The arbitrator will decide any issues regarding the process for the arbitrations. I may be contacted regarding the actions as needed.”  (the “July 2022 Order”).”

Defendant’s counsel received no communication from plaintiffs’ counsel by August 5, 2022. 

The plaintiffs represented by the other counsel argued that they had not yet commenced an arbitration on their claims and may never do so. They claimed that they could not be forced to be claimants in an arbitration if they did not wish to do so. Counsel for the plaintiffs also suggested that this question should be argued in a fuller process and not during a case conference. 

The defendant condominium corporation argued that an arbitrator should be appointed by the Court to hear and resolve the plaintiffs’ claims against it pursuant to the July 2022 Order.

Justice Myers noted that Section 23 of the Arbitration Act, 1991, provides that either side of a dispute may commence an arbitration:

“Commencement of arbitration 

23 (1) An arbitration may be commenced in any way recognized by law, including the following 

  1. A party to an arbitration agreement serves on the other parties notice to appoint or participate in the appointment of an arbitrator under the agreement. 
  2. If the arbitration agreement gives a person who is not a party power to appoint an arbitrator, one party serves notice to exercise that power on the person and serves a copy of the notice on the other parties. 
  3. A party serves on the other parties a notice demanding arbitration under the agreement.”  

Justice Myers held that the condominium corporation properly commenced an arbitration by sending the plaintiffs notice to participate in the appointment of an arbitrator to hear the plaintiffs’ claims. The claims brought by the plaintiffs could only be pursued in arbitration and, although the action was stayed, the claims still existed. Justice Myers held that while the claims existed, the condominium corporation was entitled to push forward with the claims made against it to try and clear its name. Further, the July 2022 Order provided that if counsel were not able to agree on an arbitrator, one would be appointed by the court. 

Justice Myers dismissed the plaintiffs’ argument that a fuller process was required before a decision could be rendered. None of the parties sought additional relief beyond the matters decided in the July 2022 Order, such as an order lifting the stay or the dismissal of the plaintiffs’ claims. Finally, as no objections to the arbitrators proposed by the condominium corporation in July 2022 had been previously raised, and the plaintiffs were prohibited from doing so at this stage.

In the result, Justice Myers appointed an arbitrator to hear the claims made by the plaintiffs against the condominium corporation. Justice Myers noted that the process under which the arbitration would be constituted and carried, including the issue of whom he would designate as the claimant, was within the jurisdiction of the arbitrator and so that process was to be determined by him. 

Contributor’s Note: 

This decision highlights the importance of section 23 of the Arbitration Act, 1991, and the different ways in which an arbitration may be commenced. In this case, the claims raised in the stayed action brought by the plaintiffs in the Ontario Superior Court of Justice were recognized as arbitrable. The statute therefore provided the defendant with recourse to have the extant claims determined through the arbitration process, whether the plaintiffs wished it or not. Interestingly, the statute permits “a party” to commence an arbitration and it is not necessary that it be the party advancing the claims. Justice Myers takes note of this in his reasons where he states that it is up to the arbitrator to work with the parties to determine the arbitration process, including whom will be designated as the claimant. Justice Myers’ carefully written reasons and awareness of the jurisdiction of the arbitrator are perhaps why he did not address any of the procedural logistics of the arbitration in his decision.