In Green Urban People Ltd. v. Berthault, 2022 ONSC 737, the Divisional Court (Justices Sachs, Morgan and D.L. Edwards) granted leave to appeal on the issue of whether a certificate of pending litigation (“CPL”) can be issued by the court in face of an arbitration agreement.
The dispute related to new build condominiums, which 11 individuals purchased from a builder. Relying on an early termination condition in the purchase and sale agreements, the builder advised the individual purchasers that the builder had not received certain planning approvals by the specified date and therefore the agreements were terminated. The individuals disagreed that the builder had the right to terminate the agreements. They claimed to have an interest in land in the condominiums and they applied to the court for CPLs to be issued. (A CPL is an encumbrance that is publicly registered on the title of a property and prevents the owner from dealing freely with the property, for example by selling the property or getting a mortgage.) The builder opposed the application for the CPLs, in part, by arguing that the court had no jurisdiction to issue any CPLs because the purchase and sale agreements contained arbitration clauses.
In the decision of the court below (Berthault v. Green Urban, 2021 ONSC 8039), Justice Nicholson found that the court has jurisdiction to issue a CPL even if the underlying dispute must be determined by an arbitrator pursuant to an arbitration clause. Justice Nicholson added that he did not need to decide whether an arbitrator can also issue a CPL.
Justice Nicholson reasoned that CPLs are to be issued by “the court” under to s. 103 of the Courts of Justice Act, R.S.O. 1990, c. C.43, specifically by a registrar only under an order of “the court” under the Rules of Civil Procedure (Rule 42.01). Justice Nicholson combined these provisions with an analysis of the court’s role under the Arbitration Act, 1991, SO 1991, c 17 as follows:
“Section 6 provides that no court shall intervene in matters governed by the Act except in certain circumstances. Notably, the exceptions include enforcing awards. Section 8 of the Act sets out certain powers of the court. That section reads as follows:
8(1) The court’s powers with respect to the detention, preservation and inspection of property, interim injunctions and the appointment of receivers are the same in arbitrations as in court actions.
It is also noteworthy that the Arbitrations Act, 1991, contains provisions whereby the court can be called upon to enforce orders made by an arbitrator. For example, s. 18 (1) of the Act authorizes an arbitral tribunal to make orders for the detention, preservation or inspection of property that are the subject of the arbitration. Subsection 18(2) states that “the court may enforce the direction of an arbitral tribunal as if it were a similar direction made by the court in an action”.”
Justice Nicholson also quoted from an earlier decision (2033363 Ontario Limited v. Georgetown Estates Corp, [2006] O.J. No. 687 (not reported), in which the court had decided a CPL could be issued by the court notwithstanding an arbitration clause because an application for a CPL is heard within a short time and delay could undermine the ultimate relief sought:
“In the present case, 203 moved within a reasonable time after the September 5, 2005 notice from Georgetown purporting to terminate the Agreement. The motion was before Master Peterson on September 27, 2005. It would not have been possible to have such a motion heard by an arbitrator under the Arbitration Act within such a short time. The parties have not even agreed on an arbitrator. Given that the remedy sought in this case is specific performance, delay in moving for this relief could have undermined the relief sought at the end of the day if successful. Nor would it have made sense to ask an arbitrator to decide whether the arbitrator had jurisdiction to order a CPL before going to the court for relief.
I find that in light of the above as well as rule 42.01(1) and a significant reason for including an arbitration clause in the Agreement, namely to expedite the resolution of disputes that arise under the Agreement, 203 acted appropriately by applying to the court for a CPL rather than initiating the arbitration process for that purpose.”
Contributor’s Notes:
The appeal of this decision will hopefully clarify the jurisdictions of the court and an arbitrator specifically when it comes to issuing CPLs. The more general issue raised on this appeal is how the private dispute resolution forum of arbitration interacts with the larger government machinery of registering interests in land.
In the decision under appeal, the court’s analysis was made without reference to the wording of the arbitration clause in question or the fact that parties can contract out of certain aspects of the court’s intervention in an arbitration (in accordance with section 3 of the Arbitration Act, 1991, SO 1991, c 17). The decision creates a jurisdiction for the court to issue CPLs even in the face of a valid and comprehensive arbitration clause.
Given the emphasis many arbitrators and arbitral institutions have put in recent years on the availability of short notice emergency arbitration, it will be interesting to see if the concerns expressed 16 years ago in 2033363 Ontario Limited v. Georgetown Estates Corp, [2006] O.J. No. 687 that arbitration could not offer a swift enough remedy when it came to issuing CPLs remain concerns the court still has today.