Ontario – statutory undertaking to mediate/arbitrate contract disputes inapplicable if dispute’s “substance” involves breach of legislation – #497

In Carleton Condominium v. Poirier, 2021 ONSC 3778, Mr. Justice Paul B. Kane refused to convert Applicant’s application into an action despite Respondents’ submissions that Applicant had not engaged in mediation and arbitration before commencing the application.  An application would proceed on a record comprised of affidavit and cross-examination evidence whereas an action would lead to a hearing with viva voce witnesses and more extensive pre-trial procedural steps. Even though some of Applicant’s relief appeared to qualify as a disagreement for which the Condominium Act, 1998, SO 1998, c 19 imposed mediation and arbitration, Kane J. determined that (i) the “substance” of the application involved breaches of the legislation for which mediation and arbitration were not imposed and (ii) Applicant’s reliance on those breaches was not “to avoid mediation and arbitration”. 

Carleton Condominium Corporation No. 15 (“CCC 15”) filed an application under section 134 of Ontario’s Condominium Act, 1998, SO 1998, c 19 (“Application”) against a unit owner and two (2) tenants (“Respondents”) seeking various relief set out in more detail at para. 3 of Kane J.’s reasons.  Among other orders sought, CCC 15’s Application sought a declaration that Respondents were in breach of sections 19, 98, 117 and 119 of the Condominium Act as well as specific sections of CCC 15’s Declaration, By-laws and Rules.

Respondents did not file a cross-application but did apply under Rule 38.10(1)(b) of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194 (“Rules”) for an order to convert CCC 15’s Application into an action and proceed to a trial with witnesses instead of on a record comprised of affidavit and cross-examination evidence.  Rule 38.10(1)(b) authorizes the court to order that the whole of an application or any issue proceed to trial and, under Rule 38.10(2), the proceeding is thereafter treated as an action. 

Respondents argued that CCC 15’s Application ought not to have commenced as an application but should have first proceed to mediation and, absent a resolution, to arbitration for a determination under section 132(4) of the Condominium Act.

At paras 19-27, Kane J. addressed Respondents’ objection to allowing CCC 15 to proceed in a summary manner, by application, rather than by an action which lead to hearing with viva voce witnesses and other more fulsome pre-trial procedural steps.

Kane J. observed that section 134(1) of the Condominium Act permitted CCC 15 to proceed by application but section 134(2) required it to engage in mediation and arbitration if section 132 required those processes.

Section 134(1) Subject to subsection (2), an owner, an occupier of a proposed unit, a corporation, a declarant, a lessor of a leasehold condominium corporation or a mortgagee of a unit may make an application to the Superior Court of Justice for an order enforcing compliance with any provision of this Act, the declaration, the by-laws, the rules or an agreement between two or more corporations for the mutual use, provision or maintenance or the cost-sharing of facilities or services of any of the parties to the agreement.

(2) If the mediation and arbitration processes described in section 132 are required, a person is not entitled to apply for an order under subsection (1) until the person has failed to obtain compliance through using those processes”.

Section 132 provides that specific agreements are deemed to contain a provision to submit disagreements to mediation and arbitration and those agreement include agreements between a declarant and a corporation, agreements between two (2) or more corporations and those agreements between a corporation and an owner provided for in section 98(1)(b).  Section 132(4) stipulates that every declaration is deemed to contain a provision that the corporation and the owners agree to submit a disagreement between the parties with respect to the declaration, by-laws or rules to mediation and arbitration in accordance with section 132(1).

CCC 15’s Application did include relief regarding alleged breaches of its Declaration, By-laws and Rules but Kane J. accepted that the “substance” of its Application was breach of the Condominium Act and that its reliance on those provisions was not “to avoid mediation and arbitration” in contrast to Peel Condo Corp 166 v. Ohri, 2017 ONSC 6438 paras 35-36.

Kane J. noted that disputes “involving the [Condominium Act] itself do not mediation or arbitration” under section 132, referring to Metropolitan Toronto Condominium Corporation No. 747 v. Korolekh, 2010 ONSC 4448 para. 50 and that disputes with unit tenants “do not fall within the mediation and arbitration” set out in section 134, referring to Ottawa-Carleton Standard Condominium Corporation No. 961 v Menzies, 2016 ONSC 7699 para. 37.

Based on his reading of the Application and in light of the provisions of the Condominium Act, Kane J. dismissed Respondents’ application to convert the Application into an action and proceed to a trial.

Sections 134(1) and (2) accordingly did not require that the subject of this application first proceed to mediation and arbitration. Mediation and arbitration were not required and do not constitute grounds requiring that this application be converted into an action”.

urbitral notes – First, in Peel Condo Corp 166 v. Ohri, 2017 ONSC 6438, the court noted the consequences of a party’s unwillingness to engage n the mediation and arbitration process.

[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”.

Second, for a recent consideration of whether referral to a court removes jurisdiction for an arbitrator, see the recent Arbitration Matters note “Ontario – legislation permitting application to court does not oust arbitrator’s jurisdiction for same remedy – #485” regarding Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2021 ONCA 360. Ontario’s Court of Appeal held that wording in the Condominium Act, 1998, SO 1998, c 19 which permits an application to the Superior Court for relief regarding oppression set out in that legislation “does not oust the jurisdiction of an arbitrator to consider the same relief, if that relief is part of the dispute in question that properly falls within the terms of the arbitration provision”.  The Court also expressly accepted that a stay order would result in “parallel proceedings” – arbitration between two (2) parties and court litigation with all four (4) over the balance of the dispute – but concluded that parallel proceedings did not “detract from the central point” that two (2) of the parties must arbitrate.  The Court did observe that the other non-parties to the arbitration “might voluntarily agree to be part of the arbitration proceedings”.

Third, see the recent Arbitration Matters note “Québec – attempt dismissed to limit arbitral jurisdiction by presumption statutory recourse excluded unless expressly included – #476” regarding Valiquette v. PL Nouvelle France Inc., 2021 QCCS 1096. Madam Justice Florence Lucas followed the lead recently set out in Groupe Dimension Multi Vétérinaire Inc. v. Vaillancourt, 2020 QCCS 1134 which dismissed attempts to limit an arbitral tribunal’s jurisdiction by way of presumption that statutory recourses were excluded unless expressly included.  Lucas J. held that an arbitrator’s jurisdiction extends to all disputes relating directly or indirectly to the contract in which the agreement to arbitrate is contained, unless from its wording or the context a real intention by the parties to limit its scope.  Lucas J. held that nothing in the agreement to arbitrate – which defined ‘Dispute’ in ‘excessively broad terms’ – or in the context of the matter permitted inferring the parties’ intention to limit the scope of their agreement to arbitrate or to exclude the oppression remedy from an arbitrator.  Relying on the record before her, Lucas J. also definitively determined the issue of jurisdiction and referred the parties to arbitration.

Fourth, see the earlier Arbitration Matters note “Alberta – creature of statute, non-party can initiate arbitration where same legislation imposes its obligations and arbitration – #215” regarding TransAlta Generation Partnership v. Balancing Pool, 2019 ABCA 318. Alberta’s Court of Appeal upheld dismissal of a challenge to arbitration initiated by an entity which was created by legislation but was not party to contracts stemming from the legislation.  The Court determined that the statutory scheme which created the non-party did not limit its right to dispute its significant financial obligations to compensate the contracting parties in certain disputes.  The Court’s handling of the implied exclusion rule lends itself to other legislative schemes created in the public interest.