Court rules (again) that condo can’t avoid mandatory arbitration

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There have been several cases in the last year or two that have been stayed (halted) because one of the parties ignored an obligation to arbitrate a dispute. Another decision was released this week. Given the number of cases as of late, it seems that a review of the basic principles might be useful. The most recent case includes a great review so we will summarize it here.

A condominium brought an action against various parties, including the City and the developer. The City owned a theme park next to the development. The condominium, developer, and City entered into two separate agreements about the sharing of costs for certain facilities. Both agreements included a dispute resolution clause that required the parties to use their best efforts to resolve disputes and to resort to legal proceedings “only as a last resort”.

Some of the defendants brought a motion to stay the proceedings in favour of arbitration. They argued the agreements required arbitration of the dispute. The condominium argued that the arbitration clause did not apply because the developer’s conduct was oppressive according to section 135 of the Act and mediation and arbitration requirements do not apply to oppression claims.

The court reviewed the provisions of the Courts of Justice Act and the Arbitration Act related to requests to stay proceedings on the basis of an arbitration clause in an agreement. The court also reviewed section 132 of the Condominium Act, 1998, which requires mediation and arbitration of certain condominium disputes. The court also reviewed other options that were available to the condominium, including terminating the agreements within one year of the turn-over meeting pursuant to section 113 of the Act.

In reviewing the condominium’s argument that the conduct was oppressive, which allowed it to avoid the mandatory arbitration clause, the court reviewed a previous decision that stated:

 In determining whether to grant a stay, the question is whether it is at least arguable that the dispute is arbitrable;

Where the essence of the dispute is the oppression remedy, which, under s. 135 of the Condominium Act, falls within the exclusive jurisdiction of this court, a stay in favour of arbitration proceedings would be inappropriate; and

On the other hand, courts should guard against allowing the mere invocation of an oppression remedy under s. 135 to avoid the consequence of an arbitration clause in an agreement.

In reviewing the condominium’s claim that the conduct was oppressive, the court looked at the “pith and substance” of the claim. The court found that the allegations of oppressive conduct related solely to the agreements, which should have subject to an application under section 113 to terminate the agreements within one year of turn-over or enforce compliance with the agreement under the arbitration clause in the agreement. Interestingly, the condominium sought an order compelling arbitration in the event that renegotiation fails. The court found this to be an acknowledgment by the condominium that arbitration would be a more appropriate way to resolve the dispute. Also, in another proceeding involving the parties the condominium took the position that the matters raised by the developer were not oppressive and should be submitted to arbitration. It now took the opposite position.

The court stayed the condominium’s claim in favour of arbitration and awarded the defendants $35,000 for their costs of the motion.

The full decision is available on CanLii: https://www.canlii.org/en/on/onsc/doc/2019/2019onsc3900/2019onsc3900.html?resultIndex=1