Can You Arbitrate Oppression Claims Between Condos?

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Today’s post is about a recent Court of Appeal decision regarding arbitration in condominiums. The facts are straightforward. Two condominiums were parties to a cost-sharing agreement. There was a dispute about the amounts owing under the cost-sharing agreement. The parties participated in a mediation, which was unsuccessful. One of the condominiums sought to arbitrate the dispute. The other disagreed that aribtration was appropriate and commenced an application to the Superior Court of Justice seeking various relief, including an order that the conduct of the first condominium was oppressive, unfairly prejudicial or unfairly disregards the interests of the condominium pursuant to section 135 of the Condominium Act, 1998.

In response to the application, the other condominium brought a motion to stay the application in favour of arbitration. The motion judge found that the entire matter should proceed before the court, despite finding that some matters were within the jurisdiction of an arbitrator under section 132 of the Act. The decision was appealed.

For context, section 135 of the Condominium Act, 1998, permits certain parties to bring an application to the Superior Court of Justice if the conduct of another owner, the condominium, a declarant, or a mortgagee of a unit “is or threatens to be oppressive or unfairly prejudicial to the applicant or unfairly disregards the interests of the applicant”. Previous court decisions have found that disputes involving oppression claims do not require mediation and arbitration under section 132 of the Act and the claim could proceed in the Superior Court according to section 135 of the Act.

The Court of Appeal reviewed a recent decision where the Supreme Court of Canada made it clear that a court did not have discretion to refuse to stay claims that were dealt with in an arbitration agreement. The Court of Appeal found that the dispute between the condominiums was clearly covered by the arbitration clause and the motion judge should have stayed that portion of the application.

With respect to the oppression claim, the Court of Appeal did not agree with the motion judge that the “pith and substance” of the dispute was oppression. The core of the dispute was the interpretation and application of the cost-sharing agreement and these sorts of disputes required mediation and arbitration under section 132 of the Act. The Court of Appeal cautioned courts reviewing these sorts of claims at paragraph 25:

In our view, courts should generally be cautious in their approach to oppression claims of the type asserted here. In particular, courts should be wary of allowing such claims to overtake, and potentially distort, the dispute resolution process that lies at the heart of the Condominium Act, 1998, a central aspect of which is a preference for arbitration over court proceedings. In other words, courts should be alert to the possibility that persons, who are party to an arbitration agreement, are attempting to avoid that process by “piggybacking” onto claims made against others: see e.g. MTCC No. 965 v. MTCC No. 1031 and No. 1056, 2014 ONSC 5362, at para. 18; see also TELUS, at paras. 76, 98.

The Court of Appeal stated that oppression claims may be determined by arbitrators if the claim relates to a dispute that falls within the terms of the arbitration clause (in the cost-sharing agreement) or section 132 of the Act. At paragraph 29:

The language of s.135(1) is permissive, not mandatory. It contemplates that, in certain circumstances, it may be necssary to have resort to the Superior Court of Justice to obtain relief. However, s.135(1) 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 or within the terms of s.132. In this case, we have already noted the broad language of the arbitration clause. There is nothing, in our view, that would preclude an arbitrator, acting under the authority of that arbitration clause, from considering the alleged oppressive conduct advanced by the respondent in appeal, at least as it relates to the actions of TSCC1636.

The Court of Appeal allowed the appeal and granted a stay of the application. The two condominiums will need to participate in arbitration.

This is an interesting decision. I have had debates with other lawyers about mediation/arbitration for oppression claims. Many take the position that only the Superior Court of Justice has jurisdiction to hear these sorts of claims. It is nice to have a decision that brings some clarity to the issue.