Court File and Parties

Court File No.: CV-22-0249-00 Date: 2023-02-10

Ontario Superior Court of Justice

Between:

The Corporation of The City of Thunder Bay, Applicant A.-M. McKitrick, for the Applicant

- and -

Dawn MacKay, Respondent D. MacKay, representing herself

Heard: January 20th, 2023, at Thunder Bay, Ontario

Before: Mr. Justice W. D. Newton

Decision On Application

Overview

1Central to this dispute is how a former lessee, Ms. MacKay, is to be compensated for certain leasehold improvements upon the expiry of a lease with the City of Thunder Bay (“City”). Although the lease provides that the issue is to be resolved through arbitration, Ms. MacKay has refused to appoint an arbitrator.

2For reasons that follow, I order that Ms. MacKay has 30 days to appoint an arbitrator failing which I will an appoint an arbitrator on further motion from the City. Ms. MacKay is ordered to pay the full indemnity costs of the City as fixed by me.

The Facts

3Although not necessary for the legal analysis, the following background gives the context for the current dispute. To the extent that Ms. MacKay disputes any of these facts I will state her position below.

4The property leased by Ms. MacKay is part of lands known as “Sandy Beach.” The City acquired the lands at Sandy Beach in 1917 to establish a public park. Initially, City employees occupied small cabins at Sandy Beach. Over time, other individuals leased vacant sites at Sandy Beach on which they constructed cottages and other buildings. Construction required the approval of the City and was subject to certain terms as hereinafter described.

5Exhibit A to Ms. MacKay’s affidavit is what she described as her “Transfer of Deed 1999”. The first document at Exhibit A is “Purchaser’s Instructions to Solicitor” signed by Ms. MacKay. Paragraph 3 of that document is an acknowledgement that Ms. MacKay is accepting title to the property subject to the following:

The subject property is subject to a Lease (on the land) with The Corporation of the City of Thunder Bay which Lease has a term of 13 years from January 1, 1989 to and including December 31, 2001.

6Ms. MacKay also acknowledged receiving a copy of the City’s policy regarding Sandy Beach leases. The documents at Exhibit A also include the assignment of the lease to Ms. MacKay from the previous lessee. The consideration was $26,000.

7Pursuant to that assignment of lease, the City and Ms. MacKay entered into a lease renewal agreement that provided for nominal annual rent, $1,500 plus any increase in the CPI, and taxes to be paid by Ms. MacKay. The lease agreement further provided that all buildings were subject to the approval of the City. In the event that the City did not renew the lease, the City was obliged to purchase the buildings and improvements at a price to be determined by a single arbitrator. If the parties were unable to agree on a single arbitrator, then each party was to appoint one arbitrator and the two arbitrators would appoint the third arbitrator. The arbitrators were to determine the value of buildings and improvements and appoint a time for payment of the value. That determination was to be final, and the expense of the arbitration was to be borne equally between the parties. Until the publication of the award and the payment of the value, the lessee would continue in possession of the lands subject to payment of rent etc.

8Other agreements signed in 1999, around the time of the assignment of the lease, and November 2005 by Ms. MacKay acknowledged that the City was not bound to purchase or pay any compensation for certain specified unauthorized construction and improvements including a second story addition and wrap around covered verandah, among others.

9The lease was renewed in 2002 for a 13 year term terminating on December 31, 2014. Annual rent was increased to a little over $2,000 per year plus any increase in the consumer price index.

10In 2014, the City adopted a policy to return the sites at Sandy Beach to public parklands. By letter dated December 12, 2014, the City notified Ms. MacKay and other lessees that the City would not be renewing any Sandy Beach leases.

11As of December 31, 2014, only 26 tenancies remained. Since then, the City has resolved and ended the tenancies of all other tenants who had requested a renewal except for Ms. MacKay and the tenants of two other properties. Those other tenants have appointed a member to the arbitration tribunal to determine valuation issues in accordance with the lease and that arbitration is in progress.

12Ms. MacKay is the only remaining tenant who has neither settled nor advanced to arbitration. [1]

13As no agreement was reached between the parties, the City proposed an arbitrator for a single-member arbitration board. Ms. MacKay did not agree with this appointment or suggest an alternate arbitrator. By letter dated December 19, 2016, the City asked Ms. MacKay to allow an appraiser to inspect the premises. Ms. MacKay responded, by letter dated January 12, 2017, disagreeing with the valuation process under the lease and stated her position that her property was worth $1.5 million.

14By correspondence dated May 4, 2021, counsel for the City wrote to Ms. MacKay proposing a nominee to the arbitration board and asking Ms. MacKay to identify her nominee to the arbitration board. A further letter was sent on May 16, 2022, notifying Ms. MacKay that she had seven days to appoint a member to the arbitration board. Ms. MacKay has not responded to the request that she appoint a member to the arbitration board.

15According to correspondence from the City dated October 6, 2022, attached as Exhibit C to Ms. MacKay’s affidavit, Ms. MacKay had not paid her monthly rent ($218.11) since January 1, 2017.

Positions of the Parties

The City

16The City argues that Ms. MacKay, by failing to appoint an arbitrator since 2016, has abandoned her claim for compensation under the lease or should be estopped from receiving any compensation under the lease.

17The City also argues that Ms. MacKay’s entitlement to compensation under the lease is barred because two years have elapsed since the termination of the lease.

18Alternatively, the City argues that this court should appoint an arbitrator on behalf of Ms. MacKay and at her expense to resolve the compensation matters under the lease.

19The City submits that the compensation issues must be resolved before a proceeding can be brought before the Landlord and Tenant Board to terminate the tenancy.

Ms. MacKay

20Ms. MacKay describes herself as a “treaty Indian”, a former real estate agent, and a native rights activist for the past 30 years.

21She argues that she has Title/Deed based on the land transfer tax affidavit, yet at other times acknowledges that the property is leased.

22She also argues that the City did not properly acquire the property from Fort William First Nation and that therefore the City is not the owner of the property.

23She argues that the City is valuing the improvements at 1972 values and that this is unfair.

Analysis and Disposition

24None of Ms. MacKay’s arguments have any merit.

25She has signed several documents acknowledging the lease. She is a former real estate agent. She has not argued that she did not know what she was signing.

26As to ownership of the lands, she acquired her rights under the lease from the City and never disputed, until now, that the City was the owner. The issue that she now raises is an issue between Fort William First Nation and the City if there is an issue.

27The valuation to be undertaken is not at 1972 values but is a valuation that excludes unauthorized improvements and additions on the property.

28The issue before me is not one of terminating a tenancy but rather the procedure for valuation of certain leasehold improvements.

29With respect to the City’s argument that Ms. MacKay’s right to make a claim for compensation is statute barred, I conclude that, by repeating its attempts to proceed to arbitration in 2021 and 2022, the City is estopped from relying on the limitation period.

30The City takes two positions: (1) that I should rule Ms. MacKay is estopped from receiving any compensation because of her protracted refusal to participate in the arbitration process; or, alternatively (2) that I should appoint an arbitrator on behalf of Ms. MacKay.

31Both parties have rights and obligations under the lease. Ms. MacKay’s obligations include paying rent and taxes. She has the right to have buildings on the property and make improvements to those buildings subject to the consent of the City.

32Upon termination of the lease, Ms. MacKay may remove buildings or improvements and, if not removed, the City must purchase the building or improvements subject to the lease and other agreements between the parties. Agreements signed in 1999 and November 2005 provided that the City was not bound to purchase or pay any compensation for any unauthorized construction/improvement on the premises. If not removed at the lessee’s expense upon expiry of the term of the lease, then title to that construction or improvement would vest in the City.

33Improvements have not been removed and Ms. MacKay has not expressed any intention to remove the improvements. She has refused to enter into discussions about valuation apparently because she disputes the terms of the lease and the other agreements she has signed.

34Failing agreement as to price that the City is to pay for improvements, then the parties are to proceed with either a single arbitrator or a three-arbitrator panel. The single arbitrator or the majority of three arbitrators shall determine the price and set the time for payment of the price. The decision of the arbitrator(s) is final, and the expense of the arbitration is to be borne equally by the parties.

35The lease provides that, until the publication of the arbitral award and payment of the price fixed for the value of the improvements, the lessee may continue in possession of the premises.

36By refusing to participate in the appraisal process, Ms. MacKay has remained in possession of the premises for over eight years after the termination of the lease. Not only has she frustrated the attempts of the City to restore the lands to parklands, but she also has, through her “self-help”, remained in possession when other tenants who abided by the terms of the lease did not. This flouting of legal obligations should not be rewarded or encouraged.

37However, as recently as May 2022, the City was prepared to abide by the arbitration provision notwithstanding the passage of eight years and served a Notice to appoint an arbitrator with this application record. In my opinion, the further passage of time is not a sufficient reason to deprive Ms. MacKay of her right to compensation under the lease.

38Section 10 of the Arbitrations Act, 1991 [2] provides as follows:

Appointment of arbitral tribunal

10 1) The court may appoint the arbitral tribunal, on a party’s application, if,

(a) the arbitration agreement provides no procedure for appointing the arbitral tribunal; or

(b) a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so.

No appeal

(2) There is no appeal from the court’s appointment of the arbitral tribunal.

39This matter must proceed to arbitration under the lease. I will not interfere with Ms. MacKay’s right to appoint her own arbitrator provided that she appoint her arbitrator within 30 days of the date of the release of this decision. If Ms. MacKay does not appoint an arbitrator within 30 days, then the City may move within 30 days, on notice to Ms. MacKay, for an order that I appoint an arbitrator to act on Ms. MacKay’s behalf. The motion material should provide the names of at least two persons who are willing to act as an arbitrator on Ms. MacKay’s behalf along with a brief statement of each person’s qualifications to be appointed arbitrator.

40The City is entitled to its costs of this application on a full indemnity basis given Ms. MacKay’s behaviour in refusing to participate in arbitration as required under the lease. The City, and its tax payers, should not bear the cost of this unnecessary application which was required because of Ms. MacKay’s inaction and her unmeritorious arguments. I will assess those costs upon receipt of the City’s written costs submissions which should not exceed three pages plus costs outline. The City’s submissions on costs are to be delivered within 20 days from the date of the release of this decision. Ms. MacKay will have 10 days to respond to the cost submissions and her submissions shall not exceed three pages.

41If a motion is required for me to select an arbitrator to act on Ms. MacKay’s behalf the City will be entitled to its costs of that motion, also on full indemnity basis.

“Original signed by”

The Hon. Mr. Justice W.D. Newton

Released: February 10, 2023

Footnotes

[1] One tenant did not request a renewal and was served with a Notice of Termination. [2] S.O. 1991, C. 17.