Toronto Standard Condominium Corporation No. 2130 v. York Bremner Developments, 2014 ONSC 96
COURT FILE NO.: CV-13-487086
DATE: 20140108
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Toronto Standard Condominium Corporation No. 2130
Applicant
– and –
York Bremner Developments Limited, The Cadillac Fairview Corporation Limited and York Bremner Hotel Leaseholds Limited
Respondents
Richard Macklin & Ed Hiutin,
for the Applicant
Catherine Francis,
for the Respondents
HEARD: December 20, 2013
REASONS FOR DECISION
Justice W. Matheson
[1] This is an application by Toronto Standard Condominium Corporation No. 2130 (TSCC2130) for an order appointing an arbitrator. There is no dispute about the choice of arbitrator. The dispute arises because the respondents do not agree that the matters at issue should go to arbitration, either now or at all.
[2] TSCC2130 is the condominium corporation for a two-tower residential condominium in a complex called Maple Leaf Square, which is located near the Air Canada Centre in downtown Toronto. The respondent York Bremner Developments Limited is the Declarant of TSCC2130 and owns the commercial and retail lands at Maple Leaf Square. The respondent York Bremner Hotel Leaseholds Limited holds the leasehold interest in a hotel in Maple Leaf Square. Lastly, the respondent The Cadillac Fairview Corporation Limited is described by the respondents in this application as York Bremner Developments’ agent, appointed to be the Common Facilities Manager of Maple Leaf Square.
[3] In late 2010, TSCC2130, York Bremner Developments and York Bremner Hotel Leasing entered into an agreement called the Complex Reciprocal Agreement. In short, it relates to the management of the common facilities, areas and services at Maple Leaf Square. Since the Agreement was signed before the condominium corporation was registered, the same person signed it for TSCC2130 as well as signing for the other parties.
[4] The Agreement contains a broad arbitration clause, which reads as follows:
22.01 Requirement for Arbitration
Whether or not specifically provided for elsewhere in this Agreement, should any dispute, difference or question arise between or among the Parties arising out of, or in connection with, this Agreement including any question regarding its existence, validity or termination or relating to the application, meaning or effect of any provision of this Agreement, including any of the allocations in Schedule “D”, then such dispute, difference or question shall be submitted to and finally resolved by arbitration by reference to a single arbitrator under the Arbitration Act (Ontario), as amended or substituted from time to time (the “Act’). The rules and procedures set out in the Act shall apply except to the extent that they are modified, expressly or by implication, by the provisions of this Article 22.
[5] The Agreement also contains a subject-matter specific reference to arbitration that is discussed below.
Events giving rise to notice of arbitration
[6] On March 30, 2012, TSCC2130 began corresponding with Cadillac Fairview regarding a number of issues, as well as related requests for information. In the period between then and now there has been further correspondence between TSCC2130 and not only Cadillac Fairview but also the other respondents, through counsel. I characterize the correspondence from the various respondents as beginning constructively but descending into unproductive rhetoric and positioning.
[7] TSCC2130 initiated the arbitration process in May 2013. The Agreement sets out the steps required to pursue arbitration. TSCC2130 has proceeded through those steps and proposed that Larry Banack be the arbitrator. At the outset of the hearing of this application, counsel to the respondents indicated for the first time that they are not objecting to Mr. Banack. They have also taken no issue with the process of proposing an arbitrator. Their position is, however, that none of the matters listed in the notice of arbitration should be arbitrated.
[8] A further amended notice of arbitration was provided at the outset of the hearing and the application proceeded based upon it.
[9] The respondents submit that the relief sought in the amended notice of arbitration does not fall within the arbitrator’s jurisdiction and there is therefore no point in appointing an arbitrator. TSCC2130 submits that the question of whether the matters at issue are within the arbitrator’s jurisdiction is a question to be answered by the arbitrator, at least in the first instance.
Overlapping court proceedings
[10] The respondents also object because TSCC2130 has commenced overlapping proceedings in court. TSCC2130 frankly states that it commenced those proceedings in order to protect against limitation period problems. It did not serve and move forward with them right away, hoping instead that most or all of the issues could be dealt with in the arbitration as required under the Agreement or, in some respects, be dealt with in the arbitration on consent. No consent has been forthcoming. As well, TSCC2130 seeks some relief under s. 113 of the Condominium Act, S.O. 1998, c. 19, and that relief must be pursued in court.
[11] I accept TSCC2130’s explanation for commencing the overlapping proceedings. I do not agree with the respondents that, having commenced those proceedings, TSCC2130 is obligated to proceed in court first with respect to all matters at issue. I note that the respondents have not waived the right to assert, in the court proceedings, that certain matters should be arbitrated. Thus, their position appears to me to be tactical and delay-oriented. There is a particularly onerous clause in the Agreement regarding common costs, one of the matters at issue, under which delay operates to the direct benefit of the respondents.
[12] The respondents further argue that TSCC2130 should not be permitted to go to arbitration because it is calling into question the validity of the Agreement in the court proceedings. The overlapping court proceedings do seek relief under s. 113 of the Condominium Act, which permits a court to make an order amending or terminating the Agreement in certain circumstances. Since the obligation to arbitrate arises from the Agreement, the respondents again submit that TSCC2130 must first go ahead in court.
[13] The respondents rely on Deluce Holdings Inc. v. Air Canada et al. (1992), 1992 CanLII 7654 (ON SC), 12 O.R. (3d) 131 (Gen. Div., Comm. List), a case in which Blair J. (as he then was) heard competing motions to stay court and arbitration proceedings arising from Air Canada’s attempt to exercise a share purchase right under an unanimous shareholder agreement. Notably, and unlike this case, the agreement in question did not have a general “resort to arbitration” clause, an omission that Blair J. found significant (see para. 71). It had an arbitration clause that related to a dispute over share price, which could arise only after the preconditions to the share purchase had been triggered. Deluce claimed that Air Canada had met those preconditions through oppression.
[14] Blair J. concluded that the competing motions had to be resolved under the following principles (at paras. 73 and 76):
Courts have long exercised an equitable jurisdiction to restrain the continuation of an arbitration proceeding in circumstances where the foundation of the arbitration agreement is under attack. There must be some prima facie evidence – I would say, a strong prima facie case – that resort to the arbitration mechanism by the party seeking to rely upon it may be impeached. The stay must not cause an injustice to that party. The applicant for the stay must persuade the court that the continuance of the arbitration would be oppressive or vexatious or an abuse of the process of the court [citations omitted].
A threshold test of some kind on the merits of the case of the party seeking to stay the arbitration is clearly necessary. … It is important to guard against the resort to such a position simply as a tactic to avoid the agreed upon arbitration procedure, thereby eroding the clear policy of the Legislature that the parties are to arbitrate what they have agreed to arbitrate.
[15] Thus, in relying on the equitable jurisdiction referred to above, the respondents are essentially asking for a stay of the arbitration. However, unlike Deluce, the respondents here have not met the required high threshold. To begin with, they have not asserted or proved that the arbitration would be “oppressive” or “vexatious” or an “abuse of process of the court.” Those phrases do not even appear in their factum. They have also not demonstrated that a stay would not cause an injustice to TSCC2130. Nor have they addressed the impact of the broad general submission to arbitration in Article 22, as distinguished from the agreement at issue in Deluce. I am therefore not prepared to deny the application on this basis.
Legal principles regarding jurisdictional challenges
[16] As a general rule, in any case involving an arbitration clause a challenge to the arbitrator’s jurisdiction must be resolved first by the arbitrator: Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801, at para. 84.
[17] A court should depart from the rule of systematic referral to arbitration only if the challenge to the arbitrator’s jurisdiction is based solely on a question of law: Dell Computer, at para. 84.
[18] If the challenge requires the production and review of factual evidence, the court normally should refer the case to arbitration because arbitrators have, for this purpose, the same resources and expertise as courts. Where questions of mixed law and fact are concerned, the court hearing the referral application must refer the case to arbitration unless the questions of fact require only superficial consideration of the documentary evidence in the record: Dell Computer, at para. 85 and Seidel v. TELUS Communication, 2011 SCC 15, [2011] 1 S.C.R. 531, at para. 29.
[19] Before departing from the general rule of referral, the court must be satisfied that the challenge to the arbitrator’s jurisdiction is not a delaying tactic and that it will not unduly impair the conduct of the arbitration proceeding. This means that, even when considering the exceptions for questions of law and mixed fact and law, the court might decide that to allow the arbitrator to rule first on his or her competence would be best for the arbitration process: Dell Computers at para. 86.
[20] This competence-competence approach calls for deference to arbitrators to resolve challenges to their jurisdiction. TSCC2130 need only show that it is “arguable” that the dispute falls within the terms of the arbitration agreement: Dancap Productions Inc. v. Key Brand Entertainment, 2009 ONCA 135, [2009] O.J. No. 572, at para. 32. A court will decline to have the arbitrator determine his or her jurisdiction only when it is clear or obvious that there is no jurisdiction: Dancap Productions Inc., at para. 40.
Issues proposed to be arbitrated
[21] During the hearing of the application, TSCC2130 withdrew certain proposed issues in the notice of arbitration. In particular, items listed as 4 to 8 and 15 on the amended notice of arbitration were withdrawn. The remaining issues relate to these topics:
• the allocation of common costs (items 1 and 2)
• access to the common areas (item 3)
• Cadillac Fairview as Common Facilities Manager (item 9)
• Cadillac Fairview’s fee (item 10)
• HST charged on insurance premiums (item 11)
• parking facilities (items 12 and 16)
• life safety systems (item 13)
• payment of common costs by York Bremner Developments and York Bremner Hotel Leasing (item 14)
• space to store garbage (item 17)
• requests for information (item 18)
• construction deficiencies (item 19)
• fees and interest in connections with relief sought in the arbitration (items 20 and 21)
[22] To defeat this application, the respondents must persuade me that each and every issue is clearly outside the jurisdiction of the arbitrator. They have failed to do so on the very first issue, regarding the allocation of common costs. That issue was the focus of much of the dialogue between the parties in their correspondence and in their submissions on this application.
Issue re: allocation of common costs
[23] The first claim for relief in the amended notice of arbitration seeks a determination of a fair and reasonable allocation of common costs under the Agreement. Article 9 of the Agreement has a specific reference to arbitration in this regard as follows:
9.03 Right to Require Arbitration
To the extent that the allocation of Common Costs as set out in Schedule “D” does not result from separate metering or sub-metering, any Party contributing to such Common Costs may require that such allocation be revised based on the allocation of such Common Costs not being fair and reasonable and, failing agreement among the relevant Parties, that such allocation be the subject of review by arbitration in accordance with Article 22 to determine whether it is fair and reasonable and, if not, to make a fair and reasonable allocation. [Emphasis added.]
[24] The applicant argues that based upon the course of correspondence it is apparent that the parties have failed to reach an agreement about the allocation. The next step is arbitration.
[25] As set out in their factum, the respondents take the position that “in order to submit the issues of cost allocations to arbitration, TSCC2130 first needs to submit its own proposed reallocation of costs for consideration.”
[26] Quite simply, there is no such express precondition in Article 9 or elsewhere in the Agreement. The applicant’s position – that there is no such precondition – is at least arguable.
[27] Further, among the applicant’s information requests are requests for information about the basis for the existing cost allocations. While the respondents have provided some information, some requests in this area remain unsatisfied. Thus, even if the applicant wished to make a proposal, it has been denied the information it needs to prepare one. This information request forms part of the amended notice of arbitration.
[28] I therefore conclude that the issues about the allocation of common costs are arguably within the arbitrator’s jurisdiction.
Other issues
[29] Given that there is at least one issue that arguably falls within the arbitrator’s jurisdiction, the arbitrator should be appointed. In the circumstances, I do not see it as necessary to go through all of the other issues in the amended notice of arbitration. If the respondents continue to challenge the arbitrator’s jurisdiction, they must pursue a ruling from the arbitrator.
Order
[30] I therefore order that Mr. Banack be appointed the arbitrator in connection with the arbitration commenced by notice of application dated May 17, 2013, as amended.
[31] If the parties are unable to agree on costs, the applicant shall make its submissions by brief written submissions together with a bill of costs to be delivered by January 29, 2014. The respondents’ brief written response shall be delivered within 30 days after service of the applicant’s submissions.
Justice W. Matheson
Released: January 8, 2014
v. York Bremner Developments, 2014 ONSC 96
COURT FILE NO.: CV-13-487086
DATE: 20140108
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Toronto Standard Condominium Corporation No. 2130
Applicant
– and –
York Bremner Developments Limited, The Cadillac Fairview Corporation Limited and York Bremner Hotel Leaseholds Limited
Respondents
REASONS FOR DECISION
W. MATHESON J.
Released: January 8, 2014