Court File and Parties
COURT FILE NO.: CV-18-595712 DATE: 20180625 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: EYELET INVESTMENT CORP., Plaintiff AND: LI SONG, BO XIAO, MESFIN YERSAW also known as MESFIN YERSAW AMHA, EKATERINA AMKHA and DONGMEI ZHAO also known as DONG MEI ZHAO, Defendants
BEFORE: Ferguson J.
COUNSEL: Stephen Brunswick and Jennifer Lake, for the Plaintiff Sara J. Erskine and Malik Martin, for the Defendant
HEARD: May 18, 2018
Endorsement
[1] This is a dispute about whether the parties should be at arbitration or in court. For the reasons that follow, I find that the parties should be in arbitration.
Factual Background
[2] The plaintiff, Eyelet Investment Corp. (“Eyelet”) is the developer of a residential subdivision in Aurora, Ontario.
[3] The defendants are the named purchasers in agreements of purchase and sale entered into with Eyelet for new residential homes built on the properties described below.
[4] The defendants entered into agreements of purchase and sale (the “agreements”) to purchase the following properties (collectively, the “properties”) at purchase prices ranging from $1,734,900 to $1,754,900 on either March 7, 2016 (Lots 5, 20 and 40) or April 12, 2016 (Lot 45):
(a) Lot 5, purchased by Mesfin Yersaw (“Yersaw”); (b) Lot 20, purchased by Bo Xiao (“Xiao”) and Ekaterina Amkha (“Amkha”); (c) Lot 40, purchased by Dongmei Zhao (“Zhao”); (d) Lot 45, purchased by Li Song (“Song”).
[5] On September 11, 2017, Eyelet’s solicitor received correspondence from the defendants’ then solicitor demanding the return of her clients’ deposits plus interest on the basis that the agreements had allegedly been terminated pursuant to section 6(g)(iii) of the Tarion addendum which forms part of the agreements, because Eyelet did not provide written notice of non‑waivable early termination conditions (“ETCs”).
[6] On September 12, 2017 and September 13, 2017, Eyelet’s real estate and litigation lawyers, respectively, denied the defendants’ claims and confirmed to the defendants’ then solicitor that:
(a) Eyelet construed the September 11, 2017 letter as an anticipatory breach of contract by the defendants; (b) Eyelet accepted the defendants’ anticipatory breach and would begin to mitigate its damages; and (c) while reserving all of its rights to claim other damages and costs, Eyelet was treating the deposit monies as forfeited and would in due course initiate a claim for the requisite relief, including all damages resulting from the defendants’ breach.
[7] On March 2, 2018, the defendants initiated arbitration by preparing notices of arbitration which were later delivered to Eyelet on March 5, 2018. The defendants selected Horace King of Lextar Arbitration Services (“Lextar”) as the arbitrator. The basis of the defendants’ claim in the arbitration is that the agreements are subject to ETCs, and that Eyelet failed to provide written notice that the ETCs had been satisfied, so the agreements were terminated pursuant to section 6(g)(iii). As a result, they are entitled to a refund of their deposits and other monies paid.
[8] The arbitrator has decided that the arbitration agreement applies to the dispute.
Has the Plaintiff participated in the arbitration?
[9] There was a preliminary issue as to whether or not Copeland J., on the stay of arbitration motion, made a decision that the vendors had not participated in the arbitration process which was binding on me. I find that she dealt with that issue comprehensively and agree with her decision that the vendors did not participate. This decision was not appealed. The fact that counsel for Eyelet showed up at a meeting, clearly taking the position that he was not attorning to the arbitrator`s jurisdiction, cannot now be used against the plaintiff. Therefore, the plaintiff is entitled to seek a declaration that the arbitration is invalid pursuant to s. 48(1)(d) of the Arbitration Act, 1991, S.O. 1991, c. 17 (“the Arbitration Act”). However, other conditions apply before such a declaration can actually be granted. In order to stay the proceeding, I must also determine whether the arbitration agreement actually applies to the dispute.
Does the Arbitration Agreement Apply to the Dispute?
[10] Section 15 of the Tarion Freehold Form specifically provides that the vendor and purchaser agree that disputes arising between them relating to the termination of the agreement under section 11 shall be submitted to arbitration in accordance with the Arbitration Act, and subsection 17(4) of the Ontario New Home Warranties Plan Act, R.S.O. 1990, C.O.31 (“the ONHWPA”).
[11] I agree with the defendants that the arbitration agreement applies to this dispute. The dispute concerns whether the defendants are entitled to a refund of monies they paid to Eyelet because of their allegation that Eyelet failed to satisfy ETCs in the Tarion addendum. In the agreement the parties agreed to submit this kind of dispute to arbitration. Eyelet’s position is that the defendants are not entitled to the refund of monies because there were no ETCs in the Tarion addendum. I find that the parties agree on the nature of their dispute. I do not believe that Eyelet’s response to the claim does not raise a question of jurisdiction. If I am wrong, and it does raise a question of jurisdiction, that is exactly what an arbitrator can decide.
[12] I further agree that the scope of the arbitration agreement between the parties is broad. Section 15 of the Tarion addendum provides for arbitration of disputes over monies paid (s. 15(a)), but also gives the arbitrator discretion to award any relief available under the Arbitration Act regardless of whether the agreement was properly terminated (s. 15(e)). The broad authority of the arbitrator is also consistent with section 17(4) of the ONHWPA which provides that every agreement between a vendor and a prospective owner shall be deemed to contain a written agreement to submit present or future differences to arbitration. The Court of Appeal in Radewych v. Brookfield Homes (Ontario) Limited, 2007 ONCA 721, agreed with the trial judge’s broad reading of s. 17(4): it applies to the arbitration of differences arising out of the agreement of purchase and sale between purchasers and vendors. Both s. 15 of the Tarion addendum and the deemed arbitration agreement under s. 17(4) of ONWHPA apply to this dispute, including the tort claims which arise out of the alleged breach of contract.
[13] This court should defer to the arbitrator’s decision. Deferring to the arbitrator’s decision that the arbitration agreement applies to the dispute is consistent with the well-established presumption under Ontario law and codified in s. 17 of the Arbitration Act that courts will defer questions of jurisdiction to the arbitrator. The courts have ruled that where a party opposes the arbitrator’s jurisdiction, that question must, at the first stage, be resolved by the arbitrator. Under the “competence-competence” principle, unless it is clear that the dispute falls outside the terms of the arbitration agreement, questions relating to jurisdiction – which includes the scope of the arbitration agreement – should in the first instance be decided by the arbitral tribunal rather than by the court.
[14] Eyelet also has a claim for tortious interference. I made an order at the hearing of this motion that the defendants are not to interfere with the closings on the properties or any future dealings with the properties. That order was not made on consent as counsel did not have those instructions.
[15] This matter shall therefore be dealt with by arbitration.
Costs
[16] If the parties cannot agree on costs, I am prepared to receive the appellant’s submissions within 20 days and the respondents’ responding submissions within 10 days thereafter. The appellant’s response, if any can be provided within 7 days thereafter. They can be sent by email to my assistant at Lorie.Waltenbury@ontario.ca. I will add that, in my view, success was split. Eyelet had to come to court to get injunctive relief in order to mitigate its damages.