COURT FILE NO.: CV-19-00079283-000

DATE: 20191122

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Urbandale Corporation

Applicant/Respondent by Cross-Application

– and –

Richcraft Homes Limited

Respondent/Applicant by Cross-Applcation

Ron Caza, Alyssa Tompkins , James Plotkin, for the Applicant/Respondent

David Elliot and Scott McLean, for the Respondent/Applicant

HEARD: October 30, 2019

REASONS FOR JUDGMENT

R. SMITHJ.

[1] Urbandale Corporation ("Urbandale") asks the Court to appoint an arbitrator pursuant to article 12.15 of the co-tenancy agreement ("CTA'') it entered into with Richcraft Homes LTD ("Richcraft") in 2000 to develop the Kanata Lakes lands. Urbandale wants an arbitrator to interpret the provisions of the CTA and the 2005 agreement to decide how it may convey residential lots and whether the issue is res judicata based on the result of the previous litigation for the Riverside South lands.

[2] Richcraft opposes the appointment of an arbitrator because it submits that the parties intended that the Ontario courts would have exclusive jurisdiction to deal with all matters arising from the CTA based on article 12.06 which is titled " Applicable Law". Richcraft argues that the arbitration clause at article 12.15 of the CTA is invalid, has ceased to exist, or does not apply to this dispute because it is inconsistent with article 12.06.

[3] On October 13, 2001, the parties also entered into a Limited Partnership Agreement ("LPA") to develop lands in Riverside South. On May 9, 2005 the parties entered into a further agreement confirming that each would have the first rights to purchase available lots in the above projects (Riverside South and Kanata Lakes) to be divided equally at the same price.

[4] In 2015 Justice Ray held that the 2005 agreement was enforceable and that Richcraft was entitled to purchase 50% of the residential lots in the Riverside South project that were ready for sale. The decision was upheld on appeal.

Issues:

[5] The following issues must be decided:

1. Is the arbitration clause in the CTA invalid or has it ceased to exist?

2. Does the dispute, which Urbandale has submitted to arbitration, fall within the scope of the arbitration clause in the CTA?

Analysis:

[6] Article 12.15 (also referred to as a "paragraph" or "clause") of the CTA titled Arbitration reads as follows:

"12.15 Arbitration. The resolution of any dispute on the interpretation of this agreemetn [sic] shall be pursuant to the terms of the Arbitration Act (Ontario)."

[7] Article 12.06 of the CTA titled Applicable Law reads as follows:

"12.06 Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein and shall be treated in all respected as an Ontario contract. The parties hereby attorn to the exclusive jurisdiction of courts of the Province of Ontario with respect to any matter arising under this Agreement or any of the Schedules or documents to be entered into or delivered pursuant to this Agreement.”

Issue #1:

Has the Arbitration Article Ceased to Exist?

[8] Richcraft has not presented any evidence to support a finding that article 12.15 in the CTA had somehow ceased to exist. Article 12.15 has always been and remains part of the CTA. As a result, I find that the arbitration clause continues to exist.

Issue #2

Does the Applicable Law Article Invalidate the Arbitration Article?

[9] Richcraft argues that the arbitration clause in the CTA is invalid because it is contradicted by the Applicable Law clause. In particular, Richcraft argues that in article 12.06, the parties agreed to attorn to the exclusive jurisdiction of the courts of Ontario with respect to any matter arising under this agreement, which it submits invalidates the Arbitration clause.

[10] Urbandale submits that the two articles can be read together to give meaning to both paragraphs and the specific Arbitration article 12.15 should be carved out from the general provision set out in the Applicable Law article 12.06.

[11] The cases of, Sattva Capital Corp. v. Creston Moly Corp, [2014] Section 53, Tercan Contractors Ltd V British Columbia (Transportation and Highways), [2010] SCC 4, para. 64 and Kahlon v. ACE INA Insurance, [2019] ONCA 774 at para. 6, state that contracts must be read as a whole, in harmony with other terms of the contract, and that all words in a contract must, to the extent possible, be given meaning.

[12] A concise summary of the principles to be used to interpret a commercial contract were outlined by Lauwers J.A. in the Appeal decision at paragraph 22, when he referred to the case of Ventas Inc. v. Sunrise Senior Living Real Estate Investment Trust, [2007] 85 OR [3d] 254 (C.A.) at para 24 he stated as follows:

Broadly stated... a commercial contract is to be interpreted

(a) As a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective;

(b) By determining the intention of the parties in accordance with the language they have used in the written document and based upon the "cardinal presumption" that they have intended what they have said;

(c) With regard to objective evidence of the factual matrix underlying the negotiation of the contract, but without reference to the subjective intention of the parties; and (to the extent there is any ambiguity in the contract);

(d) In a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.

[13] Richcraft submits that article 12.06 should be interpreted to mean that "any matter arising under this agreement" including the interpretation sought by Urbandale, must be decided by the courts of the Province of Ontario. This interpretation would render the arbitration clause at article 12.15 meaningless, which is contrary to the first principle set out in Ventas decision.

[14] Article 12.06 is titled Applicable Law, which indicates an intention of the parties to specify which law applied to the agreement. The agreement is to be governed by Ontario law and the parties attorned to the exclusive jurisdiction of the courts of the Province of Ontario with respect to any matter arising under this agreement.

[15] The term attorn has been defined in the legal dictionaries in terms of a transfer of a tenancy or a mortgage clause. I find that attorn as used in article 12.06 means "transfer to or to submit to" the exclusive jurisdiction of the courts of Ontario.

[16] The contra preferendum rule is not applicable in these circumstances as there was no imbalance of negotiating power between the patties. Both parties were sophisticated, had access to independent counsel to review the agreement, and they were able to negotiate the terms of this commercial contract.

[17] I find that both the Applicable Law article and the Arbitration article can be read as complementary to each other in a manner that gives meaning to both articles and accords with sound commercial principles. Article 12.06 is intended to specify that Ontario law applies to the CTA and that the parties attorn to the jurisdiction of Ontario courts, unless otherwise specified which is the case with the arbitration clause in Article 12.15.

[18] Arbitration clauses have been recognized by Ontario law in the Arbitration Act and by Ontario courts which have held that arbitration clauses are to be given a large and liberal interpretation as stated in the text written by Geoff R. Hall, Canadian Contractual Interpretation Law, 2nd edition (Toronto: Lexis Nexis, 2012) at paragraph 8. 1.4.

[19] In BG Chelo International Ltd. v. British Columbia Hydro Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12 at paragraphs 24-25 the Supreme Court held that the general terms of a contract shall be interpreted to be qualified by the specific terms and stated as follows:

"…A frequent result of this kind of analysis will be that the general terms of a contract will be seen to be qualified by specific terms - or, to put it another way, where there is apparent conflict between a general term and a specific term, the terms may be reconciled by taking the parties to have intended the scope of the general term to not extend to the subject matter of the specific term."

[20] The CTA must be read as a whole, in a manner that gives meaning to all of its terms which is possible. I find that the arbitration term set out in article 12.15 is a specific term which the parties intended to take precedence over the general term set out in article 12.06.

Disposition:

[21] The question submitted for arbitration in the Notice to Arbitrate involves an interpretation of the CTA along with the 2005 Agreement with regards to the sale or conveyance of lots for the Kanata Lakes project. The LPA (which did not contain an arbitration clause) for the Riverside South project has already been the subject of litigation. I find that the issue submitted for arbitration falls within the arbitrator's scope as set out in Article 12.15 of the CTA for the Kanata Lakes development project.

[22] For the above reasons, I find that the Arbitration article 12.15 of the CTA is valid and may be read together with article 12.06 to give meaning to all articles in the agreement and that the parties intended the general term of article 12.06 to be qualified by the specific term of article 12.15.

[23] The parties shall be permitted to hold discoveries as agreed or as determined by the Arbitrator. The parties also agree that the record filed with the Ontario Court of Appeal for the appeal, involving an interpretation of the 2005 Agreement with regards to the LPA applicable to the Riverside South lands may be filed as evidence in this Arbitration. The Arbitrator shall also decide whether the dispute submitted to arbitration by Urbandale under the CTA is "res judicata" as submitted by Richcraft. Finally, the parties were both agreeable to the appointment of the Honourable Douglas Cunningham as the arbitrator for this matter and he is so appointed.

Costs:

[24] If the parties are unable to agree on costs, Urbandale shall have 10 days to make submissions. Richcraft shall have 10 days to respond and Urbandale shall have 7 days to reply.

Released: November 22, 2019

COURT FILE NO.: CV-19-00079283-000

DATE: 20191122

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

Urbandale Corporation

Applicant/Respondent by Cross-Application

– and –

Richcraft Homes Limited

Respondent/Applicant by Cross-Application

REASONS FOR JUDGMENT

R. Smith J.

Released: November 22, 2019