Grandfield Homes (Kenton) Ltd. v. Chen, 2020 ONSC 5230

COURT FILE NO.: CV-19-00617250

DATE: 20200901

SUPERIOR COURT OF JUSTICE - ONTARIO

GRANDFIELD HOMES (KENTON) LTD., Applicant

AND:

XIAO LU CHEN, Respondent

BEFORE: Kimmel J.

COUNSEL: Michael Doyle, for the Applicant/Responding Party

Malik Martin, for the Respondent/Moving Party

HEARD: August 6, 2020

ENDORSEMENT

Overview and Preliminary Matters

[1] The respondent Ms. Chen (the “Purchaser”) entered into an Agreement of Purchase and Sale dated May 5, 2017 (the “APS”) to purchase a pre-construction home (the “Home”) from Grandfield Homes (Kenton) Ltd. (the “Vendor”). The purchase price of the Home was $3,350,000.00. The APS required payment of deposits totalling $502,500.00 on the specified dates under the APS, including $100,000.00 on the date the APS was signed. She paid the last deposit installment of $102,500.00 on the 120^th day following the execution of the APS.

[2] The closing date for the purchase was extended by agreement, the last extension having been to February 20, 2019 at the request of Chen. On the day prior to closing, Chen’s litigation counsel sent a notice indicating that she was purporting to terminate the APS as a result of the Vendor’s failure to give written notice under s. 6(g)(iii) of the Tarion Addendum to the APS[^1] regarding the satisfaction of non-waivable Early Termination Conditions (“ETC’s”). On February 20, 2019, a Request for Arbitration, dated February 19, 2019, was delivered to Grandfield’s lawyer on behalf of Chen (the “Request for Arbitration”). The Request for Arbitration seeks a determination by an arbitrator, appointed by Chen, that the APS has been terminated or rescinded. Chen also makes allegations of undue influence and misrepresentation, and that the APS is unconscionable and voidable. She seeks a refund of all of the deposit monies she paid.

[3] Grandfield put Chen on notice on February 19, 2019 that it would treating Chen’s refusal and failure to close on February 20, 2019 as a breach of the APS. Grandfield takes the position that it is entitled to retain the deposits provided by Chen pursuant to the APS and seeks, by this Application, a declaration to that effect. Grandfield denies the allegations made by Chen. Grandfield maintains that Chen had no right to terminate the APS.

[4] Chen brought a cross-motion to stay the Application in favour of her Request for Arbitration. Grandfield argues that Chen had no right to make the Request for Arbitration, and that the Application should not be stayed in favour of an improperly constituted arbitration.

[5] When this Application came on for hearing on July 22, 2020 before Morgan J., there were two preliminary matters raised: (i) the applicant’s motion to compel the respondent to re-attend to answer questions refused on cross-examination; and (ii) the respondent’s cross-motion to stay the Application in favour of the arbitration that she initiated in April of 2019. Morgan J. directed that the respondent’s cross-motion for a stay of this Application should proceed first as its outcome could have implications for the Application and the applicant’s refusals motion and could also have cost implications.

[6] Chen’s cross-motion for a stay of the Application was adjourned to August 6, 2020 before me. The parties agree that the primary relief on the application is not before me to be decided on its merits at this time, by summary judgment or otherwise. However, there are some overlapping issues between the Application itself and the motion to stay that I will have to decide. As well, some of the alternative relief sought in the notice of application, relating to the conduct of the arbitration proceeding, has been reconstituted into a further motion by the applicant, which is before me to decide in the event that I grant the respondent’s cross-motion to stay this Application in favour of the arbitration.

[7] The respondent’s cross-motion for a stay of this Application turns upon a determination of whether the arbitration provisions contained in the Tarion Addendum to the APS have been triggered or engaged. That, determination involves the interpretation and application of ss. 6, 10, 11 and 15 of the Tarion Addendum.

[8] For the reasons that follow, I find that there is no arbitrable dispute about the termination of the APS. The Purchaser could not have terminated the APS under either s. 6(g)(iii), as she purported to do, nor s. 6(c), of the Tarion Addendum. Therefore, the arbitration provisions under s.15 of the Tarion Addendum were not triggered or engaged. The dispute about the termination of the APS by the Vendor arises as a result of the Purchaser’s alleged breaches which is expressly explicitly carved out of the disputes to be arbitrated.

[9] Even if I had been persuaded that this dispute about the purchaser’s breaches could arguably fall within any statutory arbitration clause, this is a case where I would have exercised my discretion not to stay this Application and require the parties to go to arbitration given the state of readiness of the record in this Application, in contrast with the status of the arbitration which is in its infancy, without even an agreed or properly appointed arbitrator in place. Accordingly, and for other reasons outlined in this endorsement, the Purchaser’s cross-motion seeking a stay of this Application in favour of arbitration is dismissed.

Factual Background and Chronology

[10] The following facts are not contentious:

a. The APS was signed on May 5, 2017 for a purchase price of $3,350,000.00.

b. The Purchaser paid total deposits of $502,500.00.

c. The Vendor did not check off either “yes” or “no” in section s. 6(c) of the Tarion Addendum to confirm whether the APS was subject to ETC’s. The Vendor says this was due to inadvertence.

d. Even though “yes” had not been checked off in s. 6(c), the section immediately following, s. 6(d) of the Tarion Addendum, specified that the obligations of the Purchaser and the Vendor to complete the purchase and sale transaction were subject to the satisfaction (or waiver, if applicable) of one of the ETC’s prescribed in Schedule A, namely that: the Vendor be satisfied by the 60^th day after entering into the APS that the Purchaser had the financial resources to complete the purchase transaction (the “financial resources ETC”). This condition was typed in under the heading Condition #1 in s. 6(d) of the Tarion Addendum, as follows:

Condition #1 (if applicable)

Description of the Early Termination Condition:

The Vendor is satisfied that the Purchaser has the financial resources to complete the purchase transaction.

There is no Approval Authority for this Condition.

The date for the satisfaction of this Condition is the 60^th day after the date that the Purchaser has entered into this agreement of purchase and sale.

e. This financial resources ETC is identified in Schedule A to the Tarion Addendum as one of the “Types of Permitted Early Termination Conditions,” at paragraph1 (b)(iv). It is identified as a condition that is for the benefit of the Vendor and may be waived by the Vendor in its sole discretion.

f. No notice of the satisfaction or waiver of the specified ETC was provided by the Vendor on or before July 5, 2017, the 60^th day after the APS was signed.

g. The closing date for the purchase and sale transaction under the APS was extended multiple times, the last time being on January 14, 2019 when it was extended at the request of the Purchaser to February 20, 2019.

h. On February 19, 2019, the day before the final closing date, the Purchaser sent a notice indicating that she was terminating the APS because the Vendor had not provided notice under s. 6(g)(iii) of the Tarion Addendum of the satisfaction or waiver of the ETC, and she demanded the return of all deposit monies she had paid under the APS.

i. The Vendor advised the Purchaser on February 19, 2019 that it did not accept the validity of the Purchaser’s notice of termination and put the Purchaser on notice that it would treat the Purchaser’s refusal and failure to close as a breach of the APS, resulting in the automatic termination of the APS if it did not close on February 20, 2019, and resulting in the forfeiture of all deposits paid and possible claims for losses and damages in contract and/or equity.

j. The Purchaser delivered the Request for Arbitration, dated February 19, 2019 on February 20, 2019, seeking a declaration that the APS was rescinded or terminated or unenforceable and the return of her deposit monies.

k. The arbitrator chosen by the Purchaser accepted his appointment by the Purchaser on March 12, 2019.

l. The Vendor advised on March 20, 2019 that it did not consent to the appointment of the arbitrator.

m. The Vendor’s notice of application was issued on April 4, 2019.

n. The Purchaser’s cross-motion for a stay of the Application was initiated in early June of 2019.

o. The cross-motion for a stay and the Application came before the court for the first time together on August 6, 2019.

p. The cross-motion and Application were adjourned two more times before coming on for hearing together again on July 22, 2020, at which time the Purchaser argued that the cross-motion should proceed first and it was so ordered by Morgan J.

The Provisions of the APS and Tarion Addendum

[11] Section 6 of the Addendum describes “Early Termination Conditions.” Section 6(c) provides that:

The Vendor confirms that the Purchase Agreement is subject to Early Termination Conditions that, if not satisfied (or waived, if applicable), may result in the termination of the Purchase Agreement.

It then provides the option for the Vendor to fill a blank to indicate “yes” or “no”.

[12] Section 6(d) provides that:

If the answer in (c) above is “Yes”, then the Early Termination Conditions are as follows. The obligation of each of the Purchaser and the Vendor to complete this purchase and sale transaction is subject to satisfaction (or waiver, if applicable), of the following conditions and any such conditions set out in an appendix headed Early Termination Conditions….

After which there is space provided for in the Tarion Addendum for the description of two Early Termination Conditions: Condition #1 (if applicable) and Condition #2 (if applicable). The financial resources condition was inserted under Condition #1.

[13] There was no appendix to this APS headed “Early Termination Conditions”. Schedule A of the Tarion Addendum describe the types of permitted ETC’s that can be included under s. 6. The financial resources ETC that was included under the heading “Condition #1” in s. 6(d) of the Tarion Addendum appended to the APS corresponds with the type of permitted ETC identified in paragraph1(b)(iv) of Schedule A to the Tarion Addendum. It is indicated to be for the benefit of the Vendor.

[14] Section 6(h) of the Tarion Addendum applies to the types of ETC’s permitted under paragraph 1(b) of Schedule A. This section provides that:

(i) Conditions in paragraph 1(b) of Schedule A may be waived by the Vendor;

(ii) The Vendor shall provide written notice on or before the date specified for satisfaction of the condition that: (A) the condition has been satisfied or waived; or (B) the condition has not been satisfied or waived, and that as a result the Purchase Agreement is terminated; and

(iii) If notice is not provided as required by subparagraph (ii) above then the condition is deemed satisfied or waived and the Purchase Agreement will continue to be binding on both parties.

[15] Section 6(g) of the Tarion Addendum applies to the types of ETC’s permitted under paragraph 1(a) of Schedule A to the Tarion Addendum. This section does not permit the waiver of those ETC’s and requires notice of their satisfaction, failing which the condition is deemed not satisfied and the APS is terminated.

[16] Sections 10 and 11 of the Tarion Addendum provide for the termination of the APS.

10. Termination of the Purchase Agreement

(a) The Vendor and the Purchaser may terminate the Purchase Agreement by mutual written agreement. Such written mutual agreement may specify how monies paid by the Purchaser, including deposit(s) and monies for upgrades and extras are to be allocated if not repaid in full.

(b) If calendar dates for the applicable Critical Dates are not inserted in the Statement of Critical Dates or if any date for Closing is expressed in the Purchase Agreement or in any other document to be subject to change depending upon the happening of an event (other than as permitted in this Addendum), then the Purchaser may terminate the Purchase Agreement by written notice to the Vendor.

(c) The Purchase Agreement may be terminated in accordance with the provisions of section 6.

d) Nothing in the Addendum derogates from any right of termination that either the Purchaser or the Vendor may have at law or in equity on the basis of, for example, frustration of contract or fundamental breach of contract.

11. Refund of Monies Paid on Termination

(a) If the Purchase Agreement is terminated (other than as a result of breach of contract by the Purchaser), then unless there is agreement to the contrary under paragraph 10(a), the Vendor shall refund all monies paid by the Purchaser including deposit(s) and monies for upgrades and extras, within 10 days of such termination, with interest from the date each amount was paid to the Vendor to the date of refund to the Purchaser. [emphasis added]

[17] Section 15 of the Tarion Addendum contains the Arbitration provision relied upon by the Purchaser:

15. Disputes Regarding Termination

(a) The Vendor and Purchaser agree that disputes arising between them relating to termination of the Purchase Agreement under section 11 shall be submitted to arbitration in accordance with the Arbitration Act, 1991 (Ontario) and subsection 17(4) of the ONWHP Act.

(b) The parties agree that the arbitrator shall have the power and discretion on motion by the Vendor or Purchaser or any other interested party, or of the arbitrator’s own motion, to consolidate multiple arbitration proceedings on the basis that they raise one or more common issues of fact or law that can more efficiently be addressed in a single proceeding. The arbitrator has the power and discretion to prescribe whatever procedures are useful or necessary to adjudicate the common issues in the consolidated proceedings in the most just and expeditious manner possible. The Arbitration Act, 1991 (Ontario) applies to any consolidation of multiple arbitration proceedings.

(c) The Vendor shall pay the costs of the arbitration proceedings and the Purchaser’s reasonable legal expenses in connection with the proceedings unless the arbitrator for just cause orders otherwise.

(d) The parties agree to cooperate so that the arbitration proceedings are conducted as expeditiously as possible, and agree that the arbitrator may impose such time limits or other procedural requirements, consistent with the requirements of the Arbitration Act, 1991 (Ontario), as may be required to complete the proceedings as quickly as reasonably possible.

(e) The arbitrator may grant any form of relief permitted by the Arbitration Act, 1991 (Ontario), whether or not the arbitrator concludes that the Purchase Agreement may be properly terminated.

Framework for the Analysis of the Issues to be Decided on the Cross-Motion for a Stay

The Parties’ Positions

[18] Section 15 of the Tarion Addendum submits to arbitration disputes between the Vendor and Purchaser about termination under s. 11. Section 11 applies to any termination other than termination as a result of a breach by the Purchaser. Section 10 enumerates various grounds on which the APS might be terminated (most of which are not as a result of a breach by the Purchaser, including a termination under s. 6 as a result of the failure of an ETC).

[19] The issue in this case comes down to whether the arbitration clause can be engaged by a purported termination by the Purchaser under s. 6 at a time when there were no unfulfilled ETC’s. The Vendor argues that the stated s. 6 grounds for termination relied upon by the Purchaser could not apply because the only ETC that was specified in the Tarion Addendum was deemed satisfied or waived under s. 6(h) long before the Purchaser purported to terminate the APS for its failure. According to the Vendor, the APS could thus only have been terminated as a result of a breach by the Purchaser (her refusal and failure to close) which takes it outside of s. 11 and the agreement to arbitrate in s. 15 of the Tarion Addendum.

[20] The Purchaser argues that once she sent her notice of termination due to the failure of the s. 6 ETC and submitted its Request for Arbitration, the dispute over her entitlement to terminate under ss.6 and 10 and her entitlement to the return of her deposit under s. 11 of the Tarion Addendum must be arbitrated. The Purchaser also relies on the other grounds set forth in her Request for Arbitration for the rescission of the APS or for her to be excused from the performance of her obligations under it, due to alleged misrepresentations, undue influence or unconscionability. She argues that her Request for Arbitration of the dispute over the ETC’s, as well as the related tort claims, all fall within the scope of the arbitrator’s jurisdiction to decide. If there is a dispute about whether she was in breach of the APS by refusing to close on February 20, 2019 that too should be arbitrated, according to the Purchaser.

The Statutory Framework and Guiding Cases

[21] The analysis begins on the premise that the court is directed by the Arbitration Act, on the motion of a party, to stay judicial proceedings when there is an applicable arbitration agreement. Section 7 provides of the Arbitration Act:

Stay

7(1) If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.

[22] The threshold questions by which the court must determine whether s. 7(1) of the Arbitration Act is engaged, that I need to answer, were outlined by the Court of Appeal for Ontario in Haas v. Gunasekaram, 2016 ONCA 744, at para. 17:

1. Is there an arbitration agreement?

2. What is the subject matter of the dispute?

3. What is the scope of the arbitration agreement?

4. Does the dispute arguably fall within the scope of the arbitration agreement?

And if so, then the court is to consider whether, under s. 7(2) of the Arbitration Act:

5. Whether there are grounds on which the court should refuse to stay the action?

[23] The Supreme Court of Canada has recently considered s. 7 of the Arbitration Act, 1991, S.O. 1991, c.17, in Uber Technologies Inc. v. Heller, 2020 SCC 16. In Uber Technologies, the Supreme Court was concerned with the statutory exception to the stay of proceedings under s. 7(2) of the Arbitration Act due to the invalidity (unconscionability) of the arbitration agreement:

[30] But a court has discretion to retain jurisdiction and decline to stay proceedings in five circumstances enumerated in s. 7(2):

Exceptions

(2) However, the court may refuse to stay the proceeding in any of the following cases:

1. A party entered into the arbitration agreement while under a legal incapacity.

2. The arbitration agreement is invalid.

3. The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.

4. The motion was brought with undue delay.

5. The matter is a proper one for default or summary judgment.

[24] The Supreme Court in Uber Technologies re-affirmed the competence-competence principle and the deference that is generally afforded to arbitrators by the courts:

[34] The doctrine established in Dell [Dell Computer Corp. v. Union des consommateurs, 2007 SCC 34, [2007] 2 S.C.R. 801] is neatly summarized in its companion case, Rogers Wireless Inc. v. Muroff, 2007 SCC 35, [2007] 2 S.C.R. 921, at para. 11:

The majority of the Court held that, when an arbitration clause exists, any challenges to the jurisdiction of the arbitrator must first be referred to the arbitrator. Courts should derogate from this general rule and decide the question first only where the challenge to the arbitrator’s jurisdiction concerns a question of law alone. Where a question concerning jurisdiction of an arbitrator requires the admission and examination of factual proof, normally courts must refer such questions to arbitration. For questions of mixed law and fact, courts must also favour referral to arbitration, and the only exception occurs where answering questions of fact entails a superficial examination of the documentary proof in the record and where the court is convinced that the challenge is not a delaying tactic or will not prejudice the recourse to arbitration. [emphasis added]

[25] The Arbitration Act allows an arbitrator to rule on her/his own jurisdiction:

17. (1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.

Independent agreement

(2) If the arbitration agreement forms part of another agreement, it shall, for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the main agreement is found to be invalid.

The Issues to be Decided

[26] The above principles set the stage for the issues to be decided in this case, which are:

a. Is s. 7(1) of the Arbitration Act engaged: is there an arbitration agreement that applies to the subject matter of this Application? The arguments in this case focused on the interpretation of the Tarion Addendum which contains the agreement to arbitrate.

b. Does the competence-competence principle require an arbitrator, rather than the court, to determine whether the subject matter of this Application is covered by the arbitration agreement? The arguments in this case focused on whether the arbitration clause of the Tarion Addendum can be said to have been triggered or engaged, having regard to the competing allegations of the parties as to the grounds for the termination of the APS.

c. Are there grounds under s. 7(2) of the Arbitration Act on which the court should refuse to stay this Application? The arguments in this case focused on whether there has been undue delay in the pursuit of this cross-motion to stay, and also whether this would be a proper case for summary judgment.

A. Is Section 7(1) of the Arbitration Act engaged: Is there an Arbitration Agreement with respect to the Subject Matter of this Application?

1. Is there an Arbitration Agreement?

[27] Section 15 of the Addendum provides that: The Vendor and Purchaser agree that disputes arising between them relating to termination of the Purchase Agreement under s. 11 shall be submitted to arbitration in accordance with the Arbitration Act, 1991 (Ontario) and s. 17(4) of the ONHWPA.

[28] Both parties agree that s. 15 of the Tarion Addendum contains an agreement to arbitrate certain matters.

[29] The Purchaser also seeks to rely upon the deemed arbitration agreement in s. 17(4) of the ONHWPA. Section 17(4) of the ONHWPA deems all agreements between vendors and purchasers of new homes to contain an agreement to submit present or future differences to arbitration. The Vendor argues that this deemed agreement to arbitrate is not engaged.

[30] The Purchaser argues that the ONHWPA arbitration clause broadly applies to all disputes or differences between a vendor and a purchaser arising out of their purchase agreement, relying on Radewych v. Brookfield Homes (Ontario) Limited, 2007 CanLII 23358 (Ont. S.C.), aff’d 2007 ONCA 721. The Radewych case was concerned with whether extra-contractual disputes, such as tort claims, were covered by this clause. In concluding that they were not, the court stated (at paragraph 19) that “subsection 17(4) of the Act requires the arbitration of differences arising out of the agreement, rather than requiring the arbitration of any differences whatsoever, whether arising under an agreement or not," to reinforce that s. 17(4) of the ONHWPA was restricted to differences (disputes) arising under the contract (purchase agreement) and does not apply to extra-contractual disputes.

[31] This entire discussion about s. 17(4) occurred in the context of the broader observation of the court in Radewych, at para. 17, that the ONHWPA, as a whole, provides for statutory warranties and for claims against the fund when those warranties are breached. “[O]n its face, the statute does not deal with anything other than warranty claims.” The Radewych case was not concerned with making the distinction between contractual breaches of the statutory implied warranties and breaches of other contractual clauses.[^2]

[32] Read in context, the scope of the deemed arbitration provisions of s. 17(4) of the ONHWPA is limited to disputes about warranty claims arising out of a new home purchase agreement. None of the Purchaser’s claims in this case (in either this Application and in her Request for Arbitration) are statutory warranty claims. Section 17(4) of the ONHWPA does not apply to the disputes raised in this Application or in the Request for Arbitration.

[33] I find that the only relevant arbitration agreement in this case is the agreement to arbitrate under s. 15 of the Tarion Addendum, specific to disputes relating to the termination of the APS under s. 11.

2. What is the Subject Matter of the Dispute?

[34] Broadly speaking, the dispute between the Vendor and the Purchaser in this Application and in the Request for Arbitration can be characterized to be about whether the Vendor is required to return the Purchaser’s deposit.

[35] The Purchaser claims to be entitled to the return of her deposit because: (i) the APS was terminated due to the Vendor’s failure to confirm whether there were ETC’s and to give notice of the satisfaction or waiver of the applicable ETC’s under s. 6 of the Tarion Addendum; and/or (ii) the APS was rescinded and is void or voidable on grounds of misrepresentation, undue influence and/or unconscionability at common law.

[36] The Vendor claims to have terminated the APS and to be entitled to retain the Purchaser’s deposit as a result of the Purchaser’s breach of the APS for her refusal and failure to close. The Vendor also claims additional damages, beyond the forfeited deposit, as a result of the Purchaser’s refusal and failure to close the purchase of the Home.

3. What is the Scope of the Arbitration Agreement?

[37] The Court of Appeal has taken a broad interpretative approach to the intended scope of an arbitration agreement. In Haas, at para. 29, the Court of Appeal quotes Dancap Productions Inc. v. Key Brand Entertainment Inc., 2009 ONCA 135, 246 O.A.C. 226, at paras. 38, for the proposition that the language of arbitration provisions should be “…generously interpreted to enjoy ‘a wide compass’…‘consistent with the legislative policy…which favours arbitration over litigation where the parties so provide by agreement.’”

[38] This is consistent with the limitations on court intervention in arbitrations that the legislature has prescribed under s. 6 of the Arbitration Act, in addition to the stay provisions under s. 7 of the Arbitration Act.

[39] Under s. 15(a) of the Tarion Addendum, the parties agreed that disputes arising between them relating to the termination of the APS pursuant to s. 11 would be submitted to arbitration. Section 11 provides that: “If the Purchase Agreement is terminated (other than as a result of breach of contract by the Purchaser), the vendor must return the purchaser’s deposit monies.” [emphasis added].

[40] Section 10 of the Tarion Addendum sets out the grounds upon which the APS may be terminated, most of which would not be as a result of breach of contract by the Purchaser. These grounds include: (a) by agreement of the parties; (b) due to a failure by the vendor to insert a Critical Date (giving the purchaser the right to terminate); (c) in accordance with s. 6, when an applicable ETC is not satisfied or waived. Section 10(d) confirms (but does not prescribe) the preservation of the rights of termination of the parties at common law and in equity, some of which could arise as a result of a breach of the APS by the Purchaser. These rights at common law and in equity continue to exist outside of the termination rights conferred in respect of rights and obligations prescribed by the Tarion Addendum, which relate to Critical Dates and ETC’s.

[41] The scope of the arbitration agreement (s. 15 of the Tarion Addendum) is important in this case because it does not purport to apply to all disputes relating to the termination of the APS, but only those “relating to termination of the Purchase Agreement under section 11” which, in turn, excludes termination as a result of the purchaser’s breach of contract. The interpretation of the scope of the agreement to arbitrate, contained in s. 15 of the Tarion Addendum, must balance the general policy of favouring arbitration over litigation with the basic principles of contract interpretation which require the court to give meaning to all provisions of an agreement.

[42] The latter principle of contract interpretation is applicable even when considering it in the context of the Tarion Addendum, which the Court of Appeal has described as the “…sort of document … not meant to be read, still less to be understood.” See Ingarra v. 301099 Ontario Limited (Pevin Court Homes), 2020 ONCA 103, at para. 23 (quoting from Lord Devlin in McCutcheon v. David MacBrayne Ltd., [1964] 1 W.L.R. 125 (U.K.H.L.). Despite the fact that the Tarion Addendum “is a small-font, single spaced, convoluted and confusingly long and obscure document,” its convoluted language must still be worked through, considered and applied by the court. See Ingarra, at para. 24.

[43] A broad and generous interpretation of the scope of the agreement to arbitrate contained in s. 15 of the Tarion Addendum leads me to conclude that it requires the parties to arbitrate all disputes relating to a termination of the APS that occurs as a result of any of the matters prescribed by the Tarion Addendum itself, such as: the establishment and adherence to Critical Dates (and delays) to Closing and the fulfillment and waiver (as applicable) of ETC’s. This also includes disputes about the purchaser’s right to the return of deposit monies in the prescribed circumstances under s. 11. This legislation is concerned with the rights and obligations it creates. It does not cover all disputes between a vendor and a purchaser arising from the termination of the APS for causes or reasons outside of the rights and obligations that it creates, hence the exception in s. 11 for termination as a result of a purchaser’s breach.

[44] Section 15(e) of the Tarion Addendum gives the arbitrator discretion to award any relief available under the Arbitration Act regardless of whether the APS was properly terminated. This allows for the arbitrator to grant relief ancillary to matters that are the proper subject of arbitration. This section would, in the appropriate case, allow a dispute about whether the purchaser breached the APS to be drawn into an otherwise properly constituted arbitration. It does not, however, expand the threshold question of the scope of disputes that can trigger or engage the arbitration provision in the first place.

[45] As a matter of statutory interpretation, there would be no point in excepting from s. 11 the termination of an APS “as a result of breach of contract by the Purchaser” if such disputes could, on their own, trigger or engage the arbitration provisions. The legislature clearly intended that those types of disputes be treated differently.

4. Does the Dispute Arguably Fall Within the Scope of the Arbitration Agreement?

[46] The parties agree that to meet this criterion, it only needs to be arguable that their dispute falls within the scope of s. 15 of the Tarion Addendum. Or, put another way, the court would have to be satisfied that the core dispute about whether the Purchaser is entitled to the return of her deposit monies is clearly outside the scope of s. 15 of the Tarion Addendum.

[47] Any dispute resulting from the termination of the APS by the Purchaser in accordance with s. 6 of the Tarion Addendum would fall within the scope of the agreement to arbitrate.

[48] The Purchaser purported to terminate the APS under s. 6(g) of the Tarion Addendum because of the failure of the Vendor to send a notice confirming or waiving any applicable ETC’s. Although the Purchaser did not rely in her February 19, 2019 termination notice on the Vendor’s failure to confirm whether there were ETC’s by checking the “yes/no” box in s. 6(c), the right of a purchaser to rely on that section to termination an APS is prominently featured in the cases that the Purchaser argues are determinative of this motion, discussed below (Deco Homes and Eyelet). In either event, the Purchaser relies on her notice of termination said to have been given pursuant to s.6 of the Tarion Addendum to arguably bring the parties within the arbitration provisions of s. 15 of the Tarion Addendum. She seeks in her Request to Arbitrate an order that the APS was terminated pursuant to ss. 6 and 10 of the APS.

[49] If it is even arguable that the Purchaser terminated the APS in accordance with s. 6 of the Tarion Addendum, then the dispute about her entitlement to the return of her deposit monies would fall within the s. 15 agreement to arbitrate. The question I must decide at this stage is whether it is arguable that the Purchaser could have terminated the APS as a result of either the alleged failure of the Vendor: (i) to confirm whether there were ETC’s under s. 6(c) of the Tarion Addendum; and/or (ii) to give notice of the satisfaction or waiver of any applicable ETC’s under s. 6(g)? Both sides devoted a significant portion of their submissions to this issue. I have concluded that this is not arguable in this case.

(i) Can a Purchaser Terminate an APS for a Vendor’s Failure to Provide the Confirmation Contemplated by s. 6(c) of the Tarion Addendum

[50] The Purchaser relies heavily on earlier decisions of this court in the cases of Deco Homes (Richmond Hill) Inc. v. Mao, 2019 ONSC 6223, at paras. 32-34, Deco Homes (Richmond Hill) Inc. v. Li, 2019 ONSC 7501 (that adopts the reasoning in the earlier Deco Homes decision of the same judge), and Eyelet, at paras. 10-15, that referred to arbitration disputes about whether a purchaser had the right to terminate their purchase agreement as a result of the vendor’s failure to confirm whether there were ETC’s by checking neither “yes” or “no” under s. 6 (c) of the Tarion Addendum.

[51] The Vendor says that those cases are not binding and that they did not examine the interplay between Tarion Addendum ss. 15 and 11 and the s. 6 termination rights. Rather, in the case of Mao, at para. 31, the decision to refer the dispute to arbitration focused on the existence of a factual dispute arising from the vendor’s assertion that the purchaser was aware that there were no ETC’s, which the purchaser denied. In the case of Eyelet, the decision was influenced by the court’s deference to the arbitrator who had already decided (after a hearing) that he had the jurisdiction to adjudicate this issue. See Eyelet, at para. 8.

[52] The Vendor relies on the appeal decision of the arbitral award in Eyelet Investment Corp. v. Song, 2019 ONSC 5910. This court decided in that appeal that a failure by a vendor to check the “yes/no” box in s. 6(c) of the Tarion Addendum does not give a purchaser a right of termination. This interpretation of s. 6 is consistent with the fact that, unlike other parts of s. 6, s. 6(c) does not specify any right of termination.

[53] The Purchaser argued that the existence of a “debate” in the case law, about whether a failure by a vendor to confirm the existence of ETC’s in s. 6(c) of the Tarion Addendum gives a purchaser a right of termination is enough to give rise to an arguable dispute about her termination of the APS and is enough to trigger or engage the arbitration clause under s. 15.

[54] The Purchaser also argued against the appeal decision in Eyelet, that the Vendor’s failure to check off either “yes” or “no” under s. 6 (c) of the Tarion Addendum is not a technicality because the absence of this confirmation creates an ambiguity about whether there are ETCs or not, which implicitly gives rise to a factual inquiry of the parties’ understandings and intentions with respect to the ETC’s.

[55] The Vendor concedes that the language of the Tarion Addendum is dense but maintains that there is no ambiguity here. Section 6(c) is followed by s. 6(d) which provides space for the inclusion of up to two ETC’s (and allows for the inclusion of additional ETC’s in an appendix). In this case, the Vendor did expressly include one specific ETC (the financial resources ETC) on a page that was initialed by the Purchaser when she signed the APS. There can be no implicit dispute about the Purchaser’s theoretical understanding about the inclusion of ETC’s where an ETC has been expressly included under Condition #1.

[56] I agree with the Vendor that this case does not raise a factual dispute about whether there were any ETC’s. The financial resources ETC is clearly indicated as Condition #1 in s. 6 (d).

[57] To the extent that the Purchaser places any reliance on the non-compliance of the Vendor with s. 6(c) of the Tarion Addendum as a ground for her termination of the APS, I adopt the reasoning of O’Brien J. in the Eyelet appeal. The failure of the Vendor to check the “yes/no” box in s. 6 (c) of the Tarion Addendum could not be a ground for the Purchaser to terminate the APS in this case. There is no debate or arguable issue about this, when the specific inclusion of the financial resources ETC and the reasoning of O’Brien J. (equally applicable here) are considered.

[58] The Purchaser, thus, could not have been exercising a right of termination in accordance with the provisions of s. 6 by virtue of that omission or failure by the Vendor. Where it is not arguable that any right of termination by the Purchaser exists under s. 6(c), there is no dispute to arbitrate under s. 15 of the Tarion Addendum.

[59] I will deal with the competence-competence principle later in this endorsement, but suffice it to say that this is one of the precise types of circumstances that the court can and should determine as a matter of law, or mixed fact and law that involves only a superficial examination of the record, that the competence-competence principle does not require the court to defer to an arbitrator to decide.

(ii) The Purchaser’s Purported Termination under s. 6(g) of the Tarion Addendum

[60] The Vendor argues that any purported reliance by the Purchaser on s. 6(g) for a termination right is also misplaced since it does not apply to the financial resources ETC that was included in the APS. Section 6(g) termination rights for purchasers only arise in respect of the types of ETC’s listed in Tarion Addendum, Schedule A paragraph 1(a). The financial resources ETC included as Condition #1 in s. 6(d) in this APS is a Schedule A paragraph (b)(iv) type of condition, which is governed by s. 6(h) of the Tarion Addendum. That condition was deemed waived by s. 6(h).

[61] I agree with the Vendor that the Purchaser could not have had a s. 6(g) termination right. The assertion by the Purchaser of a non-existent right of termination cannot give rise to a dispute about the termination under the arbitration provisions of s. 15. As I concluded in the previous section of these reasons, where it is not arguable that any right of termination exists under s. 6(g), there is no dispute to arbitrate under s. 15 of the Tarion Addendum.

(iii) The Purchaser’s Purported Reliance on Common Law and Equitable Rights

[62] The Purchaser’s notice of termination relies on s. 6 of the Tarion Addendum but the Request for Arbitration more broadly refers to common law claims of alleged unconscionability, undue influence and misrepresentation. The Purchaser herself describes the disputes in her Request for Arbitration as a dispute over ETC’s and related tort claims.

[63] The Vendor argues that the purported exercise of rights at common law and equity do not, on their own, fall within the scope of the agreement to arbitrate in s. 15. Section 10(e) of the Tarion Addendum simply preserves those rights, in the same way that it preserves the rights of the Vendor to terminate for the Purchaser’s refusal and failure to close. Those rights at common law and equity are not created by, and exist outside of, the Tarion Addendum.

[64] The Vendor says the APS was terminated as a result of the Purchaser’s refusal or failure to close on February 20, 2019 and any dispute about whether the Purchaser is entitled to the return of her deposit monies that turns on whether or not her refusal or failure to close was a breach of the APS falls outside of the arbitration provisions of s. 15 of the Tarion Addendum, unless that dispute is tethered to rights and obligations established by the Tarion Addendum (for example, if the Purchaser had an arguable right of termination under s. 6).

[65] Section 7(5) of the Arbitration Act would allow for an ancillary or associated dispute about the exercise of termination rights at common law or in equity to be arbitrated together disputes properly within the scope of s. 15 of the Tarion Addendum. However, those types of disputes arising from common law and equitable rights do not, on their own, trigger the s. 15 arbitration clause in the absence of a dispute that squarely falls within it.

B. Does the Competence-Competence Principle Require the Court to Defer to an Arbitrator to Determine Whether the Arbitration Agreement Has Been Triggered or Engaged?

[66] The arbitral tribunal (arbitrator) has, by virtue of s. 17 of the Arbitration Act, the jurisdiction and authority to rule on her/his or its own jurisdiction to conduct the arbitration. There is a predisposition towards allowing the arbitrator to decide, in the first instance, matters involving the arbitrator’s jurisdiction. Canadian courts have a policy of enforcing agreements to arbitrate and limiting court intervention in matters that the parties have agreed to arbitrate. See Telus Communications Inc. v. Wellman, 2019 SCC 19, [2019] 2 SCR 144, at paras 51 to 55; Arbitration Act, s. 6.

[67] However, the arbitrator appointed by the Purchaser in this case has not to date been asked to decide, and has not decided, the question of whether the agreement to arbitrate contained in s. 15 of the Tarion Addendum has been triggered or engaged. To answer this question involves the analysis and interpretation of the Tarion Addendum. After fourteen months of litigation, the Purchaser has now asked the court to the preliminary issue of whether to stay the Application. Since I have had to determine whether it is even arguable that the dispute falls within the scope of the s. 15 agreement to arbitrate (and I have decided that it does not), there is no need or efficiency to refer this to be decided by the arbitrator.

[68] This is precisely the type of case where it was appropriate for the court to make that determination, as it falls within the exceptions to the competence-competence principle.

[69] The Supreme Court of Canada’s affirmation in Uber Technologies, at para. 34, of the doctrine requiring a court to first refer jurisdictional challenges to the arbitrator, established in Dell and summarized in Rogers Wireless, requires consideration of the following questions in the discretionary assessment of whether an exception to this doctrine applies:

a. Does the challenge to the arbitrator’s jurisdiction concerns a question of law alone?

b. If the challenge concerns questions of mixed law and fact, can the questions of fact be answered by a superficial examination of the documentary evidence in the record?

c. Is the challenge a delaying tactic that will prejudice the recourse to arbitration?

[70] The jurisdictional challenge in this case is linked to the scope of the agreement to arbitrate and whether it has been triggered or engaged by the dispute over the Purchaser’s entitlement to the return of her deposit monies. Matters of contract interpretation are generally considered questions of mixed fact and law, but the extent of the factual inquiry can widely vary. This case involved only a limited factual inquiry and only a superficial examination of the evidence, focused on the contract (the Tarion Addendum).

[71] The jurisdictional challenge that the court has been asked to decide was not leveraged by the Applicant for delay purposes. It proceeded in tandem with the briefing of the issues to be decided on their merits, regardless of whether they are ultimately to be decided by the court or by an arbitrator.

[72] Efficiency and judicial economy favour a merits-based decision being made in this Application. Although the parties have indicated that they will try to make use of the record that has been developed in this Application if the matter is referred to arbitration, the deferral to an arbitrator at this stage runs the risk of further delay and additional expense for the parties.

[73] In light of my earlier findings that the Purchaser could not have had a right to terminate the APS under s. 6(c) or (g) of the Tarion Addendum, the only real dispute relates to the Vendor’s termination of the APS as result of the alleged breach of the APS by the Purchaser. That is the subject matter of the Vendor’s application, the resolution of which will determine the heart of the dispute between the parties: whether the Purchaser is entitled to her deposit monies back or not.

[74] The other grounds that the Purchaser has raised, by which she seeks to void or rescind the APS may be answers to the Vendor’s claim for her breach of the APS. The arbitrator might have had the residual jurisdiction to decide these issues under s. 15(e) of the Tarion Addendum, but these claims do not trigger or engage the jurisdiction of the arbitrator in the first instance. As I have indicated earlier in this endorsement, the expanded or ancillary jurisdiction of an arbitrator to decide matters beyond the scope of the arbitration agreement only exists when there is a dispute that directly triggers or engages the arbitrator’s jurisdiction.

[75] The outcome might well have been different if there was a genuine dispute about whether the factual circumstances upon which a s. 6 termination right had been exercised by the Purchaser existed, or about whether an agreement to terminate had been reached or about whether the Critical Dates for Closing had been established, extended and/or met. Those would be disputes that the court might well refer to an arbitrator to decide, but none of that is at issue in this case.

C. Are There Grounds Under s. 7(2) of the Arbitration Act on Which the Court Should Refuse a Stay?

[76] Since I have decided that this Application is not a proceeding in respect of a matter to be submitted to arbitration under the applicable agreement to arbitrate contained in s. 15 of the Tarion Addendum, and that I am not required (and have declined) to stay this Application under s. 7(1) of the Arbitration Act, it is not necessary for me to determine whether I might have refused to stay the Application based on any of the exceptions contained in s. 7(2) of the Arbitration Act.

[77] I will therefore only briefly address the two exceptions that the Vendor raised in this case, namely that: (i) the motion to stay was brought with undue delay; and (ii) the matters are proper for determination by way of summary judgment.

(i) Undue Delay

[78] The delay relied on by the Vendor in this case is not attributed to the time it took the Purchaser to initiate the cross-motion for a stay of this Application, which was brought promptly after the Arbitration was commenced. Rather, it is the delay in pursuing an early and preliminary determination of the stay issue that is said to have been undue. It was only after a year of exchanging evidence and conducting cross-examinations and exchanging written arguments, at the return of the hearing of this Application on its merits in July 2020, that the Purchaser for the first time argued that the stay should be dealt with as a preliminary issue.

[79] The delay in bringing on this stay motion has diminished the benefits of what might have otherwise been a quick and less expensive arbitration. The Application is well advanced: the records have been exchanged and almost complete, cross-examinations have been conducted, undertakings have been answered and the matter is ready for a hearing. After fourteen months of litigating through the various steps in the Application, it makes little practical sense to now switch to a private arbitration.

[80] The issue of undue delay should be considered in the context of the litigation as a whole and how it compares with the efficiency objectives of arbitration. See Carillion Construction Inc. v. Imara (Wynford Drive) Ltd., 2015 ONSC 3658, at paras. 54-55. I would have found the Purchaser’s delay in advancing the stay motion to have been undue and those delays to justify a refusal to grant a stay under s. 7(2) of the Arbitration Act, had I not reached the conclusion under s. 7(1) that a stay is not warranted in this case.

(ii) Matters Appropriate for Summary Judgment

[81] If there is no need for a trial, a referral to arbitration should be avoided where further adjudication is unnecessary. See MDS Kingston Inc. v. MDG Computers Canada Inc., 2008 ONCA 656, 299 D.L.R. (4th) 497, at para. 38. I agree with the Vendor that there are some aspects of this Application that might be conducive to summary judgment.

[82] However, the Purchaser’s claims for rescission or to void the APS on grounds of misrepresentation, undue influence and unconscionability, which have been raised in both this Application and in the Request for Arbitration, are not prima facie conducive to summary judgment. While there may not be much of a procedural distinction between summary judgment and this Application at this stage, the question of if, and how, those claims are to be adjudicated on a paper record is not something that I am prepared to determine at this time.

[83] I would not have found this to be a ground to refuse to grant a stay under s. 7(2) of the Arbitration Act if I had not reached the conclusion under s. 7(1) that a stay is not warranted.

Challenges to the Purchaser’s Appointed Arbitrator

[84] I do not need to decide the applicant’s cross-motion challenging the Purchaser’s chosen arbitrator since I have decided not to stay the Application.

[85] I do have concerns about the manner in which the arbitrator was appointed by the Purchaser (and his acceptance of that appointment) without consultation with the Vendor. The Vendor objected to the arbitrator and the arbitration process in a timely manner and the objections have some merit. There is a potential shadow over the arbitrator chosen by the Purchaser because of his involvement in the Eyelet case that was overturned on appeal, in light of the comments of the appeal court concerning his handling of that proceeding (for example, at Eyelet, paras. 34, 37, 42, 46, 55, 48). These findings could create a perception of actual or perceived bias. There were also concerns raised about his terms of arbitration and his fees.

[86] The Purchaser argued that this challenge to the arbitrator’s qualifications should have first been raised for the arbitrator to decide under s. 13 of the Arbitration Act. That assumes that the arbitrator was validly appointed by the Purchaser alone. In my view, he was not. In the absence of a procedure for the appointment of an arbitrator in the Tarion Addendum, if the parties do not agree on the arbitrator then the proper procedure would have been for one of them to apply to the court for an arbitrator to be appointed under s. 10 of the Arbitration Act based on a selection of proposed arbitrators from each side. That did not happen. The Purchaser’s purported unilateral appointment of the arbitrator in this case is a nullity.

[87] If I had stayed this Application on the Purchaser’s cross-motion, I would have granted the Vendor’s motion regarding the appointment of a new arbitrator.

Final Disposition, Costs and Implementation

[88] The Purchaser’s (Respondent’s) cross-motion for a stay of this Application is dismissed.

[89] Counsel for the Applicant advised the court at the conclusion of the hearing that there had been an offer to settle that might be relevant for the court to consider on the question of costs. The Applicant seeks substantial indemnity costs of $10,000.00 for the stay cross-motion heard by me, and partial indemnity costs of $1,000.00 for the attendance before Morgan J. on July 22, 2020.

[90] The Respondent’s primary position was that the costs of this Application should be deferred to the arbitration, but if that was not to occur, the Purchaser asked for $8,500.00 in partial indemnity costs for both the August 6 and July 22, 2020 attendances at the conclusion of argument.

[91] But for the existence of the settlement offer which I have not yet seen, I would have dealt with costs in this endorsement. In light of having been advised of that offer, I will allow the parties to make brief submissions on costs if they are unable to reach an agreement on the entitlement and quantum of costs. I would encourage the parties to try to reach an agreement first. I have afforded them time to try to do that in the schedule for the exchange of cost submissions that I have set out below.

[92] If an agreement on costs is reached, the parties are directed to advise the court of such by September 18, 2020. If the parties are unable to reach an agreement on costs:

a. the Applicant (Vendor) may deliver a brief submission on the costs of this cross-motion and the July 22, 2020 attendance before Morgan J. (of no more than 3 pages double spaced) together with a cost outline on or before September 25, 2020;

b. the Respondent (Purchaser) may deliver a brief responding submission on the costs of this cross-motion and the July 22, 2020 attendance before Morgan J. (of no more than 3 pages double spaced) together with a cost outline on or before October 7, 2020; and

c. the Applicant (Vendor) may deliver a brief reply submission (of no more than 1.5 pages double spaced) on or before October 14, 2020.

[93] All such cost submissions shall be served on opposing counsel and filed with the court by email to my assistant at: linda.bunoza@ontario.ca If the court has not received any cost submissions from the parties by October 14, 2020, or such later date as the parties may ask the deadline to be extended to and the court may permit, the issue of costs will be deemed to be settled without the necessity of any further ruling from the court.

[94] The Applicant requested a chambers appointment to discuss the scheduling and final briefing for the hearing of the Application on its merits, and to determine a procedure for dealing with the Respondent’s outstanding refusals and leave for the filing of any further evidence by the Respondent, if that is being pursued. A hearing date for the Application will also need to be booked. Counsel are directed to make a request (through the online procedure in place for such) for a chambers appointment with me to address these matters. I may hear the Application if my schedule permits, but I am not seized of it.

[95] Notwithstanding Rule 59.05, the orders and directions contained herein are effective from the date of this endorsement and are enforceable without any need for entry and filing. In accordance with Rules 77.07(6) and 1.04, no formal Order need be entered and filed unless an appeal or a motion for leave to appeal is brought to an appellate court. Any party to this endorsement may nonetheless submit a formal Order for original signing, entry and filing when the court returns to regular operations.

Kimmel J.

Date: September 1, 2020

[^1]: The Tarion Statement of Critical Dates Freehold Addendum is a standard form required by the Ontario New Home Warranties Plan Act R.S.O. 1990, c. O.31 (the “ONHWPA”) to be included in purchase agreements for the sale of new freehold homes in the Province (the “Tarion Addendum”).

[^2]: Ferguson J. and her decision in Eyelet Investment Corp v. Li Song et al., 2018 ONSC 3980, at para. 12, took a broader view of the scope and applicability of s. 17(4) of the ONHWPA deemed arbitration clause. She read paragraph 17 of Radewych for the proposition that the deemed arbitration clause applies to all disputes arising out of a new home purchase agreement. Ferguson J.’s decision in Eyelet did not turn on whether the ONHWPA arbitration provisions were engaged. I am not bound by this approach and I do not read the Radewych decision that broadly, nor am I persuaded that s. 17(4) applies to disputes concerning every provision of a new home purchase agreement, or that it applies to any disputes aside from those arising from the statutory warranty claims that the ONHWPA creates. To read the section that broadly would carry with it the implication that virtually every dispute involving a new home purchase would have to be arbitrated. To my experience and understanding, that is not how that section has been interpreted and applied.