Court File and Parties

COURT FILE NO.: CV-21-00672382-0000 COURT FILE NO.: CV-22-00679310-0000 DATE: 20220510

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

WALTER CAMPBELL and OLAKEMI SOBOMEHIN Applicants

• and – TORONTO STANDARD CONDOMINIUM CORPORATION NO. 2600 Respondent

Walter Campbell and Olakemi Sobomehin, self-represented Eric Kerson for the Respondent

AND BETWEEN:

TORONTO STANDARD CONDOMINIUM CORPORATION NO. 2600 Applicant

• and – WALTER CAMPBELL, OLAKEMI SOBOMEHIN and ENID WING SUM CHAN Respondents

Eric Kerson for the Applicant Walter Campbell and Olakemi Sobomehin, self-represented

HEARD: April 12, 2022

PERELL, J.

Reasons for Decision

A. Introduction

[1] Pursuant to s. 46 (1), para. 9 of the Arbitration Act, 1991 [1], Olakemi Campbell (a.k.a. Sobomehin) and Walter Campbell bring an application to set aside an arbitral award requiring them to pay $30,641.72 to the respondent Toronto Standard Condominium Corporation No. 2600. The Arbitrator ordered the Campbells to pay the costs of an arbitration that began as a dispute under the Condominium Act, 1998 [2] about the Campbells’ alleged non-compliance with some rules of the Condominium Corp. The arbitration, however, became notionally or purportedly a dispute about whether the costs for the self-same arbitration were reasonable. Costs typically follow the event; this time, costs notionally or purportedly were the event.

[2] Pursuant to s.46 (1) para. 9 of the Arbitration Act, 1991, the court may set aside an arbitral award when the award was obtained by fraud. In my opinion, the Campbells were tricked into this arbitration, which was notionally or purportedly about costs but actually was an arbitration of substantive issues. In my opinion, the Campbells are the victims of constructive fraud, which focuses on unfairness more than it does on deceit. Although the Condominium Corp. was not deceitful, it misled, outmanoeuvred, and outsmarted the Campbells. The court should not countenance the trickery and the injustice, and I, therefore, set aside the arbitral award.

[3] For the reasons set out below, I, therefore, grant the Campbells’ application, and I dismiss the Condominium’s late arriving cross-applications to enforce the arbitral awards as common area expenses. There shall be no judgment to enforce. I dismiss the application and also the Condominium’s cross-applications without costs.

B. Preliminary Matters

[4] In their Amended Notice of Application, the Campbells raise a variety of matters that are distinct from their request to have the Arbitral Award dated September 6, 2021 set aside pursuant to s. 46 (1), para. 9 of the Arbitration Act, 1991. In these Reasons for Decision, I shall only address the request for relief pursuant to s. 46 (1), para. 9.

[5] I agree with the Condominium Corp.’s submission that the other objections that are raised by the Campbells, some of which are extraneous to the arbitration, if they are anything properly before the court, are matters of an appeal of the arbitrator’s decision. However, no appeal is available to the Campbells.

[6] No appeal is available to the Campbells for any or all of the following reasons: (a) pursuant to the agreement of the parties, the Arbitrator’s decision was final and not subject to appeal; [3] (b) if an appeal was available, it was not brought in time; [4] or (c) if an appeal was available, it is only with leave of the court for an issue of law and leave would not be available in the circumstances of the immediate case.

[7] The time periods for an appeal, however, do not apply to an application pursuant to s. 46 (1) para. 9 of the Arbitration Act. Section 47(2) of the Act provides that the thirty-day time limit in s.47 (1) does not apply if there are allegations of fraud. [5]

[8] I, therefore, shall confine my analysis to s. 46 (1), para. 9 of the Arbitration Act, 1991. In particular, I shall not address the disputed matter of the status certificate, one of the Campbells’ most passionate grievances, save to note that their request for a status certificate is part of the factual background to the arbitration proceedings and their need for the certificate made them very vulnerable to being outfoxed by the Condominium Corp.

C. Procedural and Evidentiary Background

[9] On November 2, 2021, the Campbells (Walter Campbell and Olakemi Campbell a.k.a. Sobomehin) commenced an application against Toronto Standard Condominium Corporation No. 2600 pursuant to among other things, s. 46 (1), para. 9 of the Arbitration Act, 1991. The Campbells delivered an amended Notice of Application in January 2022 supported by Ms. Sobomehin’s affidavits dated January 24, 2022 and February 25, 2022. In their application, on a variety of grounds, the Campbells sought, among other things, an Order setting aside an Arbitral Award dated September 6, 2021 made by Marc Bhalla.

[10] On February 18, 2022, the Condominium Corp. brought a cross-application within the Campbells’ application. In its responding application, the Condominium Corp. sought, amongst other things: (a) an Order enforcing the Arbitral Award made against the Campbells as a judgment of this court; and (b) an Order that the amount of the arbitral award may be added to the common expenses attributable to the unit formerly owned by the Campbells and to be collectible as a common area expense.

[11] The Condominium Corp.’s responding material, which included its cross-application, was supported by the affidavit of Marie Wai Shar Yang dated February 18, 2022. Ms. Yang is a licensed property manager pursuant to the Condominium Management Services Act [6]. She is employed by ComField Management Services Inc. as the property manager for the Condominium Corp.

[12] On April 1, 2022, the Condominium Corp. brought a separate but parallel application to its cross-application. In its own separate but parallel application, (CV-22-00679310-000), the Condominium Corp. sought the identical relief it claimed in its cross-application. This separate application was supported again by the affidavit of Marie Yang dated February 18, 2022. The major difference between the cross-application and the Condominium Corp.’s separate application is that Enid Wing Sum Chan, who had purchased the condominium unit from the Campbells, is joined as a party respondent. The Condominium Corp.’s aim was, if necessary, to have Ms. Chan pay the arbitral award as a common expense and then she could seek indemnification from the Campbells.

[13] Although Ms. Chan had not been served in any of the applications, all the applications came on for a hearing on April 12, 2022.

[14] At the hearing, the Condominium Corp. asked that the Campbells’ application be dismissed and that the first branch of its cross-application and of its the parallel separate application be granted, i.e., that the court order that the arbitral award be made a judgment. The Condominium Corp. asked that the second branch of its cross-application and of its parallel separate application be adjourned so that Ms. Chan could be served and given an opportunity to respond to the request to enforce the arbitral award as a common area expense chargeable to her unit. The Condominium Corp. asked for the adjournment during its responding submissions.

[15] I heard all the applications and reserved judgment. As I shall explain below, I am granting the Campbells’ application and dismissing the Condominium’s cross-application and its application. There is no need to consider the second branch of the cross-application or of the parallel separate application.

D. Facts

[16] Toronto Standard Condominium Corporation No. 2600 is a non-profit condominium corporation incorporated pursuant to the provisions of the Condominium Act, 1998 to govern the affairs of a townhouse-style condominium development at 100 Parrotta Drive in Toronto.

[17] On August 4, 2017, the Campbells purchase a unit in the condominium development described as Suite 95-100 Parrotta Dr. and legally described as Unit 66, Level 2, Toronto Standard Condominium Plan No. 2600 and bearing PIN 76600-0102 (LT).

[18] In December 2018, the Condominium Corp. writes the Campbells about a complaint about noise from their unit. The complainant is Chantal Faria who is another unit owner.

[19] On January 22, 2019, the Condominium Corp.’s Board of Directors address the matter of short-term rentals and whether to proceed by way of an amendment to the condominium’s declaration or by by-laws or rules. No decision, however, is made at the meeting.

[20] In February 2019, the Condominium Corp. retains legal counsel to write the Campbells about the Faria noise complaint. Legal counsel sends a cease and desist letter on February 19, 2019 to the Campbells.

[21] Effective April 12, 2019, the Condominium Corp. makes new rules prohibiting the use of any unit for the purposes of a boarding house, lodging house, rooming house, bed and breakfast, inn, hotel, or other short-term rental.

[22] In May 2019, the Condominium Corp. writes the Campbells again about the Faria noise complaint and about alleged violations of the Condominium Corp.’s new rule prohibiting short-term rentals. At this time, the Campbells are in occupation of their unit with their young child, and they make complaints of their own about Ms. Faria harassing the family.

[23] In June 2019, after the Condominium Corp. enacts its rule prohibiting short-term rentals, the Campbells enter into a one year lease with Fathiyo Jire and Anisa Harun. The term of the lease is from June 3, 2019 to June 30, 2020. The tenancy to Jire and Harun is not a short-term rental.

[24] On July 12, 2019, the Condominium Corp.’s manager issues a notice to the Campbells about more noise complaints and on July 29, 2019, the Condominium Corp. sends the Campbells a Notice of Mediation among the Condominium Corp., Ms. Faria, and the Campbells. The Notice of Mediation states:

WHEREAS pursuant to sections 17(2) and (3) of the Condominium Act, 1998, S.O. 1998, c. 19, ("the Act"), the Corporation has a duty to manage the property and assets of the Corporation […]

AND WHEREAS Ms. Faria is the owner of 93-100 Parrotta Drive, Toronto ("Unit 93") and Mr. & Ms. Campbell are the owners of 95-100 Parrotta Drive, Toronto ("Unit 95"), both within the Condominium;

AND WHEREAS the Unit Owners have allegedly breached the Declaration, By-laws and Rules of the Corporation, with such allegations include but are not limited to:

1. Permitting loud and disturbing noise that disrupts the other Unit Owner's quiet enjoyment of their home;
2. Renting their Unit for short-term accommodation, in contravention of the Condominium's Rules;
3. Intimidating and harassing the Unit Owner with constant complaints, threats and allegations;
4. Mutually exchanging increasing repetitive and incendiary allegations against each Unit Owner that no longer leaves the Condominium with the ability to discern the responsible party or parties; and,
5. Causing the Condominium to expend vital, finite and unbudgeted resources, without result;

AND WHEREAS section 132(4) of the Act provides that a disagreement between the Corporation and the Unit Owners shall be submitted to mediation, and if necessary, binding arbitration, pursuant to the Arbitration Act 1991, S.O. 1991, c. 17;

NOW THEREFORE in accordance with section 132 of the Condominium Act, 1998, Toronto Standard Condominium Corporation No. 2600 hereby gives notice to the Unit Owners that it is submitting the disagreement between the Parties to Mediation, to be conducted at a date to be set by the Mediator, […]

[25] On August 11, 2019, the Campbells send the Condominium Corp. an email message rejecting its suggested mediator and indicating that they will propose alternatives before the end of September.

[26] Also in August 2019, the Campbells’ tenants stop paying rent, but do not vacate the unit. The Campbells commence proceedings before the Landlord and Tenant Tribunal. The tenants do not vacate until January-February 2020.

[27] Pausing here in the narrative to comment, the significance of the tenancy to Jire and Harun is that if there was a breach of the Condominium Corp.’s short-term tenancy rule it would have to have occurred between April and June 2019 before their tenancy or it would have to have occurred during their tenancy.

[28] Returning to the narrative, on September 10, 2019, the Condominium Corp.’s legal counsel corresponds with the Campbells. Counsel states that if the mediation does not proceed, then arbitration may become necessary. Counsel warns that the Condominium Corp. will seek recovery of its costs if arbitration is needed.

[29] In October 2019, the parties agree to engage Marc Bhalla as a mediator. However, on October 31, 2019, in the course of a phone call to establish a process for the mediation, the Campbells withdraw their consent. By this time, the Condominium Corp. has incurred significant costs, largely associated with the demand letters about the noise complaints.

[30] No mediation is arranged, and the Condominium Corp. decides not to pursue enforcement at that time, and it is not until November 17, 2020, that the Condominium Corp. delivers a Notice of Arbitration. In the meantime, the Bill of Costs of the Condominium Corp. reveals that between November 2019 – November 2020, the Condominium Corp.’s legal counsel incurs legal work of over $11,000 on the Campbells’ enforcement file for: (a) ongoing consultations, analysis and recommendations to the Condominium Corp. about enforcing the Condominium Corp.’s rules and regarding ongoing complaints of noise and use of the Campbells’ unit in violation of the rules; (b) preparing materials to respond to the Campbells’ application to the Condominium Authority Tribunal (“CAT”) to obtain records; (c) preparing the Notice of Arbitration and materials for the arbitration.

[31] On October 16, 2020, the Condominium Corp.’s legal counsel writes the Campbells and demands that they cease and desist using their unit for short-term rentals.

[32] On November 17, 2020, the Condominium Corp. delivers a Notice of Arbitration, which states:

WHEREAS pursuant to sections 17 (2) and (3) of the Condominium Act, 1998, S.O. 1998, c. 19 (the “Act”), the Corporation has a duty to manage the property and assets of the Corporation on behalf of the owners and to ensure that all unit owners and occupiers comply with the Act and the Corporation’s registered Declaration, By-laws and effective Rules.

AND WHEREAS the Unit Owners have an obligation to comply with the Act and the Corporation’s registered Declaration, By-laws and effective Rules

AND WHEREAS the Unit Owners have breached the Declaration, By-laws and Rules of the Corporation as well provisions of the Act, including but not limited to, the following conduct:

1. By using the Unit for the purposes of a boarding house, lodging house, rooming house, bed and breakfast, inn, hotel, or other short-term stay lodging facility, including but not limited to, Air BnB and or Vacation Rental by Owner (“VRBO”), contrary to the Rules.

AND WHEREAS the Corporation and the Unit Owners previously attempt to mediate the issues between them, without success and more than sixty (60) days have elapsed since the parties submitted this disagreement to mediation, but were unable to select a mediator.

The Condominium has incurred costs to date in this matter in the total amount of $24,003.43. It is the Condominium’s intention to seek recovery of these costs, and all costs going forward, on a full indemnity basis, in accordance with section 12 of the Condominium’s Declaration.

[33] Pausing here in the narrative, it shall be important to keep in mind for the analysis portion of these Reasons for Decision that in the November 2020 Notice of Arbitration, the only violation of the rules and the only particularized dispute for arbitration is the matter of the Campbells’ alleged violation of the rules prohibiting short-term rentals of the condominium unit. It is also important to note that Ms. Faria’s noise complaint is no longer the focus of the dispute. Her complaint and the Campbells’ countercomplaint have become moot because Ms. Faria has sold her unit and she has moved from the condominium development.

[34] On January 28, 2021, the Condominium Corp. commences a court application for the appointment of an arbitrator pursuant to s. 10 of the Arbitration Act, 1991.

[35] On February 2, 2021, Eric Kerson, legal counsel for the Condominium Corp. writes the Campbells advising them and enclosing a Notice of Application to appoint an arbitrator.

[36] The Campbells retain Seta Boyadjian as legal counsel and on February 10, 2021, the parties agreed that Marc Bhalla would be appointed Arbitrator. After his retainer, Mr. Boyadjian is queried as to the Campbells’ position about the arbitration and about settling the dispute. On February 24, 2021, there is the following email exchange between Mr. Kerson and Mr. Boyadjian:

Mr. Kerson: […] we are looking to (a) finalize the arbitration agreement, including to define the issues in dispute and […] In addition, our offices are advised that a request for a status certificate has been made for the unit. Our offices have provided language advising of the current dispute resolution process, including that the Condominium will be seeking recovery of the costs of this process. If it is in fact your client’s intention to sell the unit, this may provide a complete answer to the Condominium’s current enforcement process, save and except for the subject of costs recovery. In this regard, I would suggest that we can either come to a negotiated resolution of the subject of costs, or we can agree to have the issue of costs decided by the arbitrator. […] [emphasis added]

Mr. Boyadjian: […] I was not aware of the request for the status certificate and will follow up with my clients on that as well. With respect to your email could you please clarify your point regarding a negotiated settlement? Do you mean to say that if the property is in fact being listed for sale, that the Corporation would be agreeable to negotiating a resolution of the subject of costs without the need to finalize the arbitration agreement and without my clients having to pay their portion of the arbitral retainer?

[37] On February 25, 2021, Mr. Kerson sends the following email message to Mr. Boyadjian:

Mr. Kerson: […] With respect to my point about a negotiated settlement, what I mean is that, subject to the parties resolving the substantive issues of the dispute, the only outstanding matter would be that of costs, and which could either be agreed on or determined by the arbitrator. I think that, no matter what, it will be necessary to finalize the arbitration agreement so that the arbitration process is engaged, whether or not the parties actually proceed to arbitrate the dispute. I think it would help if we knew your clients’ intentions. If they are in fact planning to sell the unit, then this will effectively resolve the dispute, and if the parties can agree to the quantum of costs recovery, then I see no need to continue with either the Application nor the arbitration. If you could please advise of your client’s position/intention, I will work with our client to put together a settlement offer on the matter of costs. […] [emphasis added]

[38] On March 1, 2021, Mr. Boyadjian sends an email message advising Mr. Kerson that he is waiting for instructions and on March 2, 2021, Mr. Boyadjian advises Mr. Kerson that the Campbells intend to sell their unit. Mr. Boyadjian asks the Condominium Corp. to make a settlement offer and for it to provide its Bill of Costs breaking down its costs claim. The same day, Mr. Kerson sends Mr. Boyadjian the following email message:

Mr. Kerson: […]. I will prepare and provide a Bill of Costs and Settlement Offer for your client’s consideration. To be clear, however, the enforcement efforts in this matter will not cease until the arbitrator has been appointed. […] Once the arbitrator has been appointed, we will have no issue with an adjournment of the arbitration to permit your clients an opportunity to sell the unit. […]

[39] On March 4, 2021, two significant events occurred. First, the Campbells sign a conditional agreement to sell their condominium townhouse unit to Enid Wing Sum Chan. Second, the Campbells sign an Arbitration Agreement with the Condominium Corp. The Arbitration Agreement between the Condominium Corp. and the Campbells provides, amongst other things:

WHEREAS the [Condominium] and [Campbells] (collectively, the "Parties") are engaged in a dispute regarding those matters set out in TSCC 2600's Notice of Submission of Dispute to Arbitration, dated November 17, 2020, and which is attached to this Agreement to Arbitrate as Schedule "A" (the "Dispute") […]

3. Issues

The Parties agree to have the Arbitrator make a final determination to conclude the following issues:

1. Those matters set out in TSCC 2600's Notice of Submission of Dispute to Arbitration, dated November 17, 2020, and which is attached to this Agreement to Arbitrate as Schedule "A" (Collectively, the "Issues")

The Parties agree to have the Arbitrator render a final and binding decision on their behalf with respect to the Issues and Costs, as set out in Paragraphs 3 and 4 herein, (the "Arbitration Award") upon directing a quasi-judicial, adjudicative process at his sole discretion.

4. Costs

In addition to deciding the Issues, the Parties acknowledge that, pursuant to Section 54 of the Arbitration Act, 1991, the Arbitrator may award costs, at his sole discretion and as he deems appropriate. Such cost considerations include all costs pertaining to the Issues incurred by the Parties prior to entering into this Agreement to Arbitrate and beyond the Arbitration ("Costs").

5. Commitment to Closure

Pursuant to Section 37 of the Arbitration Act, 1991, the Parties agree to be bound by the Arbitration Award in respect of the Issues and Costs as set out in this Agreement to Arbitrate. The Parties confirm that they have engaged the Arbitrator to realize complete and final closures to the Issues. Accordingly, they irrevocably agree not to appeal or attempt to set aside any aspect of the Arbitration Award, including, but not limited to the basis of:

i. Questions of Fact. The Parties irrevocably agree not to appeal, attempt to set aside or submit for judicial review any aspect of the Arbitration Award on questions of fact.

iii. Representation. Each of the Parties hereby acknowledges having the opportunity and capacity to obtain legal representation in respect of this Agreement to Arbitrate and the Arbitration and to engage the services of legal and other representatives in the course of their participation in the Arbitration. The Parties irrevocably agree not to appeal or attempt to set aside any aspect of the Arbitration Award in connection with any appeal rights that they have waived in this Agreement to Arbitrate or otherwise in connection with their representation selection.

The Parties acknowledge and confirm that they have had ample opportunity and capacity to obtain legal representation in advance of entering into this Agreement to Arbitrate. The Parties irrevocably waive any right to claim any future lack of understanding of the lack of appeal rights that they have agreed to be bound to in this Agreement to Arbitrate in the interest of obtaining complete and final closure of the Issues.

[40] I pause here in the narrative to emphasize that the only violation of the rules and the only particularized dispute for arbitration is the matter of the Campbells’ alleged violation of the rules prohibiting short-term rentals of the condominium unit.

[41] Following the signing of the Arbitration Agreement, the parties discuss whether the dispute can be settled on the basis that the only outstanding issue will be the matter of the costs claimed by the Condominium Corp. The Campbells are anxious to settle on this basis because they are concerned that the Condominium Corp.’s claim for costs might imperil the Campbells’ sale to Ms. Chan.

[42] I pause again in the narrative to foreshadow that the discussions between Mr. Kerson and Mr. Boyadjian about settling the terms of the arbitration agreement are crucially significant to the Campbells’ application pursuant to s. 46 (1) para. 9 of the Arbitration Act, 1991. As a close reading of the lawyers’ correspondence will reveal, the lawyers and their clients did not have a common understanding of what isolating the matter of costs meant in word and in deed. The narrative of the events associated with defining the scope of the Arbitrator’s mandate follows.

[43] On March 4, 2021, Mr. Boyadjian sends the following email message to Mr. Kerson:

Mr. Boyadjian: Please see attached the Agreement to Arbitrate signed by my clients. […] My clients have just advised me that they have accepted an offer for the purchase of their unit that is conditional on the purchaser’s lawyer’s review of the status certificate. They would like to expedite a resolution and hope to come to an agreement with your clients before the expiry of the condition which I’m told expires Monday (I have not seen the APS). […]

[44] Also on March 4, 2021, there is a phone call between Mr. Kerson and Mr. Boyadjian following which Mr. Kerson sends the following email message to Mr. Boyadjian:

Mr. Kerson: […] I confirm that I am in the process of pushing our client to put a settlement offer on the table. Our client has incurred costs in this matter over a significant period of time (~2 years), and which costs were also increased as a result of the commencement of the Application. […] Regarding resolution, as I indicated to you over the phone, if we can come to an agreement before the property is sold, then the Status Certificate for the unit can be modified or revised to remove reference to the dispute. If the property sells before a resolution is reached (or an offer is made conditional on such a resolution), then let our offices know and we can discuss substitution of an appropriate security (e.g., a holdback from the proceeds of sale sufficient to satisfy potential costs). […]

[45] On March 5, 2021, Mr. Kerson sends the following email message to Mr. Boyadjian:

Mr. Kerson: [...] With respect to the resolution of this matter and an offer, I will seek instruction from our client to see if there is any way to put an offer on the table before the end of day. Failing this, please advise that the lawyer reviewing the Status Certificate may speak to our offices about any questions they may have, or we may arrange a conference call to discuss. I see no reason why this dispute should hold up the sale of the property.

[46] On March 8, 2021, Mr. Kerson writes Mr. Boyadjian to advise that the Condominium Corp. will settle all matters in exchange for the Campbells’ payment of $35,000.00, inclusive of all legal costs and HST. Mr. Boyadjian sends Mr. Kerson an email asking for his Bill of Costs.

[47] On March 9, 2021, Mr. Boyadjian writes Mr. Kerson to say that if the Condominium Corp. does not deliver its Bill of Costs by March 10, 2021, he will write Mr. Bhalla requesting an urgent hearing to resolve the matter of costs that being the only outstanding issue, and if the Condominium Corp.’s failure to deliver a Bill of Costs causes the sale to Chan to fail, the Campbells will sue for interference with contractual relations. The same day, Mr. Kerson responds that a Bill of Costs will not be provided at that time. He advises that if the Campbells wish to review the Condominium Corp.’s Bill of Costs, then this issue can be put to the arbitrator.

[48] On March 10, 2021, there is a telephone conversation between Mr. Boyadjian and Mr. Kerson and still on 10th of March, Mr. Kerson sends Mr. Boyadjian an email message excerpting the indemnification provision from the condominium declaration. The provision requires the unit owners to indemnify and save the Condominium Corp. harmless against any loss, costs, damage, which the Corporation may suffer or incur from an act or omission of the owner or tenants with respect to the common elements and other units. The indemnification is to be deemed additional contributions toward common expenses payable by the owner and recoverable as such.

[49] On March 11, 2021, Mr. Boyadjian sends the following email message to Mr. Kerson:

Mr. Boyadjian: I write further to our telephone discussion yesterday during which discussed our clients’ respective positions. In addition to the concerns, I raised during our call yesterday regarding the within proceeding, your blanket bill of costs is insufficient in detail. While my clients dispute the allegations against them and their position remains that your client is not entitled to the costs being claimed, they are, on a without prejudice basis, prepared to see this matter at an end and resolve all outstanding disputes on the following basis: (a) payment to the Corporation of the all inclusive sum of $5,000 […]; (b) the Corporation shall execute a full and final release […]; (c) the Corporation shall dismiss the Arbitration, without costs and with prejudice; (d) The Corporation shall dismiss the Application bearing court file number CV-21-00655741-0000, without costs and with prejudice; (e) The Corporation shall remove any and all references to disputes with respect to Suite 95, 100 Parrotta Drive, Toronto, from the Status Certificate […]; (f) the Corporation shall, at its own expense, deliver to Walter Campbell and Olakemi Sobomehin an updated Status Certificate with all references to disputes between the parties removed; (g) the Corporation shall provide any and all confirmations necessary for the benefit of the purchasers of Suite 95, 100 Parrotta Drive, Toronto, that the disputes have been resolved. This offer shall be open for acceptance until 3 p.m. on Friday, March 12, 2021, after which it will be automatically withdrawn.

[50] Pausing here in the narrative, it is worth emphasizing that the factual context of settling the terms of the arbitration was that the Campbells were desperate that the status certification did not scupper the Chan sale. The initial discussions between Mr. Kerson and Mr. Boyadjian were about settling the dispute without an arbitration. The Campbells seemed prepared to pay the Condominium Corp. for its legal expenses in exchange for a clean status certificate. Those discussions, however, cratered when the Campbells would not agree to making a payment without receiving a detailed Bill of Costs and the Condominium Corp.’s position was that it would only provide a Bill of Costs in the arbitration and not before.

[51] On March 12, 2021, Mr. Kerson writes Mr. Boyadjian as follows:

Mr. Kerson: I acknowledge receipt of your e-mail and am seeking instruction from our client. I agree with your assessment that our client’s positions are too far apart to merit further negotiation and feel that arbitration of the issue of costs will be necessary. […] Obviously the Condominium is willing to take steps to facilitate the sale of the property, while maintaining its security against the unit. In this regard, on a without prejudice basis, I would propose to our client that an acceptable resolution of the issue of the status certificate would be that a comfort letter could be provided to any potential purchaser of the unit, under the following conditions: 1. That the Condominium be provided with the Agreement of Purchase and Sale for review; 2. That your clients arrange for either (a) payment of $50,000 in trust to Mr. Bhalla, or (b) an undertaking from their real estate solicitor to hold back $50,000 from the proceeds of sale. I believe this would provide sufficient security for the Condominium, so as to enable the parties to resolve any issues and ensure the sale of the unit can proceed.

[52] On March 12, 2021, Mr. Kerson writes Mr. Bhalla with a copy to Mr. Boyadjian. The email states:

Mr. Kerson: At this point in time, the parties have not been able to resolve all outstanding issues. It is the position of the Condominium that it will be necessary to arbitrate some or all of the remaining issues. […] We would like to set up a conference call to discus the next steps in this process, including those remaining issues which are required to be arbitrated (in particular, a determination of costs), and of the process for moving this matter to a resolution as expediently and cost effectively as possible. […]

[53] On March 16, 2021, Mr. Kerson emails Mr. Boyadjian as follows:

Mr. Kerson: […] I confirm my availability for a discussion with Marc today at 2:30 and tomorrow at 2:00. We can discuss the matter of costs of the Application at that time. I confirm that the Condominium is willing to resolve the matter of costs of the Application within the Arbitration process, together with the other costs sought by the Condominium. I look forward to discussing this matter with you and Marc further at your convenience.

[54] On April 8, 2021, there is a zoom call scheduled with Mr. Boyadjian, Mr. Kerson, and Mr. Bhalla. Before the zoom call, Mr. Kerson sends the following email message to Mr. Boyadjian, which refers to correspondence from Mr. Boyadjian that is not in the evidentiary record:

Mr. Kerson: Thank you for your correspondence. I have had the opportunity to briefly review same in advance of the pending conference call with Marc. In the first place, the Condominium has incurred the fees which are sought, and continues to incur fees in this matter. Any suggestion in the alternative (i.e., that the Condominium is attempting to “back fill” its expenses) is, quite frankly, tantamount to an accusation of fraud. I do not take such accusations lightly. Any further suggestion in this regard may result in escalation.

[55] At the zoom call on April 8, 2021, Mr. Kerson advises Mr. Bhalla that the Condominium Corp. will not consider that the only remaining issue is costs until there is a completed conveyance of the Campbells unit. After the zoom call, Mr. Kerson writes Mr. Boyadjian to advise that the underlying issue of the Campbells’ use of their unit could be resolved by one of three ways:

a. by evidence that the unit has been sold by a copy of an unconditional agreement of purchase and sale or a transfer. Then, the Condominium Corp will consider the underlying issue resolved and the parties can arbitrate the issue of costs. b. the parties agree on terms and entering into a consent Order regarding the Campbells’ use of the unit and the matter of costs would be determined by the Arbitrator. c. by proceeding to the arbitration to resolve the underlying issue.

[56] On April 8, 2021, Mr. Boyadjian responds by email to take issue with Mr. Kerson’s account of the events. In his reply, Mr. Kerson does not back down. The exchange of emails is as follows:

Mr. Boyadjian: […] To date, I have not seen and do not have a copy of the Agreement of Purchase and Sale. I have not represented to you that title has been conveyed and I have never advised you that I provided your office with information that I simply do not have. You have misrepresented our discussion and are characterizing what is obviously a misunderstanding between us as false representations made by me. It is one thing to point out that you are lacking information and evidence regarding the sale of the unit and to take the position that you do not consider the property “sold” until title has been conveyed, but I find the attack with respect to my personal credibility unnecessary and inflammatory. Without delving any further into this point as it is not conducive to this process, I ask that you refrain from such personal attacks in the future. […]

Mr. Kerson: You represented the unit was sold. Whether this was further to an APS or otherwise, it is clear that there is not sufficient evidence to support such an assertion. I took issue with your assertion, not your understanding of the word “sold”. In any event, I was clear in advising you at the end of February that “If they are in fact planning to sell the unit, then this will effectively resolve the dispute.” Aside from your client’s bold assertion that they have entered into an APS for the unit, I have seen no evidence that the unit has been sold. I do not believe it should come as a surprise that the condominium would not actually consider this matter resolved until such evidence has been provided. I look forward to receiving your client’s position once you are able to obtain instruction. [emphasis added]

[57] Pausing here in the narrative, I have added emphasis to Mr. Kerson’s email message to observe the centrality of the idea that a sale of the Campbells’ unit would resolve or at least narrow the dispute to be decided by the Arbitrator. This theme and the idea that the Condominium Corp. will only provide a detailed Bill of Costs as a part of the arbitration is repeated in Mr. Kerson’s next email message.

[58] On April 12, 2021, Mr. Kerson sends the following email message to Mr. Boyadjian:

Mr. Kerson: I need to receive and review a copy of the APS for the unit and be satisfied that the sale of the unit is proceeding in a reasonable period of time, or we need to agree to the terms of an interim award regarding the underlying substantive issues, prior to appearing again before Marc. If we do not receive a copy of the APS, or we are not able to agree to terms of an interim award, then all issues (and not simply costs) will be on the table in the arbitration. Our client has incurred significantly more than $35,000 in legal fees in this matter; that was our client’s offer to settle the matter of costs. I have been clear that if your client’s desire to see an itemized bill of costs, that this will be provided to them in the course of submissions to the arbitrator for costs on a full indemnity basis. […]

[59] On April 14, 2021, Mr. Boyadjian sends the following email message to Mr. Kerson:

Mr. Boyadjian: Please do not take any steps or draft any unnecessary documents or orders until I have had the opportunity to discuss the matter and obtain instructions from my clients. […] In your email of April 8th at 1:28 p.m., you advised that there is insufficient evidence to support the “assertion” that a firm APS has been entered into and that because you have seen no evidence that the unit has been sold, it should come as no surprise that the Corporation would not actually consider this matter resolved until such evidence has been provided. Similarly, there has been no evidence provided to substantiate the Corporation’s claim that $35,000 in legal fees have been properly incurred. Surely the irony is not lost on you. As such, I ask that you please provide a sufficiently detailed and particularized Bill of Costs. […] I only wish to say that I wholly dispute and reject your interpretation of my correspondence. If you wish to escalate the matter as a result of your perception, I trust that you will not take steps without sufficient notice to me. […]

[60] On April 23, 2021, Mr. Kerson sends the following email message to Mr. Boyadjian, which reiterates the idea that if the Campbells sell their unit, then the arbitration will be limited to a determination of costs without need to resolve the underlying substantive issue of the use of the unit:

Mr. Kerson: I have not had a response to my e-mail […]. The dispute between our clients remains unresolved. An agreement to limit the arbitration to a determination of costs was predicated on the representation that the unit had been sold, which would have resolved the underlying substantive issue of the use of the unit. No further information with respect to the sale of the unit has been forthcoming. As a result, the arbitration must address all issues. As I have indicated before, there are 3 options for moving this matter forward in advance of the further conference call with Marc on May 6: […] At this point, given that I do not anticipate being able to agree to an interim award, I wish to make it clear that absent the receipt of an APS satisfactory to the Condominium, it will be our client’s position that all matters need to be addressed in the arbitration, and we will ask that Marc establish a timeline for the exchange of material. I look forward to receipt of your client’s position at your earliest convenience. [emphasis added]

[61] On May 7, 2021, the Campbells requested a Status Certificate for their pending sale. The Condominium Corp. prepares a Status Certificate that gives notice of the dispute between the Condominium Corp. and the possible effect of that dispute on the common elements liability of the Campbells’ unit. The Status Certificate stated, amongst other things, as follows:

8. There are no amounts that the Condominium Act, 1998, requires to be added to the common expense payable for the unit, EXCEPT,
   1. The unit is currently the subject matter of a dispute with the Corporation with respect to compliance with the Condominium Act, 1998 as well as the Corporation's Declaration, By-laws and/or Rules … the Corporation will be seeking an arbitral award enforcing compliance with the Condominium Act, 1998 as well as the Corporation's Declaration, By-laws and/or Rules. The Corporation will be seeking to recover its costs of this process, and which amounts if unpaid will be sought to be charged back against the unit and recoverable as a common expense; …

[62] On May 14, 2021, the Campbells’ sale to Chan closed. On the application now before the court, there is no evidence as to the terms upon which the transaction closed. The evidentiary record does not indicate whether there was a holdback or any agreement between the Campbells and Ms. Chan to deal with the unresolved dispute between the Campbells and the Condominium Corp.

[63] After the completion of the sale, the arbitration got underway. With the Campbells’ departure from their unit in the Condominium, the parties discussed what should be the scope of the arbitration. The Condominium Corp.’s expressed position was that the only outstanding matter was the costs of the arbitration. That was the understanding of the Campbells as well. The parties agreed that the subject matter of the dispute was which party was to pay the costs of the arbitration and the scale and amount of those costs.

[64] The arbitration proceeded as a hearing in writing. Both sides were represented by counsel. On June 30, 2021, the Condominium Corp. delivered its arbitration submissions. The Campbells were taken by surprise by the Condominium’s submissions which dealt with the entire history of the use of the Campbells’ unit at the condominium. The Condominium Corp. was relying on this entire history as the justification for claim costs of $50,961.95 from the Campbells, representing the recovery of costs on a full indemnity basis.

[65] On July 30, 2021, the Campbells delivered their arbitration submissions. They responded to the Condominium Corp.’s submissions about the entire history of the use of their former unit at the Condominium. The Campbells sought $34,278.54 representing the recovery of costs on a full indemnity basis.

[66] On August 6, 2021, the Condominium Corp. delivered its reply submissions.

[67] From a temporal perspective, the Condominium Corp.’s Bill of Costs is broken down as follows:

Time Period	Fees
Feb-June 2019	$2,052.50
July 2019-Oct. 2019	$9,205.00
Nov. 2019-May 2020	$7,908.50
July 2020-Dec. 2020	$3,785.50
Jan. 2021-Feb. 2021	$9,081.00
March 2021-May 2021	$6,446.00
June 2021	$4,664.00
Total	$43,122.50

[November 19, 2020 – Notice of Arbitration]

[68] On September 6, 2021, the Arbitrator issues his 100-paragraph in length decision. He awards the Condominium Corp. its legal costs and expenses of $30,641.72. In his award, paragraphs 1-9 describe the parties, the issues, and the evidentiary record (9 paras.). Paragraphs 10-30 and 55-57 describe the Condominium Corp.’s position (24 paras.). Paragraphs 31-54, describe the Campbells’ position (24 paras.). Paragraphs 58-66 analyze the short-term rental issue (9 paras.). Paragraphs 67-69 analyze the Campbells’ complaint about not receiving communications from the Condominium Corp. (3 paras). Paragraphs 70-72 analyze the Campbells’ relationship with Ms. Faria and her absence from the arbitration (3 paras.). Paragraphs 73-78 analyze the circumstance that the Arbitrator had been asked to be the mediator for the failed mediation (6 paras.). Paragraphs 79-83 analyze the hours of work undertaken by the Condominium Corp.’s counsel because of the Campbells’ contravention of the short-term rental rule (5 paras.). In paragraph 84, the Arbitrator rejects the Campbells’ submission that their contribution to common expenses, including the special assessment is enough contribution to costs (1 para.). Paragraphs 85-86, analyze and reject the Campbells’ submission that the Condominium Corp. is relying on the indemnification provision in the condominium declaration to claim costs (2 paras.). Paragraphs 87-94 reject the Campbells’ submission that the Condominium Corp.’s enforcement proceedings were biased, not even-handed with respect to Ms. Faria, unfairly prosecuted, and unreasonable (8 paras.). In paragraphs 95-100, the Arbitrator calculates his award.

[69] The Arbitrator’s essential finding, upon which his whole award depends, is set out in paragraph 61, which states:

61. Campbell states they have abided by TSCC 2600’s rule preventing short-term rentals since its implementation. TSCC 2600 has produced a receipt dated December 2020 for a short-term rental reservation made for February 2021 that expressly lists Campbell’s Unit. This evidence supports TSCC 2600’s position that Campbell’s Unit was used for short-term rentals, in violation of the Rules of TSCC 2600.

[70] After having deducted the $5,382 claimed by the Condominium Corp. with respect to the records dispute that had been decided by the CAT (Condominium Authority Tribunal) in paragraphs 79-83, the Arbitrator finds the balance of the costs claimed reasonable, and his calculation of the award in paragraphs 95-100 was as follows:

95. It is clear that excessive costs have been incurred by both of the Parties involved in this matter, which is unfortunate for everyone involved. While I empathize with Campbell’s position, I cannot overlook the December 2020 Airbnb receipt that evidences Campbell’s Unit was being used for short-term rental long after TSCC 2600 made effort to prevent this and seek compliance with its governing documents. TSCC 2600 spent a significant amount on legal fees seeking compliance and Campbell did, in fact, fail to comply. As a result, I am inclined to award TSCC 2600 costs.

96. I hereby award TSCC 2600 costs on a partial indemnity basis of two-thirds, for a total of $30,641.72, calculated as follows: (a) Two-thirds of the legal costs set out in TSCC 2600’s Bill of Costs of $43,122.50 less the CAT legal costs of $5,382.50, being two-thirds of $37,740 or $25,160; (b) HST on TSCC 2600’s legal costs of $25,160, for a total of $3,270.80; and (c) TSCC 2600’s disbursements inclusive of HST for a total of $2,210.92.

97. […] My award is in consideration of all costs surrounding this matter through the date of this order. Any other costs incurred to date are each of the Parties’ to bear for themselves.

[71] On November 2, 2021, the Campbells commence this Application pursuant to s. 48 of the Arbitration Act, 1991 for, among other things, an Order setting aside the Arbitrator’s award. The Condominium Corp. brings a cross-application and a separate and parallel application that joins Ms. Chan as a party respondent. The procedural history of the applications is set out above.

E. Highlights Summary of the Facts

[72] It shall be helpful to the analysis that follows, to have a highlights summary of the above factual background and of my findings of fact. That summary follows.

[73] In August 2017, the Campbells purchase a unit in the condominium governed by the Condominium Corp. In December 2018, Ms. Faria, another unit owner, makes a noise complaint against the Campbells. The Condominium Corp. retains legal counsel, but the Campbells deny that they are contravening the Condominium Corp.’s rules. In April 2019, the Condominium Corp. enacts a rule prohibiting short-term rentals, and in May 2019, the Condominium Corp.’s legal counsel writes the Campbells about the Faria noise complaint and about alleged violations of the new rule. At this time, the Campbells make complaints of their own about Ms. Faria harassing the family.

[74] In July 2019, the Condominium Corp. issues a Notice of Mediation about the Faria noise complaint and the notice also refers to the matter of short-term rentals. The July 2019 Notice of Mediation is issued to Ms. Faria and the Campbells. However, no mediation nor arbitration proceeds, and it is not until November 2020 that the Condominium Corp. delivers a Notice of Arbitration to the Campbells. By this time, the Condominium Corp.’s legal counsel has billings of over $11,000, largely associated with the noise complaint. The Notice of Arbitration does not join Ms. Faria. She is no longer a unit owner. The Notice of Arbitration focuses on alleged contraventions of the short-term rental rules.

[75] In January – February 2021, the Condominium Corp. brings an application for the appointment of an arbitrator. The Campbells retain Mr. Boyadjian as legal counsel, and the parties agree to appoint Mr. Bhalla as the arbitrator. In February 2021, because of an inquiry about a status certificate, Mr. Kerson, legal counsel for the Condominium Corp. learns that the Campbells may be selling their unit, and on February 24, 2021 and on February 25, 2021, Mr. Kerson writes Mr. Boyadjian. This correspondence is the seed of the idea that if the Campbells sell their unit, the arbitration will be limited to the issue of costs and not the substantive issues.

[76] On March 4, 2021, the Campbells sign a conditional agreement to sell their condominium townhouse unit to Ms. Chan, and they sign an Arbitration Agreement with the Condominium Corp., in which the issues in dispute for the arbitrator are: (a) the alleged contraventions of the short-term rental rules; and (b) costs of the arbitration. Between March 4, 2021 and the closing of the Campbells to Chan agreement of purchase and sale on May 14, 2021, there is an acrimonious and bitter discourse between Mr. Kerson for the Condominium Corp. and Mr. Boyadjian for the Campbells. At this time, the Campbells are frantic that the dispute about short-term rentals does not ruin the sale to Chan. During this time, discussions about the possibility of settling without an arbitration crater, because, among other things, the Condominium Corp. will not provide a Bill of Costs. The discussions between Mr. Kerson and Mr. Boyadjian turn to whether the dispute to be resolved by Mr. Bhalla can just be about costs. The Condominium Corp.’s position is that the substantive issues remain to be arbitrated unless there is a completed sale or security for the costs is provided by the Campbells for the sale to be completed with a clean status certificate.

[77] On May 14, 2021, the Campbells’ sale to Chan closes. Between June 2021 and September 6, 2021, the arbitration is completed. For the arbitration, I find as a fact that the genuine understanding of the Campbells is that the only issue for the Arbitrator is the matter of costs. Further, I find as a fact that the disingenuous understanding of the Condominium Corp. is that the only issue for the Arbitrator is the matter of costs. The Condominium Corp.’s understanding is disingenuous because it vigorously pursues proving the substantive underlying issues and it expands upon them from the matter of the short-term rentals to the entirety of the Condominium Corp.’s enforcement history with the Campbells including the Condominium Corp.’s quest for a full indemnification in accordance with the provisions of the condominium’s declaration and its rules and the Condominium Act, 1998.

[78] Whether by design or whether it was unavoidable given the difficulty of separating the substantive issues from just the issue of costs, the Arbitrator’s award is a determination of the substantive issues of a dispute defined by the 2019 Notice of Mediation and not by the 2020 Notice of Arbitration. Whether by design or whether it was unavoidable, the Campbells have been outfoxed and lured into an adjudicative trap.

F. Discussion and Analysis

1. Preliminary Issue: The Alleged Special Assessment Fraud

[79] Before discussing the matter of the Campbells’ claim for relief based on s. 46 (1) para. 9 of the Arbitration Act, 1991, it is necessary to briefly address their allegations that the Condominium Corp. perpetrated fraud with respect to a special assessment that was imposed on all unit owners of the Condominium.

[80] The Campbells, repeatedly and intensely, submit that the Condominium Corp. perpetrated actual fraud by claiming legal expenses that had been already paid. They submit that the Condominium Corp. should have deducted from its claim for costs on the arbitration a $25,000 special assessment that the Condominium Corp.’s Board of Directors had levied against all unit owners in May 2020. The $25,000 was for anticipated legal expenses, which were likely but not necessarily attributable to the Condominium Corp.’s ongoing dispute with the Campbells. The special assessment was part of making up a deficiency in the Condominium’s budget reserve.

[81] The Campbells, despite their considerable efforts to understand the law about how condominiums are governed, do not understand that this special assessment for anticipated legal expenses does not in any way impair the Condominium Corp.’s right to claim costs against the Campbells.

[82] There is no fraud. The Condominium Corp. budgeted for its anticipated legal expenses. The Condominium Corp. was entitled to seek indemnification for having to resort to arbitration to resolve its dispute with the Campbells. The Special Assessment does not impair the Condominium Corp.’s right to claim an indemnification of costs against the Campbells. The fraud in the immediate case is about constructive not actual fraud.

2. Constructive Fraud

[83] Pursuant to s. 46 (1) para. 9 of the Arbitration Act, 1991, the court may set aside an arbitral award when the award was obtained by fraud. Relying on Paulus v. Fleury [7], MacNamara v. 2087850 Ontario Ltd. (Strathcona Construction) [8], and Hryniak v. Mauldin [9], in their factums and in the oral argument, the Campbells focused on common law fraud and submitted that the arbitral award should be set aside.

[84] In paragraph 21 of their Fresh as Amended Factum, the Campbells make the following allegation of fraud:

21. The clear language of [the Arbitration Agreement] limits the scope of “Costs” to legal costs and expenses, of the Arbitral tribunal pursuant to section 54 of the Arbitration Act. Only “Costs” pertaining to the “Issues” being short-term rentals. […] As such, The Applicants respectfully submit that submissions for legal fees or costs that is outside said scope and not related to short-term rentals are negligent or fraudulent. […]

[85] To defraud a person is to deprive a person dishonestly of something which is his or of something to which he is or would or might but for the perpetration of the fraud, be entitled. [10] The constituent elements of common law fraud, sometimes called “deceit,” which elements are related to fraudulent misrepresentation, are: (1) a false statement by the defendant; (2) the defendant knowing that the statement is false or being indifferent to its truth or falsity; (3) the defendant having an intent to deceive the plaintiff; (4) the false statement being material and the plaintiff having been induced to act; and, (5) the plaintiff suffering damages. [11] In the immediate case, the facts do not disclose a case of actual fraud.

[86] In paragraph 27 of their Fresh as Amended Factum, the Campbells make the following allegation of constructive fraud:

27. Constructive Fraud by Breach of Duty: litigated with no authority or submission, did not perform cost analysis, relied on secret communications with TSCC about the Applicants.

[87] In Holley v. Northern Trust Co., Canada [12], which was affirmed by the Court of Appeal, I include a discussion of constructive fraud at paragraphs 119-130 of my decision. Since I rely on this law for the present purposes of the Campbells’ application pursuant to s. 46 (1) para. 9 of the Arbitration Act, 1991, it is convenient to excerpt those paragraphs and make them a part of this decision, with some emphasis added in bold:

119 Constructive fraud is not a common law tort, but a doctrine of equity in its supervision of trustees, trustees de son tort, fiduciaries, and contracting parties, but constructive fraud also involves an element of immorality. However, the moral turpitude of constructive fraud is of a different sort than the lying with an intent to deceive which is the insignia of common law fraud. Thus, in Guerin v. R., [1984] 2 S.C.R. 335 at p. 389, Justice Dickson focused on unconscionability and adopted the definition of equitable fraud from the English case of Kitchen v. Royal Air Force Association, [1958] 2 All E.R. 241 at p. 249 as: "conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other."

120. In Nocton v. Lord Ashburton, [1914] A.C. 932 at p. 953, the famous case about a lawyer's breach of fiduciary duty, Lord Haldane stated that in equity, constructive fraud means "not moral fraud in the ordinary sense, but a breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience."

121. Justice Blair recently discussed the utility of equitable or constructive fraud to supervise a variety of relationships in Outaouais Synergest Inc. v. Keenan, 2013 ONCA 526 at para. 93, where he stated:

122. Although not necessarily an exclusive list, there appear to be certain recognized circumstances where the concept of equitable fraud is engaged. First, conduct amounting to equitable fraud or fraudulent concealment may prevent a party from relying on a limitation period or other statutory provision that would otherwise exonerate the party from liability: see Guerin v. The Queen, [1984] 2 S.C.R. 335, at p. 356 (per Wilson J.) and at p. 390 (per Estey J.); First City Capital Ltd. v. British Columbia Building Corp. (1989), 43 B.L.R. 29 (B.C.S.C.); Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2008 BCCA 278, 81 B.C.L.R. (4th) 199, leave to appeal refused, [2008] S.C.C.A. No. 416. Secondly, conduct amounting to equitable fraud is one of the preconditions to the availability of the remedy of rectification of a contract on the grounds of unilateral mistake: see Sylvan Lake, at paras. 38-39. Finally, equitable fraud has been used to describe conduct that gives rise to a breach of a fiduciary duty or other equitable obligation: see Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534, at p. 571.

123. In Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club, 2002 SCC 19, Justice Binnie for the majority of the Supreme Court of Canada considered whether equitable fraud could provide the basis for a claim for rectification, and at para. 39 of his judgment, Justice Binnie described the nature of equitable or constructive fraud as follows:

124. What amounts to "fraud or the equivalent of fraud" is, of course, a crucial question. In First City Capital Ltd. v. British Columbia Building Corp. (1989), 43 B.L.R. 29 (BCSC), McLachlin C.J.S.C. (as she then was) observed that "in this context 'fraud or the equivalent of fraud' refers not to the tort of deceit or strict fraud in the legal sense, but rather to the broader category of equitable fraud or constructive fraud ... Fraud in this wider sense refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained" (p. 37). Fraud in the "wider sense" of a ground for equitable relief "is so infinite in its varieties that the Courts have not attempted to define it", but "all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken" … [citations omitted].

125. As appears from this passage in Justice Binnie's judgment, equitable fraud refers to conduct falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained by his or her conduct. The idea of unconscientiousness connotes the idea of conduct not guided by principles of what is the right thing to do but falling short of the evil or wickedness of deceitful conduct. Justice Binnie described constructive fraud as wider than strict fraud and including all kinds of unfair dealing and unconscionable conduct.

126. Returning to Guerin v. R., supra, where Justice Dickson referred to constructive fraud as unconscionable conduct, in this case, there was no trust relationship between the Federal Government and the Musqueam Indian Band, but the Federal Government was found liable for breach of fiduciary duty. The Band had surrendered lands from its reserve, and the Crown entered into a lease of the lands to a golf club. The breach of fiduciary duty was that the government agreed to terms of the lease that were contrary to the terms approved by the Band at the surrender meeting.

127. For present purposes the important point to note is that the judges of the Supreme Court agreed that the trial judge had been correct in dismissing the alternative claim in deceit because there was no finding or dishonesty or moral turpitude. Justice Wilson (Justices Ritchie and McIntyre concurring) stated at paras. 39-40:

128. […] The appellants base their claim against the Crown in deceit as well as in trust. […] While the learned trial judge found that the conduct of the Indian Affairs personnel amounted to equitable fraud, it was not such as to give rise to an action for deceit at common law. He found no dishonesty or moral turpitude on the part of Mr. Anfield, […] he found, from their paternalistic attitude to the Band rather than from any intent to deceive them or cause them harm.

129. Nevertheless, there was a concealment amounting to equitable fraud. It was "conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other" (Kitchen v. Royal Air Force Association, [1958] 1 W.L.R. 563, per Lord Evershed M.R., at p. 573). […]

130. It was in the context of the Supreme Court's conclusion that equitable fraud was sufficient to prevent the running of a limitation period that Justice Dickson (Justices Beetz, Chouinard, and Lamer concurring) made the comment noted above alluding to equitable fraud as defined by Lord Evershed Kitchen v. Royal Air Force. The complete text of his comment at para. 115 of his judgment about the distinction between fraud and equitable fraud is as follows:

131. […] Equitable fraud, defined in Kitchen v. Royal Air Force Association, [1958] 1 W.L.R. 563, as "conduct which, having regard to some special relationship between the two parties concerned, is an unconscionable thing for the one to do towards the other", is sufficient. I agree with the trial judge that the conduct of the Indian Affairs Branch toward the Band amounted to equitable fraud. Although the Branch officials did not act dishonestly or for improper motives in concealing the terms of the lease from the Band, in my view their conduct was nevertheless unconscionable, having regard to the fiduciary relationship between the Branch and the Band. The limitations period did not therefore start to run until March 1970. The action was thus timely when filed on December 22, 1975.

132. That equitable or constructive fraud does not necessarily connote dishonesty and is therefore less odious than common law fraud is a point that also emerges from Justice Sharpe's judgment in Edwards v. Law Society of Upper Canada (1998), 39 O.R. (3d) 10 (S.C.J.), revd. (2000), , 48 O.R. (3d) 321 (C.A.), leave to appeal to the S.C.C. refused, [2000] S.C.C.A. No. 533.

133. In this case, Edwards sued the executors of the estate of a deceased lawyer who was alleged to have committed fraud. Justice Sharpe dismissed the action based on the executor's plea of plene administravit. This decision was reversed by the Court of Appeal. However, the Court of Appeal agreed with Justice Sharpe's conclusion that that claim against the executors was not statute-barred by the two-year limitation period under the Trustee Act because under the former Limitations Act, R.S.O. 1990, common law actions for fraud were exempted from all limitation periods, including the one found in the Trustee Act. For present purposes, the point to note is that Justice Sharpe drew a distinction between common law civil fraud for which there was no limitation period and equitable fraud for which there was a limitation period under the Trustee Act […]

134. To summarize, at its core, common law fraud involves dishonest and moral turpitude. The fraud elements of common law fraud are that the defendant has an intent to deceive and makes a false statement that he or she knows is false or the defendant makes a false statement that he or she is indifferent to its truth value. Constructive fraud does not necessarily involve dishonesty or moral fraud in the ordinary sense, but a breach of sort that would be enforced by a court of conscience.

[88] In my opinion, in the immediate case, pursuant to s. 46 (1) para. 9 of the Arbitration Act, 1991, constructive fraud is a basis to set aside the arbitral award. My findings of fact, which are set out and summarized above, lead me to the conclusion that constructive fraud, which can apply to the relationship between contracting parties, occurred in the contractual relationship between the Condominium Corp. and the Campbells. The constructive fraud is connected to their agreement to arbitrate. There was also a relationship between the Condominium Corp. and the Campbells as members of the condominium community governed by the Condominium Corp., that required it to not perpetrate a constructive fraud, which I find as a fact that it did.

[89] In reaching these conclusions, I accept the factual determinations of the Arbitrator. I agree that an appeal of the Arbitrator’s decision is not before me.

[90] However, the critical matter that justifies setting aside his arbitral award on the grounds of constructive fraud is that it was unconscionable and unfair that an arbitration notionally or purportedly about costs became something much different. The substantive issues intended by both parties to be removed from the dispute were not removed; they were adjudicated.

[91] Indeed, the substantive issues that were adjudicated went beyond the Notice of Arbitration, which initially was to focus on the short-term rental issue, and included the issues raised in the Notice of Mediation, which focused on the noise complaint. Moreover, the Condominium Corp., in its pursuit of total indemnification for the legal expense of its hassles with the Campbells, attempted to introduce other matters, including $5,382 claimed by the Condominium Corp. with respect to the records dispute that had been decided by the CAT.

[92] The Arbitrator was able to unscramble and eliminate the CAT matter from his notional or purported costs award, but he did not separate the substantive issues from the costs issues.

[93] With the benefit of hindsight, it can be seen that the Arbitrator was given an impossible task of deciding only the matter of costs. In any event, whether or not the task was impossible, he never undertook separating the substantive issues, which the parties agreed were to be eliminated, from the so-called remaining issue about costs. Rather, like the Campbells, Mr. Bhalla was lured into an adjudication of all of the substantive issues that had troubled the relationship between the Campbells and the Condominium Corp. What occurred in the immediate case was simply unconscionable and unfair.

[94] In a totally different context, the Supreme Court of Canada in Uber Technologies Inc. v. Heller [13] has introduced an expanded notion of unconscionability between contracting parties, and in the immediate case, I would, if necessary, apply that expanded view of unconscionability. However, it is not necessary to do so in the circumstances of the constructive fraud in the immediate case.

[95] I wish to be clear, that this decision should not be read as attributing any actual fraud or moral turpitude on the Condominium Corp., the Campbells, Mr. Kerson, and Mr. Boyadjian. The fraud in the immediate case was constructive fraud, which as Lord Haldane noted in Nocton v. Lord Ashburton [14], means "not moral fraud in the ordinary sense, but a breach of the sort of obligation which is enforced by a Court that from the beginning regarded itself as a Court of conscience." That is what occurred in the immediate case.

[96] Without attributing any moral turpitude to the inducement, the Condominium Corp. led the Campbells to believe that the only outstanding issue was the matter of costs, but in a sort of procedural sleight of hand, the Campbells were deceived, and the Arbitration was not limited to the matter of costs. The letter and the spirit of the agreement between the parties about the scope of the dispute to be resolved by Mr. Bhalla was not unconscionable; what was unconscionable and unfair is that the Condominium Corp. did not eliminate the substantive issues; rather, it prosecuted them and lured the Campbells, their legal counsel, and the Arbitrator to adjudicate the whole history of the relationship between the Condominium Corp. and the Campbells, much of which was not properly before the Arbitrator.

[97] I appreciate that in the immediate case, the Campbells were represented by Mr. Boyadjian in the negotiation of the arbitration agreement and throughout the arbitration, but that does not diminish the unfairness and the unconscionability of what occurred in the immediate case.

[98] For the above reasons, the arbitral award should be set aside. It follows that there is no judgment to be enforced by this Court and that the Condominium Corp.’s cross-application and its parallel but separate application should be dismissed.

G. Conclusion

[99] For the above reasons, I grant the Campbells’ application and I dismiss the Condominium Corp.’s cross-application and its separate but parallel application.

[100] I advise the Campbells that self-represented litigants have a quite prescribed right to claim costs, but if the parties cannot agree about the matter of costs, they may make submissions in writing beginning with the Campbells’ submissions within twenty days of the release of these Reasons for Decision followed by the Condominium Corp.’s submissions within a further twenty days.

Perell, J.

Released: May 10, 2022

Footnotes

[1] S.O. 1991, c. 17.

[2] S.O. 1998, c. 19.

[3] The Piazza Family Trust v. Veillette, 2011 ONSC 2820; Ontario v. Abilities Frontier Co‑operative Homes Inc. (1996), 5 C.P.C. (4th) 81 (Ont. Gen. Div.).

[4] Section 47 of the Arbitration Act, 1991, provides that an appeal shall be commenced within thirty days after the appellant receives the award on which the appeal or application is based.

[5] Arbitration Act, 1991, S.O. 1991, c. 17, s. 47.

[6] S.O. 2015, c. 28, Sched. 2.

[7] 2018 ONSC 1188.

[8] 2017 ONSC 499.

[9] 2014 SCC 7.

[10] Scott v. Commissioner of Police for the Metropolis, [1974] 3 All E.R. 1032 at p. 1038 (H.L.).

[11] Bruno Appliance and Furniture Inc. v. Hryniak, 2014 SCC 8; Fiorillo v. Krispy Kreme Doughnuts, Inc. (2010), 98 O.R. (3d) 103 at paras. 66-67 (S.C.J.); TWT Enterprises Ltd. v. Westgreen Developments (North) Ltd. (1990), 78 Alta. L.R. (2d) 62 (Q.B.), aff’d (1992), 1992 ABCA 211, 3 Alta. L.R. (3d) 124 (C.A.); Parna v. G. & S. Properties Ltd. (1970), 15 D.L.R. (3d) 336 at p. 344 (S.C.C.); Derry v. Peek (1889), 14 App. Cas. 925 (H.L.).

[12] 2014 ONSC 889, aff’d 2014 ONCA 719.

[13] 2020 SCC 16, aff’g 2019 ONCA 1, which rev’d 2018 ONSC 718.

[14] [1914] A.C. 932 at p. 953.