Court File and Parties
Court File No.: FC-00001779-13-0003 Date: 2023-03-16 Ontario Superior Court of Justice
Between: Brenda Murphy, Applicant And: David Murphy, Respondent
Counsel: Brenda Barr, for the Applicant Jennesa Plaine, for the Respondent
Heard: November 28 and December 1, 2022
Reasons
LEITCH J.
1This application raises the issue of an arbitrator’s jurisdiction in relation to orders of the court setting out a process for the sale of properties including the provision of a right of first refusal in such orders. At the time the Application was heard, this issue relates to only one property jointly owned by the parties: 9 Pine Street, Grand Bend, Ontario (the “Pine Street property”), where the Applicant has lived since the parties separated October 9, 2012.
2The Applicant seeks an order that the arbitration award, as it relates to the Pine Street property, is unenforceable pursuant to the doctrine of res judicata, or pursuant to s. 59.4 of the Family Law Act, R.S.O. 1990, c. F.3, or pursuant to ss. 46(1) 3 and 46(1)6 of the Arbitration Act, 1991, S.O. 1991, c. 17.
3Further, the Applicant seeks an order staying the enforcement of that portion of the arbitration award, enforcing the related court orders and dispensing with the Respondent’s consent if he does not co-operate. Alternatively, the Applicant seeks an order that the Applicant has been the sole beneficiary of the Pine Street property since April 29, 2015, when she exercised her right of first refusal.
4The Respondent seeks a dismissal of all requested relief. I note that the Respondent originally raised a limitation defence, however his Counsel confirmed that this defence is not being advanced.
5I note that the Applicant filed a Notice of Appeal on July 15, 2020. She also filed an Application seeking the relief described above and it is the Application that is before the court for determination.
Materials filed
6The parties filed a comprehensive Agreed Statement of Facts.
7The Applicant served the Respondent with a detailed Request to Admit which he responded to.
8The parties each filed extensive affidavits which they submitted as their examination in chief.
9As observed by the Respondent’s counsel, the documents filed go far beyond what is needed to determine the legal issues in this case.
Background Facts
10The parties were married on April 25, 1987 and separated on October 19, 2012.
11At the time of separation, the parties jointly owned three properties, which included the Pine Street property and 272 Huron Street, London, Ontario (the “Huron Street property”), where the Respondent resided after separation until the property was sold in May 2020.
12The Applicant also owned another property which was sold in 2014. On June 20, 2014, the parties entered into Minutes of Settlement in relation to the distribution of the proceeds of sale of that property.
13In these 2014 Minutes of Settlement, the parties agreed that the Pine Street property, the Huron Street property and other jointly held property were to be sold.
14The conditions of the sale were that:
i. Neither party was to interfere with the listing of the sale of the properties and each party was to cooperate with the mutually agreed upon real estate agent;
ii. The proceeds of sale were to be divided equally between the parties and accounted for in the equalization process; and
iii. Each party would have a confidential right of first refusal known to the listing agent; the Applicant’s right of first refusal was in relation to the Pine Street property and another property owned by the parties, while the Respondent’s was in relation to the Huron Street property.
15The order of Heeney J. dated June 25, 2014, reflected the 2014 Minutes of Settlement.
16The Applicant advised the Respondent that she would be exercising her first right of refusal for the Pine Street property.
17On or about February 2015, the Applicant brought a motion for the enforcement of the June 25, 2014 order.
18This motion was also resolved by Minutes of Settlement entered into on April 15, 2015 pursuant to which the parties confirmed that all three of their jointly held properties would be appraised and then listed for sale. They agreed on details relating to the sale and again, they agreed that each listing agreement would include “a first right of refusal clause”.
19As before, the parties requested a court order to reflect their obligations. The order of Raikes J. dated April 15, 2015, reflected the 2015 Minutes of Settlement.
20Paragraphs 6 and 8 of the April 15, 2015 order described their rights of first refusal and provided as follows:
- The following shall be the First Right of Refusal Clause attached to each listing agreement:
First right of refusal:
a) 7 days after receipt of the appraisals:
… Prior to 7 days after receipt of the appraisals, each party shall be entitled to exercise their right of first refusal in accordance with the Minutes of Settlement dated June 20, 2014 attached as Schedule “A” to these Minutes of Settlement to purchase a property to which they have a right of first refusal at a purchase price without conditions and in an amount no less than the recommended list price provided by the appraiser minus 5% and a 30 to 60 day closing date.
Should the parties exercise their respective rights of first refusal, the transfers of 272 Huron, and 9 Pine Street between the parties shall occur on the same date, unless there is a transfer combined with a sale to a third party of one of the properties. In the case of a transfer and sale to a third party of one or more of the properties, a transfer of a property in accordance with the exercise of a right of first refusal shall occur at the same time and on the same date as third-party sale closing date.
21Paragraph 6 also set out how the rights of first refusal could be exercised during various time periods after receipt of the appraisals. These provisions are not applicable in these circumstances.
22The terms of Paragraphs 8 of the April 15, 2015 order are of significance to the issues under consideration:
- Should a party exercise their right of first refusal and purchase the other party’s interest in a property pursuant to these Minutes of Settlement the purchasing party shall obtain the written release of the other party’s liabilities with respect to any secured mortgages or lines of credit registered against the purchased property and indemnify them and save them harmless from all liability with respect to the purchased property.
23Both the June 25, 2014 and April 20, 2015 orders were marked as temporary orders.
24As contemplated by these orders, the properties were appraised. The parties received the appraisals reports on or about April 28, 2015. On April 29, 2015, the Applicant advised the Respondent through counsel that she was exercising her right of first refusal over the Pine Street property. There is no issue that she exercised her right to buy the Pine Street property at 95% of the recommended list price provided by the appraiser.
25On May 8, 2015, the Respondent’s counsel wrote to the Applicant’s counsel advising that the Respondent “acknowledges that Ms. Murphy will exercise her first right of refusal on the Pine Street property” and that the Respondent was not in a position to exercise his first right of refusal on the Huron Street property.
26The Respondent did not sign a listing agreement for 380 King Street and the Huron Street property within seven days of receiving their appraised values as required by the June 25, 2014 and April 20, 2015 orders.
27As a result, the Applicant brought a further motion in June 2015 seeking an order that the Respondent be removed from the process of sale of the Huron Street and King Street properties.
28After the June 2015 motion was brought, the Respondent advised that he wished to exercise a first right of refusal in relation to the Huron Street property beyond the terms of the prior orders. The Applicant agreed to his request. A consent order was made by Leitch J., on July 8, 2015, providing in paragraph 1 as follows:
- The Respondent shall exercise his right of first refusal to purchase the property municipally known as 272 Huron Street, London Ontario in accordance with paragraph 6(a) of the Minutes of settlement dated April 15, 2015, save and except the closing date shall be September 9, 2015.
29The parties also agreed to cooperate in the listing of 380 King Street, London.
30The July 8, 2015 order was also marked as temporary. However, the parties have agreed that this was an oversight or error, and the order should have indicated it was a final order.
31The property at 380 King Street was sold as contemplated by the court orders. (The transaction closed in May of 2016 with each party receiving one half of the sale proceeds.)
32Pursuant to the terms of the April 15, 2015 order, the transfer of the Pine Street property and the Huron Street property was to occur on the same date. On September 9, 2015, the parties signed an Agreement of Purchase and Sale pursuant to which the Applicant would purchase the Pine Street property for $498,750 in accordance with the April 15, 2015 order with the Applicant to assume the obligations under the outstanding TD mortgage.
33Also on September 9, 2015, the parties signed an Agreement of Purchase and Sale pursuant to which the Respondent would purchase the Huron Street property for $536,750 in accordance with the April 2015 order with the Respondent to assume the obligations under the outstanding TD mortgage.
34The closing dates for the transfers of property was originally set for September 9, 2015. The closing dates were extended. These extensions were necessary because the Respondent advised that a condition of his mortgage financing from TD Bank, to purchase the Huron Street property, required him to “produce a written separation agreement to confirm the division of assets on the matrimonial matters and to confirm Mr. Murphy’s liabilities going forward”.
35On or about September 23, 2015, the parties entered into mediation, and failing settlement, arbitration with Ms. Madsen for the balance of the issues which were identified in the Mediation/Arbitration Agreement as: child support, including retroactivity; entitlement; duration and quantum of spousal support; lump sum support; all property issues including security issues; life insurance and benefits; occupation rent; and costs.
36Ms. Madsen eventually deemed the mediation to be unsuccessful, so the parties advanced to arbitration with dates set in November 2016. While preparing for arbitration, Ms. Madsen was appointed to the bench in October 2016, so she removed herself as the parties’ arbitrator.
37On October 16, 2015, the TD Bank advised by email that it no longer required a Separation Agreement to provide financing and only required that each party sign a credit application for their respective properties in their own name. The Applicant signed the credit application as required, however the Respondent did not. The communications with the bank will be discussed more fully later in these reasons.
38In or around November 13, 2015, the Respondent’s real estate lawyer advised that the Respondent did not want to continue to have to pay his counsel every two weeks to extend the closing dates. He indicated that “once there is a separation agreement in place, or once there are further orders from the Courts through the family law lawyers, we can revive the transactions.”
The circumstances of the entry into arbitration in 2017 and the timeline of the Arbitration Award
39The Applicant brought a motion that sought to determine whether the outstanding issues should continue in litigation or proceed through the arbitration process.
40In June 2017, McSorley J. determined that the parties were in arbitration and outlined the process for the parties to follow to procure an arbitrator. Following such instructions, the parties agreed to retain Mr. Peter Eberlie (the “Arbitrator”).
41In July 2017 the parties met with the Arbitrator. He distributed his draft Arbitration Agreement in August and set Arbitration dates in September 2017.
42In August 2017, the Respondent submitted a signed copy of the Arbitrator’s draft Arbitration Agreement. However, the Respondent did not provide the required certificate of Independent Legal Advice and a Certificate of Power Imbalance screen. As a result, the parties were advised by the Arbitrator in a letter dated August 19, 2017 that the Arbitration Agreement signed by the Respondent could not be accepted. This letter also addressed other procedural issues and emphasized the need for the parties to obtain legal advice “and continue to do so until this matter is concluded”.
43On or about August 24, 2017, the Applicant requested that the time sensitive issue of the transfers of the Pine Street and Huron Street properties be dealt with first before proceeding to arbitrate the balance of the issues. The Arbitrator rejected this request.
44The Applicant brought two further motions to move the matter forward.
45By order dated October 18, 2017, Raikes J. ordered that Mr. Eberlie be appointed as the parties’ arbitrator.
46The Respondent still did not provide the required Certificate of Independent Legal Advice and Certificate of Power Imbalance.
47The Applicant brought a further motion and on December 13, 2017, Mitrow J. set a timeline for completion of the Arbitration Agreement and other necessary documents for arbitration.
48The Arbitration Agreement was signed on or about December 18, 2017. The parties obtained independent legal advice before the Arbitration Agreement was signed and counsel completed the certificates required by s. 59.6(2) of the Family Law Act.
49The parties submitted numerous issues for arbitration. These included child support, special or extraordinary expenses, spousal support (entitlement, duration, quantum and lump sum), post-separation adjustments, occupation rent, costs, and security for costs. Further, “all property issues including equalization” and “enforcement of court orders” were identified as issues.
50I note that in addition to the Pine Street property and the Huron Street property, the parties owned other property that also had issues to be resolved.
51In paragraph 34 of the Arbitration Agreement, the parties agreed that they had the right to review the Arbitration Award in accordance with s. 46 of the Arbitration Act and acknowledged their right to appeal the Award on a question of law, with leave, as provided in s. 45 of the Arbitration Act and the Family Law Statute Law Amendment Act, 2009, S.O. 2009, c. 11 (Bill 133).
52The parties also agreed in paragraph 35 of their Agreement, that in addition to the appeal rights provided in s. 45(1) of the Arbitration Act, a party may appeal on a question of law (with leave), a question of fact and a question of mixed fact and law.
53At their meeting on December 18, 2017 the Respondent presented the Arbitrator with a Net Family Property (NFP) statement dated September 29, 2016.
54The Applicant took issue with the effective date of this NFP statement given that the December 13, 2017 order of Mitrow J. directed the Respondent to deliver a current NFP statement.
55At a subsequent appearance before Mitrow J. on December 19, 2017, the Respondent provided a signed December 2017 NFP statement, which was actually his September 29, 2016 statement re-dated.
56In his September 29, 2016, and December 2017 NFP statements, the Respondent included the full value and debt associated with the Huron Street property as his property and debt. He included the full value and debt associated with the Pine Street property as the Applicant’s property and debt.
57Notwithstanding those productions and the timelines established by the Arbitrator, the Respondent submitted a new NFP statement to the Arbitrator and the Applicant on February 8, 2018, five days before the first day of the arbitration hearings. In this NFP statement, the Respondent listed the Huron Street and Pine Street properties as joint properties and the associated debts as joint debts. He also removed his post separation adjustments.
58In June 2018 the Arbitrator raised the issue of whether he had jurisdiction to enforce court orders and asked the parties to obtain legal advice on this issue.
59The Applicant was advised by counsel, who had provided her with independent legal advice in relation to her entering into the Arbitration Agreement, that the Arbitrator had jurisdiction given that the parties submitted the relevant issue to him.
60On November 9, 2018, the Respondent submitted an opinion letter dated September 18, 2018 from a lawyer he consulted advising that the Arbitrator had no such jurisdiction.
61The Applicant noted that the Arbitrator’s invoice reflects that, unbeknownst to the Applicant, the Arbitrator spoke with the lawyer consulted by the Respondent in early September 2018.
62The Arbitrator did not address this jurisdiction issue during the arbitration hearings.
63The arbitration proceeded for 26 days of hearings from February 13, 2018 to March 14, 2019. Written submissions were to be filed by April 30, 2019.
Relevant events after the Arbitration hearing concluded
64Early in 2019, the Respondent defaulted in payment owing to TD Bank on a line of credit secured on the Huron Street property. In April 2019 the TD Bank demanded payment on the line of credit and its security on the Huron Street property. The next month, the parties signed a listing agreement for the Huron Street property.
65The Arbitrator met with the parties in August and September 2019. At these meetings the Respondent indicated that the Huron Street property had been sold but the buyers withdrew from the deal.
66The Huron Street property was relisted for sale February 2, 2020 and sold on May 5, 2020.
67The Applicant had documentation prepared in May 2020 to transfer the Pine Street property to her pursuant to her right of first refusal, but the Respondent refused to sign that documentation.
The Arbitration Award
68The Arbitrator released his awards, amendments thereto and a costs award between February 10, 2020 and June 18, 2020 (the “Award”).
69As will be discussed more fully below, the Arbitrator stated in his Award that he had no jurisdiction to enforce the three court orders made in relation to the sale of the properties and stated further that the Pine Street property – the remaining property subject to the court orders – had to be sold “unless the parties agree otherwise”.
70The Applicant filed an objection to this aspect of the Award asserting that she should not be deprived of her right of first refusal, but the Arbitrator did not amend his Award.
The relevant provisions of the Family Law Act
71The Family Law Act prescribes procedural requirements for family arbitrations in s. 59.6(1) as follows:
Conditions for enforceability
59.6 (1) A family arbitration award is enforceable only if,
(a) the family arbitration agreement under which the award is made is made in writing and complies with any regulations made under the Arbitration Act, 1991;
(b) each of the parties to the agreement receives independent legal advice before making the agreement;
(c) the requirements of section 38 of the Arbitration Act, 1991 are met (formal requirements, writing, reasons, delivery to parties); and
(d) the arbitrator complies with any regulations made under the Arbitration Act, 1991. 2006, c. 1, s. 5 (10).
72There is no issue with whether the procedural requirements were complied with.
73However, even if the arbitration agreement meets the above conditions, the agreement and corresponding award, is unenforceable if it addresses disputes arising after the agreement is made as set out in s. 59.4:
59.4 A family arbitration agreement and an award made under it are unenforceable unless the family arbitration agreement is entered into after the dispute to be arbitrated has arisen.
74The Applicant seeks a finding that s. 59.4 applies in this case.
The relevant provisions of the Arbitration Act
75Section 17 of the Arbitration Act sets out a process to address challenges to the jurisdiction of an Arbitrator and requires, amongst other things, that a party who takes issue with an arbitrator’s jurisdiction make an objection within certain time periods.
76The parties are granted certain rights pursuant to s. 19 of the Arbitration Act which required that the parties be treated equally and fairly and be given the opportunity to present a case and to respond to the other party’s case.
77The provisions of s. 17 and s. 19 are relevant on an application to set aside an Arbitrator’s award and are referenced in s. 46 of the Arbitration Act, which sets out the grounds on which an arbitration award can be set aside.
78The Applicant relies on s. 46(1) 3 and 6:
46 (1) On a party’s application, the court may set aside an award on any of the following grounds:
The award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the agreement.
The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of an arbitrator.
79It is important to note that a portion of an award challenged on the basis that such an award is beyond the scope of the agreement can be severed from the balance of the award. Section 46(2) provides as follows:
(2) If paragraph 3 of subsection (1) applies and it is reasonable to separate the decisions on matters covered by the arbitration agreement from the impugned ones, the court shall set aside the impugned decisions and allow the others to stand.
80There are constraints on setting aside an arbitration award as set out in s. 46(3) and s. 46(6):
(3) The court shall not set aside an award on grounds referred to in paragraph 3 of subsection (1) if the party has agreed to the inclusion of the dispute or matter, waived the right to object to its inclusion or agreed that the arbitral tribunal has power to decide what disputes have been referred to it.
(6) If the ground alleged for setting aside the award could have been raised as an objection to the arbitral tribunal’s jurisdiction to conduct the arbitration or as an objection that the arbitral tribunal was exceeding its authority, the court may set the award aside on that ground if it considers the applicant’s failure to make an objection in accordance with section 17 justified.
The positions of the parties
81The Applicant was adamant that she only signed the Arbitration Agreement because she understood the court orders would be enforced, “the most important issue in the litigation” to her, and had the Arbitrator questioned his authority to enforce the orders she would not have signed the Agreement. She made it clear throughout the process that she wanted the court orders enforced.
82The Applicant’s position is that the Arbitration Award is unenforceable in relation to the Pine Street property.
83She also emphasized that the Arbitrator’s jurisdiction in relation to the enforcement of court orders was not an issue until six months after the Arbitration Agreement was signed when the Arbitrator raised the issue himself.
84The Applicant contends that the three court orders dealing with the Pine Street property were final orders and determined how the property is to be dealt with. Accordingly, she submits that the doctrine of res judicata should be applied relying on the three-part test for the application of the doctrine as set out in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460, at paras. 54-60:
a. The same question has been decided on a final basis in relation to the same parties;
b. The judicial decision was final; and
c. The parties to the judicial decision or their privies were the same persons as the parties in the proceeding in which estoppel is raised.
85The Applicant also contends that although the Arbitration Agreement listed “enforcement of court orders” as an issue, the Arbitrator did not have the authority to require the sale of the Pine Street property. Furthermore, she submits that the issue of the sale of that property arose after the arbitration agreement was signed, resulting in that portion of the award being unenforceable pursuant to s. 59.4 of the Family Law Act.
86Alternatively, the Applicant contends that the award should be set aside under s. 46(1) 3 and/or s. 46(1)(6) of the Arbitration Act. Her position is that the Arbitration Agreement did not grant the Arbitrator the authority to make an award that the Pine Street property be sold, and his award is beyond the scope of the Arbitration Agreement.
87The Applicant also asserts that she was “treated unfairly and unequally in the arbitration process” as a result of the following circumstances:
a. The Respondent was permitted to provide a new NFP statement five days before the Arbitration began;
b. Meetings with the parties occurred without a reporter present, and the Respondent was permitted to enter evidence and make submissions at these meetings;
c. The Arbitrator spoke with counsel retained by the Respondent without the Applicant’s consent or knowledge;
d. The Arbitrator raised the jurisdictional issue after the Applicant had testified in chief; and
e. The Arbitrator did not advise on his conclusion regarding jurisdiction before releasing his Award, nor his conclusion respecting the negotiated consent orders and agreements of purchase and sale.
88The Respondent acknowledges that it was very clear to him that during the Arbitration process the Applicant sought a decision that included terms for the transfer of the Pine Street property into her name, as per the three, what he asserts are, interim court orders. His position was that the properties should be sold, as he made clear in the meetings before the Arbitration process began, in a memo he prepared and shared with the Arbitrator and the Applicant and in his February 6, 2018 NFP statement. He indicated that in his September 29, 2016 and December 2017 NFP statements while he allocated the assets and debts as previously described, he noted “NOT AGREED” beside those entries.
89In seeking a dismissal of this application, the Respondent contends that the 2014 and 2015 orders were not final and the doctrine of res judicata should not be applied. He further contends that while a “legal interpretation” arose after the Arbitration Agreement was signed, there is no “dispute” which arose after the Arbitration Agreement was signed. He also submits that the Arbitration Agreement allowed the Arbitrator to address all property issues and the Arbitrator did not deal with a dispute or make a decision beyond the scope of the Arbitration Agreement.
90The Respondent relies on G.S. v. A.S., 2010 ONSC 6609, A.A. v. R.R., 2021 ONSC 2984, and Veneris v. Koh Veneris, 2018 ONSC 4164, for the proposition that the inclusion of “all property issues” in the Arbitration process should be interpreted broadly.
91The Respondent also references Nasjjec Investments Ltd. v. Nuyork Investments Ltd., [2015] O.J. No. 5778 at paras. 44 and 45 in which the court indicated that the principles of fairness and natural justice are not a true question of jurisdiction under s. 46(1) 3.
92Further, the Respondent emphasizes the limitation of the court’s jurisdiction to set aside an arbitration award pursuant to s. 46(1)3 contained in s. 46(3). The Respondent references the following guidance from the Court of Appeal in Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, at paras. 25-27:
25Although the court cannot apply s. 46(1) 3 without having regard to an arbitrator’s decision, the court’s authority to set aside an arbitration award under that subsection depends on the mandate the arbitration agreement confers on the arbitrator to resolve a particular dispute. In order to succeed on an application to set aside an arbitration award, an applicant must establish either that the award deals with a dispute that the arbitration agreement does not cover or contains a decision on a matter that is beyond the scope of the arbitration agreement.
26For example, if an arbitration agreement provides that an arbitrator shall resolve a particular question and the arbitrator does so, the court has no authority to set aside the award on the basis that the arbitrator’s decision is unreasonable or incorrect…
27In short, s. 46(1) 3 requires that arbitrators act within the bounds of the authority granted by the arbitration agreement pursuant to which they are appointed – no less, but no more. Section 46(1)3 is not an alternate appeal route and must not be treated as such.
93On the issue of scope and jurisdiction, the Respondent’s position is that the arbitrator was not restricted from dealing with all property on the basis of the inclusion of the “enforcement of Court Orders” as an issue to be decided, as there was no stipulations or limitations with respect to how the Pine Street and Huron Street properties were to be dealt with if the Court orders were not enforced. The Respondent points out that the Arbitration Agreement does not contain any limits or restrictions with respect to the Arbitrator’s ability to deal with all of the property issues; the Agreement does not require the transfer of the Pine and/or Huron Street properties to either of the parties; and the Agreement does not state that the Arbitrator must not deal with the Pine Street and Huron Street properties if he concludes he does not have the jurisdiction to enforce the Court Orders.
94Overall, the Respondent emphasizes the significant time and money the parties committed to the resolution of their issues and submits the parties should rely on the intended finality of the arbitration process.
The Arbitration Award in relation to the Pine Street property
95In paragraph 11 of the Award, the Arbitrator stated “as a reminder to the parties, stating an issue for arbitration does not mean that I have jurisdiction to deal with it. It is a list of issues that I am being asked to consider”.
96The Arbitrator concluded at para. 48 of his Award that the Pine Street property “shall be sold forthwith by way of multiple listing agreement at a price to be agreed on by the parties. After payment of the usual closing costs, the net proceeds shall be divided equally between the parties.”
97Under the section of the Award dealing with the value of assets owned on the valuation date (October 19, 2012) including the Huron Street property and the Pine Street property, the Arbitrator summarized the minutes of settlement and the three court orders relating to these properties (paras. 99-184).
98In paragraph 131 of the Award, the Arbitrator stated that according to the April 15, 2015 Minutes of Settlement, “in the event either [party] exercised their right of first refusal they were then also obligated (Paragraph 8) to obtain a ‘written release of the other party’s liabilities with respect to any secured mortgages or lines of credit registered against the purchased property and indemnify them and save them harmless from all liability with respect to the purchased property’”.
99The Arbitrator then summarized the emails between real estate counsel noting that the Respondent acknowledged in May 2015 the Applicant will exercise her first right of refusal on the Pine Street property and the fact that the TD Bank required the Respondent to produce a written separation agreement as I described earlier.
100In paragraph 164 of his Award, the Arbitrator stated that in emails sent in November 2015 between real estate counsel, it was confirmed that TD Bank no longer required a separation agreement and each party had to make a credit application.
101The Arbitrator set out in his Award at paragraph 165, that in November 2015 real estate counsel for the Applicant reported that the Applicant had completed a credit application with TD Bank but the Respondent had not. He referenced the November 2015 email from the Applicant’s counsel to the Respondent’s counsel as follows:
Brenda has attended at the bank to do this, but was told that Mr. Murphy needed to attend as well to submit his application on the same day. To date, there is no indication that Mr. Murphy has attended at TD to review or submit his application. As I have previously indicated, Brenda is available any day that Mr. Murphy can attend to submit their respective applications.
Additionally, there is already a Court Order in place that states: “the purchasing party shall obtain the written release of the other party’s liabilities with respect to any secured mortgages or lines of credit registered against the purchased property and indemnify them and save them harmless from all liability with respect to the purchased property.”
My understanding is that the application to be submitted at TD, releases the other party’s liabilities with respect to the secured mortgages or lines of credit registered against the properties.
Brenda has instructed me to agree to again extend the closing date of these transactions to allow time for David to attend at TD. As your client is unwilling to extend further, this matter will have to go back to the family law lawyers to obtain yet another Court Order.
102The Arbitrator observed at paragraph 166 of his Award, that “there is no evidence from the TD Bank that the credit application process would automatically lead to that result.” He also went on to say at paragraph 166: “There is a problem with the wording of paragraph 8 of the Minutes of Settlement and Court order of April 15, 2015.”
103He observed further at paragraph 168: “Neither a Court Order nor the parties can “compel” a Bank to provide a written release of liability on a debt unless the Bank is properly satisfied that its requirements for so doing are met. Here there is no evidence of that. Filing a credit application was the start of the process for the Bank.”
104He also noted at paragraph 169 that “at this point in time”, the Applicant still had employment while the Respondent did not, and he was receiving disability payments for medical reasons.
105In paragraph 173 and 174 of his Award, the Arbitrator noted that in the correspondence from the Applicant’s counsel to the Respondent’s counsel dated February 22, 2016, Applicant’s counsel asserted that the Huron Street property should be sold because there was no confirmation that the Respondent qualified for the purchase.
106In paragraph 176 of his Award, the Arbitrator outlined communication between counsel. The Arbitrator next stated at paragraph 177 that the correspondence from the Bank dated April 12, 2016, confirming that the Bank accepted the court order as outlining the distribution of the properties, did not deal with the refinancing of the TD Bank mortgage on the Pine Street property, nor did it deal with the release of each party on the respective mortgage/lines of credit for each property.
107The Arbitrator further outlined other communications in May 2017 between family law counsel, and March 2018 communications between the Applicant and TD Bank in paragraphs 179 – 184. In that March 18 communication, TD Bank states that the Bank accepts the court documentation in lieu of a separation agreement as “proof that [the Respondent] has no further interest in” the Pine Street property.
108Under the heading, “Enforcement of Superior Court of Justice Court Orders”, the Arbitrator set out the following in paragraphs 185, 186, 188-192:
Brenda is asking the Arbitrator to enforce the 3 Court Orders and make David comply with her right to exercise a 1st right of refusal on 9 Pine Street that will require him to transfer the property to her.
In a letter dated June 12, 2018, I required both parties to seek legal advice as to whether I have jurisdiction to enforce Orders of the Superior Court of Justice.
Case law establishes that an Arbitrator does not have jurisdiction to enforce Orders of the Superior Court. An Arbitrator cannot be given jurisdiction to do so either by the terms of the Arbitration Agreement. In legal terms, the Arbitrator still has to follow the law.
Aside from the question of jurisdiction there is still the practicality of enforcing the wording of the Minutes of Settlement. A Bank cannot be compelled by Court Order to provide mutual written releases on debt covenants. To be released on a Bank debt each person has to meet the appropriate Bank requirements.
In this case, none [sic] enforced the terms of the 3 Court Orders. The parties chose to go to Mediation and then to Arbitration.
As of May 10, 2016, neither party had employment. In 2017, David’s income was around $39,000 and Brenda’s $52,395 – but $42,943.50 of that was from cashing in RRSPs.
Considering all of the circumstances, there is a real question as to whether or not after processing both parties’ credit applications and incomes, the Bank would have released either party on the existing mortgages and lines of credit.
109The Arbitrator ultimately concluded at paragraphs 813 and 814 of his Awards that in relation to the Pine Street property:
Brenda contends that this property should have been transferred into her name as per the terms of the 2nd Consent Court Order of April 15, 2015 …
As that did not happen and since the Arbitrator has no jurisdiction to enforce the terms of that Order as it relates to 9 Pine Street that jointly-owned property has to be sold (unless the parties agree otherwise).
110The Arbitrator calculated and awarded occupation rent regarding the parties’ three jointly held properties.
111The Applicant had paid all of the expenses for the Pine Street property since the date of separation.
112The Arbitrator determined that occupation rent for the Pine Street property is $2,598 per month and expenses totalled $3,074.16. This left a deficit of $476.16 per month, which at 79 months totalled $37,616.64. He found that the Applicant was entitled to be reimbursed for one half of those expenses - $18,808.32.
Discussion of the issues
113I will turn first to the Applicant’s argument that s. 59.4 of the Family Law Act renders the Award unenforceable. I find that this section is not applicable. I cannot accept the Applicant’s assertion that the issue of the sale of the properties did not arise with any clarity until after signing the Arbitration Agreement and remained unclear during the Arbitration hearings.
114Although arguments of res judicata and issue estoppel were advanced by the Applicant, I have concluded that the disposition of this matter should be based on a consideration of s. 46 of the Arbitration Act. With respect to the Applicant’s argument that the Award is unenforceable as it relates to the Pine Street property pursuant to the doctrine of res judicata, as set out above, the Respondent conceded that my order of July 8, 2015 was a final order but does not accept that characterization in relation to the June 25, 2014 and April 15, 2015 orders. In my view all 3 orders finally determined that the jointly held properties would be listed for sale and each party would have the rights of first refusal described. There is no issue that the parties had reached agreement on how the jointly held properties were to be dealt with in the face of the 3 court orders. While represented by counsel, they agreed on a process for sale and granted each other rights of first refusal at a price equal to 95% of the recommended list price provided by the appraiser. To use the words in this the definition of a “final order” pursuant to r. 2(1) of the Family Law Rules, these orders decided the party’s rights in relation to the disposition of the jointly held properties.
115I will next address the Applicant’s assertion that the contentious portion of the Award should be set aside pursuant to s. 46(1) 6 because she was not treated equally and fairly. I find that the circumstances she references to support her assertion do not ground a conclusion that she was not treated equally and was denied natural justice and procedural fairness.
116The Applicant’s situation is also quite distinct from the circumstances of three cases filed in support. In Kucyi v. Kucyi, 2007 ONCA 758, an adjournment was denied by an Arbitrator after a significantly different financial statement was late filed with no accounting for the difference; in Hunt v. The Owners, Strata Plan LMS 2556, 2018 BCCA 159, where a trial judge erred in failing to find a reasonable apprehension of bias and, in Baffinland v. Tower-EBC, 2022 ONSC 1900, where it was alleged that the President of an arbitral tribunal interfered in the proceedings and was improper and the majority of the tribunal relied upon “highly dubious legal agreement”.
117I find that the Arbitration Award relating to the Pine Street property is not unenforceable by virtue of the provisions of s. 46(1) 6 of the Arbitration Act.
118I turn next to the issue of whether s. 46(1) 3 is applicable. Does the Award deal with a dispute that the Arbitration Agreement does not cover or contain a decision on a matter that is beyond the scope of the Arbitration Agreement?
119The Respondent emphasized that the Court of Appeal in Alectra stated that s. 46(1) 3 is not an alternate appeal route. Clearly that must be the case. However, as observed by the Court of Appeal in Alectra, s. 46(1)3 requires that an arbitrator have the authority to make the decision in issue.
120I note that the procedural provisions of s. 17 of the Arbitration Act (and s. 46(7)) do not apply in these circumstances. The Arbitrator did not rule on his jurisdiction to deal with the “Enforcement of court orders”. No party raised an objection that the Arbitrator was exceeding his authority. Instead, the Applicant believed, based on legal advice given to her, that the Arbitrator could enforce the court orders. I further note that this belief, and her inclusion of this topic in the Arbitration Agreement, cannot grant jurisdiction to the Arbitrator over what is in issue here. The provisions of s. 46(3) of the Arbitration Act are not applicable.
121The Arbitrator was correct in his statement that he did not have jurisdiction to enforce a court order. As observed in Woronowicz v. Conti, 2015 ONSC 5247, at para. 30, s. 50.1 of the Arbitration Act provides that family arbitration awards are enforceable only under the Family Law Act, and s. 59.8 of the Family Law Act provides that a party who is entitled to the enforcement of a family arbitration award may make an application to the court to that effect. As Charney J. stated at para. 30, “[t]hus, the Superior Court enforces the awards of the arbitrator; there is nothing that gives the arbitrator the power to enforce Superior Court orders.”
122Further, it was noted in Woronowicz at para. 31 that arbitrators can interpret Superior Court orders and resolve disputes as to whether a party has complied with a court order. In this case, however, it was incorrect for the Arbitrator to conclude that “there is a problem with the wording” of the April 15, 2015 order. Particularly, as this conclusion led him to find that the order could not be complied with and, in essence, was no longer applicable or valid or enforceable.
123In addition, an Arbitrator cannot direct a sale of a property unless it is formally agreed to in the Arbitration Agreement.
124Section 2 of the Partition Act, R.S.O. 1990, c. P.4 empowers the court to order the sale of a jointly owned home. Arbitrators have no inherent jurisdiction, unlike the Superior Court. An arbitrator has the jurisdiction granted to them by the instrument appointing them (agreement or statute).
125This Arbitration Agreement is distinct from the agreement before the court in Spadacini-Kelava v. Kelava, 2020 ONSC 7907 , aff’d 2021 ONCA 345. In that case an arbitrator’s order – that included the sale of the matrimonial home – was appealed to the Superior Court. Justice Kurz saw no issue with the arbitrator’s order as the sale of the matrimonial home was “formally agreed to” between the parties and the arbitrator. Kurz J. upheld the arbitrator’s finding, and made a further order directing the sale, which was affirmed by the Court of Appeal.
126As the parties did not formally agree to the sale of the Pine Street property, the Arbitrator could not direct the sale. The parties’ Arbitration Agreement at clause 9 lists “All property issues including Equalization”, which is too vague to expressly include the power of sale as described in s. 2 of the Partition Act. Arbitrating "all property" issues and the “enforcement of court orders” relating to properties, does not lead to the conclusion that the Arbitrator had the jurisdiction to set aside the court orders and force a third-party sale.
127The orders in issue do not expire. They are not conditional. They reflect the parties’ agreement to grant a right to the Applicant to buy the Pine Street property at a certain price. That right was exercised by the Applicant and acknowledged by the Respondent. The transaction did not close because the Respondent could not complete his purchase of the Huron Street property.
128There is no basis on which the Respondent can resile from his agreement to grant the Applicant the right of first refusal memorialized in three court orders.
129Having no jurisdiction to enforce the orders, the Arbitrator has no jurisdiction to invalidate them.
130Furthermore, the Agreement of Purchase and Sale the parties signed reflecting the terms of the Applicant’s right of first refusal for the Pine Street property was never voided or cancelled by the parties.
131As outlined, the Arbitrator concluded that the exercise of the right of first refusal triggered the obligation to obtain a release. He described a “problem” with paragraph 8 of the April 13, 2015 order because it provides that the purchasing party shall obtain the written release of the other party’s liabilities with respect to debts secured against the purchased property “should a party exercise their right of first refusal and purchase the other party’s interest in a property”.
132There is not a "problem" with the orders in issue. The April 15, 2015 order requires that “on the purchase” – i.e., on the closing of the transaction – the Respondent is to be released from the debt associated with the Pine Street property. The order does not compel the TD Bank to do anything. The order creates an obligation for the Applicant as the purchaser. If a purchaser cannot fulfill this obligation the purchaser will not be able to complete the purchase.
133It is speculation on the part of the Arbitrator that the Applicant could not comply with the provisions of the April 15, 2015 order. His speculation does not justify the setting aside of the orders. The evidence was that the Applicant had funding to complete the purchase at various times. She was ready, willing and able to complete her purchase of the Pine Street property in September 2015. She also had funding at the time this Application was heard.
134The portion of the Award respecting the sale of the Pine Street property is set aside. The Applicant shall be entitled to purchase the Pine Street property pursuant to her right of first refusal with a 30-60 day closing date as set out in the April 15, 2015 order. On the purchase she will be obliged to provide the written release of the Respondent’s liability under the existing mortgages or security registered against that property.
135The Respondent remains entitled to occupation rent until the Pine Street property is transferred. However, the expenses for the Pine Street property, which the Applicant has paid, exceed the occupation rent awarded by the Arbitrator. The only remaining issue is whether the Respondent should be required to pay half of the expenses for the Pine Street property that exceed the occupation rent, as the Arbitrator awarded.
136The delay in enforcing the court orders is unfortunate and has resulted from many factors including the change in arbitrators, the erroneous advice given to the Applicant in relation to the jurisdiction issue, the fact that the Arbitrator did not rule on the jurisdiction issue until he issued his Award, the fact that the issuance of the Award was delayed, and the fact that the global pandemic affected the hearing date for this Application. During the period of delay, it appears that the appraised value of the Pine Street property has increased.
137In the unfortunate and unique circumstances of this case, I conclude that the portion of the Award requiring that the Respondent reimburse the Applicant for the portion of expenses relating to the Pine Street property should also be set aside.
138I urge the parties to endeavour to resolve the issue of costs, failing which they may make brief written submission within 60 days.
Released: March 16, 2023 Justice L.C. Leitch