Court File and Parties

COURT FILE NO. CV-23-00001360-0000 DATE: 20231115 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

Neil Wakefield and Robyn D. Gignac Applicants – and – 863195 Ontario Limited Respondent

Counsel: Kenneth C. MacDonald, for the applicants Helen Richards and Gordon W. Vance, for the respondent

Heard August 9, 2023, at Newmarket

Reasons for Decision

S.T. Bale J.

Background facts

[1] The applicants are the purchasers, and the respondent the vendor, under an agreement of purchase and sale of a new home to be built by the respondent.

[2] In this application, the applicants applied for an order appointing an arbitrator, pursuant to s. 17(4) of the Ontario New Homes Warranties Plan Act, s. 10 of the Arbitration Act, 1991 and s. 15 of the Tarion Addendum to the agreement of purchase and sale (the “addendum”). The respondent initially opposed the appointment of an arbitrator on the ground that there was no arbitrable dispute between the parties.

[3] However, in April 2023, several days before the application was to be heard, the applicants wrote to the respondent alleging that it had breached the agreement and advising that they were terminating the agreement as a result of the breaches. Because the facts underlying the application had then changed, the parties agreed to adjourn the application.

[4] In June 2023, the respondent took the position that by delivering the notice of termination, the applicants had repudiated the agreement, and advised that it intended to claim damages from the applicants as a result of their anticipatory breach. As there was then what the respondent considered to be an arbitrable dispute, it agreed to the appointment of an arbitrator and proposed an arbitrator different from the one proposed by the applicants.

[5] At the hearing of the application, I ruled in favour of the applicants’ choice of arbitrator but reserved my decision in relation to costs.

[6] There are two components of the parties’ claims for costs – costs incurred in relation to the issue of whether the arbitration agreement was triggered prior to delivery of the applicants’ notice of termination and costs incurred in relation to the dispute over the choice of arbitrator.

[7] As the applicants were successful in relation to the dispute over the choice of arbitrator, they are entitled to the costs of litigating that dispute. However, for the following reasons, I have decided that the respondent is entitled to its costs incurred in relation to the issue of whether the arbitration agreement was triggered prior to delivery of the applicants’ notice of termination.

[8] Section 15 of the addendum provides the following with respect to arbitration of disputes regarding termination: “The Vendor and Purchaser agree that disputes arising between them relating to termination of the Purchase Agreement under section 11 shall be submitted to arbitration in accordance with the Arbitration Act, 1991 (Ontario) and subsection 17(4) of the ONHWP·Act.”

[9] Section 11(a) of the addendum provides: If the Purchase Agreement is terminated (other than as a result of breach of contract by the Purchaser), then unless there is agreement to the contrary under paragraph 10(a), the Vendor shall refund all monies paid by the Purchaser including deposit(s) and monies for upgrades and extras, within 10 days of such termination, with interest from the date each amount was paid to the Vendor to the date of refund to the Purchaser.

[10] Pursuant to the provisions of the addendum, the closing date of the sale was extended to March 23, 2023 (the “Outside Closing Date”), as a result of “unavoidable delay” (including COVID).

[11] In August 2022, the respondent made an offer to the applicants and other purchasers whose homes had been delayed. There were two components to the offer: (1) the respondent offered a mutual release of the agreement, with a return of the purchasers’ deposits; or (2) the respondent offered to extend the closing date beyond the Outside Closing Date – subject to an increase in the purchase price of the property.

[12] The applicants did not accept either alternative, with the result that the original agreement remained alive in accordance with its terms. Their reason for not accepting the respondent’s offer was that they believe they are entitled to damages over and above the return of their deposit.

Analysis

[13] The issue to be determined is whether there was a dispute for which the applicants were entitled to the appointment of an arbitrator before they delivered the notice of termination to the respondent.

[14] The respondent’s position is that the arbitration agreement was not triggered until they accepted the applicants’ repudiation of the agreement. As a result, they argue that they are entitled to their costs, at least up until that date.

[15] The applicant’s position is that “actual termination is not a prerequisite to arbitration under clause 15 of the [addendum].” Rather, they say that it is sufficient that there is a dispute that “relates to termination.”

[16] However, under s. 15 of the addendum, the disputes to be submitted to arbitration under the Arbitration Act, 1991 (Ontario) and subsection 17(4) of the ONHWP·Act are limited to disputes arising under s. 11 of the addendum. Section 11 of the addendum provides for a refund of deposits: “If the purchase agreement is terminated (other than as a result of breach of contract by the purchaser) …” In the present case, there was no termination of the agreement until either delivery of the applicants’ notice of termination (if they were entitled to terminate); or the respondent’s acceptance of the applicants’ repudiation of the contract (if they were not entitled to terminate).

[17] The applicants also rely on the competence-competence principle to argue that the question of when the arbitration agreement was triggered should be submitted to the arbitrator. However, I find that the facts of this case come within an exception to the principle – the issue was fully argued before me and I was able to answer the question by a superficial examination of the documentary evidence in the record: see Uber Technologies Inc. v. Heller, 2020 SCC 16, at para. 34. I did not find the initial challenge to be a delay tactic that would prejudice the recourse to arbitration.

[18] I also note that there is a question of jurisdiction which remains to be determined by the arbitrator – if the arbitrator finds that the termination of the agreement was a result of a breach of contract by the applicants (the respondent’s position), arbitration of the dispute may be excluded by ss. 11 and 15 of the addendum.

[19] In the result, I find that the respondent is entitled to its costs of the application as they relate to the question of when the arbitration clause was triggered – less the costs to which the applicants are entitled in relation to the dispute over choice of arbitrator.

[20] The respondent requests its costs on a substantial indemnity basis. However, the interpretation of the arbitration agreement put forward by the applicants does not amount to conduct justifying an enhanced award of costs.

[21] Having reviewed the bills of costs of both parties, I find a costs award of $7,500 in favour of the respondent (net of the set-off in favour of the applicants) to be fair, reasonable, proportionate and within the reasonable contemplation of the applicants.

“S.T. Bale J.” November 15, 2023