The recent decision from the Ontario Court of Appeal in Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769 required the Court to consider whether a lower court judge had erred by interfering with an arbitrator’s award.
This case provides an interesting example of how the courts interpret arbitration decisions, and the complexities which accompany interpreting condominium declarations.
A Disagreement Over Parking Stall Access
Halton Condominium Corporation No. 137 owns a condominium containing 82 residences, 166 parking stalls within a parking garage, and community property. The appellant, Mensula Bancorp Inc., owns 43 parking stalls in Halton’s parking garage, which are used by Mensula employees working nearby. Mensula also leased some of the 43 parking units to others.
Over time, a dispute arose regarding parking stall access. While Mensula’s parking stalls could be accessed through a stairwell, they requested that Halton provide them with access keys for another, more conveniently located stairwell leading to a hallway in the condominium’s main lobby, part of the common elements of the property. Halton refused.
The Condominium Declaration and Access to the Parking Garage
The condominium’s declaration, which is a document that governs the use and maintenance of condominium property, defined “units” as both dwelling units and parking units unless otherwise specified. “Owners” were defined as the owners of units in the condominium property.
The condominium declaration also stated that every owner owned their unit and had an undivided interest in the property’s common elements as tenants in common. Further, each owner had “the full use, occupancy and enjoyment of the whole or any part of the common elements” subject to certain exceptions.
Dispute Taken to Arbitration
Under the Condominium Act, the parties brought their dispute to arbitration. While several issues were dealt with, the access to common property issue was the only one relevant to the appeal. The arbitrator characterized the issue as “whether Mensula ought to have access to the common elements of the condominium and, if so, the scope of that access.”
The arbitrator determined that Mensula was not entitled to access the stairwell in question. They noted that under s. 116 of the Condominium Act, there are limits on owners’ uses of common elements. First, the use must be reasonable. Second, the use can be restricted by the declaration, bylaws, or other condominium rules. In this case, the arbitrator determined that the current access arrangement “accords with a common sense and reasonable interpretation of the Declaration in its context.” In particular, the arbitrator noted that if Mensula and its lessees were granted access to the stairwell, they would have access to the condo’s lobby and hallways for no reasonable purpose.
The Application Judge’s Decision
Mensula applied to the Ontario courts to set aside the arbitrator’s award under the Arbitration Act. Mensula appealed under s. 46(1)3 of the Arbitration Act, which states that a court can set aside an arbitration award if it deals with a dispute that an arbitration agreement did not cover, or goes beyond the scope of the agreement.
The application judge was required to determine whether the arbitrator had exceeded their jurisdiction “by re-writing and introducing new terms” and effectively amending the declaration. The application judge found in favour of Mensula, finding that the arbitrator had made their determination based on outside circumstances rather than the direct interpretation of the condominium’s declaration.
The Court of Appeal’s Consideration of the Parking Stall Access Issue
Halton appealed the application judge’s decision, claiming that they erred on two grounds:
- The appeal was improperly grounded under s. 46(1)3 of the Arbitration Act as the arbitrator’s decision fell within the scope of the parties’ agreement regarding the scope of the dispute; and
- The arbitrator did not amend the condominium declaration in their decision – they interpreted the declaration, which was within their jurisdiction.
The Court began by noting that the Arbitration Act provides limited options for appealing an arbitration award. Generally, an arbitrator’s decision should not be interfered with by the Courts as long as the issue was decided properly. It is not enough to argue that an arbitrator’s interpretation of the declaration or decision was unreasonable or incorrect.
The Court found that the application judge had wrongly characterized the arbitrator’s decision as amending the condominium declaration. The application judge had effectively characterized the arbitrator’s interpretation as an amendment of the declaration because they believed the interpretation was incorrect. From the Court’s perspective, such logic meant that any decision a Court found unreasonable or incorrect would be considered an amendment of the governing document and could be said aside.
The Court allowed the appeal, restored the arbitrator’s award, and awarded $20,000 in costs to Halton.
What This Case Means for Commercial Litigants
This case is an excellent reminder that courts will typically only interfere with an arbitrator’s award in limited, prescribed circumstances.
Furthermore, be mindful of s. 132(4) of the Condominium Act, 1998, which states that every condominium declaration is deemed to contain a provision that the corporation and owners agree to submit disagreements between the parties regarding the declaration, bylaws, or rules to mediation and arbitration.
If you are involved in a condominium dispute or intend to apply to set aside an arbitrator’s award, it is critical to speak with an experienced commercial litigation lawyer beforehand. Guidance from a lawyer will assist with navigating any procedural requirements relating to a dispute (such as the requirement for mediation or arbitration) and, if necessary, counsel is available to represent you in court should you choose to apply to set aside an arbitration award.
Contact the Commercial Litigation Lawyers at Campbells LLP in Oakville for Commercial and Administrative Litigation
When leasing, purchasing, or selling a commercial property, many factors must be addressed. Zoning bylaws, the tenant mix in the building, property tax issues, title searches, and environmental issues, among other things must all be considered. If you are dealing with a commercial litigation or real estate dispute, or have questions about arbitration, consult an experienced commercial litigation lawyer.
At Campbells LLP, we leverage our litigation experience to provide advice in the best interests of both our clients and their companies. We take time to understand your business before deciding on a course of action, keeping clients well-informed so that they are empowered to make the best strategic decisions at every stage. Contact us online or at (905) 828-2247 to learn how we can assist you.