In the recent Court of Appeal decision of Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, the Court of Appeal overturned a lower court decision setting aside an arbitrator’s award, on the basis that the approach taken by the learned application judge was contrary to that mandated by Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254, 145 O.R. (3d) 481, leave to appeal refused, [2019] S.C.C.A. No. 202 (Alectra).
Background
The Halton Condominium Corporation 137 (HCC 137) located in Oakville has 82 residential units and 166 parking units located within it’s parking garage, along with common elements such as a lobby and elevators.
The parking units comprise of parking for the residential unit owners (the Residential Parking) along with 43 commercial parking units (the Commercial Parking) owned by the defendant Mensula Bancorp Inc. (Mensula), Mensula does not own any residential units and its business is located nearby outside of the condominium property. Some of the Commercial Parking units owned by Mensula are also leased out to others.
The Commercial Parking units are located on a different parking level of the garage, separate from the the Residential Parking. The Residential Parking unit’s have access to elevators into the condominimum. Mensula’s parking units do not have access to the elevators but rather, have access to two stairwells, an east end stairwell which leads outside and a west end stairwell which leads through a hallway to the main lobby of the condominium building (which is a common element).
An access dispute arose between the parties as HCC 137 kept the west end stairwell to the Commercial Parking level locked, such that users of the Commercial Parking units could only access the east end stairwell leading outside. Mensula considered this an inconvenience for the users as it was a further distance to the office than the west end stairwell.
The Declaration & Legislation
The declaration does not make a distinction for the purpose of use of common elements, between parking units and residential dwelling units. Owner was defined as the owner of a unit (again without specifying the type of unit) and the declaration provides that every unit owner also has an undivided interest in the common elements as a tenant in common.
Section 1 of Part III of the Declaration provides that “each Owner has the full use, occupancy and enjoyment of the whole or any part of the Common Elements” subject to certain exceptions. One exception provides for a distinction such that only owners and tenants of residential dwelling units may enjoy or use “Recreational Facilities”.
Section 116 of the Condominimum Act, 1998, S.O. 1998, c. 19 (Condominium Act) provides that “an owner may make reasonable use of the common elements …. Subject to this Act, the declaration, the by-laws and the rules.”
The Arbitration
The parties were required to take their dispute to arbitration pursuant to section 132(4) of the Condominium Act and the condominium’s by-law no. 6 established procedures for mediation and arbitration of disputes.
Mensula served a Notice of Arbitration and described the dispute as one over access to the common elements, seeking an order for access against HCC 137, to the users of the Commercial Parking.
HCC 137 took the position that the hallways and lobby were for recreational purposes and thus only for use by residential unit owners and that access to the east end stairwell to the Commercial Parking users was reasonable.
The arbitrator rejected that the hallways and lobby were for recreational purposes but still concluded that users of the Commercial Parking were not entitled to access it, finding that the Act places limits on an owner’s use of common elements, that such use must be reasonable and that the use may be further reasonably restricted by the declaration, by-laws, or rules of the condominium. The Arbitrator concluded that an interpretation of the declaration that gave Mensula access only to the east end stairwell was reasonable, taking into consideration the surrounding circumstances at the formation of the declaration, in reliance of the decision in Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633 (Sattva). The arbitrator also concluded that Mensula’s tenants were not entitled to access the common elements, given the language of the declaration.
The Learned Application Judge’s Decision
Mensula brought an application to set aside part of the Arbitrator’s decision, on the basis that the Arbitrator exceeded his jurisdiction “by re-writing and introducing new terms to the [d]eclaration and effectively amend[ing]” it. The application judge agreed and set aside the arbitrator’s award related to the access issue, remitting the matter back to arbitration.
The Application Judge concluded that an analysis of the “surrounding circumstances” can only be used as an interpretative aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words, relying on Sattva at paragraphs 57-60. She thus found that the arbitration award contained a decision beyond the scope of the parties arbitration agreement, which is a matter for the court under section 109 of the Condominium Act.
The Court of Appeal Ruling
HCC 137 appealed the Application Judge’s decision on two grounds: 1) that the parties agreement was to submit the dispute about whether Mensula was entitled to the access it claimed to arbitration. The arbitrator resolved that dispute and under s.46(3) of the Arbitration Act, 1991, S.O. 1991, c. 17, (Arbitration Act) the award could not be set aside; and 2) that the arbitrator did not make any amendment to the declaration he simply engaged in an exercise of interpretation, which was clearly within his jurisdiction, whether he did so correctly or unreasonably was irrelevant.
The Court of Appeal accepted HCC 137’s second ground for appeal, citing the Court of Appeal’s prior decision in Alectra in which the court explained the limited scope for judicial intervention that exists pursuant to section 46(1)3 of the Arbitration Act. This section allows only for limited review for jurisdictional error and does not allow for a review of the substance of the award.
The Court of Appeal, citing Alectra, reiterated that the use of section 46(1)3 is not an appeal route and should not be treated as such. The only avenue to set aside an arbitration award available under this section is on the basis that the arbitrator resolved a question outside of the scope of the dispute that the arbitration agreement sets out. The court has no authority to assess the reasonableness or correctness of the arbitrator’s decision if the arbitrator has made a ruling within the scope of the arbitration agreement pursuant to which they are appointed.
The Court of Appeal also reiterated that as per Alectra, where an arbitrator’s authority is to interpret and apply an agreement a loss of jurisdiction does not result from an unreasonable or mistaken interpretation of the agreement. The Court of Appeal disagreed with the Application Judge’s characterization of the Arbitrators decision as “in effect an amendment”, and held that there was no basis on which the Application Judge could have come to such a conclusion other than by engaging in an assessment as to the correctness or reasonableness of the substance of the arbitrator’s award – which was outside of the bounds of the role of the court under section 46(1)3 of the Arbitration Act.
The Court of Appeal allowed the appeal and restored the Arbitrator’s award in favour of HCC 137.
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