Arbitrator's award mischaracterized as amending condominium declaration: Ontario Court of Appeal

An arbitrator had the authority to interpret a condominium’s declaration and didn’t amend the declaration, regardless of whether the interpretation was correct or reasonable, the Ontario Court of Appeal has ruled.

Halton Condominium Corporation No. 137 (HCC 137) – the appellant in Mensula Bancorp Inc. v. Halton Condominium Corporation No. 137, 2022 ONCA 769 – owned a condominium in Oakville, ON. The respondent, Mensula Bancorp Inc., bought 43 parking units on one level of the parking garage, some for employee use and some it leased to others.

HCC 137 kept the west end stairwell to that level of the garage locked and denied Mensula’s request for 43 keys for each parking unit’s user. Thus, the users of those units had to enter through the east end stairwell, which Mensula claimed was more circuitous considering the location of its business premises.

The parties had to take their dispute to arbitration under s. 132(4) of Ontario’s Condominium Act, 1998. The arbitrator ruled in favour of HCC 137, finding that:

• he was deciding the parties’ dispute by interpreting the condominium’s declaration
• interpreting the declaration as giving Mensula access only through the east end stairwell was in line with common sense and with a reasonable interpretation of the declaration, given the context and given the surrounding circumstances during the declaration’s formation
• the tenants were not entitled to access to the common elements even if Mensula was, considering the declaration’s language.

Mensula applied to set aside part of the arbitration award under s. 46(1)3 of Ontario’s Arbitration Act, 1991. It argued that the arbitrator exceeded his jurisdiction by rewriting the declaration, effectively amending it, and introducing new terms.

The application judge granted the application, set aside the arbitrator’s award relating to the issue of Mensula’s access to the common elements, and remitted the matter to arbitration.

The judge found that, while the issue of Mensula’s access to the parking units was properly before the arbitrator, he could only determine that issue by interpreting the declaration and not by amending it. The judge said that the arbitrator – by arriving at a conclusion which was not based on the declaration’s text and which considered the surrounding circumstances – “in effect” amended the declaration.

Appeal court restores arbitrator’s award

The Court of Appeal allowed the appeal, ruling that the application judge proceeded in a way that s. 46(1)3 did not allow.

The arbitrator made no amendments and instead interpreted the declaration, which was clearly within his jurisdiction, the appellate court said. Whether the arbitrator incorrectly or unreasonably interpreted the declaration was not the point, the court added.

The case of Alectra Utilities Corporation v. Solar Power Network Inc., 2019 ONCA 254 provided that s. 46(1)3 gave courts a narrow basis to interfere with arbitration awards. According to Alectra, the section created no right of appeal, contemplated no review of the correctness or reasonableness of the arbitrator’s decision, and required courts not to interfere with arbitration awards as long as the issue was properly before the arbitrator.

In this case, the appellate court noted that the arbitrator clearly stated that his only task was to interpret the declaration, defined the issue as one involving interpretation, framed the parties’ positions as rooted in interpretation, and never said that he was correcting or amending the declaration.

Despite this, the judge described the arbitrator’s decision as an interpretation that was “in effect” an amendment. The appellate court held that the judge adopted an approach contradicting the Alectra ruling. Under the judge’s erroneous approach, only an award resulting from an interpretation that the court found reasonable or correct would be immune to judicial intervention, and anything else would effectively be an amendment beyond the arbitrator’s jurisdiction, which the court could set aside.