High insurance premiums cause for concern in Ontario

High insurance premiums cause for concern in Ontario

December 31, 2007

A recent Superior Court of Ontario decision provides guidance on the appropriate standard of review of an arbitrator’s decision in the context of an award held pursuant to the Condominium Act, says Toronto condo lawyer Armand Conant.

“Clarity is wonderful to have,” says Conant, partner with Shibley Righton LLP. “Now we know the standard is correctness and not reasonableness. The court is basically saying that the grounds for an appeal in a commercial arbitration do not apply to condos.”

In 90 George Street Ltd. v. Ottawa-Carleton Standard, 2015 ONSC 336 (CanLII), developer 90 George Street Ltd. and the residential condo corporation had a dispute over a first-year budget shortfall of $115,700, mainly due to security expenses and superintendent costs.

Under s. 132(3) of the Condominium Act, budget statement disagreements must proceed to mediation and, if unresolved, on to arbitration.

The parties were unable to resolve their issues at mediation and proceeded to arbitration in 2013. The arbitrator found in favour of the condominium corporation, which was awarded almost $125,000, which included the budget shortfall amount plus interest as well as legal costs and disbursements on a substantial indemnity basis. The developer appealed the arbitrator’s decision and award, which the court upheld at trial.

One of the issues at trial was whether the appropriate standard of review of an arbitrator’s decision was reasonableness or correctness.

The appellant argued that the appropriate standard of review of an arbitrator’s decision is correctness, while the respondent argued that the Supreme Court’s recent decision in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII) was applicable.

Justice Patrick Smith noted at the time of writing his decision, only one Ontario trial decision had applied Sattva in the arbitral context but it did not involve an arbitration conducted pursuant to the Condominium Act.

In finding that the standard of review of an arbitration award rendered is correctness, Smith has provided clarity to condo lawyers and condo boards of directors who may want to appeal an arbitrator’s decision, Conant tells AdvocateDaily.com.

Another issue at trial was whether the arbitrator correctly interpreted s. 75 of the Condominium Act, a section that deals with accountability for budget statements.

""The judge reiterated that the act is first and foremost consumer-protection legislation. Section 75 is there to protect against developers who purposely create a very low budget to try and sell units and make it look more appealing,” he says.

Conant, who heads up the firm’s condominium practice group, says this decision provides some helpful analysis for interpreting s. 75 of the act.

""What a lot of lawyers have said to date is that you never look at the individual line items in the budget. Let's say one line item was 30 per cent over budget, but another line item was 30 per cent under budget, so you still end up with a nil budget. In this case, the judge supports the interpretation that requires a declarant to be accountable to the condo corporation for all of the elements that make up the budget statement.”

While s. 75 only deals with first-year budgets, this decision will be important for any new condo development.

Conant, who was not involved in the case and makes his comments generally, says that while many disputes in the condo world are mandated by the Condominium Act to go to compulsory mediation and arbitration, it is rare for a party to appeal an arbitrator’s decision.

“Most of the fights that go to arbitration are between a unit owner and a condo corporation, and sometimes it's between two condo corporations fighting over shared facilities,” he says.

“A condo corporation is going to be hard pressed to explain to their owners why they spent $90,000 on an arbitration with a unit owner. Yes, they can recover a lot of the costs but this is one of the problems in the Condominium Act that the government is trying to resolve in the new act.”