In the Ontario Superior Court of Justice decision of 1107051 Ontario Ltd. v. GG Kingspa Enterprises Limited Partnership,[1] McEwen J. considered an Application seeking to overturn an Arbitrator’s decision regarding a dispute between 1107051 Ontario Ltd. (the “Applicant”) and GG Kingspa Enterprises Limited Partnership (the “Respondent”) regarding a major real estate development in Toronto (the “Project”). The Application was brought on the basis that the Arbitrator lacked jurisdiction and also sought a declaration that the Arbitrator lacked jurisdiction.
Background
The Applicant and the Respondent had entered into a comprehensive Co-Tenancy Agreement (the “Agreement”) concerning the Project. Each Party had a 50% interest in the Project. The Agreement set out that management of the co-tenancy was delegated to a Management Committee comprised of two members appointed by the Applicant and two members appointed by the Respondent. All decisions of the Management Committee required the approval of all of the members.
The Agreement contemplated four components to the Project, including condominiums, retail, hotel, and parking. The parties described the Agreement as being “divorce proof” with the purpose being to promote unanimous decision-making. The Agreement contained a broad arbitration clause and did not define the term “dispute”.
A dispute arose wherein the Respondent formed the view that the Project should not include a hotel component. The parties were deadlocked on this issue.
The Respondent commenced arbitration asserting that the Arbitrator should resolve the dispute and had the authority to do so given the provisions of the arbitration clause. The Applicant objected to the arbitration being brought on the issue posed as the configuration of the Project was not justiciable or arbitrable on the basis that the parties did not agree to have an arbitrator break deadlocks amongst the Management Committee or make business decisions on their behalf.
The Arbitrator accepted the Respondent’s submissions and found that he had jurisdiction to determine the dispute. Since nothing in the arbitration clause limited arbitrations to legal disputes, the Arbitrator found that non-legal disputes could be arbitrated.
The parties agreed that the standard of review of the Arbitrator’s decision on a jurisdictional question is correctness.
The court’s decision
The Application was allowed.
It would have been preferable to refer the matter back to the Arbitrator to determine the issue of jurisdiction, along with the issue of merit, on a full record. However, McEwen J. concluded that he did not have jurisdiction to refer the matter back to the Arbitrator based on the provisions of the Arbitration Act, 1991 (the “Act”).[2]
Given the broad wording of the arbitration clause, the parties in this case could arbitrate a non-legal dispute.[3] However, the arbitration clause plainly stated that the dispute must arise “under this Agreement”. The dispute in question did not arise under the parties’ Agreement.[4] If the parties had intended to make fundamental development plans subject to the arbitration clause, this would have been plainly stated in the Agreement.[5]
The parties by virtue of the provisions of the Agreement did not provide the Arbitrator with the express authorization to determine the issue in dispute between them.[6]
Conclusion
While this case serves as a reminder to arbitrators to consider the issue of jurisdiction together with the merits of a dispute, it also serves as a reminder to counsel drafting arbitration provisions to draft with intention. The courts in Ontario will be reluctant to interfere in a dispute where there is no ambiguity and the parties will get that for which they bargained.
[1] 2022 ONSC 1847; available online at https://www.canlii.org/en/on/onsc/doc/2022/2022onsc1847/2022onsc1847.html.
[2] S.O. 1991, c. 17; available online at https://www.ontario.ca/laws/statute/91a17.
[3] Supra note 1 at para. 55.
[4] Ibid., para. 56.
[5] Ibid., para. 57.
[6] Ibid., para. 70.