We were recently successful in obtaining a stay from a civil action involving our condominium client and a neighbouring condominium. The two condos were parties to a Reciprocal Agreement and Indemnity Agreement (the “Agreements”) and after a dispute arose with respect to these agreements, our client submitted the issues to mediation and arbitration. The neighbouring condo responded by bringing a civil action against our client where a corporate unit owner (which happened to own 100% of the neighbouring condominium units) was included as a co-plaintiff.
Section 132 of the Condo Act provides that any disputes “pertaining to agreements between two or more condominium corporations deemed to contain a provision submitting the disputes to mediation/arbitration”. The neighbouring condo and corporate unit owner attempted to avoid mediation/arbitration by arguing that their civil action was based on an economic tort and the corporate unit owner was not a condominium corporation that was party to the Agreements.
The Court was not convinced by this position. It held that “[it is] not bound by the legal labels used by the parties and must examine the core issues of the claim, i.e. the pith and substance of the allegations contained in the pleading” and ultimately found that the “pith and substance of the [civil] action relates to disputes arising from the interpretation and application of the [Agreements]”. It was evident that:
…the Plaintiffs’ acknowledgement that the action is predominantly a claim by 23 St. Thomas is relevant to the assessment of whether the action is an attempt to avoid the arbitration process. The acknowledgement demonstrates that the inclusion of MTCC 1271 as a plaintiff is an attempt to piggyback onto a claim by 23 St. Thomas and thereby improperly circumvent the application of the mandatory requirement to submit the dispute to mediation and arbitration pursuant s. 132 of the Condominium Act, 1998.
While the Court only stayed the civil action as between our client and the neighbouring condo — and not between our client and the corporate owner co-plaintiff – this was based on corporate legal principles as opposed to the Condo Act. Nonetheless, the Court emphasized that “the core issues in the [civil action] are disputes that relate to the interpretation and application of the Agreements”. Everything flows back to the Agreements at the end of the day.
The prioritization of mediation/arbitration to resolve condominium-related disputes and judicial disapproval of parties piggybacking onto claims to avoid mediation/arbitration is not new; we wrote about this topic before here and here. The legislature clearly intended to provide for quick and cost-effective alternative dispute resolution whether it is through mediation/arbitration or the Condominium Authority Tribunal – only the most important cases should be brought to the courts. Parties should save themselves the mental gymnastics. The requirements are clear. We hope that aggrieved parties follow the Condo Act closely as the Court continues to reject attempts to circumvent it. Only time will tell.