[1]         The appellant, Halton Condominium Corporation No. 137 (“HCC 137”), and the respondent, Mensula Bancorp Inc. (“Mensula”), disagreed about access to Mensula’s 43 parking units that are located on one of the levels of the condominium’s parking garage. Specifically, they disagreed about whether Mensula’s employees and other invitees were entitled to access the parking units by walking through the lobby and hallways of the residential condominium building (as Mensula contended), or only through an external staircase (as HCC 137 contended).

[2]         The parties proceeded to arbitration. The arbitrator found in favour of HCC 137. There was no right of appeal from the arbitrator’s decision.

[3]         Mensula successfully applied to set aside the arbitrator’s award under s. 46(1)3 of the Arbitration Act, 1991, S.O. 1991, c. 17. That provision allows the court to set aside an arbitral award where the arbitrator has decided a dispute not covered by the parties’ arbitration agreement or a matter beyond its scope. The application judge considered that although the issue of Mensula’s access to the parking units was properly before the arbitrator, he could only decide that issue by interpreting the condominium’s declaration, not by amending it. She held that the arbitrator had “in effect” amended the declaration by coming to a conclusion that was not based on the text of the declaration and which used surrounding circumstances beyond their proper limits in the interpretive process.  

[4]         For the reasons that follow, I would allow HCC 137’s appeal and restore the arbitrator’s award.

[5]         As explained in 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, s. 46(1)3 of the Arbitration Act, 1991 provides a narrow basis upon which a court may interfere with an arbitration award. It does not create a right of appeal, nor contemplate a review of the correctness or reasonableness of the arbitrator’s decision. It requires that the court not interfere with the arbitrator’s award as long as the issue decided was properly before the arbitrator.   

[6]         The application judge proceeded in a manner that s. 46(1)3 does not permit. The arbitrator said he decided the parties’ dispute by interpreting the condominium’s declaration. Whether he interpreted the declaration correctly or reasonably was irrelevant. Yet the application judge relabelled his decision as a purported interpretation that was “in effect” an amendment, because of her view that the result he arrived at could not be reached through a proper interpretive analysis. Under this approach, and contrary to that mandated by Alectra, only an award that resulted from an interpretation of the declaration that the court considered reasonable or correct would be immune from judicial intervention; anything else would “in effect” be an amendment beyond the jurisdiction of the arbitrator, and able to be set aside.

[7]         In light of the nature of the issues, only a brief description of the facts is required.

[8]         The HCC 137 condominium is located in Oakville, Ontario. It has 82 residential dwelling units located in the condominium building, 166 parking units located in its parking garage, and common elements.

[9]         Parking units of condominium residents are located on Levels A and B of the condominium’s parking garage. After parking on Level A or B, a resident may enter the condominium building by stairs and a hallway and/or by elevator.

[10]      Mensula does not own any residential units. It owns 43 parking units, which are used by Mensula’s employees who work at its nearby business (located outside of the condominium property) or are leased out to others. Mensula’s parking units are located on a different level of the parking garage, Level 1.

[11]      There are two stairwells that access Level 1. One stairwell is located on the east end of the garage and does not lead into the condominium building. The other stairwell is located on the west end of the garage and leads through a hallway into the main lobby of the condominium building. The hallway and main lobby are part of the condominium’s common elements.

[12]      The access dispute arose because HCC 137 keeps the west end stairwell to Level 1 locked. After Mensula acquired the parking units, it asked for 43 keys or their equivalent that could be given to users of each parking unit. HCC 137 refused. As a result, Mensula, and users of its parking units, cannot access them by foot through the condominium building, but can only do so from the east end stairwell, which Mensula considers a more circuitous route given where its business premises are located.

[13]      The parties’ dispute was governed by the condominium’s declaration, and by the Condominium Act, 1998, S.O. 1998, c. 19.

[14]      The declaration provides that the condominium is made up of dwelling units, parking units, and common elements. The term “Units” was said to mean both dwelling units and parking units, unless otherwise specified. “Owner” was said to mean the owner of a Unit. The declaration provided that every Owner owns its Unit(s) and 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 is for defined “Recreational Facilities”, which only Owners and tenants of a dwelling unit may use and enjoy.

[15]      Section 116 of the Condominium Act, 1998 provides that “an owner may make reasonable use of the common elements … subject to this Act, the declaration, the by-laws and the rules.” 

[16]       The parties were required to take their dispute to arbitration. Section 132(4) of the Condominium Act, 1998 deems a declaration to contain a provision that the corporation and the owners agree to submit a disagreement with respect to the declaration to arbitration.

[17]      The condominium’s By-law No. 6 established procedures for mediation and arbitration of disputes.

[18]      On March 23, 2020, Mensula served a Notice to Arbitrate pursuant to By-law No. 6 and s. 132 of the Condominium Act, 1998. Mensula described the dispute as one over access to the common elements under the declaration, and sought an order that HCC 137 provide access to the common elements for the purpose of accessing and using Mensula’s parking units.

[19]      In May 2020, the parties entered into an Agreement to Arbitrate, appointing L. Leslie Dizgun as sole arbitrator “for all issues in dispute between them”.

[20]      There were three issues before the arbitrator, but only one – the access dispute – remains relevant to the appeal. The arbitrator described the access dispute to be whether Mensula ought to have access to the common elements of the condominium and, if so, the scope of that access.

[21]      The arbitrator described the parties’ positions as involving the interpretation of the declaration. He described Mensula’s position to be that, as an owner of parking units, it is entitled to access to the common elements in accordance with the declaration, which includes pedestrian ingress and egress to the parking units through the residential hallways and lobby. He described HCC 137’s position to be that (i) the hallways and lobby were for recreational purposes and thus only for use by residential unit owners, and (ii) in any event, a proper interpretation of the declaration was that the current access (the east end stairwell without access to the hallway and lobby) was reasonable and always intended.

[22]      The arbitrator rejected HCC 137’s argument that the hallways and lobby were for recreational purposes. But he concluded that Mensula was not entitled to the access it claimed.

[23]      The arbitrator found that s. 116 of the Condominium Act, 1998 places two limits on an owner’s use of common elements. First, the use must be reasonable, and second, the use may be further restricted by the declaration, by-laws, or rules of the condominium. Those restrictions must also be reasonable.

[24]      He then turned to the meaning of the declaration. He stated that the interpretation of the declaration was subject to the rules governing contractual interpretation, and he cited Mensula’s own factum for the proposition that this meant reading the words in the context of the document as a whole consistent with the surrounding circumstances. He cited Sattva Capital Corp v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, for the principles to be applied concerning the use of surrounding circumstances in contractual interpretation.

[25]      He then cited other interpretive principles. He observed that the declaration should be read in the context of it being the formational document of the condominium and therefore interpreted in a way that promoted harmonious as opposed to contested relationships in the community. And he observed that an interpretation that results in absurdity should be avoided.

[26]      The arbitrator conducted a detailed review of the circumstances surrounding the making of the declaration. He found that a plain reading of one provision of the declaration – s. 1 of Part III – as providing for a broad right of use of the common elements would lead to an absurd result, because it would mean that Mensula as the owner of 43 parking units, and its employees and visitors, would be entitled to wander around the condominium building – including its hallways and lobby – for no known purpose. He held that could not have been intended as it would be antithetical to the declaration as a whole, whose purpose was to provide “sensible rules governing community living.” He noted that Mensula implicitly acknowledged this, as it had limited its request only to access for ingress and egress to its parking units. The arbitrator noted that access to common elements for ingress and egress was not mentioned in the declaration.

[27]      The arbitrator ultimately found that an interpretation of the declaration that gave Mensula access only through the east end stairwell “accords with a common sense and reasonable interpretation of the [d]eclaration in its context, and given the surrounding circumstances at the formation of the [d]eclaration.” Finally, he found that even if Mensula was entitled to access through the common elements its tenants were not, given the language of the declaration.

[28]      At no point did the arbitrator expressly say he was correcting or amending the declaration.

[29]      Mensula brought an application to set aside part of the arbitration award pursuant to s. 46 of the Arbitration Act, 1991. The only ground that was dealt with by the application judge was that the arbitrator exceeded his jurisdiction “by re-writing and introducing new terms to the [d]eclaration” and “effectively amend[ing]” it.

[30]      The application judge found in favour of Mensula. She set aside the arbitrator’s award as it related to the issue of Mensula’s access to the common elements and remitted the matter to arbitration.

[31]      The application judge noted the parties entered an “Agreement to Arbitrate and Terms of Appointment re: Arbitration” with the arbitrator in May 2020, which granted the arbitrator jurisdiction to resolve “all issues in dispute”. However, she was of the view that the arbitration had been commenced by Mensula’s Notice to Arbitrate, which stated that the matter was referred to arbitration pursuant to By-law No. 6 and s. 132 of the Condominium Act, 1998. Therefore, By-law No. 6 and s. 132 of the Condominium Act, 1998 represented the parties’ “arbitration agreement” and established the arbitrator’s jurisdiction.

[32]      In her view, section 1.1 of By-law No. 6 excluded from its scope disputes that must be resolved in the courts or that may be resolved in the courts unless the parties agree to submit their dispute to mediation and arbitration. The application judge stated that disputes that require an amendment or correction to a declaration because of an error or inconsistency must be resolved in the courts: Condominium Act, 1998, s. 109. The application judge framed the issue to be determined as follows, at para. 27:

[33]      The application judge found that the “arbitrator crossed the line between interpretation and correction/amendment”. While the issue of Mensula’s access to the common elements of HCC 137 was properly before him, she considered that the arbitrator was not satisfied by the answer provided by the plain language of the declaration and, by observing that the result of the plain language could not have been intended, he had “in effect” identified inconsistencies in the declaration that he “[purported] to correct … by reconciling them ‘in a common sense interpretation of the [d]eclaration’”. She considered that the “clear effect of the arbitrator’s ‘interpretation’ is to broaden the scope of section III of the [d]eclaration and the categories of common elements that cannot be used by all owners, but in a way that is not specified in the [d]eclaration.”

[34]      She concluded that:

[35]      The Arbitration Act, 1991 provides:

[36]      HCC 137 submits that the application judge erred in two respects in exercising a power under s. 46(1)3.

[37]      First, it says 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. Under s. 46(3) of the Arbitration Act, 1991, the award could not be set aside.

[38]      Second, it says that even if an amendment to the declaration was beyond the jurisdiction of the arbitrator, the arbitrator did not make any amendment. He interpreted the declaration, which was clearly within his jurisdiction to do, and whether he did so incorrectly or unreasonably is beside the point.

[39]      As I agree with HCC 137’s second submission, I need not address the first.

[40]      In Alectra, this court explained the limited scope for judicial intervention that exists under s. 46(1)3 of the Arbitration Act, 1991. The provision allows only for limited review for jurisdictional error. It does not authorize review of the substance of the award. It is not an appeal route and the correctness or reasonableness of the arbitrator’s decision is irrelevant: at paras. 41-44. As the court explained:

[45]      The arbitrator was clear that interpretation was the only task in which he engaged. He defined the issue as one of interpretation. He framed the parties’ positions as rooted in the interpretation of the declaration. He instructed himself on the statutory limit of reasonableness on an owner’s use of common elements, which formed the backdrop to the interpretive task. He instructed himself on the interpretive principles to be applied: to look at the language of the declaration in the context of the document as a whole, in light of the surrounding circumstances, considering the purpose of the declaration to achieve harmony and avoid conflict, and with a view to avoiding absurd results. He then considered each of those matters and expressed his conclusion as one of interpretation – that he had arrived at a meaning of the declaration that avoided absurdity, that respected the purpose of the declaration, and that accorded “with a common sense and reasonable interpretation of the [d]eclaration in its context, and given the surrounding circumstances at the formation of the [d]eclaration.”

[46]      Moreover, the arbitrator nowhere said that he was correcting or amending the declaration. He did not refer to any party requesting he do so, or describe that as anyone’s position. He did not cite any test for doing so. He did not say he was making an order that the declaration be corrected or amended. By his reference to a reasonable interpretation of the declaration in its context based on surrounding circumstances at the time of its formation, it is clear that he was deciding what the declaration always meant, not that it had meant something else which now had to be changed.

[47]      The application judge referred to the arbitrator having expressed a “common sense interpretation of the [d]eclaration” and to his engagement in a “contractual interpretation exercise”. As the arbitrator had the jurisdiction to interpret the declaration and did so, the court’s task under s. 46(1)3 was over. The application judge erred in proceeding to superimpose a different characterization of what the arbitrator did – calling it “in effect” an amendment – by reviewing the substance of the arbitrator’s award and considering whether a proper interpretive analysis could justify it.

[48]      Issues such as whether or not the arbitrator gave effect to plain language, went beyond the text, properly reconciled inconsistencies, or used surrounding circumstances beyond their proper limits were matters that affected only the quality of his interpretation – its correctness or reasonableness – and thus the manner in which he exercised his jurisdiction. Consistently with Alectra, whether there were errors in these areas was irrelevant and, if they occurred, did not result in a loss of jurisdiction.

[49]      As the application judge pointed out, the arbitrator considered more than the text of the declaration. Although the plain meaning of contractual language is important, the literal or plain meaning of part of a document is not the end of interpretation. Other interpretive principles may bear on the proper interpretation, which is the one that reflects the objectively derived intention of the parties. As noted in Sattva, at para. 47, “[c]onsideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning.” The text must be understood in light of the surrounding circumstances including the purpose of the document. Similarly, the meaning of the language must be assessed in light of the document as a whole, and the principle that absurdity is to be avoided: Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, 85 O.R. (3d) 254, at para. 24.

[50]      That the arbitrator’s analysis did not stop at the text but considered and used the surrounding circumstances, the purpose and meaning of the declaration as a whole, the avoidance of absurdity, and the intention of the parties were not departures from the interpretive process; they were steps in that process. Of course, there can be right and wrong ways of applying those interpretive principles. As the application judge pointed out, there are limits on the use of surrounding circumstances. But whether the principles and factors involved in an interpretation were applied correctly, or reasonably, is beside the point of whether the decision maker has engaged in interpretation.

[51]      Although the application judge instructed herself that the reasonableness or correctness of the arbitrator’s decision was not the issue, she did not, with respect, adhere to that admonition. She reviewed the substance of the decision and said that the arbitrator had not decided the matter in accordance with the text of the declaration, that he reached a decision by reference to surrounding circumstances that went beyond their proper use, and that “[t]he clear effect of the arbitrator’s ‘interpretation’ is to broaden the scope of section III of the [d]eclaration … in a way that is not specified in the [d]eclaration.” She thus concluded that a proper use of interpretive principles could not yield the result the arbitrator reached.

[52]      It was not open to the application judge to proceed as she did, and find that the arbitrator must have amended the declaration, rather than interpreted it, because a proper interpretation could not justify the result he arrived at. This confuses the correctness or reasonableness of the interpretive result with whether the arbitrator answered a question that was not remitted to him or dealt with a matter beyond the scope of the arbitration agreement. It equates an incorrect or unreasonable decision on a matter properly before the arbitrator with an exceeding of jurisdiction by deciding a different matter. As Huscroft J.A. said in Alectra, at para. 41:

[53]      The application judge erred in setting aside the award as the arbitrator clearly engaged in interpretation of the declaration, which was within the authority conferred upon him. Whether he did so incorrectly or unreasonably, the decision as to the interpretation was for him to make.

[54]      I would allow the appeal and restore the award of the arbitrator.

[55]      In accordance with the agreement of the parties, I would award costs of the appeal to HCC 137 in the amount of $20,000 inclusive of disbursements and applicable taxes.