Arbitration is an alternative dispute resolution process required under the Condominium Act. Arbitration is different from mediation as it is an adjudicative dispute resolution procedure in which a decision maker, or arbitrator, issues an award which is equivalent to a judgment from a court and is usually the final disposition of the case.
Arbitration is a legal process governed in Ontario by the Arbitration Act, 1991, (“Arbitration Act”) and in the case of condominium arbitration, it is also governed by the Condominium Act and the Arbitration Act. Condominium arbitration is not significantly different than any other type of arbitration but all things being equal, the parties should chose an arbitrator who is familiar with condominium matters.
Unlike participants in mediation who design their own settlement with the help of the mediator, participants in arbitration pass control of the outcome to the arbitrator. The chief advantage of arbitration compared to mediation is that the parties can be certain that their dispute will be dealt with, which is something that cannot be guaranteed by the mediation process.
Arbitration is a formal structured dispute resolution process, but it is designed to be less formal and more flexible than litigation in court in a number of ways:
- The parties can choose the arbitrator who will hear the case;
- The parties can control the process by structuring the terms of the arbitration;
- The rules of evidence are far more relaxed than in court;
- There is less, and often in condominium arbitration, no pre-hearing discovery which is the process through which each side obtains case-related information from the other;
- The process is private;
- The parties decide what records will be kept of the proceedings; and
- The process is less formal than in court.
Arbitration begins with “A Notice of Submission to Arbitration” from the party initiating the arbitration to the other party. In condominium disputes, it is quite often the condominium corporation that starts arbitration where mediation has failed to resolve the dispute.
The Notice will nominate a specific arbitrator for the dispute. If the other party agrees to the appointment of the nominated arbitrator, then the process proceeds. If the one party objects to the arbitrator and cannot agree on the appointment of another mutually agreed upon arbitrator, then the Arbitration Act allows a party to apply to court to appoint the arbitrator. There is no appeal from the court’s appointment.
The condominium corporation’s lawyer and the unit owner’s lawyer will usually obtain resumes from potential arbitrators, and may also interview prospective arbitrators by telephone and will make recommendations of who to choose based on a variety of factors including knowledge, cost and experience of the arbitrator.
Cost of Arbitration
The parties to the arbitration have significant legal costs in preparing and presenting their case in arbitration. The parties also pay for the arbitrator’s fees. Because of this the cost of arbitration will be much higher than that of mediation and can be extremely high if the dispute is lengthy and complex. This is another reason to try and resolve the dispute through mediation.
The arbitrator has the authority to award ‘costs’ to one side or the other, meaning that he or she can order that all or part of the costs incurred by one party be paid by another. In Ontario, the successful party is generally entitled to costs. In situations where the conduct of the losing party has contributed to significant delay or unnecessary proceedings, the arbitrator will award costs on a “full indemnity basis”, which means all of the party’s legal costs will be paid by the other party.
If costs are awarded in favour of the condominium corporation against a unit owner, they can usually be collected in the same manner as common expenses.
Additionally many condominium corporations have passed by-laws which set out the procedures to be followed in both mediation and arbitration and allows them to charge back all of the costs of mediation and arbitration to the unit owner.