Condo Living

October 11, 2019 Published by Toronto and Area Chapter - By Marc Bhalla

Beyond the Act: When Mediation and Arbitration Are Also Mandatory

From the Fall 2019 issue of the CCI Toronto Condovoice Magazine.

Did you know that the mandatory mediation and arbitration provisions provided by the Condominium Act, 1998 (the “Act”) do not speak to the only circumstances where a condominium conflict is required to proceed to mediation and, failing settlement, arbitration instead of court?

Unlike what is imposed by law, the other circumstances that I speak of are initially optional without many even realizing it until they are bound to alternative dispute resolution.

I am referring to dispute resolution clauses in contracts that a condominium corporation enters into. Many do not bother to review such clauses, particularly as there are usually more contentious and important issues to negotiate. Yet, they offer tremendous opportunities and advantages if done right.

Unfortunately, such clauses are not as standardized as many assume and they often get overlooked or taken for granted in the course of finalizing a contract. This can result in missed opportunities to avoid complication in the event that a dispute arises and uncertainty when a conflict initially surfaces.

The Advantages

Effective dispute resolution clauses in service and other contracts offer several advantages to both condominium corporations and those with whom they enter into agreements:

1. Maintaining Privacy. In addition to being slow and costly, proceeding through the court system is public in nature. It can be preferable to everyone involved in a dispute to address it privately.

Dispute resolution clauses in contracts can call for the private resolution of any dispute that may arise, avoiding the impact of negative publicity, regardless of the ultimate outcome of the conflict.

This is simply an agreement between parties to the contract to address any disputes that may arise through private mediation and arbitration. From the perspective of a condominium Board, there is often merit in keeping conflict, and even possible resolution terms, away from the public eye – including in consideration of community reputation and property value preservation.

2. Process Guidance. A long standing criticism of the mandatory mediation provisions of the Act is that they require mediation yet fail to offer any process guidance or instruction as to the procedure to be followed.

Without prescribed forms to use to propose mediation, guidelines for mediator selection or anything more than a deadline after which mediation can be considered to have failed - even if it did not actually take place - the practical reality is that the first thing feuding parties need to do to address a dispute that falls under the mandatory mediation requirements of the Act is to agree on how mediation will come together. Similar frustrations apply to arbitration as well, unless the condominium has a good mediation/arbitration by-law in place to set this out.

The delay, frustration and cost that can result from this can be avoided if process guidance is offered up front. With respect to contracts, a dispute resolution clause can set out precisely how mediation and arbitration would come together. After all, it is usually easier to agree on such terms at the contract negotiation stage, before any conflicts actually surface, rather than after the emergence of an issue.

3. Leveraging Flexibility. Mediation and arbitration can be flexible processes while going to court is rigid.

Consider scheduling. Court dates are assigned and adjournments can lead to postponement and time wasted attempting to have your day in court. Mediation and arbitration usually allow parties to have a say in scheduling and can take place online, in segments, and otherwise at a date and time that at least takes into consideration the schedules of the participants as they are set.

This need not be too specific or detailed. It can be set out in general terms to acknowledge the flexibility advantage or to otherwise empower the process facilitator to guide scheduling as they see fit.

What to Include

It can be helpful to address the following in contractual dispute resolution clauses:

1. Process Initiation Protocols. Clearly establish how one can invoke the dispute resolution clause in a contract to start the mediation or arbitration process. This can set out the way in which a mediation or arbitration proposal can be delivered, timelines for a reply and other helpful guidance surrounding the determination of location and scheduling.

Not only can this avoid confusion, frustration and delays, but it can also offer comfort over the unknown of how/if this would work otherwise.

2. Mediator/Arbitrator Selection Guidelines. Believe it or not, games can be played when it comes to selecting a mediator or arbitrator that can be proactively avoided through a dispute resolution clause.

Advanced consideration of mediator/ arbitrator availability, qualification and the division of engagement costs can avoid many of the stumbling blocks that can innocently or intentionally get in the way of a mediation or arbitration coming together.

It can also be helpful to set out a protocol for addressing disagreement over the selection of the mediator or arbitrator to set out a clear way to overcome any related obstacles that might arise.

3. Page Limits. Establishing page limits for mediation briefs and related submissions can avoid the risk of voluminous materials inflating costs and unnecessarily complicating matters.

To the extent that there is any hesitancy to set any particular page limit in stone, as the nature of the dispute may impact what is reasonable, such clauses can empower the mediator or arbitrator selected to set what they consider to be fair limitations.

What to Avoid

It may be important to avoid the following common hurdles in contractual dispute resolution clauses:

1. Overly Narrow Specifications. Particularly if there is hope that the contractual relationship will be long-term, it can be a mistake to get overly specific and neglect what could change over the passage of time. For example, referencing a specific ADR practitioner, roster or authority from which the mediator or arbitrator will be selected can become a problem if they fail to be available in the future.

General guidelines, such as qualification criteria that references the mediator or arbitrator having a designation of the ADR Institute of Canada or a similar designation that confirms the process facilitator’s qualification to practice through education, experience and insurance can “set the goal posts” in a way that will stand the test of time.

2. Over Simplification. Consider that mediation/arbitration by-laws usually consist of double digit pages while contractual dispute resolution clauses are often limited to a paragraph.

It can be a mistake to keep language too general, as this risks failing to offer any real value when needed. Such can be misinterpreted and create disputes as to what the clause means - leaving everyone no better off.

There needs to be a balance struck between being prescriptive in terms of what is desired and flexible to avoid complicating or frustrating the process through the unknown variability of the future.

3. Neglecting the Clause. It can be very easy to overlook a dispute resolution clause in a contract or to chalk it up as standard, fine print wording. This is particularly the case as these clauses usually appear toward the end of the contract, when a reader’s eyes are tired and they look forward to being done with the document.

While there may be more important aspects of the contract to concentrate on as it is being negotiated, opportunities to avoid the problems that can occur when dispute resolution clauses are insufficient, unenforceable or not included exist. Consider them before signing the contract.

Many condominium communities engage their legal service provider to negotiate and/or review contracts before they enter into them, and are wise to do so. Dispute resolution clauses in contracts could be deemed to be invalid if, for example, they are viewed as an attempt to contract out of the Act. Wording can be interpreted against the drafter if contract terms are subject to differing interpretations and serve to drag out and complicate the resolution of the dispute. Also, it can be easy to neglect appeal and cost award rights if they are not addressed up front; to that end, it may be beneficial to at least capture intentions surrounding those considerations.

Dispute resolution clauses in contracts can be very helpful in realizing the advantages that come with private, prompt and cost efficient dispute resolution offered through mediation and arbitration. These opportunities merit giving these clauses the time and attention they deserve.