Entertaining Arbitration

By Pat Williams

In the July/August 1995 issue of the Property Management News I addressed Alternative Dispute Resolution, also known in the trade as "ADR".  I compared the processes of mediation, arbitration and court.  Since that article I have had a great deal of experience with all three of the processes.  My mediation experience has been solely in the field of personal injury; while I believe that mediation will be oft used in the condominium and property management fields in the future, to date very little has occurred.  However, I cannot say the same with respect to court and arbitrations.  I have been involved in a number of court cases since the summer of 1995.  Since then I have received my "Chartered Arbitrator" designation from the British Columbia Arbitration and Mediation Institute and conducted a number of arbitrations in the condominium and personal injury field.

I intend to deal solely with arbitration in this article.  The Commercial Arbitration Act of British Columbia was enacted to replace the Arbitration Act of British Columbia.  The Commercial Arbitration Act applies to all commercial agreements, any arbitration unless an Act specifically provides that it does not apply and any other arbitration agreement.  The Commercial Arbitration Act deals with a myriad of issues including oaths, subpoenas to witnesses, costs, majority decisions, binding awards, stays of proceedings, fees, enforcement, ability to set awards aside, appeals, removal of arbitrators and so on.  An important aspect of arbitrations under the Commercial Arbitration Act is that legal principles apply unless excluded in an arbitration agreement.

This last concept of legal principles applying is key to the condominium industry.  Why?  Because the Condominium Act of British Columbia specifically excludes the operation of the Commercial Arbitration Act (with the exception of the procedure of appointing an arbitration panel) and the Condominium Act provides that arbitrator(s) may make whatever award they consider just and equitable.  In other words, there is no requirement that a condominium arbitrator must apply any legal principles whatsoever.  That is scary, especially to a person such as myself whose training is as a lawyer dealing with case precedent and statute law.

Because legal principles do not apply and the Condominium Act is statute law of British Columbia, I believe that it is at least open to a person to submit that the Condominium Act provisions do not apply to a Condominium Act arbitration!  And a couple of the most recent arbitration decisions that I have reviewed appear to ignore the provisions of the Condominium Act.

Let us take a look at a few of the provisions of the Condominium Act.  While for some readers this might appear to be elementary, my experience has been that sections 44 and 45 of the Condominium Act are not well known by a number of property managers in the condominium field.  Section 42 allows for an owner to refer to arbitration a matter that the owner alleges has oppressed or unfairly prejudiced the owner.  Section 44(1) permits a strata corporation to refer to arbitration a dispute between the strata corporation and an owner or between two or more owners a dispute about any matter.  The balance of section 44 deals with the appointment of an arbitrator or an arbitration panel.  The party referring the matter to arbitration suggests an arbitrator.  The party receiving the notice of the arbitration referral cannot reject it.  The opposing party must agree to the arbitrator chosen within two weeks or within a further week appoint a representative of their own.  If each party appoints an arbitrator then the two arbitrators appoint a third who shall be the chair of the arbitration.  I have acted as legal counsel in an arbitration with one arbitrator and with three arbitrators; and have acted as the chair of an arbitration panel as well as a single arbitrator.  I would highly recommend that if a property manager is dealing with an arbitration, a single arbitrator is preferable, if at all possible.

Section 45 of the Condominium Act is the section that deals with the process of a condominium arbitration.  Its beauty is also its drawback.  The beauty is that the arbitrator can define the procedure under which the arbitration will take place.  For example, the section provides that the arbitrator(s) shall conduct the hearing as they believe proper, and will hold the hearing as soon as possible at a location in the strata plan or nearby.  I use the word "beauty" because court can take many months or years and the hearing takes place in the Courthouse.  The court hearing is at the mercy of court time which is 10:00 a.m. - 12:30 p.m. and 2:00 p.m. - 4:00 p.m., Monday through Friday.  I am presently in the middle of hearing an arbitration as a single arbitrator.  The subject matter is the building of fences on limited common and common property.  I sat from 9:00 a.m. until 6:30 p.m. on a Saturday, in the common room of the complex and after hearing opening submissions, viewed the fences in question.  All these advantages would be unavailable under the court system.

What then is the drawback?  Quite frankly, my experience is that very few arbitrators have an intimate knowledge of the Condominium Act.  The parties are at the mercy of the arbitrator(s).  Although an arbitration under the Commercial Arbitration Act is appealable under some circumstances, that Act is specifically excluded from a condominium arbitration.  I have been told of one instance in which a strata council was advised by a single arbitrator that the fact that the strata corporation was not represented by legal counsel should not concern them, even though the individual owner had a lawyer.  I am told that the arbitrator indicated that he wold take care to ensure that the strata corporation was not at a legal disadvantage and the opposing lawyer would get no costs.  As events unfolded the strata council believes that objections of the lawyer for the owner were sustained to the detriment of the strata corporation and significant costs were awarded to the lawyer for the owner.  Can this decision be successfully appealed?  Likely not.

Note that I earlier suggested a single arbitrator, even though the immediately preceding paragraph reflects a situation in which there was a single arbitrator.  Why a single arbitrator?  One good reason is the cost.  Another is the optimistic hope that one is more likely to have an arbitrator with condo experience than having three arbitrators, all with condo experience.  Another reason is convenience and timing.  The timetable of one arbitrator is obviously more easily dealt with than the timetables of three arbitrators.

Finally, one can have disastrous results with three arbitrators.  I am aware of an arbitration on Vancouver Island in which the one arbitrator with extensive condominium experience was the dissenting arbitrator because the other two arbitrators made a decision which made no sense under any reasonable interpretation of the Condominium Act.  The strata corporation likely has no recourse because the majority of the panel made an award they considered just and equitable.

So what can a property manager do when confronted with an arbitration or when considering arbitration?  Firstly, choose an arbitrator with extensive condo experience, not just an arbitrator with arbitration experience.  Secondly, choose an arbitrator who would be reasonably likely to be impartial so that there is good chance that the other side will agree on the same arbitrator, hopefully keeping costs to a minimum.  Thirdly, when advising the strata council, err on the conservative side of estimates.  I am aware of arbitrations that have cost as little as $3,000 and others that have exceeded $15,000 in costs.  Fourthly, advise the strata council that there are no guarantees of success, nor any pattern to the awarding of costs.  If the strata corporation is considering arbitration, but the law seems to favour the strata corporation, think long and hard about choosing arbitration over court because a court must follow case precedent and statute law.

Arbitration can be a delightful process.  It is less adversarial.  It allows for views in matters of disputes.  It can be speedy and convenient.  However, it is important to understand the arbitration process; the failure to do that can result in some very upset owners who might very well suggest that a manager has not advised them of the drawbacks as well as the advantages.  If the owner opposing the strata corporation has a lawyer, advise the strata corporation that while it is not necessary to be legally represented, by not being represented the strata corporation must rely upon the arbitrator(s) to ensure fair play.  Quite frankly, the Condominium Act provides very little solace.  All parties are at the mercy of the arbitrator(s).