Urban E. Homes Ltd. v. Condominium Corporation No., 2013 ABQB 109

Court of Queen ’ s Bench of Alberta Citation: Urban E. Homes Ltd. v. Condominium Corporation No. 0313563, 2013 ABQB 109 Date: 20130227 Docket: 1201 09512 Registry: Calgary Between: Urban E. Homes Ltd. Applicant - and - Condominium Corporation No. 0313563 Respondent _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R. A. Jerke _______________________________________________________ Introduction [ 1 ] Urban E. Homes Ltd. (Urban Homes), the Builder, constructed a condominium development (Urban Manor) in 2003.

Condominium Corporation No. 0313563 (Condo Corp) is the owner of the common property. [ 2 ] Urban Homes and the Alberta New Home Warranty Program (the Program) provided a warranty certificate to the homeowners and another to Condo Corp. The terms of the certificates are nearly identical. The Condominium Common Property Warranty Certificate (the Certificate) provided to Condo Corp governs this application.

[ 3 ] Water leakage first occurred in unit 4 in early August 2009. Leakage has been seen in Urban Manor on other occasions and in a number of locations since then. Urban Homes has attempted repairs a number of times. In early 2010, Condo Corp received a report identifying problems with Urban Manor’s roof. [ 4 ] In January 2012 Condo Corp filed an application to arbitrate the leakage dispute with Urban Homes in accordance with the Certificate and the rules adopted by the Program.

The Program is not named as a Respondent and no relief is sought against it. [ 5 ] Urban Homes challenged the jurisdiction of the arbitrator. In Procedure Order No 1, issued prior to arbitration on the substantive matters, the arbitrator ruled that he had jurisdiction to arbitrate the dispute.

Urban Homes continues to deny his jurisdiction and applies for the Court’s decision on the matter pursuant to s17(9) of the Arbitration Act , RSA 2000, c A-43. [ 6 ] For the reasons which follow, I have decided that the arbitrator has jurisdiction to conduct this arbitration. [ 7 ] Determination of the arbitrator’s jurisdiction requires consideration of the following questions: A. What is the standard of review? B. Did the arbitrator consider the jurisdictional effect of mandatory steps in the dispute resolution process? C. What is the basis for the arbitrator’s jurisdiction? D.

Are Condo Corp’s obligations under s4 of the Certificate mandatory steps in the agreed dispute resolution process? E. Is conciliation a mandatory step in the agreed dispute resolution process?

A) What is the standard of review? [ 8 ] I find that the standard of review is correctness. [ 9 ] Condo Corp contends that deference should be given to the arbitrator’s decision and the standard of review should be elevated to something approaching the test in

summary judgment applications. No authority was cited, but the argument was advanced for two reasons: there is no appeal from the Court’s decision on this application (s17(10), Arbitration Act ), and the arbitrator found there were arbitral issues. [ 10 ] This argument ignores well established law. There are two recognized levels of scrutiny, correctness and reasonableness: Dunsmuir v New Brunswick , 2008 SCC 9 . Questions of law and jurisdiction are reviewed for correctness. The question here is whether the arbitrator has jurisdiction. The appropriate standard of review is correctness.

B) Did the arbitrator consider the jurisdictional effect of mandatory steps in the dispute resolution process? [ 11 ] Urban Homes contends that the Certificate stipulates a mandatory process for any dispute between Condo Corp and Urban Homes which requires notice within the prescribed time frame and completion of the conciliation procedure. Urban Homes contends that

the arbitrator failed to consider or address this issue in his ruling. [ 12 ] I find the arbitrator considered the steps claimed to be mandatory, but concluded they had no application to this dispute. [ 13 ] First, the arbitrator found that the arbitration agreement survived independently of any other terms in the certificate, including the claimed mandatory process. He stated: a.

Section 17(3) of the Alberta Arbitration Act provides that: “If the arbitration agreement forms part of another agreement, it shall for the purposes of a ruling on jurisdiction, be treated as an independent agreement that may survive even if the other agreement is found to be invalid.” b. [Urban Homes] contends that the Certificates were terminated long before [Condo Corp’s] Application to Arbitrate was filed...notwithstanding the termination/expiration of the Certificates, for the purposes of a ruling on jurisdiction, the Arbitration Agreement may be treated as an independent agreement that survived the termination/expiration of the Certificates. [ 14 ] Second, he found that the claims advanced by Condo Corp may be beyond the warranty provided in the Certificate, and that there was no requirement on Condo Corp to follow the alleged mandatory process for such claims: [Condo Corp’s] claims in its Application to Arbitrate are couched in language that is consistent with claims founded on common law principles of contract and tort law.

Non-compliance by [Condo Corp] of the limits, exclusions and notice requirements contained in the Certificates have no application to the claims or case brought by [Condo Corp]. Neither do they limit rights or create immunities from liability that exist outside of the warranty provisions. [ 15 ] Third, he discussed how expiry of the applicable warranty periods affects the Builder’s and the Program’s liabilities: Conciliation and the backing by the Program for Builder’s inadequate performance ceased to be available to Urban Manor upon expiration/termination of the Certificates.

Thereupon, the Program achieved immunity under the express provisions of the Certificates; but, as noted above, the Builder was not expressly given immunity from liability. [ 16 ] I therefore conclude that the arbitrator did consider, and reject, Urban Homes’ argument about the existence of a mandatory process.

C) What is the basis for the arbitrator ’s jurisdiction? [ 17 ] Jurisdiction is found in the Certificate which provides: “If any issue, with respect to anything in this… Certificate or contained in a Conciliation report is disputed, it shall be settled by Arbitration by a single arbitrator…”: s9(a). [ 18 ] The Certificate is a limited warranty which sets out defined obligations of both the Program and the Builder: s2(

a) and (b), and 3(a), (b), and (d). The Certificate does not address latent defects discovered after the warranty period expires. [ 19 ] Warranties and obligations of the Builder outside the Program are not excluded by the certificate, and additional Builder warranties are specifically contemplated in the certificate: s8(a). The only limitation is that the only warranty given by the Builder which is binding on the Program is that contained in the Certificate: s5(a).

[ 20 ] The application to arbitrate claims compensation for repairs and related expenses alleging poor roof installation procedures, non-compliance with the Alberta Building Code , lack of roof sealant, and insufficient overhang in the roof structure. Condo Corp attributes responsibility to Urban Homes. While the application to arbitrate raises matters specifically in the Certificate it does not limit the application to claims under the Certificate.

No remedy is claimed against the Program. [ 21 ] This dispute is between the Builder and Condo Corp concerning warranties and obligations which are not binding on the Program. I agree with the arbitrator’s finding that: “The claims made in [Condo Corp’s] Application to Arbitrate fall within the scope of the Arbitration Agreement…” As part of another agreement the arbitration agreement is treated as an independent agreement for the purposes of jurisdiction: Arbitration Act , s17(3).

D) Are Condo Corp ’s obligations under s4 of the Certificate mandatory steps in the agreed dispute resolution process? [ 22 ] The arbitrator has jurisdiction unless Condo Corp has not complied with a mandatory step in the process. Failure to comply with a mandatory step in an agreed dispute resolution process will result in arbitration proceedings being struck: Suncor Energy Products Inc v Howe-Baker Engineers Ltd 2010 ABQB 310 . I find that Condo Corp’s obligations under s4 of the Certificate are not mandatory steps in the dispute resolution process. [ 23 ] Condo Corp had an obligation to provide written notice of defects or structural defects (s4(a)(

i) and (ii)) within a prescribed time frame and to provide notice for conciliation (s4(a)(iii)). It did not do so. Provision of notice by Condo Corp under s4(a)(

i) and (ii) triggers the Builder’s obligations to repair in s2(b). Failure to comply with these notice requirements terminates the warranty obligations and liability of the Program : s6(b). No such effect is stated on the Builder’s warranty obligations and liability, whether under the Certificate or otherwise. [ 24 ] Failure by Condo Corp to comply with the obligations in s4 terminates the Warranty Certificate (s6(a)(iii)).

The arbitration provisions in s9 make no mention of Condo Corp’s obligations. [ 25 ] The result here is that the warranty obligations and liability of the Program are terminated by Condo Corp’s failure to comply with the obligations in s4 but Urban Homes’ obligations are not. Nothing in the Certificate links Condo Corp’s s4 obligations with the wider dispute resolution process. I find that these obligations are not mandatory steps in the dispute resolution process.

E) Is conciliation a mandatory step in the agreed dispute resolution process? [ 26 ] Reading all of the provisions of the Certificate together, I find that conciliation is not a mandatory step in the dispute resolution process. Arbitration may proceed without completion of conciliation. [ 27 ] The arbitration

section of the Certificate does not state that conciliation is required before arbitration. There are only two mandatory conditions for arbitration: a. Completion of an application to arbitrate in an approved form (s9(b)). b. Submission of the application in a non-refundable fee to a designated law firm (s9(c)). [ 28 ] A time limit, referenced to a conciliation report, is imposed in s9(c), however this provision does not prevent initiation of an arbitration earlier than 30 days from a conciliation report, before a conciliation report, or without conciliation. In addition s9(

a) specifically contemplates arbitration without conciliation: “If any issue, with respect to anything in this ....Certificate or contained in a Conciliation report, is disputed...” [emphasis added].

[ 29 ] Urban Homes contends that conciliation is made mandatory by s4(a)(iii), s8(a), and s8(

d) of the Certificate. The flaw with respect to the argument concerning s4(a)(iii) is that it fails to address the question, ‘mandatory to what?’. I have found that Condo Corp’s obligations under s4 may be mandatory, but they are not mandatory to the dispute resolution process. [ 30 ] There is a similar flaw in the argument concerning s8 of the Certificate when the provisions are read together.

Section 8(

d) obligates the Builder and Condo Corp to comply with the conciliation procedures set out in the section. The procedures which are set out, while not exhaustive, make no reference to conciliation as a mandatory step prior to arbitration. Conciliation (and inspection) are stated to be mandatory before the Program will do any repair work (s8(d)(i)). [ 31 ] Conciliation is referred to in s8(a), however the obligation to provide notice of conciliation is placed on either the Builder or Condo Corp. The

section makes no reference to when the notice must be provided. [ 32 ] Compliance by the Builder and Condo Corp with the conciliation process is primarily aimed at ensuring resolution of the Program’s obligation under its warranty: a. The timing of the notice provisions in s8(

b) and (

c) are connected directly to the period while the program warranty is in effect. b. Conciliation is “… mandatory before the Program will do any repair work”. c. The definition of conciliation in s1 is restricted to “warranty issues in dispute....as provided in the Warranty Certificate”. [ 33 ] Here the Program has no warranty obligations or liability.

Section 8 of the Certificate does not state that conciliation is a pre- condition to arbitration. Reading all of these provisions together, I conclude that s8 does not impose conciliation as a mandatory step in the agreed dispute resolution process. Specifically, conciliation is not a condition precedent to arbitration. [ 34 ] A number of cases were referred to by Urban Homes. I agree with the principles articulated by Hawco, J in Suncor Energy Products Inc v Howe-Baker Engineers Ltd and with his conclusions, however that case does not address the issue here.

The cases of Zeko v Progressive Casualty Insurance Co, 1999 CarswellOnt 5645 (Arbitration decision, Financial Services Commission of Ont) and Risebrough v Co-operator ’s General Insurance Co , 2012 ONSC 2738 are based on very clear language in the Ontario Insurance Act RSO 1990, c I8: “No person may…refer the issues in dispute to an arbitrator…unless mediation was sought, mediation failed…”.

A similar conclusion was reached in Hyland Homes Ltd v Pickering, 2000 BCSC 524 , again based on very clear language: “a landlord or tenant may not apply for arbitration of a dispute…until the dispute has been mediated…” [ 35 ] In Lebelle v Yellowknife Public Denominational District Education Authority, 2001 NWTSC 87 , the subject matter of the dispute was very different language from that here; I find the case of no assistance. The case of Schmidt v Alberta New Home Warranty Program, 2007 ABPC 85 was a claim against the Program and a Builder. The issues there were different than here.

The case should be restricted to its own facts. Conclusion [ 36 ] The application of Urban Homes is therefore dismissed. Condo Corp is entitled to costs and disbursements of this application under

Schedule C. Heard on the 23 rd day of January, 2013.

Dated at the City of Lethbridge, Alberta this 15 th day of February, 2013. R. A. Jerke J.C.Q.B.A. Appearances: Gowling Lafleur Henderson LLP Paul J. Stein for the Applicant Bennett Jones LLP Chris D. Simard for the Respondent