Ontario – administering institution granted leave to intervene in challenge to appellate arbitral award

In Re/Max All-Stars Realty Inc. v. Real One Realty Inc., 2019 ONSC 4956, Master Michael P. McGraw granted leave to an real estate industry association to intervene in a challenge to an award issuing from a process it administered. Master McGraw held that the association was uniquely placed to make a useful contribution to the determination of the issue regarding the history/purposes of the arbitration rules prohibiting court litigation and how interpretation of those prohibitions may affect other arbitral provisions.  Contrast this reasoning/result with HZPC Americas v. Skye View Farms, 2018 PESC 47 (CanLII) which determined that an arbitral institution would not contribute anything useful to an appeal involving excess of jurisdiction of the institution’s arbitration rules. See the Arbitration Matters note “P.E.I. – arbitral institution denied leave to intervene in jurisdiction-based challenge to arbitral award”.

On October 8, 2015, Real One Realty Inc. (“ROR”) initiated arbitration pursuant to Schedule C against Re/Max All-Stars Realty Inc. (“RMAR”) claiming $106,220.00 in commission related to a property sale in Ontario. 

ROR’s and RMAR’s agreement to arbitrate stemmed from the Rules and By-Laws adopted by the Canadian Real Estate Association (“CREA”), a national real estate trade association. CREA represents the real estate industry nationally, provincial/territorial associations represent their province/territory and real estate boards operate at the local level through their REALTOR® members.

Rule 2.1.7 of CREA’s Rules and Article 4.7 of CREA’s By-Laws stipulate respectively that (i) all Boards and Associations must provide for binding arbitration of disputes involving commissions and (ii) REALTOR® members are deemed to have agreed to submit “claims” to arbitration as provided by CREA’s Rules.  ROR and RMAR appear to be members of the Toronto Real Estate Board (“TREB”).

The arbitration involving ROR and RMAR was conducted under Schedule C of CREA’s By-Laws which “creates an optional arbitration scheme which TREB members can use to resolve disputes with respect to commission payments arising from residential and commercial real estate transactions”. Free, online access to CREA’s or to OREA’s Schedule C or equivalent appears to be limited to members only.  Master McGraw fortunately did include a citation of section 37.01 and 38.01 of Schedule C in his reasons at paras 22-23.

After the July 26, 2016 hearing, the Arbitration Panel dismissed ROR’s claims and determined that RMAR was entitled to the disputed commission (“Arbitration Decision”).

The arbitration procedure provided for an appeal to the Ontario Real Estate Association (“OREA”) and ROR appealed the Arbitration Decision on August 31, 2016.  ROR’s appeal was heard March 21, 2017 by an Appeal Panel constituted pursuant to section 30 of Schedule C of CREA’s By-Laws.  In its June 6, 2017 decision (“Appeal Decision”), the Appeal Panel allowed ROR’s appeal and determined that ROR, not RMAR, was entitled to a commission of $105,894.56.

RMAR then applied on July 7, 2017 to the Superior Court under section 46(1) of Ontario’s Arbitration Act, 1991, SO 1991, c 17 to set aside the Appeal Decision on the grounds that:

(a) the Appeal Panel exceeded its jurisdiction, made unreasonable errors and erred in making numerous findings; and,

(b) RMAR was not given an opportunity to respond to ROR’s case during the appeal and was not treated equally and fairly during the appeal.

Master McGraw identified section 46(1)6 of the Arbitration Act as being the specific provision triggered by the grounds raised by RMAR:

41(1)6 The applicant was not treated equally and fairly, was not given an opportunity to present a case or to respond to another party’s case, or was not given proper notice of the arbitration or of the appointment of an arbitrator.

On August 15, 2017, through counsel, OREA advised ROR and RMAR that it intended to seek leave to intervene in RMAR’s application.  Rule 13.01 of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194 addresses interventions:

(1) A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,

(a) an interest in the subject matter of the proceeding;

(b) that the person may be adversely affected by a judgment in the proceeding; or

(c) that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding. 

(2) On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.

RMAR opposed OREA’s motion while ROR supported it.  The Toronto Real Estate Board (“TREB”) also supported OREA’s motion but did not appear.

Acknowledging that RMAR’s application was not for judicial review and did not involve a tribunal created by statute, Master McGraw still referred to Ontario (Energy Board) v. Ontario Power Generation Inc., [2015] 3 SCR 147, 2015 SCC 44 paras 52-59 for “helpful guidance regarding the intervention of tribunals on appeals of their own decisions”. None of the parties located a reported decision which dealt with an application to set aside an OREA appeal decision.

In addition to the specific Rule 13.01 dealing with interventions, Master McGraw also referred to Rules 1.04(1) and 1.04(1.1).  Those introductory Rules remind that the Rules of Civil Procedure are to be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits and that the courts make orders and issue directions proportionate to the importance and complexity of the issues and the amount in dispute.

With regard to Rule 13.01, after referring to Peel (Regional Municipality) et al. v. Great Atlantic & Pacific Co. of Canada Ltd. (C.A.), 1990 CanLII 6886 (ON CA) para. 10 and Jones v. Taige 2011 CanLII 99894 (ON CA) para. 22, Master McGraw summarized the considerations for granting leave.  He identified the nature of the case, the issues which arise and the likelihood of the proposed intervenor being able to make a useful contribution to the resolution of the matter without causing injustice to the immediate parties.  He also noted the courts’ reluctance to grant leave in private litigation.  Should a court grant leave in private litigation, Master McGraw noted the courts’ tendency to apply a more onerous standard or one apply the standard more stringently than in cases involving issues of public policy.

Master McGraw also determined that the case law, such as Lawyers’ Professional Indemnity Co. v. Geto Investments Ltd., [2002] O.J. No. 378 (S.C.J.), had interpreted Rule 13.01 to require a proposed intervenor to establish ““the presence of an adverse affect on a person’s legal rights” such that they have rights or interests at stake or relief is sought against them as opposed to adverse findings or observations or negative comments.

Though ROR had not served its responding materials, ROR argued in other materials filed in court that RMAR’s application contravened Schedule C, violating section 37.01.  Master McGraw citated section 37.01 as well as section 38.01:

37.01 No action or proceeding, either at law or equity, shall be brought by any Member of TREB against any other Member or any servant or agent of TREB, acting in good faith, for or by reason of, any act, matter or thing done or omitted to be done in pursuance, or purporting to be in pursuance, of this Schedule.

38.01 TREB, its Members and all parties to a Claim hereby agree to exclude application of the provisions of the Arbitration Act, 1991 (Ontario) (as amended from time to time) from Arbitrations conducted by TREB pursuant to this Schedule, save those provisions thereof (Subsection 5(4) and Sections 19, 39, 46, 48, 50) from which, pursuant to Section 3 of the Arbitration Act, 1991 (Ontario)(as may be amended from time to time), contracting out is expressly prohibited. All Members of TREB acknowledge that this provision does not apply to OREA Appeals.

OREA had initially advised that it intended to file affidavit evidence.  In oral argument, OREA revised its position.  OREA advised that it sought only to make written and oral submissions limited to (i) the interpretation of Schedule C including whether sections 37-38 of Schedule C prohibit RMAR from commencing legal proceedings such as the application under section 46 of the Arbitration Act and any other jurisdictional issues raised by the parties, and (ii) the integrity and fairness of the process with respect to the hearing in the appeal.  Aside from a stated willingness to “fill in any gaps” in the record and answer questions from the court, OREA stated that “OREA has no interest in the underlying commission dispute between the parties and will not make any submissions on the merits or ultimate result of this dispute.

RMAR resisted.  It argued that (i) the dispute between RMAR and ROR was private, (ii) OREA had no genuine interest and would not be adversely affected, (iii) OREA cannot make any useful contribution and (iv) counsel for the named parties are capable of making all the necessary submissions.

Master McGraw granted OREA leave to intervene. He determined that the issue of whether RMAR was prohibited from making its motion under section 46 of the Arbitration Act went beyond the parties’ dispute over the commission.

OREA has a legitimate interest in the Court’s determination of this issue, the disposition of which may adversely affect OREA’s administration and adjudication of appeals under Schedule C. This issue has not been judicially considered and given its potential impact on OREA, it is just and reasonable that OREA be permitted to make submissions. Further, OREA is uniquely placed to make a useful contribution to the determination of this issue with respect to, among other things, the history and purposes of Schedule C and ss. 37-38 and how the Court’s interpretation of ss. 37-38 may affect other provisions. In my view, it would not be fair, just or reasonable in the circumstances for OREA to rely solely on the submissions of the immediate parties who, as member brokerages, are not in the same position as OREA to more fully and properly advise the Court regarding the administrative scheme at issue and any other jurisdictional issues.

Master McGraw also added that he:

– anticipated no delay in the hearing of OREA’s motion, especially in light of the pace RMAR had pursued filing its materials;

– determined that OREA’s submissions would not be repetitive of the parties’ arguments; and,

– accepted OREA’s submissions that it would not submit evidence on the merits of the dispute and would make no submissions on the merits of or support the Appeal Decision;

Having granted leave to intervene, Master McGraw held back from setting the terms of OREA’s intervention leaving that to the applications judge to determine.

It would be inappropriate for a Master on a Rule 13 motion to impose terms and conditions as to what submissions OREA should be permitted to make given the risk that it may fetter the discretion of the Application Judge to make a determination of the Application based on what submissions the Judge concludes are necessary. While it is appropriate for a Master to consider the relevant factors under Rule 13.01(1), once leave is granted, the Judge hearing the Application must be able to exercise their discretion to determine what submissions from the parties are necessary and appropriate in order to make a fully informed determination of the Application on its merits ([Ontario (Energy Board) v. Ontario Power Generation Inc., [2015] 3 SCR 147, 2015 SCC 44 (CanLII)] at para. 57).

urbitral note – The decision on RMAR’s application will be worth following to read, among other things, OREA’s submissions on the parties’ agreement to not institute litigation, the impact of the mention of section 46 of the Arbitration Act in section 38.01 of Schedule C and the court’s determination of the merits of the appeal.

In the earlier PEI decision in HZPC Americas v. Skye View Farms, Campbell J. determined that the administering institution’s concern for the precedential value of the appeal did not justify it being added to the appeal as the arguments it could make could be made by either of the existing parties. The institution’s claim to have a global outlook of the potential adverse impact of an “unfavourable” result was insufficient to grant the institution leave to intervene.

For a sample application of/compliance with the CREA’s Rules and By-Laws noted above, see Article 8 of the Realtors Association of Hamilton-Burlington’s March 2018 “RAHB Bylaw”, pages 31-38, sections 1-26.  Article 8 does provide terms which are not identical to the sections 37.01 and 38.01 mentioned in the reasons but do mention an OREA appeal procedure.  The RAHB Bylaw contains no express prohibition to challenge an appeal decision but section 5.02 does deem that undertaking court proceedings in lieu of an appeal is a breach of the Bylaw, absent an agreement by the parties to the dispute not to arbitrate.