A Closer Look at Dispute Resolution

January 2016

A new government office, The Condo Authority, is one of the proposed changes to the Condo Act contained in new legislation called Protecting Condominium Owners Act, 2015. One of the key responsibilities of this body would be dispute resolution.

While many groups hail this as an improvement, a closer look suggests there may be unintended consequences of dispute resolution more detrimental than the status quo.

In some ways, dispute resolution sounds much like moving many condo disputes away from the courts and into forced arbitration. Indeed, that is part of its attraction.

If required in Ontario for condo disputes, dispute resolution is being presented as less costly and fairer. It is in no way clear this is correct. The proposed system will require that all condo owners finance the system through monthly condo fees. Those filing for dispute resolution will be having the process subsidized by all condo owners. This alone creates a potential for abuse by those who file for dispute resolution while passing the cost of resolution to others. Concurrently, volunteer condo boards may find it necessary to hire lawyers or other expertise to represent them at dispute resolution hearings.

The USA has a long history of supporting arbitration. It has become standard practice in that country for organizations to require arbitration in place of litigation in their contracts. Among the reasons for this support among organizations is that they can exert greater control over decisions made through this process.

In the USA, there are concerns about the trend toward arbitration.

  • Thousands of businesses, from small to national corporations, have used arbitration to create a system of justice where rules favour businesses. Arbitration clauses are now commonly added to contracts.
  • Arbitrators of hearings often consider the businesses to be their clients. Hearings can be presided over by a lawyer who relies on one side for steady income and is predisposed to make rulings in their favour. Companies are able to direct cases to friendly arbitrators while arbitrators work to develop closer ties to companies. Arbitrators can make decisions based on the potential to obtain or lose future business.
  • Arbitration is a secretive process where proceedings are confidential. It is difficult to determine if the process is conducted fairly.
  • The New York Times examined records from over 25,000 arbitrations between 2010 and 2014. They interviewed arbitrators, plaintiffs, judges and lawyers. They found cases where companies paid employees to testify in their favour. In one case a single hearing cost $150,000. Some arbitration proceedings took place in the offices of lawyers representing accused companies.

The US experience is that dispute resolution, or arbitration, may not be as fair and economical as is being suggested. Edwin Greenfield, Manager of Mediation Services for March of Dimes Canada, views the proposed dispute resolution process identified in Protecting Condominium Owners Act, 2015 as an opportunity for the many minor disputes that take place in condo buildings to be resolved quickly, economically and without need for the corporation to employ agents to manage the process. In this way the proposed office could avoid the US experience in dispute resolution.

Currently, there is not enough information available to determine if dispute resolution will be an improvement over the status quo.