Executive Summary: Key Legal and Evidentiary Issues

• A party sought to set aside an arbitral award that interpreted a verbal agreement tied to a real estate development.

• The court analyzed whether the arbitrator exceeded their jurisdiction by overriding a prior court judgment.

• Central legal questions involved whether a contractor license was an implied contractual condition.

• Disputes arose over who held the right to purchase certain lots in the development project.

• The court confirmed that interpreting verbal agreements and recognizing implied terms involve mixed questions of fact and law, not subject to appeal.

• The application was only partially granted, with limited arbitral findings set aside but the main outcome upheld.

Background and earlier litigation

The case stems from a longstanding dispute involving four investor groups in a real estate development project known as the Projet Oasis. The project was managed by 1750739 Ontario Inc. ("739"), a company jointly owned by the investors. In 2007, Hervé Lacroix agreed to invest in the project through 1750738 Ontario Inc. ("738") based on a verbal agreement with Christian Leclair. That agreement allegedly gave a portion of the lots to Maisons Lacroix Homes Inc., a construction company linked to Hervé’s son Marc, for development. The other investors participated through numbered corporations, including 6888631 Canada Inc., 1751917 Ontario Inc., and 1750714 Ontario Inc.

In 2015, 738 commenced legal proceedings to enforce the verbal agreement. In 2019, the Ontario Superior Court (Charbonneau J.) found the verbal agreement enforceable and ordered that 25% of all lots in the project be allocated to Maisons Lacroix for construction. This ruling was upheld by the Court of Appeal in 2020.

Licensing issue and arbitration

Following the court's decision, a new issue emerged: Maisons Lacroix’s homebuilder license with Tarion had expired. Since a valid Tarion license is required by law to construct and sell new homes, questions arose about whether the developer 739 was still obligated to allocate lots to Maisons Lacroix. The parties could not resolve the matter through court motions and turned instead to arbitration under their shareholder agreement.

The arbitrator concluded that the original agreement required allocation of 25% of the lots to Maisons Lacroix for construction purposes, not ownership. However, because Maisons Lacroix lacked the necessary license, the arbitrator found that the obligation could not be enforced for Phase II of the development. The arbitrator further ruled that holding a valid license was an implied contractual condition. As a result, 739 was free to allocate the six Phase II lots elsewhere but was still required to reserve 25% of lots in future phases, provided Maisons Lacroix regularized its license.

Court challenge and legal analysis

738 challenged the arbitral decision under sections 45 and 46 of Ontario’s Arbitration Act. It argued the arbitrator exceeded jurisdiction by effectively annulling the court's prior judgment and improperly tying the right to purchase the lots to Maisons Lacroix’s licensing status.

Justice Rees found that the arbitrator had indeed erred by purporting to “annul” a court order—an action beyond the powers of an arbitrator. However, the court concluded that this error did not impact the result, because the arbitrator had authority to interpret and apply the contract terms, including recognizing implied conditions based on industry practice. The judge clarified that the Tarion license requirement was a valid implied term, grounded in commercial necessity and consistent with previous conduct among the parties.

The court also rejected 738’s argument that it, rather than Maisons Lacroix, held the right to purchase the lots. Both the arbitrator’s and the trial judge’s decisions had consistently linked the right of allocation to Maisons Lacroix in its capacity as a builder, not to 738 as an investor. Attempts to revisit that interpretation were characterized as efforts to reframe factual disputes as legal errors.

Outcome and disposition

The application was partially granted. Justice Rees set aside only two specific findings in the arbitral award—those purporting to annul the court order and to bind 739 (which was not a party to the arbitration). However, these findings were not essential to the arbitrator’s conclusions, which were otherwise upheld. The court confirmed that Maisons Lacroix's lack of a Tarion license validly limited its rights under the verbal agreement for Phase II, but preserved its entitlement for future phases if the licensing issue is resolved.

The decision reaffirms the limited scope for court intervention in arbitration outcomes, especially where the disputes turn on mixed facts and legal interpretation. The court also reinforced that implied contractual terms—such as licensing in regulated industries—can validly restrict enforceability even when not expressly stated.