Executive Summary: Key Legal and Evidentiary Issues

• The central dispute concerns whether the Sitzer Group's 2005 acquisition of the South Parcel of a Richmond Hill shopping plaza — without notifying or offering the Weiss Group an opportunity to participate — constituted a breach of fiduciary duty.
• An arbitrator issued a Partial Final Award granting the Weiss Group a 50% constructive trust interest in the South Parcel, finding an ad hoc fiduciary duty despite rejecting the pleaded partnership claim.
• At issue is whether the Co-Tenancy Agreement (CTA) precludes appeals on questions of law, or whether leave to appeal could be granted under s. 45 of the Arbitration Act, 1991.
• Key contractual provisions — including s. 3.02 (each party's absolute right to invest independently), s. 8.10 (express exclusion of partnership, agency, and joint venture), and s. 1.04 (sole purpose of the Co-Tenancy limited to the defined Premises) — directly contradict the arbitrator's findings.
• Jurisdiction was also at issue: the Notice of Arbitration pleaded only a partnership-based fiduciary duty, and the ad hoc fiduciary duty considered by the arbitrator was never pleaded, rendering it outside the scope of the arbitration.
• Multiple extricable errors of law were found, including the arbitrator's failure to give effect to unambiguous contractual language and his consideration of an unpleaded cause of action.

Facts of the case

This application arose from a long-running dispute between two co-tenants in a Richmond Hill, Ontario shopping plaza. The parties — referred to as the Sitzer Group and the Weiss Group — had jointly held interests in the plaza since its initial acquisition on July 15, 1971. Their relationship was governed by a Co-Tenancy Agreement (CTA) made as of October 5, 1971, with the Co-Tenancy commencing July 1, 1971. The plaza consists of three parcels arranged roughly in the shape of the letter "F": the North Parcel (approximately 5.5 acres), the Middle Parcel (approximately 2.2 acres), and the South Parcel (approximately 3.3 acres). The North and Middle Parcels were jointly held by both groups under the CTA. The South Parcel, prior to 2005, was owned by an unrelated third party and leased to a No-Frills grocery store, described by the arbitrator as the anchor tenant of the mall.

On January 5, 2005, Yonge Levendale Holdings Ltd. — an affiliate of the Sitzer Group — completed the acquisition of the lessor's interest in the South Parcel. The Weiss Group was neither informed of nor offered the opportunity to participate in this acquisition. The Weiss Group did not learn of the acquisition until December 2007, after which, in July 2008, it protested in writing and claimed a constructive trust over the South Parcel. The Sitzer Group rejected that allegation the same day. Arbitration proceedings were not commenced until July 2017, and following amendments to the Notice of Arbitration in October 2020, a hearing was conducted in January 2025 with closing submissions on January 29, 2025.

Contractual terms at issue

Several provisions of the CTA were central to the dispute. Section 1.04 defined the "sole purpose" of the Co-Tenancy as being to "acquire, own, improve, manage, lease, mortgage, sell and otherwise operate the Premises for the mutual benefit of the Co-Tenants," with the Premises defined by reference only to the North and Middle Parcels. Section 3.02 granted each party the "absolute right to engage in other businesses and other ventures for its own individual profit, including, without limitation, the ownership, improvement and operation of real estate," and explicitly provided that "no party by reason of this agreement shall have any interest in any other property owned by the other." Section 8.10 expressly stated that no party shall be deemed "the partner, agent, joint venturer or legal representative of any other party for any purpose" and that the CTA "shall not be construed to create any partnership or other agency whatsoever." Section 8.03 declared the CTA to be the entire agreement between the parties, and s. 8.04 provided that disputes as to any matter "under this Agreement" would be submitted to arbitration with a "final and conclusive" award.

Court's reasoning and analysis

Justice Dunphy first addressed whether the CTA's arbitration clause — which described the arbitral award as "final and conclusive" — precluded an appeal on questions of law under s. 45(1) of the Arbitration Act, 1991. Applying a fact-driven, context-driven analysis, the court found that the mere use of "final and conclusive" language in a pre-1992 agreement was, at best, equivocal on the question of appeal rights. The CTA was drafted when appeal rights did not exist unless expressly granted, and the parties made no effort to revise the arbitration clause when they amended the CTA in December 1991 — just days before the new Act came into force. The court concluded that s. 8.04 did not preclude appeals on questions of law, and that s. 45(1) of the Act applied.

Leave to appeal was granted given the significance of the issue: the award would have transferred a 50% interest in a substantial commercial parcel more than twenty years after its acquisition, with no governing framework for the new co-ownership arrangement and a near certainty that consequential amendments to the CTA would be required.

On the merits, the court found that the arbitrator's award was infected by multiple extricable errors of law. The CTA confined the Co-Tenancy strictly to the North and Middle Parcels, and nothing in its terms imposed any obligation on either party to offer the other the opportunity to participate in the acquisition of outside real estate. Section 3.02 explicitly and unconditionally provided that neither party would have any interest in property owned by the other. Section 8.10 excluded partnership, agency, and joint venture, and with those exclusions necessarily came the exclusion of the fiduciary responsibilities that ordinarily attach to such relationships. The arbitrator's construction of s. 1.04 — suggesting the CTA contemplated acquiring additional property beyond the Premises — was found to be a foundational error, as the provision plainly referred only to the acquisition of the defined Premises. The court also found that the arbitrator impermissibly relied on the parties' subsequent conduct under the Property Management Agreements — contracts entered years after the CTA and containing no relevant arbitration clause — to supply a fiduciary duty that the CTA's own terms foreclosed.

The court further found that the arbitrator exceeded his jurisdiction. The Notice of Arbitration pleaded only a fiduciary duty arising from an alleged partnership formed in 1971. Having correctly determined that s. 8.10 precluded a finding of partnership, the arbitrator had no jurisdiction to consider or declare the existence of an unpleaded ad hoc fiduciary duty. None of the constituent elements of an ad hoc fiduciary duty — including vulnerability, the nature of the interest affected, or the basis for reliance — were pleaded in the Notice. The reference to s. 3.06(ix)(c) of the CTA in the Notice, at most, addressed one element of such a duty and could not stand as adequate pleading of the whole. The court held that allowing the ad hoc fiduciary duty claim to proceed amounted to an excess of jurisdiction under s. 46(1) of the Act.

Ruling and outcome

The Ontario Superior Court of Justice (Commercial List), per Justice S.F. Dunphy, allowed the application by the Sitzer Group on both pleaded grounds. The court set aside, pursuant to ss. 45 and 46 of the Arbitration Act, 1991, those portions of the arbitrator's Partial Final Award relating to the finding of an ad hoc fiduciary duty and the award of a 50% constructive trust interest in the South Parcel — specifically, paragraphs 109–156, paragraph 163, and paragraphs 173(a), (b), and (c) of the Partial Final Award. The Sitzer Group was the successful party. No monetary award or damages amount was specified in the decision; the costs issue was left to be resolved by written submissions or agreement, with the court requesting to be advised by the end of May 2026.