Ontario: Stay ordered as promissory note captured by separate arbitration agreement – #643

In Pioneer Cannabis Corp. v. 2715615 Ontario Inc., 2022 ONSC 3998, the Plaintiff’s action was stayed pursuant to s. 7(1) of Ontario’s Arbitration Act, 1991 (the “Act “) and the parties’ arbitration agreement found in their “Master Cannabis Agreement” (the “MCA”). The Plaintiff Pioneer Cannabis Corp (“Pioneer”) commenced an action alleging that the Defendants 2715615 Ontario Inc and Mr. Sangha owed money pursuant to a promissory note. The parties had entered into a number of agreements relating to cannabis retail consulting and brand licensing services including the MCA, a Retail Services Authorization Agreement (the “RSAA”), and a promissory note. On its motion to stay, the Defendants argued that the Plaintiff’s claim fell within the arbitration clause in the MCA. The Plaintiff, however, argued since its claim wass based solely on the promissory note, which should be viewed as a standalone instrument, it fell outside the scope of the arbitration clause. Associate Justice Robinson disagreed with Pioneer, found the arbitration agreement covered the promissory note, and granted the stay. As outlined below, in reaching his conclusion, Associate Justice Robinson applied the five-part test established by the Court of Appeal for Ontario in Haas v Gunasekaram, 2016 ONCA 744  (“Haas”)at paragraph 17 to determine whether an action should be stayed in favour of arbitration (the “Haas Test”). 

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Ontario: Award set aside for “trickery and injustice” – #624

In Campbell v. Toronto Standard Condominium Corp. No. 2600, 2022 ONSC 2805, Justice Perell of the Ontario Super Court of Justice set aside an arbitral award for “constructive fraud” pursuant to s. 46(1), para. 9 of the Ontario Arbitration Act, 1991. The arbitral award ordered the Campbells, who were condominium owners (the “Owners”), to pay $30,641.72 to the Toronto Standard Condominium Corporation No. 2600 (the “Condo Corp.”), which represented the costs of their arbitration. The matter began as a dispute regarding the Owners’ alleged non-compliance with the rules of the Condo Corp, including noise complaints and short-term rentals. However, the Owners were led to believe that the arbitration would be limited to the reasonableness of Condo Corp.’s legal costs in enforcing compliance up to and including the arbitration. Justice Perell held that the Owners were “tricked” intothe arbitration because it was actually an arbitration on the non-compliance issues.While Justice Perell found that the Condo Corp. was not deceitful, he found that “[2] it misled, outmanoeuvred, and outsmarted the [Owners]” such that “[t]he court should not countenance the trickery and the injustice.” As a result, the arbitral award was set aside.

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Newfoundland and Labrador – No attornment to court jurisdiction where arbitration mandatory under treaty – #605

In Newfoundland and Labrador v Nunatsiavut Government, 2022 NLCA 19, the Court of Appeal of Newfoundland and Labrador (the “Court”) allowed the Province’s appeal of a trial decision in respect of a dispute pursuant to the Labrador Inuit Land Claims Agreement(the “Treaty”). The Court found that the parties were required to arbitrate their dispute, even though this issue was raised for the first time on appeal. At first instance, the trial judge agreed with the claim of the Nunatsiavut Government (“Nunatsiavut”) against the Province for a share of revenue related to the exploitation of land subject to the Treaty. On appeal, the Province challenged, for the first time, the jurisdiction of the Supreme Court of Newfoundland and Labrador (the “Superior Court”) to have adjudicated the matter in light of the requirement for mandatory arbitration under the Treaty. Central to the Court’s finding on appeal was its determination that the parties could not “attorn” to the Superior Court’s jurisdiction despite the fact that the Province did not raise the issue of jurisdiction before the trial judge. The Court found that “[56] [g]iven the clear language of the treaty that the parties must proceed to arbitration to resolve the disputes over revenue sharing, the parties cannot ‘attorn’ to the jurisdiction of the Court because the jurisdiction of the provincial Superior Court has been removed by these terms.

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Alberta –No appeal of decision refusing leave to appeal arbitration award, despite s. 48 of Alberta Arbitration Act – #583

In 719491 Alberta Inc v Canada Life Assurance Company, 2021 ABCA 419, a three-member panel of the Court of Appeal of Alberta denied the applicant’s requests (i) for permission to appeal the chambers judge’s order refusing leave to appeal the arbitration award (the “Leave to Appeal Request”)and (ii) for permission to appeal the chambers judge’s dismissal of its application to set aside the award (the “Set Aside Request”). As a preliminary matter on the Leave to Appeal Request, the applicant asked the Court to reconsider its previous decision in Sherwin-Williams Company v. Walls Alive (Edmonton) Ltd., 2003 ABCA 191(“Sherwin-Williams”), which held that leave to appeal decisions are not appealable to the Court of Appeal under s. 48 of Alberta’s Arbitration Act, RSA 2000, c A-43 (the “Arbitration Act”). Section 48 provides, in relevant part, that an appeal from the decision of the Court of Queen’s Bench on an appeal of an award (s. 44) may be made to the Court of Appeal with leave. However, based on the case law on the test for leave to reconsider a previous decision, which includes whether the decision has some “obvious, demonstrable flaw,” the Court denied leave and ruled that it did not have jurisdiction to hear the Leave to Appeal Request. The Court similarly rejected the applicant’s Set Aside Request based on the finding that the chambers judge did not err in holding that the arbitrator did not exceed his jurisdiction.

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John’s 2021 Top Pick: Ontario – China Yantai Friction Co. Ltd. v. Novalex Inc., 2021 ONSC 3571 and 7714 – #566

My top pick for 2021 stands for the proposition that a foreign award creditor will not be ordered to post security for costs simply by virtue of being a non-resident seeking to recognize and enforce an arbitral award. In China Yantai Friction Co. Ltd. v. Novalex Inc., 2021 ONSC 3571, a three-person panel of the Divisional Court of the Ontario Superior Court of Justice (the “Divisional Court”) granted leave to appeal two interlocutory orders, including the order requiring the foreign award creditor China Yantai Friction Co. Ltd. (“Friction”) to post security for costs in the amount of $76,376.71. This case is important because it provides support for Ontario as an “arbitration-friendly” jurisdiction, and, as the Divisional Court noted, “[13] … it speaks to the response of Canadian courts to international comity and our relationship to the courts of other countries.

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Québec – No referral to arbitration; arbitration clauses intended to “subvert” litigation process – #547

In Sigounis c. Sigounis, 2021 QCCS 4185, as part of his ruling addressing several interim applications, Justice Pinsonnault refused to refer the parties to arbitration in a drawn-out family dispute. The underlying oppression remedy action was commenced by the Plaintiff Jimmy Sigounis against his father, Defendant Nicolas Sigounis, and sister, Defendant Argyro Sigounis (“Argyro”), regarding the family’s interests in various private corporations (the “Chenoy Corporations”). While the action was ongoing, the father sold his interests in the Chenoy Corporations to co-Defendant Argyro (the “Transaction”). Thereafter, the father passed away and his widow (the Plaintiff’s, mother Eleni Sigounis), who had previously not been involved in the action, took over as “Defendant in Continuance of Suit” in her capacity as the estate’s liquidator and universal legatee. The Plaintiff and his mother then learned of the Transaction, which they both viewed as prejudicial to their interests; including that the Transaction potentially left the estate insolvent. Accordingly, the mother made several filings with the Court, including a Cross-Application and a Declaration of Intervention against Argyro (the “Filings”), seeking the cancellation of the Transaction. In response, Argyro brought the subject interim applications, including an application to refer all matters raised in the Filings to arbitration pursuant to the identical arbitration clauses in the Transaction agreements. In rejecting Argyro’s application, Justice Pinsonnault found that the dispute, as a whole, fell within one of the exceptions in the arbitration clauses as “a severe dispute over family matters” thus rendering the dispute outside the scope of the arbitration clauses in the Transaction agreements. In addition, Justice Pinsonnault took issue with the timing of the Transaction, which took place over two years after the action was commenced, and the Defendants’ intentions of subverting the litigation process by including the arbitration clauses in the event that the Transaction was contested.

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