B.C. – Under new B.C. Act, third party may apply to arbitrator OR court to set aside subpoena issued by arbitrator – #524

In Terrace Community Forest LLP v Skeena Sawmills Ltd., 2021 BCSC 1522, Justice Milman dismissed an application brought by the petitioner, Terrace Community Forest LLP (TCF), for an order under s. 29(4) of the new British Columbia Arbitration Act, S.B.C 2020, c. 2, to set aside a subpoena requested by the respondent, Skeena, and issued by the arbitrator. The subpoena required TCF to produce documents in an ongoing arbitration under the Act. TCF was not a party to the arbitration, but was a third party and was alleged to have documents that were relevant to the arbitration. Justice Milman’s decision turned on the meaning of the word “or” in s. 29(4), which provides that a subpoena issued to a third party may be set aside on application by the person named in the subpoena to the arbitral tribunal “or” the Supreme Court. Justice Milman held that the word “or” in this context was to be read exclusively, rather than inclusively, because: (a) by its plain meaning, s. 29(4) contemplates an application by the third party in the first instance to either the arbitrator or the court, but not both, and the Legislature could not have intended that a third party could make sequential applications to set aside the same subpoena if dissatisfied with the first answer it received (b) there is no provision in the Act for the third party to bring an appeal or seek a review of an arbitrator’s decision under s. 29(4) and (c) s. 4 of the Act precludes any review of an arbitrator’s order by the court except as provided in the Act.

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B.C. – Scope/excess of authority when arbitrator considers variation of award made based upon incorrect facts – #523

In Marchetti v Lane, 2021 BCSC 1259, Justice Tucker dismissed an application brought by the respondent (Lane) to “change or set aside” an arbitral award under s. 19.18 of the Family Law Act, S.B.C. 2011, c. 25. The case has application to commercial arbitration awards and, indeed  Justice Tucker looked to the set aside provisions of the  International Commercial Arbitration Act, R.S.B.C. 1996, c. 233 (“ICAA”) to determine whether the award should be set aside on jurisdictional grounds. Lane argued, among other things, that the arbitrator had acted outside the scope of the submission to arbitration and outside her authority in varying an earlier “final” award. He argued that the arbitrator had previously declined to clarify or correct the initial award, so it was final and binding upon the parties and subject only to the statutory right of appeal. The parties had agreed to have all their issues in dispute resolved by arbitration and the award which was the subject of this application related merely to one issue. After considering s. 34 of the ICAA, Justice Tucker found that the first award had been based upon facts that turned out not to have been correct and was therefore incapable of being implemented.  In varying that award, the arbitrator did not “purport to correct or clarify the award, but determined the application to vary brought before her while her jurisdiction over the matter remained extant under the terms of the submission to arbitration and the applicable statute”.

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Ontario – Party’s conduct in suing in foreign jurisdiction constituted “strong cause” why arbitration clause should not be enforced under ONCA Novatrax principles – #519

In CSI Toronto Car Systems Installations Ltd. v Pittasoft Co., Ltd., 2021 ONSC 5117, Justice Mohan D. Sharma dismissed a motion by Pittasoft for a stay of CSI’s Ontario action in favour of arbitration on the grounds that: (1) under Article 8(1) of the Model Law, the arbitration agreement was “null and void, inoperative or incapable of being performed” because Pittasoft was estopped by its own conduct from relying upon it and also that Pittasoft had brought its stay motion too late; and (2) these findings constituted “strong cause” why the arbitration clause should not be enforced in accordance with the principles articulated by the Ontario Court of Appeal in Novatrax International Inc. v Hagele Landtechnik GmbH, 2016 ONCA 771 , that apply “when a litigant seeks to displace a forum selection clause agreed upon in a commercial contract”.

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B.C. – Portion of arbitral award set aside; re-hearing to be conducted by different arbitrator – #518

In Spirit Bay Developments Limited Partnership v Scala Developments Consultants Ltd., 2021 BCSC 1415, Justice Davies set aside a portion of an arbitral award and ordered a re-hearing on the basis that the arbitrator had erred in his application of the law of unjust enrichment to a construction contract.  However, he found that it was necessary to have a different arbitrator conduct the re-hearing because the arbitrator had made findings of credibility adverse to Petitioner (Spirit Bay) representatives and also made several determinations of credibility that were critical of Spirit Bay’s evidence as well as its motivation in advancing some arguments.  The arbitrator had “harshly criticized” Spirit Bay’s conduct not only in relation to the disputes in issue, but also within the arbitration, referring to “accounting tactics or tricks” and “tricks by Spirit Bay [which] continued into the hearing”, and characterizing Spirit Bay’s position in respect of one issue as a “ruse or a fiction”. 

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Ontario – Party can sue and not required to arbitrate where opposing party obviously will not participate – #514

In 1100 Walkers Line Inc. v Elliott Sports Medicine Clinic Inc., 2021 ONSC 5067, Justice E.M. Morgan considered a commercial lease containing a renewal provision, which stated that if the parties could not agree on the applicable market rent to be paid during the renewal term, that issue “shall be determined by arbitration”. When the Tenant terminated the lease, but did not give the required 6 months’ written notice and thereafter vacated the premises, the Landlord sued, asserting that the automatic renewal provision was triggered and rent during the renewal term was owing. The Tenant claimed that the renewal provision was ambiguous and unenforceable, in part, because the applicable market rent during the renewal term had never been agreed upon by the parties, nor determined by arbitration since neither party had commenced an arbitration. Justice Morgan found that the renewal provision was unambiguous and enforceable and that the mandatory arbitration clause did not require the Landlord to initiate an arbitration in which the Tenant would obviously not participate. Further, because only the Landlord adduced any evidence of the applicable market rent, the arbitrator would have fixed the rent at that rate. Therefore, Justice Morgan granted judgment in favour of the Landlord.

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Ontario – Court application under Model Law Art. 16(3) to “decide the matter” of the tribunal’s jurisdiction is a hearing de novo and not a “review” of the tribunal’s decision – #513

In Russian Federation v. Luxtona Limited, 2021 ONSC 4604, the Divisional Court heard an appeal by Russia of an interlocutory decision of Justice Penny of the Ontario Superior Court of Justice, Russia Federation v. Luxtona Limited, 2019 ONSC 7558. Justice Penny had declined to allow Russia to adduce fresh evidence on an application brought under Model Law Art. 16(3) to set aside an interim arbitral award finding that Russia had consented to arbitrate Luxtona’s claims and that the tribunal therefore had jurisdiction.  The proposed fresh evidence related to the jurisdictional issue and had not been before the tribunal. The appeal turned on whether the application before Justice Penny was a “review” of the tribunal award on jurisdiction or a hearing de novo. The Divisional Court, in a decision written by Justice D.L. Corbett, held that Russia was entitled to adduce fresh evidence as of right because the application was a hearing de novo. The court relied upon two key decisions raised by the parties. Mexico v Cargill, 2011 ONCA 622 held that a set aside application brought in the Superior Court of Justice under Art. 34 of the Model Law is a “review” and not a hearing de novo, but in that case there was no challenge to the tribunal’s jurisdiction to hear and decide the dispute. Therefore, the Divisional Court was not bound by it. The English Supreme Court decision of Dallah v Pakistan, [2011] AC 763, held that the court’s role where one party took the position that it had not consented to the arbitration was “to reassess the issue [of jurisdiction] itself” and not to “review” the tribunal’s decision. The Divisional Court found that this approach is supported by the language in the Model Law and the weight of international authority and Art. 2A of the Model Law, which promotes the uniformity of the application of the Model Law internationally.

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