Lisa C. Munro

September 29, 2021May 4, 2022

Ontario – Participating party in arbitration not granted leave to intervene in appeal/set aside application – #537

In Baffinland Iron Mines v Tower-EBC, 2021 ONSC 5639, the parties were engaged in a dispute about a project to build a railway to transport ore in Nunavut. They entered into two contracts which contained an arbitration clause. After delays in the project, one party terminated the contracts; the other claimed breach of contract and commenced an arbitration for its own losses and the losses of its sub-contractor, which participated in the hearing and had counsel present. However, that participation expressly did not constitute an agreement that the sub-contractor was a party to the arbitration. The tribunal issued a Final Partial Award finding that the contract had been wrongfully terminated, however, the tribunal was split on whether the innocent party was also entitled to recover the damages of the sub-contractor. The innocent party brought an application to set aside the award pursuant to s. 46 of the Arbitration Act, 1991, S.O. 1991, c. 17, and for leave to appeal the award under s. 45(1) of the Act. The sub-contractor sought leave to intervene in the application on the ground that it had an interest in the subject matter of the proceeding and would be adversely affected by the judgment. Justice Pattillo dismissed the motion, in part, because “courts are reluctant to permit third parties to intervene in purely private and commercial litigation” and that this is “more so where private arbitration is involved.”

September 24, 2021May 4, 2022

B.C. – Stay motion: pleadings sufficient for “arguable case” that arbitration clause applies, despite contrary evidence – #534

In Beck v Vanbex Group Inc., 2021 BCSC 1619, Justice Fleming granted a partial stay of a proposed class action under s. 7 of the Arbitration Act, S.B.C. 2020, c. 2. The issue before her was whether the Defendants had any evidentiary burden to meet to establish an “arguable case” that they were both proper parties to the arbitration agreement, thereby warranting a stay. The Plaintiffs argued that although one of the Defendants was not a signatory to the business agreement upon which they were suing and which contained the arbitration clause, both corporate Defendants were essentially alter egos of one another and both were liable to them. However, they argued that the Defendants’ stay application must be dismissed in the face of the Defendants’ evidence that the two corporate Defendants were entirely separate and one of them was not a proper party to the arbitration agreement. The Defendants agreed that, in the arbitration or at trial, their position would be that one of the Defendants was not a party to the arbitration agreement; however, they were entitled to a stay because: (1) if the Plaintiffs were correct, the action should be stayed; and (2) if the Plaintiffs were not correct, the Plaintiffs had no claim against the non-party Defendant anyway and the action would be dismissed. Justice Fleming agreed that the issues pleaded by the Plaintiffs demonstrated that it was arguable that both corporate Defendants were proper parties, notwithstanding the evidence adduced by the Defendants to the contrary.

September 16, 2021May 4, 2022

B.C. – Leave to appeal on question of law; arbitrator’s error must be “material to result” and appeal must have “arguable merit” – #533

In Escape 101 Ventures Inc. v March of Dimes Canada, 2021 BCCA 313 Justice DeWitt-Van Oosten granted, in part, the Plaintiff’s application for leave to appeal the arbitrator’s award dismissing the Plaintiff’s claims brought pursuant to an asset purchase agreement. The Plaintiff argued that the arbitrator committed errors of law in interpreting the terms of the agreement. Justice DeWitt-Van Oosten found that the arbitrator had misapprehended the evidence, which underlay his conclusions and “laid the foundation for an extricable error of law”. Further, even where an applicant demonstrates that there is an extricable question of law, a court should consider the reasons of the arbitrator as a whole in assessing that error and deny leave unless satisfied that the error was material to the result and the appeal has arguable merit. Justice DeWitt-Van Oosten was satisfied that both these criteria were met. Further, the amount of money at issue met the requirement for leave to appeal in s. 59(4) of the B.C. Arbitration Act, S.B.C. 2020, c. 2, that, “the importance of the result of the arbitration to the parties justifies the intervention of the court”.

September 10, 2021May 4, 2022

B.C. – Statutory arbitrator’s award set aside on basis that it was “arbitrary and irrational” – #529

In Shahcheraghi v Divangahi, 2021 BCSC 1576, Justice Horsman set aside the award of an arbitrator of the Residential Tenancy Branch (“RTB”) and remitted the matter back to the RTB for a new hearing, either by the same arbitrator or someone else assigned by the RTB. She found that the arbitrator’s reasons were inadequate for the parties to understand the rationale for the decision:

“[53]… I wish to be clear that my concern with the Arbitrator’s decision is the reasoning process, which in my view is insufficient to serve the basic function of reasons in allowing the parties to understand why the decision was reached…The point is that [certain] issues are unexplored in the Arbitrator’s decision. It is not the role of the reviewing court to re-write the Arbitrator’s reasons so as to arrive at a new rationale that might support the outcome.”

September 2, 2021November 29, 2022

Ontario – Partial stay; oppression claim arbitration to precede related family law action – #528

In Pezo v Pezo, 2021 ONSC 5406, the applicant Elma Pezo brought two claims: a family law claim against her spouse Kabir Pezo; and an oppression remedy claim against Kabir and his friend Hadis Kozo regarding a business they had all operated together. Kazo sought a stay of all claims against him on the basis that the parties had entered into a Shareholders’ Agreement with respect to the business that contained a mandatory arbitration clause. However, Elma argued that it was invalid because the two claims intersected and had to be heard together, but the arbitration clause did not meet the requirements for a family law arbitration set out in Ontario Regulation 134/07 of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17. Justice Kraft disagreed. She found that the arbitration clause covered only the oppression remedy claims and that she had the discretion to grant a partial stay under s. 7(5) of the Arbitration Act because its two pre-conditions had been met: (a) the agreement dealt with only some of the matters in respect of which the proceeding was commenced; (b) it was reasonable to separate the matters dealt with in the agreement from other matters. She stayed the family law claims an ordered an arbitration with respect to the oppression claims to proceed before the action so that the findings of the arbitrator on issues that could affect the family law claim would be before the court.

August 27, 2021May 4, 2022

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.

August 19, 2021May 4, 2022

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”.

August 13, 2021May 4, 2022

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”.

August 6, 2021January 10, 2023

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”.

August 4, 2021May 4, 2022

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.