Manitoba – court uses res judicata and abuse of procedure principles to pre-empt appeal of arbitral award – #011

Manitoba Court of Queen’s Bench relied on the principle of res judicata and the control’s inherent powers to control for abuse of its procedure to deny 3 grounds for leave to appeal application in Broadband Communications North Inc. v. I-Netlink Incorporated, 2017 MBQB 146.  Mr. Justice James G. Edmond did allow a limited number of grounds to go forward as those few did qualify under Manitoba’s The Arbitration Act, CCSM, c A120.

Before looking at the underlying facts, it is helpful to consider comments made by Madam Justice Holly C. Beard J.A., the appeal judge in an earlier 2013 case  referred to by  Edmond J. in earlier 2014 reasons involving the same parties as the present case.  That 2013 case was Hopkins v. Ventura Custom Homes Ltd., 2013 MBCA 67 .  In his reasons, Edmond J. specifically drew the reader’s attention to paragraphs 11-16 of the 2013 reasons which summarized the history of law reform for arbitration in Manitoba.  Writing for the court in that earlier 2013 decision, Beard J.A. referred to the Manitoba Law Reform Commission’s (“MLRC”) November 1994 report on arbitration which lead to the June 28, 1997 coming into force of Manitoba’s current Arbitration Act and she summed up the “value of arbitration as including” the following:

lower cost to the parties, due mostly to costly pre-trial procedures associated with litigation; earlier resolution of the dispute, being months for arbitration as compared to years for litigation; an informal and flexible process; privacy and confidentiality; and the ability to select a decision-maker with knowledge of the area (at pp. 1.2)

Beard J.A. in the 2013 reasons in Hopkins v. Ventura Custom Homes Ltd., at paragraph 14, cited further extracts of the MLRC’s report on the proposed new legislation.  The MLRC wrote that it “restricts access to the courts by removing the court’s former discretion to stay arbitrations, which it often used to override contractual agreements to arbitrate”, “places greater recognition on the will of the parties” and “strengthens arbitration agreements by requiring courts to hold parties who enter into valid arbitration agreements to those agreements.

The history of the parties’ arbitration suggests that it is not the courts who had overridden the parties’ undertaking to arbitrate.

I-Netlink Incorporated (“I-Net”) and Broadband Communications North Inc. (“BCN”) signed their contract in March 2006 but a dispute subsequently arose and the dispute went to arbitrate.  There is no date in the decision as to when the arbitration started.  The parties agreed to bifurcated the hearing of the issues to be decided by the arbitrator.  They submitted a preliminary question and the arbitrator issued a preliminary award on October 18, 2013.  I-Net sought leave to appeal that decision and leave was denied April 24, 2014.  The arbitration continued and the arbitrator issued a final award on November 13, 2015.  After the award, the parties sought clarifications and the arbitrator issued “a number” of clarifications.

Both I-Net and BCN both sought leave to appeal the final award under section 44(2) which provides for an appeal on a question of law with leave:

44(2) If the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that

(a) the importance to the parties of the matters at stake in the arbitration justifies an appeal; and

(b) determination of the question of law at issue will significantly affect the rights of the parties.

I-Net alleged six (6) errors of law and BCN alleged no less than fifteen (15) errors of law.  Both parties alleged that each of the alleged errors they listed were “questions of law of importance to the parties in the matters at stake which justifies an appeal; will significantly affect the rights of the parties; and the questions of law present an arguable case on appeal.”

Edmond J.. noted a great deal of agreement between the parties.   Both parties agreed that the threshold for leave to appeal on a question of law was “a low one which requires that the parties show that the legal question at issue has arguable merit.”  Both parties also argued “the other party’s notice of application should be dismissed primarily on the basis that the grounds for seeking leave to appeal are not questions of law, but questions of fact or questions of mixed fact and law and thus fall outside the scope of appellate review permitted under the Act.

Edmond J. referred to and cited Sattva Capital Corp. v. Creston Moly Corp., [2014] 2 SCR 633, 2014 SCC 53 and  Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 in order to identify principles to apply to the parties’ applications and listed them at paragraph 21 of her reasons.

Edmond J. decided to deal with the first three of I-Net’s grounds for appeal in response to BCN’s argument that the doctrine of res judicata, cause of action estoppel or issue estoppel applied and that it would be an abuse of the court’s process to grant I-Net leave to in effectively reconsider the same issues and the decision in the earlier 2013 appeal.

He turned to the recent decision of Loewen v. Manitoba Teachers’ Society, 2013 MBQB 8, 287 Man.R. (2d) 141, the affirmed by the Court of Appeal in Loewen v. Manitoba Teachers’ Society, 2015 MBCA 13 which summarized the law of the doctrine of res judicata and abuse of process.  He cites extensive excerpts of each in her reasons at paragraphs 49 and 50 respectively.  The excerpts include statements an exerpt from Mr. Justice Ian Binnie in Danyluk v. Ainsworth Technologies Inc., [2001] 2 SCR 460, 2001 SCC 44:

18 The law rightly seeks a finality to litigation. To advance that objective, it requires litigants to put their best foot forward to establish the truth of their allegations when first called upon to do so. A litigant, to use the vernacular, is only entitled to one bite at the cherry.  …  An issue, once decided, should not generally be re-litigated to the benefit of the losing party and the harassment of the winner. A person should only be vexed once in the same cause.  Duplicative litigation, potential inconsistent results, undue costs, and inconclusive proceedings are to be avoided.”

In addition, the doctrine of abuse of process exists as an exercise of the court’s inherent power to prevent misuse of its procedure.

Edmond J. applied the result of her review of the applicable doctrine and held that both the doctrine of res judicata and abuse of process applied and dismissed I-Net’s first three grounds.  His findings were a complete answer to the appeal sought by I-Net on those three grounds and he expressly declined to consider section 44(2) of Manitoba’s Arbitration Act.

“[61] Both parties made extensive submissions about whether the first three grounds of appeal advanced by I-Net raised questions of law and met the other pre-conditions set out in s. 44(2) of the Act.  Given my ruling on the application of the doctrine of res judicata and the law of abuse of process, it is unnecessary to address those issues.  Deciding those issues would lead to exactly what the Supreme Court of Canada has stated should be avoided, namely:  Duplicative litigation, potential inconsistent results, undue costs and inconclusive proceedings.

Edmond J. continued on to examine the balance of the grounds raised by I-Net and by BCN and issued a ruling on them, granting I-Net leave on one ground and BCN on two grounds.  His analysis should be of interest to those looking for a recent and considered application of the court’s standard of review of arbitral awards but are beyond this note.

The case and history of the parties’ file demonstrates that the courts have other tools available to them, in addition to those in the legislation restricting appeals from arbitration award.  It is worth noting that the ‘values of arbitration’ sought by the MLRC in enacting the 1997 legislation and cited above were not fully appreciated.