Manitoba – ‘reckless’ and ’unfounded’ allegations against S counsel regarding arbitration record justify personal costs order against C counsel – #486

In Christie Building Holding Company, Limited v. Shelter Canadian Properties Limited, 2021 MBQB 101, Mr. Chief Justice Glenn D. Joyal dismissed attempts to reopen an earlier hearing in which he determined what constituted the record from the arbitration for the purpose of leave to appeal applications and any eventual appeal.  To do so, Joyal C.J. reviewed the evolution of the procedural decisions contemplated in the arbitration, offering insights into how to document such decisions and whether excessive flexibility actually generates uncertainty even for those involved in the arbitration.  In dismissing attempts by C’s counsel to ground C’s relief on allegations of fraud or facts arising or discovered after the initial court order, Joyal C.J. characterized the allegations made by C’s counsel against S’s counsel as “reckless and unfounded”, “an abuse of this Court’s process” and “unprofessional and inappropriate”.  Such allegations made personally against S’s counsel justified a reasonable solicitor-costs order against C’s counsel personally.

Christie Building Holding Company, Limited’s (“Christie”) and Shelter Canadian Properties Limited (“Shelter”) arbitrated disputes regarding their February 2012 Development Agreement (“Agreement”).  The arbitration resulted in a June 17, 2020 award (“Award”) and an August 27, 2020 supplemental award (“Supplemental Award”).  The Award and the Supplemental Award (“Awards”) supported Shelter’s positions. Christie filed two (2) applications seeking leave to appeal the Awards under section 44(2) of The Arbitration Act, CCSM c A120.

In the context of an application for leave to appeal on a question of law, Joyal C.J. rejected Applicant’s attempt to adduce extensive affidavit material to reconstruct the arbitration’s evidentiary record limited by the parties’ procedural decisions not to (i) have a court reporter attend the hearing and prepare a transcript and (ii) mark documents as exhibits.  See the earlier Arbitration Matters note “Manitoba – applicant for leave to appeal cannot revisit procedural decisions creating limited evidentiary record – #467” regarding Christie Building Holding Company, Limited v. Shelter Canadian Properties Limited, 2021 MBQB 77. In that earlier decision, Respondent successfully argued the parties’ procedural decisions (i) and (ii) were consistent with “the characteristics of commercial arbitration and the need for efficiency, cost effectiveness, confidentiality and finality” and afterwards Applicant could not “tender a selective and disputed evidentiary record” and seek a court’s review of alleged errors of law which necessarily require a complete evidentiary record.  Joyal C.J. agreed and limited the record to the awards and reasons, five (5) exhibits and the pleadings.  

Following the release of Joyal C.J.s initial decision, Christie applied for an order to vary that decision to include other items, listed at para. 3, as part of the record of the arbitration hearing (“Motion to Vary”).  Shelter opposed Christie’s Motion to Vary.

Christie invoked two (2) grounds to do so:

(i) Rule 59.06(2)(a) of the Court of Queen’s Bench Rules, Man Reg 553/88 (“Court Rules”) which authorizes a party to apply to set aside or vary an order on the ground of fraud or of facts arising or discovered after it was made; and,

(ii) Court’s discretion under the common law to grant an opportunity to reopen the matter.  See the two (2) prong test in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc., 2001 SCC 59 (CanLII), [2001] 2 SCR 983.

[20] In dismissing the motion to reopen the trial, the trial judge applied a two-part test from Scott v. Cook, 1970 CanLII 331 (ON SC), [1970] 2 O.R. 769 (H.C.).  First, would the evidence, if presented at trial, probably have changed the result?  Second, could the evidence have been obtained before trial by the exercise of reasonable diligence?

In addition to that relief, Christie also sought costs on a solicitor-client basis or alternatively as elevated costs against Shelter’s counsel personally.

Joyal C.J. at para. 9 introduced the key grounds invoked by Christie in its Motion to Vary which applied to both Rule 59.06(2)(a) and the common law, noting that those grounds “include the suggestion that this Court’s April 7, 2021 decision in respect of what constitutes “the record” from the arbitration hearing is based on representations made by Shelter’s counsel (as found in both his brief and oral submissions), which Christie says were discovered after the hearing to be false and/or misleading (and unsupported by the evidence)”.

The written and oral representations targeted by Christie appear at paras 6-7 of Joyal C.J.’s reasons.  Joyal C.J. records that Christie referred to those representations as “misrepresentations” and also that Christie asserted that the evidence it sought to adduce was not discoverable prior to the earlier hearing before Joyal C.J.  See paras 11-12.

[13] In making the submissions respecting fraud and misrepresentation that Christie and its counsel make on this motion, they clearly suggest that Shelter’s and/or its counsel’s conduct falls within the meaning of fraud as put forward in JV Mechanical v. Steelcase, 2010 ONSC 1443 (at paragraph 24).  In this regard, it is Christie’s position that insofar as Shelter and its counsel made a false representation either knowingly or without belief in its truth or else recklessly, and careless as to whether it was true or false, the definition of fraud for the purpose of Rule 59.06(2) has been satisfied.  Christie further suggests that Shelter’s counsel has ignored their duties as officers of the Court and breached important rules of the Code of Professional Conduct adopted by the Benchers of The Law Society of Manitoba”.

Joyal C.J. followed his summary of Christie’s position with an outline of Shelter’s response.

[14] Shelter for its part, characterizes Christie’s motion as completely inappropriate, without merit and based upon unfounded accusations towards Shelter’s counsel, which accusations themselves, are unprofessional, unethical and deserving of the punitive cost sanctions.  Shelter strongly asserts that its submissions (oral and/or written) made at and for the November 4, 2020 hearing, remain accurate and are accordingly unchanged on this motion.  Shelter maintains that the so-called newly relevant evidence discovered by Christie after the hearing (which it failed to adduce at the hearing on the record) was evidence or information that was within the knowledge and possession of Christie and available to it leading up to and on November 4, 2020.  Shelter insists that the information or evidence in its earlier submissions in no way demonstrates fraud, misrepresentation or anything misleading.  Indeed, Shelter contends that in the context of Christie’s attempt to obtain the extraordinary remedy of reopening a hearing, the information and evidence that Christie now alludes to contains nothing new and it has no bearing now and would have had none earlier on the analysis that was carefully conducted by this Court on all of the issues that were squarely before it prior to this Court coming to its April 7, 2021 decision”.

Joyal C.J. identified two (2) issues: should he exercise his discretion to reopen the hearing; and, what cost consequences if any, should flow from the Motion to Vary?

Prior to addressing either issue, at paras 19-27, Joyal C.J. detailed a chronology of facts between September 2020 and April 2021 culminating in Shelter’s and Christie’s final exchanges on a reconsideration of Joyal C.J.’s earlier decision.   Referring to Shelter’s counsel’s last letter dated April 13, 2021, Joyal C.J. noted that “the point was made that there was nothing new that would have addressed the concerns about the uncertainties and dangers that this Court clearly raised regarding Christie’s proposed record and its potential effect on the integrity on the proceedings”.  Joyal C.J. observed that Christie did not respond to that letter and, instead, filed the Motion to Vary “along with the accompanying and highly personal attack on the professional ethics and personal honesty of Shelter’s counsel”.

(i) exercise discretion to reopen the hearing – Joyal C.J. first addressed whether he had made an “order” which could be varied and, in doing so, questioned whether Christie could invoke Rule 59.06(2)(a) to establish jurisdiction.

Independent of the parties’ submissions on his jurisdiction, Joyal C.J. at para. 30 pointed ahead into his decision and stated that “there is a complete absence of persuasive evidence that would establish either fraud or new relevant facts arising or discovered after an order was made”.

Given their relevance, Joyal C.J. determined he would first address the allegations of fraud and misrepresentation.  See his comments at paras 33-41 regarding the quality of the allegations and paras 40-44 regarding the procedural give and take in the arbitration and at the hearing before him. 

Joyal C.J. recorded the process as it evolved. 

[40] Put simply, whatever submissions were made about the record leading up to and at the hearing before me on November 4, 2020, I take Shelter and Mr. Stefanson’s position as suggesting that whatever may have been discussed, considered and perhaps even tentatively agreed to respecting how the documentary evidence might have been organized and compiled, there was in fact, a different approach adopted and implicitly accepted shortly after the arbitration hearing itself commenced.  For that reason, I agreed with Mr. Stefanson, who submitted on behalf of Shelter, that the actual approach adopted by the parties to not marking the documentary evidence in a traditional and reliable way, created, in light of the manner in which all of the evidence was received (including the accompanying viva voce testimony/commentary) a serious problem for a court attempting to discern “the record”.

[41] As a consequence, the actual approach adopted by the parties a few days into the 43-day arbitration hearing did not permit me (beyond noting the five (5) marked exhibits) to identify an evidentiary record that would, amongst other things, properly allow me to consider the potentially disputed viva voce testimony, which was not officially transcribed and which, in some cases, would have commented on specific parts of the voluminous but unmarked documentary evidence.  In this regard, irrespective of what the parties may have discussed and what the arbitrator may have mused, Mr. Stefanson argued (and was justified in arguing) that the reality of what actually occurred at the arbitration hearing, left this Court — for the purpose of its appellate task — little by way of identifiable evidence that was compiled and arranged in a coherent and indexed manner so as to ensure a level of reliable completeness and accuracy necessary to discern a record beyond that which I identified in my April 7, 2021 decision and which would preserve the integrity of the arbitration hearing itself”.

See also para. 44 for more submissions on the process in the arbitration.

Joyal C.J.’s review of the record before him lead him to conclude as follows at para. 45. “Christie’s allegations respecting fraudulent and misrepresentative submissions by Shelter cannot be substantiated.  They ought not to have been made”.

At paras 47-59, Joyal C.J. set out extensive references to considerations for reopening a hearing under common law principles.  Based on his review, Joyal C.J. dismissed Christie’s reliance on common law principles to reopen the hearing and adduce new evidence.

[60] In the circumstances of this case, Christie has not advanced any persuasive evidence that would justify the court exercising its discretion to reopen this hearing.  Neither has Christie advanced any clear or persuasive evidence that would suggest anything remotely resembling misrepresentation by Shelter’s counsel.  I agree with Shelter that on this motion, counsel for Christie is doing nothing more than repeating many of the same submissions that were made at the November 4, 2020 hearing, none of which were persuasive and all of which were quite clearly rejected by this Court”.

(ii) costs – Joyal C.J. at paras 61-76 turned to consideration of the costs consequences following his disposition of the Motion to Vary. 

In his review, he referred to Judges of the Provincial Court of Manitoba v. The Queen, 2012 MBQB 153 paras 7-8, 3812511 Manitoba Ltd., c.o.b. as Terry’s Towing v. M.P.I., 2012 MBQB 252 para. 6; Johnson v. BFI Canada Inc. et al., 2002 MBQB 326 para. 36, Eblie v. Yankoski, 2007 MBQB 106 paras 11-14.  Further cases appear as references in the excerpts to those cases.

Applying the criteria from the cases, Joyal C.J. at para. 73 concluded that the allegations made by Christie’s counsel “can properly be characterized as “reprehensible”” and determined that they were “unfounded and as I noted earlier, ought not to have been made”.

[73] The impugned conduct by Christie in making these allegations can properly be characterized as “reprehensible”.  On a proper reading of my April 7, 2021 reasons for decisions, the problems with Christie’s proposed record should have been clear.  Nothing in the so-called newly relevant or discovered information or evidence provided by Christie, could have addressed those foundational concerns that I identify.  Neither does that information or evidence in any way support Christie’s connected, but inappropriate allegations of misrepresentation and fraud as made against Shelter’s counsel.  Christie’s motion has resulted in a considerable waste of time and resources and the manner in which that motion has been formulated and argued, calls into question the integrity of Shelter’s legal team and does nothing less than put their reputations at risk of serious damage.  I am of the view that in the circumstances of this case, any cost award restricted to the Court of Queen’s Bench Tariff will not adequately condemn and denounce the manner in which this motion was brought and the nature of the allegations that accompanied it”.

Joyal C.J. observed further that Christie sought costs against Shelter’s counsel personally.  This claim served as a prompt to Joyal C.J. considering an order against Christie’s counsel personally.  In his closing remarks, Joyal C.J. qualified the allegations made against Shelter’s counsel variously as “reckless and unfounded”, “an abuse of this Court’s process” and “unprofessional and inappropriate”.  His determinations lead him to conclude that the case before him represented “compelling circumstances” for such a costs order against Christie’s counsel personally.

Joyal C.J. dismissed Christie’s Motion to Vary and ordered reasonable solicitor-client costs against Christie’s counsel personally.

urbitral notes – First, Joyal C.J.’s reasons at paras 40-41 provide insights into the arbitral process considered and applied by the parties.  By recording the process as it evolved, Joyal C.J. illustrates the dynamic nature and flexibility of the process and the necessity to fix a process as it might lead to post-award disputes about the record. 

Second, in his earlier decision, Joyal C.J. also declined to assess the impact of Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 but commented that he found “persuasive, certain aspects of the reasons and conclusions set forth” in Cove Contracting Ltd. v. Condominium Corporation No. 012 5598 (Ravine Park), 2020 ABQB 106 and Ontario First Nations (2008) Limited Partnership v. Ontario Lottery and Gaming Corporation, 2020 ONSC 1516.  Joyal C.J. observed “without deciding the issue, it need be acknowledged that it is anything but obvious that the Supreme Court of Canada intended Vavilov to apply to a statutory appeal of a commercial arbitration award and thereby overrule its own significant judgments in [Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), [2014] 2 SCR 633] and [Teal Cedar Products Ltd. v. British Columbia, 2017 SCC 32 (CanLII), [2017] 1 SCR 688] along with the long-standing legal principles which acknowledge the reasons for limited judicial intervention in commercial arbitration.