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.”
Baffinland Iron Mines LP and Baffinland Iron Mines Corporation (together, “BIM”) owned the mine from which the ore was extracted. Tower-EBC/S.E.N.C. (“TEBC”) was a general partnership formed for the limited purpose of performing work on the project. In May, 2017, these parties entered into two construction contracts to carry out work on the project. The contracts contained a clause that all required that all disputes which could not be resolved were to be determined by arbitration.
Concassés de la Rive Sud inc. and Forage et Dynamitage de la Rive Sud inc. “CRS”) wasin the business of drilling, blasting, and crushing. On June 1, 2017, TEBC entered into a sub-contract with CRS for work in connection with the project. In September and October, 2017, it sent specialized equipment to the site to meet the project schedule.
There were unexpected lengthy delays in obtaining the required permits for the project. Therefore, in September, 2018, BIM sent notices of termination of the contracts to TEBC. In July, 2019, TEBC commenced an arbitration challenging BIM’s right to terminate the contracts and claiming damages arising from the termination. Among its claims, TEBC sought recovery of amounts that would be owing to CRS for “outstanding standby charges, the cost of spare parts, and lost profit”. CRS’s president and owner swore an affidavit in support of TEBC’s claim.
The hearing on the merits was scheduled to take place from May 20, 2020, to June 5, 2020.
On April 7, 2020, on the consent of the parties, the tribunal issued Procedural Order No. 3, which provided that counsel for CRS would represent CRS witnesses during their testimony for the purpose of advancing the CRS component of TEBC’s claim. The participation of CRS’s counsel was limited to examination-in-chief of CRS witnesses, cross-examination, and leading re-examination or reply evidence of CRS witnesses, and cross-examination of BIM’s expert witnesses on evidence relating to the CRS component of TEBC’s claim. The Order also provided that: CRS, its witnesses, and its counsel would be bound by the same confidentiality obligations of the parties; that CRS’s counsel’s participation would not alter the equal allocation of time at the hearing; and that CRS’s counsel would be permitted to attend the hearing even when not leading evidence from a CRS witness.
Significantly, the Order expressly stated that, “BIM’s consent to the participation of CRS’s counsel was without prejudice to its position that CRS was not a party to the arbitration”.
On December 9, 2020, the tribunal issued a Partial Final Award finding that BIM had wrongfully terminated the contracts. The tribunal was split, however, with respect to the award of damages. The majority ordered TEBC damages in an amount which included CRS’s lost profit and standby charges. However, one member of the tribunal issued a partial dissent which disagreed with portions of the award, including the CRS damages amount.
Thereafter, BIM brought an application seeking (among other things) an order setting aside the award pursuant to s. 46 of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17 and an order granting it leave to appeal the award under s. 45(1) of the Arbitration Act.
CRS sought leave to intervene in the application pursuant to Rule 13.01 of the Ontario Rules of Civil Procedure, which provides:
- A person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims,
- an interest in the subject matter of the proceeding;
- that the person may be adversely affected by a judgment in the proceeding; or
- that there exists between the person and one or more of the parties to the proceeding a question of law or fact in common with one or more of the questions in issue in the proceeding.
- On the motion, the court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding and the court may add the person as a party to the proceeding and may make such order as is just.
Justice Pattillo found that the criteria in Rule 13.01(1) were disjunctive and that CRS had to establish only one of them. CRS argued that it met two of them: it had an interest in the subject matter of the proceeding and it would be adversely affected by a judgment on the application. Further, pursuant to Rule 13.01(2), its intervention would not unduly delay or prejudice the proceeding.
Justice Pattillo disagreed – a financial interest in the outcome is not sufficient to establish an interest in “the subject matter of the application” as required under Rule 13.01(1)(a). The subject matter of the application concerned the construction of the contracts between TEBC and BIM, specifically, whether TEBC had the right to terminate. In addition, in order to establish that CRS would be adversely affected by a judgment in the proceeding to satisfy Rule 13.01(1)(b), CRS had to show a greater adverse impact than a member of the public in respect of the proceeding in a greater way than any member of the public. It could not do so because its losses were incidental to and separate from the subject matter of the application, “given the fact that CRS is a non-party to the arbitration and its claim is against TEBC, not BIM.
Finally, Justice Pattillo considered whether he should exercise his discretion to grant CRS leave to intervene and declined to do so for the following reasons:
“[37] The dispute in issue is a private matter between two parties to the Contracts, dealt with by way of private arbitration. The courts are reluctant to permit third parties to intervene in purely private and commercial litigation. See: Jones v. Tsige, 2011 CanLII 99894 (ON CA), [2011] O.J. No. 4276 (C.A. Ch.) at para. 26; Authorson v. Canada, 2001 CanLII 4382 (ON CA), [2001] O.J. No. 2768 (C.A. Ch.). In my view, it is more so where private arbitration is involved. The fact that TEBC asserted a damage claim in respect of CRS’ losses and that CRS participated in the arbitration in assisting TEBC does not change the nature of the proceeding. CRS is not a party to the Contracts and was not a party to the arbitration.
[38] I am also satisfied based on the issues that CRS’s intervention will result in no useful contribution to the issues on the application. As noted, the issue of whether TEBC is entitled to claim damages occasioned by CRS, its subcontractor, turns on the provisions of the Contracts. That argument is for TEBC to make. Given BIM’s claims, TEBC will have to address the issue on jurisdiction in any event. Further, any argument by CRS on that issue would simply be repetition, which in my view would result in an injustice to BIM.
[39] CRS submits that it has no control over what arguments TEBC might make and that given its potential claim against TEBC, their interests are not completely aligned. While that may be true on paper, given their relationship, and the fact that they worked together in the arbitration and TEBC was able to make all of CRS’ arguments before the Arbitral Tribunal, there is no evidence to suggest TEBC cannot adequately do so in the application.”
He dismissed the motion for leave to intervene.
Editor’s notes:
First, Justice Pattillo’s assertion that the test for leave to intervene should be higher in a court proceeding arising out of a private arbitration is an interesting expression of the policy decision increasingly evident in the case law in Canadian appellate courts to prevent interference in arbitration where the parties have chosen it as their dispute resolution process.
Second, this case was listed on the Ontario Superior Court of Justice – Commercial List, whose practice is governed by the Consolidated Practice Direction Concerning the Commercial List. Its introduction explains the purpose of this specialized court:
“The Commercial List was established in 1991 for the hearing of certain actions, applications and motions in the Toronto Region involving issues of commercial law. The special procedures adopted for the hearing of matters on the Commercial List expedite the hearing and determination of these matters and have been met with considerable approval… The Commercial List remains, in the first instance, voluntary, except for bankruptcy matters. Applicants and plaintiffs may continue to set other matters that qualify for the Commercial List down for hearing either on the Commercial List or elsewhere. There is, however, a provision for any party to have a matter transferred to, or removed from, the Commercial List…This Practice Direction is to govern the conduct of matters on the Commercial List subject to further amendments as required”.
Matters which are eligible to be listed on the Commercial List are applications, motions, and actions which involve “suitably commercial matters” under the International Commercial Arbitration Act (Ontario), Arbitration Act, 1991 (Ontario) and Commercial Arbitration Act (Canada).”
Justices of this court develop specialized expertise in commercial arbitration matters.