Ontario – Abuse of process precludes re-litigating arbitrator bias allegation – #827

La Française IC 2 v. Wires, 2024 ONCA 171 involved an appeal from a judgment recognizing and enforcing an arbitration award obtained by the Respondent. The Appellant/Claimant in the arbitration, entered into a funding agreement.  The arbitration arose when the Appellant/Claimant commenced proceedings seeking recovery of fees under the funding agreement. The central issue before the Court was whether the doctrine of abuse of process prevented the Appellant/Claimant from arguing on the application to enforce the judgment that the arbitrator was biased, when that issue had already been dismissed by the arbitral institution that heard and decided the challenge. 

In the arbitration , the arbitrator ordered the Appellant/Claimant to pay security for the Respondent’s costs.  The Appellant then challenged the arbitrator’s appointment and alleged bias. This challenge was dismissed by the Stockholm Chamber of Commerce (“SCC”). The Appellant/Claimant subsequently attempted to discontinue the arbitration, which the Respondent opposed, leading the arbitrator to dismiss the claims advanced by the Appellant/Claimant and awarding tribunal and counsel costs to the Respondent .

The Respondent then obtained a judgment enforcing the award.

The Appellant/Claimant appealed the judgment enforcing the award, arguing several errors by the application judge:

1) Failure to address the alleged lack of independence and impartiality of the arbitral tribunal.

2) Error in finding that the Respondent had standing to bring the application to enforce the award, as the funding the agreement referred to the Respondent by a shortened name.

3) Error in upholding the arbitrator’s award of costs to the Respondent, including settled costs.

The Ontario Court of Appeal summarily rejected these arguments. 

It affirmed the application judge’s decision, stating that re-litigating the challenge to the arbitrator’s independence and impartiality which had been dismissed by the SCC would constitute an abuse of process, explaining that the doctrine becomes engaged “to prevent the misuse of [the court’s] procedure, in a way that would be manifestly unfair to a party to the litigation before it or would in some other way bring the administration of justice into disrepute”: Behn v. Moulton Contracting Ltd., 2013 SCC 26 citing Canam Enterprises Inc. v. Coles, 2000 CanLII 8514 (ON CA), at para. 55per Goudge J.A. (dissenting), rev’d 2002 SCC 63

The Court, moreover, agreed that the  Appellant’s/Claimant’s challenge of the arbitrator stemmed not from genuine concerns of bias, but rather dissatisfaction with the arbitrator’s security for costs award. The Court noted that because the bias allegation was raised relatively early in the arbitration, any valid deficiencies, if accepted, could have been addressed by empanelling a new tribunal if the Appellant/Claimant had pursued an appeal of the SCC’s decision on the bias issue, something he did not do. 

The Court also upheld the finding that the Respondent had standing to bring the application to enforce the judgment and that there was no error in recognizing and enforcing the costs awarded by the arbitrator. 

The Court dismissed the appeal, and the Respondent was awarded its costs of the appeal.

Contributor’s Note:

In this case, the Court makes clear that Canadian courts will apply the doctrine of abuse of process to prevent re-litigation of previously decided matters – even those that were decided outside the courts –  if doing so will undermine the integrity of the judicial system. As a corollary, the case underscores that a party faced with an unfavourable decision must exhaust all avenues of appeal, as the failure to do so will weigh against that party challenging that decision in the courts.