In Kubecka v Novakovic, 2022 ONSC 4503, Justice Pinto determined that, on the wording of the parties’ arbitration agreement, the parties had agreed that the arbitration was not terminated and their dispute returned to the jurisdiction of the courts – even when the arbitrator resigned. He appointed a replacement arbitrator on the application of one of the parties.
Wife and Husband were engaged in high-conflict matrimonial litigation for about seven years, until Husband passed away. Thereafter, the Applicant Wife and Husband’s Estate Trustees, the Respondents, entered into a Mediation-Arbitration Agreement. The mediation concluded with the execution by the Parties of Partial Minutes of Settlement dated August 18, 2021. The arbitration proceeded with respect to the remaining issues.
The Arbitrator resigned by letter dated May 3, 2022. Thereafter, she released an Interim Decision on May 24, 2022.
The Applicant brought an application for the appointment of a specific named arbitrator to replace the Arbitrator who had resigned. The issue before Justice Pinto was whether, in these circumstances in which the parties disagreed, the court should appoint a replacement arbitrator and whether that arbitrator should be the Applicant’s appointee, or whether, as the Respondents requested, the arbitral process should be terminated and the dispute continued in the courts.
Justice Pinto quoted the relevant portion of the Mediation-Arbitration Agreement:
“12. WITHDRAWAL FROM MEDIATION OR ARBITRATION
12.1 Neither party may unilaterally withdraw from this Agreement at either the mediation or arbitration stage. However, the parties may jointly terminate this Agreement by their written agreement. Subject to paragraph 12.2, the Arbitrator shall proceed with an arbitration as provided for in this Agreement notwithstanding that the mediation has been unsuccessful or that one of the parties no longer wishes to participate in the arbitration.
12.2 [The Arbitrator] may at any time resign from her appointment as arbitrator by providing written notice of her resignation to the parties.
12.3 In the event that [the Arbitrator’s] appointment is terminated, and the parties are unable to agree on a replacement, a court of competent jurisdiction shall appoint a replacement arbitrator on either party’s application to the court.
12.4 In the event that [the Arbitrator’s] appointment is terminated, the parties agree that any interim or interlocutory award(s) made by [the Arbitrator] will continue to bind the parties and will continue in full force and effect as the basis for the continuation of the arbitration with a replacement arbitrator.”
The Respondents argued that article 12.3 did not apply because the Arbitrator had resigned. Her appointment was not “terminated”, as provided for article 12.3. Therefore, the arbitration process itself was terminated and the Applicant could not apply to the court for the appointment of a replacement arbitrator.
Justice Pinto disagreed. He found, as a general proposition, that the resignation of the arbitrator does not trigger the end of the arbitral process and the return of the dispute to the court’s jurisdiction. In this case, the language of the Mediation-Agreement as a whole demonstrated the parties’ commitment to a mediation-arbitration process.
Further, Justice Pinto noted that s. 14 of the Ontario Arbitration Act, 1991, S.O. 1991, c. 17, expressly includes resignation as a form of “termination” of the arbitrator’s appointment:
“14 (1) An arbitrator’s mandate terminates when,
(a) the arbitrator resigns or dies;
(b) the parties agree to terminate it;
(c) the arbitral tribunal upholds a challenge to the arbitrator, ten days elapse after all the parties are notified of the decision and no application is made to the court; or
(d) the court removes the arbitrator under subsection 15 (1).”
He found that it could be implied that the parties intended that the word “terminated” in the Mediation-Arbitration Agreement would accord with the meaning of the word in the Act.
He directed the matter to return to arbitration.
The Respondents then argued that he should give the parties additional time to try to reach agreement on the selection of a replacement arbitrator. Justice Pinto declined that request for three reasons: first, the Applicant’s Notice of Motion made it clear that she was seeking the appointment of a specific named replacement arbitrator; second, the Respondents took no issue with the Applicant’s choice; and third, given the age of the Applicant and the “tortured history” of the dispute, further delay was not desirable. He appointed the Applicant’s choice of arbitrator.
Editor’s Notes:
First, compare this result to that in SZ v JZ, 2022 ABQB 493, which is reviewed in Case Note #647: Alberta – SCC Wastech decision applies to exercise of arbitrator’s decision to resign.
Second, the Respondents claimed that the Arbitrator herself had directed in her Interim Award that this matter must be returned to the court. Justice Pinto noted that the Interim Award was not put before him and there was no agreement between the parties that this is what it said. Therefore, “in any event”, he found that even if the Interim Award had so stated, he “would not find it binding on the court in the face of the parties’ Mediation-Arbitration Agreement.” There are not sufficient facts set out in the case (or apparently before Justice Pinto) to analyse this apparent jurisdiction decision by the Arbitrator. For example, we don’t know the terms of the resignation. The Arbitrator resigned by letter dated May 3, 2022, but issued her Interim Award weeks later, on May 24, 2022, on issues that were not identified. Was there an argument that the Arbitrator was functus officio? Was the Interim Award a ruling on a preliminary question of jurisdiction, which would invoke s. 17(8) of the Act and a party’s right to apply to the court to “decide the matter”? Did the decision give rise to the right of a party to appeal under s. 45 of the Act?
Third, this case involved a straightforward interpretation of the parties’ arbitration agreement; the judge interpreted the agreement as a whole. It is a reminder of the importance of clarity of drafting of the arbitration clause and the wisdom of using standard language wherever possible. But since this is the second case I have reviewed in as many weeks in which the parties’ dispute resolution has gone off track because of the resignation of the arbitrator, this is an issue that the parties may wish to address directly in their arbitration agreement. As demonstrated by this case, that will not always eliminate disputes over what will happen if the arbitrator does resign, but at least it may lead to a speedy determination of this issue by the courts, if necessary. Here, the arbitrator resigned in May, 2022, the parties filed their material by July, 2022, the Application was heard on July 28, 2022, and Justice Pinto’s decision appointing the replacement arbitrator was issued on August 2, 2022.