Ontario – court assists arbitration by holding party to its agreement to appoint arbitrator – #056

The Ontario Superior Court in Overberg v. Aerospace, 2018 ONSC 1720 exercised its jurisdiction under section 6 Arbitration Act, 1991, SO 1991, c 17 to intervene in a private commercial arbitration and enforce respondent’s agreement to accept and confirm the arbitrator nominated by claimants.  In doing so, the court assisted the conduct of the arbitration and ensured that the arbitration was conducted according to the parties’ agreement.

Richard Overberg, dba Avia Connect International, and Martin Basson, dba M Basson Enterprises, (“Applicants”), entered into a fiver (5) year agreement with Vector Aerospace Engine Services – Atlantic Inc. (“Respondent”).  Applicants undertook to promote and market Respondent’s ability to complete aviation maintenance, repair and overhaul.   Their agreement contained an arbitration agreement at clause 27.

Only extracts of clause 27 appear in the reasons for decision.  In addition to providing that the arbitration award be final and binding, that the hearing be conducted in Toronto and in English, the parties had agreed on a process for appointing the arbitration tribunal:

In any arbitration hereunder, the Parties may agree on the selection of a single arbitrator, but if they cannot so agree, each such Party shall select an arbitrator and the two selected arbitrators shall select a third arbitrator.

A dispute arose leading Applicants sent a March 17, 2017 notice to arbitrate and proposed a well-known Toronto litigator as sole arbitrator.   Respondent’s counsel responded by confirming that it had no objection to the arbitrator identified by Applicants subject to the arbitrator clearing conflicts and “assuming he remains your clients’ preferred choice”.

By May 17, 2017, the arbitrator cleared conflicts, Applicants confirmed that he remained their choice and the arbitrator soon after sent a draft arbitration agreement to parties’ counsel.

Subsequent to the confirmation of the sole arbitrator, through its counsel, Respondent wrote to Applicants requesting that the arbitration be put on hold due to significant issues occurring with a related company. At no time did Respondent question the confirmation of the arbitrator.

In July and August, 2017, Applicants advised that they intended to proceed with the arbitration and Respondent responded that it would terminate their agreement if the arbitration proceeded.  A first meeting with the arbitrator was set for September 7, 2017 to set out scheduling procedural steps for the conduct of the arbitration.  At no point in any of the exchanges did Respondent object to the arbitrator having the proper credentials to serve as sole arbitrator.

After agreement between the parties to suspend the proceedings until October 15, 2017, Respondent’s new counsel advised on October 31, 2017 that it was concerned with the arbitrator acting as sole arbitrator and proposed alternatives.  Applicants advised of their intention to proceed with the arbitrator already agreed upon and applied on December 6, 2017 under section 6 of the Arbitration Act to have the court appoint the arbitrator.

Section 6 authorizes the court’s intervention in arbitrations provided it serves to assist and enable the arbitration to proceed:

6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:

 To assist the conducting of arbitrations.

 To ensure that arbitrations are conducted in accordance with arbitration agreements.

 To prevent unequal or unfair treatment of parties to arbitration agreements.

 To enforce awards.

Other than what Mr. Justice Grant R. Dow considered to be “vague allegations”, Dow J. held that Respondent provided “no credible evidence” that the arbitrator already agreed upon was somehow unsuited for the arbitration.  Dow J. instead focused on the remaining two grounds raised by Respondent in order to resile from its agreement to appoint the arbitrator:

(a) the requirement to have a signed or finalized arbitration agreement; and,

(b) the right of a party to reconsider its agreement to a specific arbitrator before any timetable or procedural steps have been taken or agreed upon.

Dow J. found that neither of the two grounds were mentioned expressly or by implication in the parties’ clause 27.   Rather, he identified the issue before him as whether a party could resile its earlier agreement to confirm an arbitrator.

Dow J. refused to approach the appointment of the arbitrator as an application under section 10 of the Arbitration Act.

10 (1) The court may appoint the arbitral tribunal, on a party’s application, if,

 (a) the arbitration agreement provides no procedure for appointing the arbitral tribunal; or

 (b) a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so.

Dow J. held that, in order to apply section 10, he would first have to agree with Respondent that it could lawfully resile its earlier confirmation of the arbitrator.  Dow J. wrote that he did not agree.  Dow J. added that the arbitrator in question had the necessary qualifications to complete the arbitration and that if it had had any genuine concerns, Respondent ought to have raised them at the outset when he was first proposed and before his appointment was agreed upon.

He also held that section 12 of the Arbitration Act applied, preventing a party from revoking its appointment of an arbitrator.  He also mentioned that neither party argued this section.

Dow J. concluded that Applicants were justified in seeking the court’s assistance under section 6 to ensure that the arbitration was conducted in accordance with their agreement.