[:en]In Swift v Allied Track Services, 2017 ONSC 6514, the Ontario Superior Court granted a motion to quash an attempted appeal from a final arbitral award. The court determined that a submission agreement, negotiated by the parties after their disputes had arisen, had overtaken their earlier arbitration agreement and provided no right of appeal without leave.
In his reasons, Mr. Justice James F. Diamond made reference to the two earlier decisions by Mr. Justice Frank Newbould involving the same parties, Allied Track Services Inc. (“Allied”) and Jeffrey Swift et al (“Swift et al”), and the same cluster of disputes : (1) a June 1, 2015 decision in Allied Track Services Inc. v Jeffery Swift et al, 2015 ONSC 3455 in which Newbould J. issued an order, among others, requiring the disputes regarding three post-closing adjustment disputes be arbitrated; and, (2) a subsequent September 4, 2015 decision in Allied Track Services Inc. v Jeffery Swift et al, 2015 ONSC 5496 in which Newbould J. appointed an arbitrator after an earlier court-appointed arbitrator declined to act given what Newbould J. qualified as “unreasonable suspicions” asserted by Swift et al. The latter decision includes an analysis of the limits of allegations of apprehension of bias “arising from the retainer of a large law firm by a large accounting firm in other unrelated cases” plus the following introduction to a costs order on the motion heard in that case:
“[26] It is clear based on the history of this case that the respondents have in bad faith done their best to upset the arbitration process that was to take place quickly after the sale of the business. They refused to engage BDO in the face of the orders of June 1 and 17, 2015 requiring them to do so. The positions taken by them regarding the arbitrator have been completely without merit and part of their bad faith attempts to derail the process. In the circumstances while the respondents have now obtained a consent order regarding the arbitration, it was in no way obtained because of their co-operation or good faith bargaining. It was caused by the capitulation by the applicant borne out of practical necessity to the unreasonable positions taken by the respondents. Normally consent matters are accompanied by an agreement to no costs or a no cost order. But each case has its own peculiarities, and in this case the history of how the respondents have dealt with this arbitration issues leads in my view to a significant cost order against the respondents.”
Following the latter decision by Newbould J., the parties negotiated an October 21, 2015 Joint Submission to Arbitrate (“JSA”) in which they appointed the honourable Colin L. Campbell as their arbitrator under the JSA. Note that Mr. Campbell was the same arbitrator which Newbould J. appointed under the parties’ original March 21, 2014 Share Purchase Agreement (“SPA’). Their appointment of Mr. Campbell under the JSA could be seen as re-confirming his appointment or compliance with the spirit of the court’s earlier order rather than a fresh appointment.
The case therefore involved experienced parties who had initially negotiated an undertaking to arbitrate before their dispute arose, had been to court twice to debate the application of that original undertaking and then negotiated a post-dispute submission to arbitrate. The parties proceeded to their arbitration and Mr. Campbell issued a final award which granted Allied (a) a net amount of $33,913.00 payable by Swift et al plus (b) a costs award of $355,000.00. The costs award was due to what Diamond J. explained as being “due to the respondent’s greater success in the arbitration, and the fact that the positions taken by the appellants during the arbitration lengthened the proceedings.”
Diamond J. therefore had to decide if Swift et al could appeal the final award under Ontario’s Arbitration Act, 1991, SO 1991, c 17 or grant Allied’s motion to quash and thereby terminate the appeal.
The full terms of the SPA are reproduced in the decision whereas the JSA is only mentioned by title with only a fragment cited to deal with the parties’ agreement on the level of any post-award review by the court. The SPA appointed an accountant to decide the dispute and stipulated that the decision “shall be final and binding, barring manifest error.” In contrast, the JSA stipulated that the arbitration “shall be governed by the Ontario Arbitration Act 1991, S.O. 1991 C.17.” The parties disputed which arbitration agreement applied: the SPA or the JSA.
Allied argued that the JSA replaced the earlier SPA and the any appeal would be subject to the terms of the Arbitration Act. If the arbitration agreement does not provide for appeals, then Swift et al were limited to an appeal on a question of law and then only with leave of the Court. Allied further argued that an appeal on a question of fact or mixed fact and law was unavailable because the JSA did not provide any such right, as required by section 45(1) of the Arbitration Act, no leave had been sought by Swift et al. and the time for applying for leave had passed. Swift et al. argued that the SPA still applied and that the final award could be challenged if the court determined it had “manifest errors” though it did not articulate the content of that standard.
Diamond J. held that the JSA replaced the SPA and was negotiated by both parties with legal representation. He also determined that the JSA dealt with a larger scope of issues than the initial SPA and the enlarged scope was mentioned in the JSA. He relied on the reasoning in 6524443 Canada Inc. v City of Toronto, 2016 ONSC 7147 in which the court agreed to limit the parties’ appeal rights to what they and their legal counsel had negotiated:
“In this case, the parties simply stated that the appeal would be in accordance with the 1991 Act. It did not provide for a right of appeal on questions of law, fact or mixed fact and law. The parties were represented by senior counsel who are presumed to know that the 1991 Actrequires the agreement to specify whether the parties have the right to appeal questions of law, fact or mixed fact and law, failing which they are entitled to appeal only on questions of law, with leave.”
Diamond J. declined to rely on the earlier SPA to discern the meaning of the JSA. If he did so, he would have found the SPA did not provide helpful insights and, in any event, did not express a clear intention for an appeal. Diamond J. therefore granted Allied’s motion to quash.[:]