Ontario – courts consider final award which refuses to resolve dispute between some parties to arbitration – #043

A short decision from the Court of Appeal, in Chambers, highlighted the shortened delay applicable in Ontario to appeals of Superior Court decisions confirming arbitral awards.  Maracle III v. Miracle, 2017 ONCA 950 also dealt with the uncommon situation of an arbitrator’s refusal to make any findings regarding certain parties to a dispute despite their clear agreement to arbitrate that dispute. 

Madam Justice Gladys I. Pardu was asked to undertake a routine task but on odd facts: whether to grant a brief extension of delay to seek leave to appeal when the Superior Court confirmed an award in which the arbitrator refused to make an award.  If leave is granted, the parties’ arguments will offer the Court of Appeal a twist.   Instead of applying standards of review to the more common situation in which parties’ critique or praise of the merits of an award actually made, the Court of Appeal will have to decide what is the standard of review when the arbitrator makes no award and that award is confirmed by the Superior Court.

The litigation involved three individuals: Andrew Maracle III (“AM”), Jasmin Johnson (“JJ”) and Sir Andrew Clifford Miracle (“CM”).  AM and CM were bound by partnership contract regarding the operation of a cigarette and gasoline business. The contract provided for mandatory arbitration.  CM sued AM and JJ in Superior Court alleging misappropriation of funds by AM and signature of cheques by JJ without authority.  The litigation included broad allegations by CM against CM in regard to the partnership between AM and CM sought broad relief against both AM and JJ.

The Superior Court, by consent, issued a May 9, 2016 order against all three, AM, JJ and CM, that they would all go to binding arbitration.  The three subsequently signed an October 7, 2016 agreement to arbitrate stating that the three “have agreed to proceed to an arbitration of their dispute”.

The arbitrator issued a final award in favour of CM against AM but refused to make any findings regarding the dispute between CM and JJ as JJ was not a party to the arbitration agreement. The arbitrator did not invite submissions on his decision to decline to exercise jurisdiction.

CM and JJ applied, arguing that the arbitrator’s decision not decided the dispute between CM and JJ was procedurally unfair.  They applied to the Superior Court under section 46(1) of the Arbitration Act, 1991, SO 1991, c 17 arguing that the court should set aside the award as they had not been treated fairly or that the arbitration procedure did not comply with the Arbitration Act.

A Superior Court judge dismissed CM’s and JJ’s application and confirmed the arbitral award.  CM and JJ applied for leave to appeal but did so outside the delay which they were allowed to do so.  Counsel for both parties agreed that the failure to meet the 15 day delay prescribed rule 61.03.1(3) of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194 was a result of the applicant’s lawyer’s error and that no prejudice resulted from the short delay by which the applicant exceeded that delay.  Counsel for applicant mistakenly believed that he had 30 days from the date of the Superior Court decision in which to seek leave to appeal a decision confirming an award in favour of the other litigants.  The case reminds party of that the delay to seek the opportunity to challenge such decisions are shorter than the standard 30 days applicable to most appeals.

Pardu J.A. summarized the reasoning in first instance, excerpting key phrases from the Superior Court in her own brief reasons.  The Superior Court judge reasoned that he did not “see what benefit would be gained by an arbitration between” JJ and CM and that requiring JJ and CM to go to trial would not result in “duplication, inconsistent findings or multiple proceedings”.  Pardu J.A. commented that the reasoning “may be doubtful”.  Pardu J.A. noted that CM’s claims against JJ were “intertwined” with those against AM.

[11] As the above review of the pleadings illustrate, the allegations against (JJ) were inextricably intertwined with the disputes related to the partnership and the accounting of profits. On its face, the dispute between (JJ) and (CM) fell within the terms of the arbitration agreement that both parties signed. It is arguable that the arbitrator did not act with procedural fairness when he declined to arbitrate the disputes between (CM) and (JJ) in the absence of submissions from the parties. There is no indication that any of the parties raised this issue of excluding (JJ) from the issues to be dealt with by the arbitrator.

Pardu J.A. cautioned that AM and JJ faced “a more rigorous test for leave” as she was only extending the time in which AM and JJ could apply for leave and was not opining on the strength of their case.  She granted the extension of time in which to apply for leave to appeal, giving AM and JJ 10 days from the release of her decision to file a motion for leave to appeal.