Ontario – court’s jurisdiction “not an elastic concept” – it either has or has not jurisdiction – #389

In George v. Wang, 2020 ONSC 6175, Mr. Justice James F. Diamond dismissed a defendant’s challenged to the court’s jurisdiction, determining that defendant had effectively waived the application by conduct in court. Having participated in case conferences and motions, including seeking relief on separate cross-motions, Diamond J. determined that defendant had effectively waived the application of the otherwise-valid agreement to arbitrate.  Diamond J. also underlined that the court’s jurisdiction arose from plaintiff’s application as originating document and not from an earlier court order in the action.

Applicant and Respondent participated in a mediation on March 26, 2019 to resolve financial issues stemming from the breakdown of their common law relationship.  The mediation lead to a signed mediation agreement (“Agreement”) to which the parties inserted an agreement to arbitrate at clause 7.1 and attached a draft arbitration agreement as Schedule A.  The Agreement provided that Respondent would obtain a new mortgage and purchase Applicant’s 50% interest in a property.

The specific arbitrator identified in the Agreement and in Schedule A also served as the mediator who had conducted the successful mediation.

Clause 7.1 – The parties agree that any issues arising out of this agreement shall be mediated and if no agreement arbitrated by [Arbitrator].  [Arbitrator’s] arbitration agreement is attached as Schedule “A””.

Diamond J. identified the arbitration agreement as a “draft” and observed that it “required the parties to arbitrate “the resolution of any issues arising from the implementation and enforcement” of the agreement, and to waive any right to further litigate those issues in court”.

The transaction never proceeded and, after efforts to proceed with the transaction failed, Applicant applied to the court on November 20, 2019.  Diamond J. described the relief sought in Applicant’s application as “wide” and included issues in the Agreement and beyond. 

Respondent had not yet filed a formal Answer to Applicant’s application but Diamond J. noted that Respondent had taken several steps in the proceedings. In his reasons, Diamond J. outlines the activity undertaken in the court file by both Applicant and Respondent, observing that Respondent had participated in three (3) case conferences and five (5) motions, aside from the motion before him for decision.   For example, at para. 15, Diamond J. referred to an order sought by Respondent regarding Applicant’s responsibility for payment of half of the mortgage and line of credit expenses existing on the property.  An earlier order in the court action addressed Respondent’s compliance with the Agreement and is outlined by Diamond J. at para. 16 when summarizing earlier findings made in one of the decisions on an earlier motion by Applicant.

Respondent opposed the relief sought by Applicant on two (2) grounds, summed up at para. 2, the first of which argued that “this Court lacks jurisdiction to hear this motion on the grounds that the subject matter of the relief sought by the applicant is properly within the jurisdiction of the mediator/arbitrator”.  She claimed that she had “never taken any steps akin to “attornment”, and thus the subject matter of the within motion is “an issue arising from the implementation and enforcement of” the agreement that triggers the mediation/arbitration clause”.

Diamond J. addressed Respondent’s jurisdiction argument at paras 22-27 of his reasons and, having done so, dismissed it.

First, he corrected for Respondent’s submission that the court’s jurisdiction stemmed from an earlier order and not from the filing of Applicant’s application.

[23] Contrary to the respondent’s submissions, this Court’s jurisdiction to hear and decide the issues in this proceeding is bestowed by the issuance of the application, not the terms of the Gilmore Order.  The respondent’s position that this Court’s jurisdiction is limited to the matters arising from the listing and sale of the property (ie. what the respondent deems to be the “scope of the Gilmore Order”) is simply incorrect.  Until such time as a motion is brought to stay this proceeding, this Court maintains jurisdiction to hear all the issues raised and/or joined in the pleadings.  The fact that the parties consented to the Gilmore Order (the terms of which go beyond the listing and sale of the property) is not the originating document bestowing jurisdiction upon this Court.  The application, which seeks various remedies pursuant to statutory and common law rights, is the originating document”.

Diamond J. next addressed the approach taken by Respondent to the court’s jurisdiction, dismissing it as “piecemeal” and underlining that the court’s jurisdiction is “not an elastic concept”.

[24] Further, the respondent’s argument is the definition of piecemeal.  After participating in three case conferences and five motions, including seeking relief on two separate cross-motions before Justice Kraft, it cannot possibly lie in the respondent’s mouth to now take the position that this Court lacks jurisdiction to hear the within motion.  Jurisdiction is not an elastic concept, as this Court either has jurisdiction, or it does not.  Using the respondent’s own logic, if the subject matter of her previous two cross-motions was clearly an issue arising from the implementation and enforcement of the agreement, how was she able to pursue that relief before Justice Kraft?  The answer is that she fully participated on the merits because it suited her.  Even though the respondent was not successful before Justice Kraft, this does not change the fact that the respondent was content with, and availed herself of, this Court’s jurisdiction to advance her own interests”.

Diamond J. applied the reasoning set out in Tameanko v. Goldman, 2014 ONCJ 580 which set out the circumstances in which a party can acquiesce to a waiver the application of an agreement to arbitrate. See paras 47-57 of Tameanko v. Goldman.  Diamond J. added that the reasoning applied with additional force to the facts before him.

Such a result is even more obvious when that party not only fails to raise the existence or effect of the arbitration clause, but then takes active steps in the legal proceeding to pursue his/her rights, interests and claims.  This is exactly what the respondent did in this proceeding”.

As Respondent had never enforced the agreement to arbitrate and even sought reimbursement of the Arbitrator’s retainer, Diamond J. held that the court did not lack jurisdiction.

[26] The respondent never sought to enforce the mediation/arbitration clause.  She in fact sought the return of her retainer funds from [Arbitrator] after this proceeding was commenced. As found by Justice Kraft, the respondent has delayed matters, and is now hoping that this Court follows her lead to place her head in the sand and ignores the events since the issuance of this proceeding. Such a result is neither reasonable nor correct”.

urbitral notes – First, without express mention, the facts involved a med-arb agreement.

Second, the reasons made no mention of any party’s challenge to the validity of the agreement to arbitrate but to whether it had been waived by conduct in court.