Arbitration Matters

September 27, 2022September 26, 2022

Québec – Interests of justice require closely linked disputes to be arbitrated – #664

In Tessier v 2428-8516 Québec inc., 2002 QCCS 3159, Justice Dufresne granted an application for a declinatory exception in respect of an originating application, and referred two disputes involving ownership of two closely connected companies to arbitration where the shareholders of only one of the two companies involved in the disputes were subject to an arbitration agreement. Justice Dufresne found that the disputes were linked. He relied upon the interests of justice and the principle of proportionality and found that [informal translation]“rather than depriving the shareholders of the first [company] of the effects of the arbitration clause, the shareholders of the second [company] should be ordered to be subject to it.”

September 26, 2022September 26, 2022

Alberta – Court reviews preliminary jurisdictional award for correctness de novo – #663

In Ong v Fedoruk, 2022 ABQB 557, Justice Bourque confirmed that under subsection 17(9) of the Alberta Arbitration Act(“the Act“), the court reviews preliminary jurisdictional awards in domestic arbitrations for correctness on a de novo basis. In doing so, Ong aligned the standard of review and procedure in Alberta with the decision of the Ontario Divisional Court in The Russian Federation v. Luxtona Limited, 2021 ONSC 4604 (“Luxtona”), a case decided under the comparable provision of Ontario’s International Commercial Arbitration Act, 2017, SO 2017, c 2, Sch 5 (“ICAA”), which implements the UNCITRAL Model Law on International Commercial Arbitration (“Model Law”). However, it diverged from Ace Bermuda Insurance Ltd. v Allianz Insurance Company of Canada, 2005 ABQB 975 (“Ace Bermuda”), an international case which applied a review standard of “reasonableness, deference & respect” under Alberta’s International Commercial Arbitration Act, RSA 2000, c I-5, which also implements the Model Law. That case as a precedent may now be in doubt, considering the trend in Canadian and other Model Law jurisdictions in favor of non-deferential review of preliminary jurisdictional decisions of arbitral tribunals.

September 23, 2022April 13, 2023

B.C. – Material misapprehension of evidence is an extricable error of law – #662

In Escape 101 Ventures Inc. v March of Dimes Canada, 2022 BCCA 294, Justice Voith (for the Court) allowed an appeal of a commercial arbitral award on two grounds of significance: (1) the arbitrator demonstrated a material misapprehension of evidence going to the core of the outcome – this constituted an extricable error of law subject to appeal; and (2) an appeal is allowed with respect to “any question of law arising out of an arbitral award”, but this is not limited to errors arising from the formal award of the arbitrator. Here, the error was patent from the record, but was not apparent in the arbitrator’s reasons. The Court remitted the issue back to the arbitrator for reconsideration rather than substitute its own decision because there was no record of the proceedings, so it lacked the necessary evidentiary foundation to do so. (This was also the first appeal under the new B.C. Arbitration Act, S.B.C. 2020, c. 2.)

September 15, 2022September 9, 2022

Ontario – Action abuse of process – even against new defendant – where issues already arbitrated – #661

In Doria v Warner Bros. Entertainment Canada Inc. et al., 2022 ONSC 4454, Justice Koehnen granted the Defendants’ motion to strike the Plaintiff’s Statement of Claim pursuant to Rule 21.1(3)(d) of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194 on the ground that it was an abuse of process because it sought to relitigate issues that were previously decided by an arbitrator. The Plaintiff argued that s. 139 of the Ontario Courts of Justice Act. R.S.O. 1990, c. C.43, allowed him to bring a subsequent proceeding for the same or similar relief against a person who was jointly liable and who was not bound by a previous judgment. Justice Koehnen found that s. 139 did not apply these circumstances, where the Plaintiff had a full opportunity to have his entire claim adjudicated in the arbitration, was awarded judgment, and had fully collected on the judgment. The Plaintiff’s complaint was that the arbitrator did not grant him his full damages. The fact that the Defendants were not parties to the arbitration and therefore not bound by the award was irrelevant.

September 14, 2022September 9, 2022

Ontario – Court of Appeal upholds “single proceeding” insolvency model over recourse to arbitration – #660

In Mundo Media Ltd. (Re), 2022 ONCA 607, Court of Appeal for Ontario Justice Julie Thorburn dismissed a motion for leave to appeal a decision denying a motion to stay a receiver’s court proceeding. The Appellant/Moving Party sought the stay on the basis of an international arbitration agreement. Justice Thorburn found no reversible error in the motion judge’s choice to apply the “single proceeding model”, applicable in insolvency proceedings, with the effect that the Appellant/Moving Party, one of the insolvent company’s debtors, could not require the receiver to arbitrate its claim rather than litigate it. Together with the Superior Court’s decision below, this decision provides important guidance on the interplay between arbitration agreements and claims advanced in the bankruptcy and insolvency context.

September 13, 2022September 9, 2022

Alberta – Successful enforcement of right to arbitrate attracts triple “tariff” costs – #659

In Barrel Oil Corp v. Cenovus Energy Inc., 2022 ABQB 488, Justice M.H. Hollins granted a Respondent who successfully defended an application to stay an arbitration the Respondent had commenced, triple “tariff” costs, equating to just over 40% of the Respondent’s out of pocket costs. The Court rejected the Respondent’s plea of full indemnity costs, finding they were inappropriate in this case.

September 12, 2022September 9, 2022

Québec – Annulment – No review of the merits and no reason to appeal – #658

Balabanyan v. Paradis, 2022 QCCA 877 is, hopefully, the last stage of this arbitration saga, which has come before the Court many times before. In a previous Case Note, Québec – Annulment – No review of the merits, even if award wrong #603, I reviewed how the Court dismissed each and every reason the Appellant raised against the arbitral award made against him. In her decision, Québec Superior Court Justice Harvie reaffirmed that courts have no jurisdiction to revisit the merits of an arbitral award or the arbitrator’s reasons and assessment of the evidence when a party is seeking homologation or annulment of an arbitral award. She also confirmed the strict scope of analysis of homologation/annulment grounds according to sections 645 and 646 CCP. In an ultimate attempt to annul the award made against him, the Appellant sought leave to appeal Justice Harvie’s decision. Firstly, the Court of Appeal took notice of Justice Harvie’s assessment that the Appellant acted in bad faith in the conduct of his proceedings: by seeking to “wear the opponent out of steam by a maze of procedures and ill-founded arguments”. This increased Appellant’s burden significantly and even more considering the fact that the Appellant’s application was out of time. The Court of Appeal dismissed the leave application because the Plaintiff did not demonstrate any reason to justify his demand.

September 8, 2022September 8, 2022

Québec – Arbitral award did not “apply” to court proceeding – #657

In Nour v Estephan, 2022 QCCS 2996, Justice Wery dismissed an action brought by the Plaintiff for damages for breach of an agreement with the Defendants, which set out the terms of his departure from their business acting as financial advisors. Confession: this is not an arbitration case, but don’t stop reading because there is an interesting little section on the precedential value in the Québec Superior Court of an arbitral award issued by a retired former justice of the Québec Court of Appeal, acting as arbitrator, in unrelated litigation brought in the courts.

September 7, 2022September 12, 2022

Québec – Stay of homologation application where parties disagreed on award’s meaning – #656

In Syndicate of co-owners of Quartier Urbain 3 v Habitations Bellagio Inc, 2022 BCCS 2445, the Applicant sought the homologation of an arbitral award dated October 28, 2021, which ordered the Respondent to carry out certain corrective work on the Applicant’s residential building. The parties disagreed upon the meaning of the award. Therefore, Justice Lussier stayed the homologation application for a short time to allow the parties to return to the Arbitrator to try to reach agreement on the meaning of the award. Because the Arbitrator was functus officio (presumably because the parties were too late to seek an interpretation of the award from the Arbitrator), she was not to participate in the meeting as arbitrator.

August 29, 2022August 29, 2022

Newfoundland and Labrador – Objections to litigation to be raised early (even if tentative) – #655

In 55668 Newfoundland and Labrador Limited v. Sullivan, 2022, NLSC 127, a franchisor-franchisee dispute arose between the parties. The Franchise Agreement contained an arbitration clause, however, the Plaintiffs proceeded by way of Statement of Claim. The Defendants did not take the position that the dispute was to be referred to arbitration in their original pleading, relying upon the Statement of Claim, which referred to conduct that occurred after the Franchise Agreement had been terminated. Later, the Plaintiffs corrected their pleading to provide that the impugned conduct occurred pre-termination. The parties disputed whether the arbitration clause terminated with the termination of the Franchise Agreement, and also whether the dispute fell within the scope of the arbitration clause. At trial, the Defendants argued that they had been prejudiced by the pleading amendment, which they asserted clearly gave them the right to arbitration. Justice Knickle held that, assuming the dispute fell within the terms of the arbitration clause, arbitration may have been the available option. However, the Defendants knew from the beginning of the litigation that the facts that were relevant to the dispute covered the period both before and after the termination; their failure to plead their right to arbitration in their Statement of Defence meant that they were out of time to object.