Arbitration Matters

June 7, 2022May 27, 2022

Ontario: Award set aside for “trickery and injustice” – #624

In Campbell v. Toronto Standard Condominium Corp. No. 2600, 2022 ONSC 2805, Justice Perell of the Ontario Super Court of Justice set aside an arbitral award for “constructive fraud” pursuant to s. 46(1), para. 9 of the Ontario Arbitration Act, 1991. The arbitral award ordered the Campbells, who were condominium owners (the “Owners”), to pay $30,641.72 to the Toronto Standard Condominium Corporation No. 2600 (the “Condo Corp.”), which represented the costs of their arbitration. The matter began as a dispute regarding the Owners’ alleged non-compliance with the rules of the Condo Corp, including noise complaints and short-term rentals. However, the Owners were led to believe that the arbitration would be limited to the reasonableness of Condo Corp.’s legal costs in enforcing compliance up to and including the arbitration. Justice Perell held that the Owners were “tricked” intothe arbitration because it was actually an arbitration on the non-compliance issues.While Justice Perell found that the Condo Corp. was not deceitful, he found that “[2]… it misled, outmanoeuvred, and outsmarted the [Owners]” such that “[t]he court should not countenance the trickery and the injustice.” As a result, the arbitral award was set aside.

June 6, 2022May 27, 2022

Alberta – Appeal process under s. 44(2) of the Arbitration Act clarified – #623

In Esfahani v. Samimi, 2022 ABCA 178, the Court of Appeal for Alberta set out the procedure to be undertaken by the Court of Queen’s Bench when an arbitral award is appealed under s. 44(2) of the Arbitration Act, RSA 2000, c A-43. It states that if the arbitration agreement does not provide that the parties may appeal an award to the court on a question of law, a party may, with the permission of the court, appeal an award to the court on a question of law. The Court of Appeal held that the procedure is as follows: (a) an appeal does not exist unless permission to appeal is granted; (b) if parties do not make the required election in their arbitration agreement, permission to appeal is required and will be granted on questions of law only, subject to s 44(3) of the Arbitration Act (which provides that a party may not appeal an award to the court on a question of law that the parties expressly referred to the arbitral tribunal for decision); and (c) an application for permission to appeal must be heard and decided first, and separately, not contemporaneously with the appeal of the arbitral award.

June 2, 2022June 14, 2022

Ontario – Powers of Independent Accountant “acting as expert and not as arbitrator” – #622

In Elad Canada Operations Inc. v Rester Ontario Investments Inc., 2022 ONSC 2327, Justice Penny considered the role of an Independent Accountant retained by parties to a Share Purchase Agreement (“SPA”) to determine disputes relating to the calculation of post-closing purchase price adjustments. The Independent Accountant was to make a final determination, “acting as an expert and not an arbitrator”. In addition, the parties disputed the process for determination of the dispute after they had followed the information exchange protocol provided for in the SPA. The Vendor’s dispute notice disagreed with the Purchaser’s calculation of the adjustment and provided a narrative explanation. It argued that the Independent Accountant’s jurisdiction to make a final determination “based solely on the written submissions of the parties” referred to the information exchanged pursuant to the protocol and did not allow the Purchaser to provide “narrative” submissions in response to the Vendor’s dispute notice. Justice Penny disagreed and found that this was the first opportunity the Purchaser had to respond to the issues in dispute and that it was, “inconceivable that both the parties and the independent accountant would not reasonably expect that written submissions to the independent accountant would: a) identify the points in dispute; and b) set out each side’s position on those points” (para. 35). Once Justice Penny had interpreted the SPA, the issue of the correct calculation of the post-closing adjustment was to be decided by the Independent Accountant.

May 25, 2022May 26, 2022

Ontario – Dismissal of appeal of order enforcing award as abuse of process – #621

In Ledsham v. Air Canada Pilots Association, 2022 ONSC 1877, a self-represented litigant found himself in the wrong place at the wrong time to appeal an order enforcing an arbitral award. Justice D.L. Corbett of the Ontario Divisional Court summarily dismissed the appeal under rule 2.1.01 of the Ontario Rules of Civil Procedure. That Rule provides that the court may, on its own initiative, stay or dismiss a proceeding if it appears on its face to be frivolous, vexatious or an abuse of the process. Despite observing several badges of vexatiousness, Justice Corbett declined to declare the appellant a vexatious litigant. He nevertheless found the appeal before him was frivolous, vexatious and an abuse of process.

May 24, 2022May 26, 2022

Ontario – Arbitration or expert determination? Stay granted, referral to “Independent Accountant” – #620

In 2832402 Ontario Inc. v 2853462 Ontario Inc., QBD Modular Systems Inc., and QBD Cooling Systems Inc., 2022 ONSC 2694, Justice Conway was asked to decide whether the parties had agreed to arbitration or expert determination. The parties had entered into a Share Purchase Agreement (“SPA”), which contained a dispute resolution clause to deal with disagreements as to post-closing purchase price adjustments, which disputes were to be determined by an “Independent Accountant”. A dispute arose and the Vendor brought a court application against the Purchaser for production of documents to allow it to calculate the post-closing adjustments. The Vendor argued that even if the parties had agreed to arbitration, the document production issue was outside the jurisdiction of the Independent Accountant. Justice Conway considered the various indicia of arbitration and concluded that the clause in the SPA was an arbitration clause. Therefore, she stayed the application and referred the production issue to the Independent Accountant. That issue was relevant to the Independent Accountant’s ability to decide the parties’ dispute as to the amount of the post-closing purchase price adjustment.

May 23, 2022May 26, 2022

Québec – Court extends arbitrator’s immunity to appointing authority – #619

In B Smart Technology inc. v. American Arbitration Association, 2022 QCCS 1526, Justice Mark Phillips granted the Defendants’ Application for dismissal of the Plaintiff’s Request for Provisional Interlocutory Injunction and Order to Safeguard the Rights of Plaintiff. The Defendants were the American Arbitration Association (“AAA”) and the arbitrator it had appointed. In its Request, Plaintiff sought orders: (1) to recuse and replace the arbitrator; (2) to review the arbitration proceedings, including the costs of the proceedings, the reimbursement for arbitrator’s fees paid to date; and (3) alternatively, the annulment of the arbitration clause and referral of the dispute to the Superior Court. Justice Phillips’s judgment was mainly based on the application of two well-known principles in arbitration law: arbitrator protection against prosecution/immunity (sec. 621 CCP); and the exclusion of court review except as provided by law (sec. 622 CCP). Justice Phillips reaffirmed that the arbitrator’s protection against prosecution is broad and applies both to the arbitrator’s liability and to any challenges against the conduct of the arbitration process itself. He found that the institute offering arbitration services is covered by the protection as well. Justice Phillips also confirmed the exclusion of court review principle, which prevents courts from interfering in an arbitration process other than within the strict and limited occasions provided by law. In this case, the law did not provide for court intervention. Finally, the issue was moot because the arbitrator terminated the arbitration for the Plaintiffs’ failure to pay his costs, as he was entitled to do under the AAA Rules.

May 22, 2022May 26, 2022

Ontario – Trial required to determine compliance with arbitration preconditions – #618

In H. R. Doornekamp Construction Ltd. v. Canada (Attorney General) (Department of Public Works and Government Services), 2022 ONSC 2247, the Divisional Court (Justices Stewart, Lederer and Tzimas) dismissed the Defendant’s motion for summary judgment and decided that a trial was required to determine whether a party had properly complied with a condition precedent to an arbitration clause. The issue was whether the Plaintiff’s rights under the dispute resolution clause were extinguished or whether the Defendant’s conduct was such that the Plaintiff’s rights were not yet engaged.

May 19, 2022May 19, 2022

Ontario – Appeal permitted on issue not first submitted to arbitrator for correction – #617

In Farmer v Farmer, 2022 ONSC 2410, Justice Alex Finlayson found that he had discretion to consider an issue on appeal that had not been raised before the arbitrator as an error to be corrected or amended pursuant to s. 44(1) of the Ontario Arbitration Act, 1991, SO 1991, c. 17. Justice Finlayson found that there was a “dearth” of authority on this issue and set out principles to be considered when deciding whether a court should exercise its discretion. Here, the issue raised was one that was intertwined with an issue that was properly before the court on the appeal, there was no prejudice to the parties, and the error was discovered by the court after the expiry of the 30-day period under s. 44(1) for seeking correction or amendment of the award from the arbitrator.

May 12, 2022May 10, 2022

Ontario – Set- aside application failed; dispute covered by arbitration agreement, no objection to jurisdiction – #616

In Baffinland v Tower-EBC, 2022 ONSC 1900, Justice Pattillo dismissed both: (1) an application to set aside an award from a majority of an arbitral tribunal (the “Majority Award”) under section 46 of the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”); and (2) an application for an order granting leave to appeal the Majority Award and Costs Award under section 45(1) of the Act. Justice Pattillo found there were no grounds upon which to set aside the Majority Award; there was no lack of jurisdiction or failure to be treated equally and fairly. Nor could leave to appeal be granted under section 45(1) of the Act because the arbitration agreement precluded an appeal.

May 11, 2022May 10, 2022

British Columbia – Court sets aside arbitrator’s decision for breach of procedural fairness – #615

In Bedwell Bay Construction v. Ball, 2022 BCSC 559, Justice Giaschi granted a judicial review application to set aside an interim decision of an arbitrator (the “Arbitrator”) of the Residential Tenancy Branch (the “RTB”) and to remit the matter back to the RTB for redetermination de novo before a different arbitrator. In doing so, the Court accepted the petitioner’s argument that the arbitrator did not act fairly when it required the petitioner to present its case first (even though it did not have the burden of proof), and denied it the right to cross-examine and to provide reply evidence and submissions. The Court held that this amounted to breaches of the rules of natural justice and procedural fairness. These findings have relevance to commercial arbitrations.