Drafting tip Archives - Arbitration Matters

February 2, 2023February 9, 2023

Ontario – ‘Parochial’ perspective on expert determination rejected – #708

In KMH Cardiology Centres Incorporated v Lambardar Inc., 2022 ONSC 7139, Justice Myers referred a dispute for expert determination pursuant to the parties’ agreement. He concluded that the parties intended the dispute to be determined by an expert, and not arbitration, even though it required the expert to engage in the exercise of contractual interpretation and not simply a mathematical calculation.

January 16, 2023March 13, 2023

Liz’s 2022 Hot Topic: Treatment of arbitration agreements in 2022 – #703

My hot topic for 2022 is the treatment of arbitration agreements by the courts. Frequently, challenges to arbitral jurisdiction and appeals are brought on the basis of the scope and enforceability of an arbitration agreement. A review of a number of cases within the last year indicates a trend that a strongly, and often broadly drafted agreements are frequently the difference between a successful and unsuccessful court challenge. This case note will review a number of notable cases we have seen this past year.

December 30, 2022March 13, 2023

Lisa’s 2022 Hot Topic #1: Arbitrator resignation – the when, how, and what next? – #696

Although there is provision in most provincial domestic arbitration legislation and the Model Law for the resignation of the arbitrator, there is little guidance on when the arbitrator may do so and the potential consequences once that occurs. However, two cases released in 2022 are helpful in that they suggest: (1) potential limitations on the discretion of an arbitrator to resign, regardless of the rights contained in the legislation; and (2) how the parties many anticipate this issue and provide for it in their arbitration agreement if it is important, so as to minimize the inevitable disruption that arises when an arbitrator resigns.

December 6, 2022December 9, 2022

Ontario – Shareholders dispute stayed where 2 of 3 agreements had arbitration clauses – #690

In 12823543 Canada Ltd. v Mizrahi Commercial (The One) GP Inc., 2022 ONSC 6206, Justice Penny granted an application to stay the proceeding commenced before the Superior Court of Justice and referred the matter to the appropriate arbitral tribunal to decide its jurisdiction. He found that the moving parties had raised an arguable case as to the application of the relevant arbitration agreements to the dispute and that the principle of compétence-compétence therefore favoured directing the parties to address their arguments to the arbitral tribunal regarding its jurisdiction. Only two of the three agreements at issue contained an arbitration agreement and yet Justice Penny was swayed by the nature of the dispute, grounded in a broad oppression claim, and considered that the Applicant’s allegations raised issues that went straight to the ability of the shareholders to make decisions of fundamental significance to their joint project.

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.

August 26, 2022August 19, 2022

Ontario – Arbitrator resignation did not terminate arbitration – #652

In Kubecka v Novakovic, 2022 ONSC 4503, Justice Pinto determined that, on the wording of the parties’ arbitration agreement, the parties had agreed that the arbitration was not terminated and their dispute returned to the jurisdiction of the courts – even when the arbitrator resigned. He appointed a replacement arbitrator on the application of one of the parties.

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 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 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.

April 26, 2022April 25, 2022

Ontario – Clause specifying non-exclusive attornment to courts doesn’t override arbitration clause – #609

In Husky Food Importers v. JH Whittaker & Sons, 2022 ONSC 1679, Justice Conway granted a stay of proceedings in favour of arbitration despite an allegation that no underlying agreement was ever finalized and notwithstanding a clause stating that the courts of New Zealand had non-exclusive jurisdiction.