COURT FILE NO.: 08/04

DATE: 20040928

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, MATLOW AND JENNINGS, JJ.

B E T W E E N:

REA INTERNATIONAL INC.

Applicant

• and -

MANFRED MUNTWYLER and THE HONOURABLE COULTER OSBORNE, Q.C.

Respondents

Ian Blue Q.C. and Arnold B. Schwisberg, for the Applicant

Chris G. Paliare and Richard P. Stephenson, for the Respondents

HEARD: May 14, 2004.

MATLOW J.:

1This application for judicial review is dismissed. Counsel for the disputing parties may make written submissions regarding costs addressed to the president of this panel and to be delivered within 30 days of the release of these reasons.

2The application was brought for an order quashing an award of the arbitrator, Hon. Coulter A. Osborne Q.C., dated December 5, 2003, and other related relief. The stated grounds for the attack on the award include allegations that the arbitrator “erred in law and acted beyond his jurisdiction…” and that he “failed to observe a principle of procedural fairness, and treated the parties unequally and unfairly…”

3The application is dismissed on two separate grounds. Primarily, it is our view that we should exercise our discretion by declining to grant any relief regardless of the merits of the application because of various statutory barriers relied on by the respondent which confront the applicant. In the alternative, our consideration of the merits has led us to the view that the arbitrator conducted the arbitration and rendered his award as he was entitled to do in accordance with the law.

4The dispute between the parties (the arbitrator will not be referred to in these reasons as a “party” or as one of the “parties”) arose out of a transaction of purchase and sale by which the applicant agreed to purchase all of the shares of Alfield Industries Ltd from the respondent. The purchase price of the shares was dependent on Alfield’s earnings following completion of the transaction in accordance with a formula earn-out which applied to earnings at the Alfield facility of over $3 million annually and which was capped at $5 million in total. As a result of conflicting interpretations of the agreement, the parties ultimately came to dispute the final purchase price and, therefore, the amount to which the respondent had become entitled.

5The 37 page carefully considered award of the arbitrator ruled in favour of the respondent and determined that he was entitled to payment from the applicant of the maximum $5 million plus costs and prejudgment interest.

6Article 8 and Schedule 2.5 of the shareholder purchase agreement between the parties dated September 17, 2001, included extensive and detailed provisions for the resolution of disputes by arbitration in accordance with the provisions of the Arbitration Act (“the Act”), subject to certain exceptions which have no application to this case. One provision that is of particular importance to this case stated that, subject to section 44 of the Act, which also has no application to this case, “all awards of the Arbitrator shall be final and binding on the Parties, and there shall be no appeal of any such award whatsoever. The Parties undertake to satisfy any award without delay.”

7I turn now to the statutory barriers referred to in paragraph 3 relied on by the respondent which, succinctly stated, are as follows:

1. There is no right to seek judicial review of an award in an arbitration made pursuant to the Act;

2. Had the parties not agreed that there should be no right of appeal from the award, the applicant would have had various rights of appeal to a single judge of the Superior Court of Justice. In these circumstances, however, its only right of appeal was, with leave, solely on a question of law;

3. In any event, the applicant failed to pursue whatever rights of appeal it may have had within the time allowed but, instead, commenced this application after the appeal period had expired. In such circumstances, judicial review by three judges of the Divisional Court should not be offered as an available alternative for the applicant and we should exercise our discretion by refusing to grant relief regardless of the merits of the application.

8The Act, which was extensively revised by S.O. 1991, c.17, is now widely regarded as a comprehensive code governing private arbitrations in Ontario which limits court intervention in the arbitration process very narrowly. Section 6 of the Act, which demonstrates this legislative policy, reads as follows:

“No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:

1. To assist the conducting of arbitrations.

2. To ensure that arbitrations are conducted in accordance with arbitration agreements.

3. To prevent unequal or unfair treatment of parties to arbitration agreements.

4. To enforce awards.”

9The Act expressly provides for appeals to the Superior Court of Justice in a variety of circumstances. Section 45 (1) of the Act, which applies to appeals on questions of law if the arbitration agreement does not deal with such appeals, confers a right of appeal but only with leave. Section 45 (2), which applies to appeals on questions of law if the arbitration agreement does provide for such appeals, confers an unfettered right of appeal. Section 45 (3), which applies to appeals on questions of fact or mixed fact and law if the arbitration agreement provides for such appeals, also confers an unfettered right of appeal. Accordingly, because the agreement in this case expressly prohibited all appeals, the applicant thereby agreed to give up all of its rights of appeal. Even if section 45 (1) should be interpreted as applying only if the agreement does not specifically refer to appeals on questions of law, the only possible right of appeal available to the applicant would be on a question of law with leave.

10Quite apart from the various rights of appeal conferred by the Act, section 46 confers additional rights to apply to the Superior Court of Justice for an order setting aside an award on any of the nine grounds set out. As well, section 48 confers further rights to apply to the Superior Court of Justice for an order declaring that the arbitration was invalid on any of the four grounds set out there.

11It is clear from the material filed and the submissions made that the applicant’s grounds for attacking the award all fall within sections 45 and 46 and could have been pursued pursuant to those provisions if the parties’ agreement had not prohibited all appeals.

12In any event, the Act also imposes a time limit for the appeal of an award or an application for an order to set aside an award. Specifically, section 47 provides that such steps be commenced “within thirty days after the appellant or applicant receives the award, correction, explanation, change or statement of reasons on the appeal or application is based.” It is clear that the applicant allowed this time limit to expire without invoking section 46 or section 47 and there is no claim by it that the lapse was unintentional or otherwise deserving of special consideration. Indeed, no explanation of any kind was put forth by the applicant for its failure to prosecute an appeal.

13Accordingly, as stated above, we are persuaded that we should exercise our discretion by declining to grant any relief regardless of the merits of the application. Because of the the provisions of the share purchase agreement referred to above and the balance of the record before us, we are of the view that judicial review should not lie in this case. We leave it to be determined on another occasion whether there now remains any scope whatsoever for judicial review in applications brought to attack arbitration awards.

14I now turn briefly to our consideration of the merits of the applicant’s attack on the award. The main issue in dispute was the meaning of the term, “new work’, as it was used in the parties’ agreement and the consequences that flowed from the meaning attributed to it. The arbitrator heard extensive evidence from both sides regarding the events surrounding the making of the parties’ agreement. He carefully considered whether, in the context of the transaction, there was any ambiguity in the language of the agreement which he was required to resolve. He then went on to conclude that there was no ambiguity in the agreement and that “it plainly sets out what the parties’ rights and obligations are” and he interpreted it in accordance with his “objective consideration of the language the parties chose to use”.

15We are not persuaded, even taking into account the material filed by the applicant, that the arbitrator deprived the applicant of its rights to adduce admissible evidence, that he treated the applicant unfairly in any way or that he failed to properly consider the issues that were before him. As well, his conclusions and award make eminent sense and clearly do not fail to meet the “patent unreasonableness” standard of review. He performed the task for which the parties engaged him and he deserves the deference to which he is entitled.

16We would not, therefore, interfere with the award even in the absence of the statutory barriers referred to above. The applicant should now be required to carry out the mutual undertakings set out in the parties’ agreement “to satisfy any award without delay”.

MATLOW, J.

O’DRISCOLL, J.

JENNINGS, J.

Released:

COURT FILE NO.: 08/04

DATE: 20040928

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

O’DRISCOLL, MATLOW and JENNINGS jj.