Court File and Parties

Court File No.: CV-24-96401 Date: 2024-09-25 Superior Court of Justice – Ontario

Re: Lukus Abraham, Applicant And: Andrew Abraham and A. Abraham Holdings Ltd., Respondents

Before: Justice R. Ryan Bell

Counsel: Geoffrey Cullwick, for the Applicant Christopher S. Spiteri, for the Respondents

Heard: September 17, 2024

Endorsement

Overview

[1] Lukus Abraham applies for an order enforcing an arbitration award against Andrew Abraham and A. Abraham Holdings Ltd. (together, “Andrew”). The arbitration was commenced by Lukus to enforce a settlement agreement among the parties, which was intended to resolve Lukus’ employment and ownership interest claims in Ottawa Capital Management Corporation (“OCM”). After four months, Andrew stopped payments to Lukus under the settlement agreement; Andrew claimed that Lukus had disparaged a company in which Andrew was involved.

[2] Arbitrator Bansie found that Lukus did not breach the settlement agreement. The Arbitrator also found that the breaches alleged by Andrew were not fundamental and that, even if Lukus had breached the settlement agreement, Lukus would have been relieved from forfeiture. The Arbitrator ordered Andrew to comply with the settlement agreement and awarded Lukus damages in the amount of $632,588 plus interest, and costs of $130,305.77.

[3] The parties’ arbitration agreement expressly provides that there would be no right of appeal except under s. 46 of the Arbitration Act, 1991, S.O. 1991, c. 17:

5. Other than subject to any of the provisions of s. 46 of the Arbitration Act, 1991 that may apply, the Arbitrator’s Award shall be final and binding upon the parties, shall not be appealed by either party and may be incorporated in an order of the Ontario Superior Court of Justice.

[4] Andrew has commenced an application to set aside the Arbitrator’s award and for an order granting leave to appeal on questions of law. Andrew’s application is returnable in mid-November 2024.

[5] Lukus seeks to enforce the arbitration award. Although Andrew has, somewhat belatedly, amended his own application to seek a stay, there is no motion to stay the enforcement of the arbitration award in this application. Lukus submits that Andrew’s application lacks bona fides because it amounts to an impermissible appeal of the merits of the arbitration award. Lukus argues that Andrew is attempting to “distract” the court by relying on a forensic accounting report obtained by OCM. The forensic accounting report was not before the Arbitrator and there is no motion before me to introduce the report as fresh evidence.

[6] In response, Andrew submits that given the proximity of this hearing to his application in November, it would be appropriate to “wait” until Andrew’s application is determined. He argues that the arbitration award was calculated improperly and that the Arbitrator’s failure to conduct a credibility assessment of Lukus is central to his application to set aside the award. Andrew argues the forensic accounting report confirms that Lukus breached his fiduciary duty to Andrew and caused damages equal to or greater than the arbitration award (the equitable set-off argument). Andrew maintains that an order enforcing the award will cause him irreparable harm.

[7] The application was originally returnable before me on August 22, 2024. At Andrew’s request, I adjourned the application to permit him to cross-examine Lukus on his affidavit. Lukus was cross-examined on September 5, 2024. On the return of the application, Andrew argued that the cross-examination was rendered “effectively meaningless” because of numerous refusals. Notwithstanding the absence of an appropriate notice of motion, I heard the parties’ submissions on this issue at the outset of the hearing. I ruled that the questions were properly refused and proceeded to hear submissions on the application.

[8] These are my reasons for my ruling that the refusals given on Lukus’ cross-examination were proper and my reasons for granting the application to enforce the arbitration award.

The questions refused on Lukus’ cross-examination were properly refused

[9] At the outset of his cross-examination, Lukus was asked a question about the interpretation of section 5 of the arbitration agreement. This question engaged legal principles of contractual interpretation and was properly refused on this basis.

[10] The remainder of the questions refused on Lukus’ cross-examination were objected to on the basis that they are irrelevant. I agree.

[11] With respect to determining whether a question asked is relevant, the key factor is whether an answer could be relied on by the trier of fact to determine an issue before them: Sanctuary et al. v. Toronto (City) et al., 2020 ONSC 4708, at para. 19.

[12] Andrew asserts that the questions (i) relate to Lukus’ “pattern of behaviour” (for example, questions relating to Lukus’ alleged breach of his employment contract), and are relevant to the issue of irreparable harm; (ii) relate to (“were triggered by”) the forensic accounting report recently obtained; (iii) go to issues of Lukus’ credibility (said to be a central issue on Andrew’s application); and/or (iv) relate to the issue of equitable set-off and the prematurity (according to Andrew) of this application.

[13] The issue of irreparable harm – part of the three-part test on a motion for an interim stay [1] – is not before me. Section 50(5) of the Arbitration Act, 1991 provides that if an appeal or an application to set aside an award is pending, the court may (a) enforce the award or (b) order that enforcement of the award is stayed until the pending proceeding is finally determined. But there is no motion for an interim stay in this application. In these circumstances, the court must assess the bona fides of the application to set aside the award or the appeal of the award, and the relative hardship to the parties in the event the court grants the stay: 887574 Ontario Inc. v. Pizza Pizza Ltd., 1995 CarswellOnt 1205 (Ont. Gen. Div. [Commercial List]), at paras. 5, 7; Jaffasweet Juices Ltd. v. Michael J. Firestone & Associates, 1997 CarswellOnt 4384 (Ont. Gen. Div.), at para. 41. Questions aimed at the issue of irreparable harm are therefore not relevant.

[14] The forensic accounting report is not before me, and it was not before the Arbitrator. There is no motion to introduce the report as fresh evidence. Questions relating to or arising from the report are not relevant.

[15] The questions said to be related to the issue of Lukus’ credibility overlap to some degree with those arising from the forensic accounting report. Andrew describes the Arbitrator’s alleged failure to conduct a credibility assessment of Lukus as the “crux” of Andrew’s application to set aside the arbitration award. These matters of Lukus’ credibility were either before the Arbitrator or they were not. If they were before the Arbitrator, the same ground cannot be tilled on this application. If they were not, Andrew cannot attempt to expand the record in this fashion. These questions are not relevant to this application to enforce the award.

[16] Finally, the answers to questions said to be related to the equitable set-off argument have no bearing on my assessment of the bona fides of Andrew’s application and the relative hardship to the parties in the event a stay is granted. OCM has commenced a civil action against Lukus. In that action, OCM alleges that Lukus breached various covenants in his employment agreement, resulting in the depletion of revenues from OCM. OCM commissioned the forensic accounting report. On this application, Andrew alleges that it would be unjust to compel payment of the arbitration award in advance of his opportunity to appeal or set aside the award. I repeat: there is no motion before me to introduce the forensic accounting report. In addition, Andrew’s equitable set-off argument suffers from a fatal defect. The proceedings involve different parties; OCM was not a party to the arbitration, nor is it a party to this application. A corporation will be treated as a separate legal entity for the purpose of set-off, and where there is no mutual debt between individual defendants and a corporation, even if in the same action, there is no legal basis to apply the equitable rule of set-off: Speciale v. Giardino, 2012 ONSC 1876, at paras. 25, 28. These questions are not relevant.

[17] For these reasons, I ruled that the refusals were proper, and I proceeded to hear the application on its merits.

The arbitration award should be enforced

[18] I consider first the bona fides of Andrew’s application to set aside the arbitration award and to seek leave to appeal on questions of law. In his written submissions, Andrew states: “[u]nder appeal is the decision itself based on procedural and fairness errors in the Arbitrator’s decision and also the Arbitrator’s calculation of the quantum of the Award.” Andrew argues that the absence of a reconciliation resulted in an “inaccurate and inflated award.”

[19] In regard to alleged breaches of procedural fairness, Andrew relies on s. 19 and s. 46(1)6 of the Arbitration Act, 1991. Section 19 provides that in an arbitration, the parties shall be treated “equally and fairly”, and each party shall be given an opportunity to present their case and respond to the case of the other party. Section 46(1)6 provides that the court may set aside an award where the applicant was not treated “equally and fairly”, was not given an opportunity to present a case or to respond to another party’s case or was not given proper notice of the arbitration or of the appointment of the arbitrator.

[20] Andrew argues that there were breaches of procedural fairness in that:

(i) the Arbitrator failed to draw an adverse inference against Lukus for “failing to provide a key witness”;

(ii) the Arbitrator failed to conduct a credibility analysis of Lukus, which “resulted in a fundamental misapplication to the weight of Lukus’ submissions”, disregarded the rules of natural justice and procedural fairness, and was a “marked departure from the consensus ad idem that underpinned the very reason why the Respondents agreed to the arbitration”;

(iii) the Arbitrator incorrectly imposed an evidentiary onus on Andrew by finding his failure to establish damages and/or harm suffered was attributable to Lukus’ disparagement; and

(iv) the Arbitrator erred in finding there was no ambiguity in the meaning of the words “disparage”, “disparaging”, or “disparagement” as set out in the settlement agreement; the Arbitrator applied an incorrect contractual interpretation by failing to consider the commercial context and the nature of the parties’ relationship.

[21] Section 5 of the arbitration agreement unambiguously states that other than under the provisions of s. 46 of the Arbitration Act, 1991 the Arbitrator’s award shall be “final and binding upon the parties” and “shall not be appealed by either party.” There is no right to appeal and no right to seek leave to appeal from the merits of the arbitration award, whether on a question of law, fact, or mixed fact and law.

[22] Section 46 of the Arbitration Act, 1991 “cannot be used as a broad appeal route to bootstrap substantive arguments attacking an arbitrator’s findings which the parties had agreed would be immune from appeal”: Tall Ships Landing Development Inc. v. The Corporation of the City of Brockville, 2022 ONCA 861, at para. 95. That is precisely what Andrew seeks to do in this case: he is attacking the Arbitrator’s findings even though the parties agreed in s. 5 of the arbitration agreement that those findings would be immune from appeal.

[23] The obligation to treat parties “equally and fairly” in both ss. 19(1) and 46(1)6 of the Arbitration Act, 1991 incorporates the requirement of natural justice and procedural fairness. In the context of these provisions, procedural fairness refers to the right to be heard and the right to an independent and impartial hearing: The Tire Pit Inc. v. Augend 6285 Yonge Village Properties Ltd., 2022 ONSC 6763, at para. 23; The Canada Soccer Association, at paras. 23-24. Again, Andrew cannot use s. 46(1)6 to bootstrap his substantive concerns with the Arbitrator’s findings which are immune from appeal.

[24] There is no question that Andrew’s complaints with the Arbitrator’s decision are substantive and not procedural in nature. The alleged failure to conduct a reconciliation, which Andrew argues resulted in an error in calculating damages, is substantive in nature. The alleged failure to draw an adverse inference is substantive, not procedural. Findings of credibility are factual issues determined by the trier of fact: Focal Elements Ltd. v. Alvand, 2021 ONSC 6105 (Div. Ct.), at para. 17. Andrew’s complaint about the evidentiary onus is a substantive complaint, not a procedural one. And finally, the alleged incorrect contractual interpretation issue is a question of mixed fact and law: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, at para. 50.

[25] Andrew’s application is an impermissible attempt to use s. 46(1)6 as a broad appeal route to attack the Arbitrator’s findings which the parties expressly agreed in s. 5 of the arbitration agreement would be immune from appeal.

[26] As for the relative harm to the parties, the arbitration award was binding on the parties the day it was made. Andrew ceased making payments to Lukus under the settlement agreement after approximately four months. Lukus’ evidence is that he has received only $40,000 to date and needs the money awarded as damages to live his life and support his family. Lukus was not cross-examined on his evidence in this regard.

[27] For his part, Andrew says that he would not be able to recover the amount of the award from Lukus in the event he, Andrew, succeeds on his application. There is nothing in the record to support Andrew’s speculation. To the contrary, there is evidence that Lukus owns a number of rental properties in Ottawa. The relative hardship to the parties weighs strongly in favour of enforcing the arbitration award.

Conclusion

[28] Lukus’ application is granted. I order that the arbitration award be enforced against Andrew and A. Abraham Holdings.

[29] In the event the parties are unable to agree on costs of the application, they may make brief written submissions, limited to a maximum of three pages, exclusive of relevant attachments. Lukus shall deliver his costs submissions by October 9, 2024. Andrew and A. Abraham Holdings shall deliver their responding costs submissions by October 23, 2024. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.

Justice R. Ryan Bell Date: September 25, 2024

[1] The Canada Soccer Association v. Association de Soccer de Brossard, 2023 ONSC 4317, at para. 14, citing RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311, at p. 334.