DATE: 20050722

DOCKET: C43052

COURT OF APPEAL FOR ONTARIO

RE:

REA INTERNATIONAL INC. (Applicant/Appellant) – and – MANFRED MUNTWYLER and THE HONOURABLE COULTER OSBORNE, Q.C. (Respondents/Respondent)

BEFORE:

FELDMAN, GILLESE and LAFORME JJ.A.

COUNSEL:

Ian Blue, Q.C. and

Arnold B. Schwisberg

for the appellant

Chris G. Paliare and

Richard P. Stephenson

for the respondent

HEARD:

July 19, 2005

On appeal from the judgment of the Divisional Court (Justice John G. J. O'Driscoll, Justice P. Theodore Matlow and Justice John R. R. Jennings) dated September 28, 2004.

E N D O R S E M E N T

[1] Rea International Inc. and Manfred Muntwyler entered into a consensual arbitration over a commercial dispute arising from Muntwyler’s sale of shares in Alfield Industries Limited to Rea. The dispute arose from an “earn-out” provision in the sale purchase agreement between the parties under the terms of which Muntwyler could be paid up to $5 million. The arbitrator found in Muntwyler’s favour.

[2] Rea brought a judicial review application to the Divisional Court notwithstanding a “no appeal” clause in the sale purchase agreement. Rea appeals from the judgment of the Divisional Court dated September 28, 2004 in which the Divisional Court dismissed Rea’s application to quash the arbitrator’s award.

[3] The Divisional Court gave two bases for dismissing Rea’s application. First, it declined to exercise its discretion to grant relief, without a consideration of the merits of the application, because the sale purchase agreement provided that all arbitration awards were final and binding, with no right of appeal, and because the appellant had, without explanation, allowed the time period to expire in respect of its statutory review rights under s. 46 of the Arbitration Act, 1991, S.O. 1991, c. 17. Second, a consideration of the merits led the court to conclude that the arbitrator conducted the arbitration and rendered his award in accordance with the law. The Divisional Court found that the arbitrator had not treated the appellant unfairly in any way, that he had properly considered the evidence and issues that were before him, and that he had carefully considered whether there was ambiguity in the relevant share purchase provisions, based on an objective consideration of the language used by the parties. The court held that the arbitrator’s conclusion and award made eminent sense and met even the “patently unreasonable” standard of review.

[4] The Divisional Court left open the question of whether a decision of an arbitrator made under the Arbitration Act, 1991 is subject to an application for judicial review. We agree that it is not necessary to decide that question on this appeal.

[5] Based on Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226, in our view, it was an error in principle for the Divisional Court to fail to determine the standard of review before deciding the application. See also Pushpanathan v. Canada (Minister of Employment and Immigration), [1998] 1 S.C.R. 982. As this court explains in Stetler v. Agriculture, Food and Rural Affairs Tribunal, [2005] O.J. No. 2817, those cases make it clear that the Divisional Court, as the reviewing court, was obliged to determine the appropriate standard of review and then apply that standard to the impugned decision before it could appropriately determine what relief, if any, was to be granted.

[6] Nonetheless, we conclude that whether the proper standard of review is reasonableness, as submitted by the appellant, or patent unreasonableness, as submitted by the respondent, there is no basis upon which to interfere with the award. In our view, the arbitrator properly considered the language of the specific provision in question in the context of the agreement as a whole. He also considered the commercial context in which the agreement was concluded, the purpose of the specific provision and the mischief it was designed to address. The arbitrator found that:

(1) Muntwyler’s ability to be paid the full purchase price depended upon the profitability of the Alfield facility;

(2) the commercial purpose of the pricing approval mechanism was to address Muntwyler’s concern that he needed protection against the possibility that Rea would use the Alfield facility (one of several that it operated) as a “dumping ground” for low or no margin work; and

(3) Alfield obtained brand new or repeat business from new or existing customers through a process of making quotations and receiving purchase orders.

He concluded that the plain and ordinary meaning of “new work” was any business obtained through a purchase order for the sale of goods by Alfield entered into after the date of the share purchase agreement. That interpretation is not unreasonable.

[7] Accordingly, we would dismiss the appeal with costs to the respondent fixed at $50,000, inclusive of GST and disbursements.

“K. Feldman J.A.”

“E. E. Gillese J.A.”

“H. S. LaForme J.A.”