CITATION: Greenfield Ethanol Inc. v. Suncor Energy Products Inc., 2007 ONCA 823

DATE: 20071130

DOCKET: C47630

COURT OF APPEAL FOR ONTARIO

SIMMONS, MacFARLAND and EPSTEIN JJ.A.

BETWEEN:

GREENFIELD ETHANOL INC. (formerly known as COMMERCIAL ALCOHOLS INC.)

Applicant/Respondent on Appeal

and

SUNCOR ENERGY PRODUCTS INC.

Respondent/Appellant on Appeal

William J. Burden and Linda I. Knol for the respondent/appellant on appeal

Sheila R. Block and Frank Cesario for the applicant/respondent on appeal

Heard: November 14, 2007

On appeal from the judgment of Justice J.M. Spence of the Superior Court of Justice dated August 15, 2007.

ENDORSEMENT

[1] The issue in this appeal concerns the interpretation of an arbitration clause contained in an agreement for the long term supply of fuel grade ethanol (the “1996 Agreement”) between Commercial Alcohols Inc. (now known as Greenfield Ethanol Inc.) and Sunoco Inc. (now known as Suncor Energy Products Inc.) and signed by the parties September 30, 1996. This agreement related to the production and supply of ethanol fuel by Commercial Alcohols Inc. (“CAI”) to Sunoco.

[2] Section 36 of the 1996 Agreement is entitled “Arbitration” and sets out a compre-hensive code for the manner in which disputes between the parties are to be resolved. Section 36.1 provides:

Relationship Management to Resolve Disputes

In the event of any dispute or disagreement between the parties hereto either with respect to the interpretation of any provision of the agreement or with respect to the performance of a party or any agreement which must be reached by the parties hereunder and cannot be reached, the process set out in this section will be the process for dispute resolution, and arbitration may be used either prior to or after the termination of this agreement…

[3] The section goes on to detail a structure for the resolution of disputes, a structure that starts with the relationship management committee, defined in clause 23.3 of the agreement, and then, failing resolution, proceeds through the chief executives of both companies and finally to designated officers. Each of these stages is to take place within specific timelines. Section 36.4 provides that if resolution proves impossible through discussions between the designated officers, the matter shall be determined by arbitration and either party can serve written notice of its desire to arbitrate. The arbitrator’s decision is final and binding with no right of appeal.

[4] CAI commenced an arbitration proceeding in which it asserts a myriad of claims. Some of these claims have been resolved. Sunoco acknowledges that some claims fall within the terms of the arbitration clause. However, in respect of certain claims (the “disputed claims”) Sunoco takes the position that they are not covered by the arbitration clause. Sunoco has therefore refused to proceed with the arbitration.

[5] Within these disputed claims CAI, among other things, seeks a declaration that Sunoco owes fiduciary duties to CAI arising out of the 1996 Agreement, $450 million in damages for breach of fiduciary duty, $250 million in damages for misuse of confidential information, a constructive trust over Sunoco’s ethanol plant located in Sarnia, Ontario and $25 million in punitive damages.

[6] As a result of Sunoco’s position with respect to the disputed claims, CAI brought an application seeking a declaration that the disputed claims are arbitrable and referring the dispute to arbitration.

[7] The application judge found that s. 36.1 of the 1996 Agreement “must be regarded as providing for the arbitration of disputes that are referable to the interpretation or the performance of some provision or provisions of the 1996 Agreement.” From there he proceeded to examine the nature of the disputed claims and concluded that

“[i]n principle, it is not evident that a clause requiring arbi-tration in respect of the interpretation or performance of the provisions of an agreement such as the 1996 Agreement is not broad enough to cover a claim that the relationship estab-lished between the parties is such that it includes fiduciary duties. A contract may be interpreted to impose fiduciary duties without a specific provision to that effect being included in the contract.”

The application judge further concluded that paragraphs 37 to 40 of CAI’s claim “refer specifically to the contents of a number of provisions of the 1996 Agreement which are alleged to have given rise to fiduciary obligations.”

[8] Due to the factual and legal connection between the claim relating to alleged breach of fiduciary duties and applying the same analysis, the application judge concluded that the rest of the disputed claims were arbitrable.

[9] The first issue concerns the application judge’s interpretation of the arbitration clause that lead to his decision to refer the disputed claims to arbitration.

[10] Sunoco submits that the application judge erred in concluding that the disputed claims are governed by the arbitration clause as they are not referable to any specific provisions of the 1996 Agreement as there is no specific clause in the agreement that expressly establishes a fiduciary duty.

[11] We disagree. To accede to such a submission would be to interpret this broadly worded arbitration clause too narrowly. The application judge properly concluded that the arbitration clause is similar to the one that was the subject of this court’s analysis in Woolcook v. Bushert (2004), 2004 CanLII 35081 (ON CA), 246 D.L.R. (4th) 139 (Ont. C.A.) and that provides for arbitration where a dispute is referable to the interpretation or performance of some provision of the agreement.

[12] Given CAI’s reliance on the 1996 Agreement as giving rise to a fiduciary duty, the application judge did not err in holding that CAI’s claim for breach of fiduciary duty is not clearly outside the scope of the arbitration clause and should therefore be referred to arbitration.

[13] Sunoco also submits that the context of the relationship between the parties and the nature of the disputed claims preclude such a broad interpretation of the arbitration clause. The argument is that it is inconceivable that the parties intended that their representatives would sit around a table and try to resolve claims of this nature and magnitude.

[14] This argument must also fail as it is undisputed that the 1996 Agreement provides for the arbitration of issues arising from the termination of the 1996 Agreement, claims in that may well involve millions of dollars and be of significant complexity.

[15] We therefore see no reason to interfere with the application judge’s conclusion that the disputed claims are arbitrable.

[16] Sunoco further argues that it was not open for the application judge to usurp the role of the arbitral tribunal by making a conclusive determination that the disputed claims were arbitrable.

[17] In our view, when the application judge determined that CAI’s claim was arbitrable, he did no more than decide that the subject matter of the disputed claims is not clearly outside the arbitration clause.

[18] We see no error in the application judge’s conclusion in this respect.

[19] Therefore the appeal is dismissed. CAI is entitled to its costs of this appeal on a partial indemnity scale, fixed in the amount of $15,000 including GST and disbursements.

“Janet Simmons J.A.”

“J. MacFarland J.A.”

“G. Epstein J.A.”