COURT OF APPEAL FOR ONTARIO

CITATION: Shaw Satellite G.P. v. Pieckenhagen, 2012 ONCA 192

DATE: 20120323

DOCKET: C54202 and C54205

MacPherson, LaForme JJ.A., and Pattillo J. (ad hoc)

BETWEEN

Shaw Satellite G.P., c.o.b. as Shaw Direct™

Plaintiff (Respondent)

and

Curt-Michael Pieckenhagen a.k.a. Curt Michael Pieckenhagen a.k.a. Curt Pieckenhagen a.ka. Curt-Michael Picckenhagen a.k.a. Kurt Micahel, a.k.a. Pat Turner, Kurt Pieckenhagen, Megan Anderson, Julita Pieakenhagen, Julite-Luise Pieckenhagen, a.k.a. Jules Luise a.k.a. Jules Michael, Vera Pieckenhagen, Christopher Brooks, a.k.a. Chris Brooks a.k.a. Andrew Brooks, Nicole Pieckenhagen, 1125749 Ontario Limited, Eccelerated Digital, Accelerated Digital Communications Inc., 121429 Ontario Inc., 373041 Ontario Inc., Graydon Hall Property Management Ltd., GH Capital Corporation, Andrew Brooks, Theo Bulk, Jules Luise, Jules Michael, Kurt Michael and Pat Turner

Defendants (Appellants)

Michael A. Spears for the appellants Curt-Michael Pieckenhagen, 1125749 Ontario Limited, Eccelerated Digital, Accelerated Digital Communications Inc. and 121429 Ontario Inc.

Melvyn Solmon, Nancy Tourgis, Jonathon Kappy, for the appellants 373041 Ontario Inc., Kurt Pieckenhagen, Julita Pieakenhagen, Julite-Luise Pieckenhagen, a.k.a. Jules Luise a.k.a. Jules Michael, Vera Pieckenhagen, Christopher Brooks, a.k.a. Chris Brooks a.k.a. Andrew Brooks, Nicole Pieckenhagen, Graydon Hall Property Management Ltd., GH Capital Corporation

Christopher D. Bredt and Isabella Massimi, for the respondent

Heard and released orally: March 21, 2012

On appeal from the order of Justice Paul M. Perell of the Superior Court of Justice, dated July 14, 2011.

ENDORSEMENT

[1] The defendants appeal from the order of the motion judge dated July 14, 2011 dismissing their motion under s. 7(1) of the Arbitration Act, 1991, S.O. 1991, C.17 (the “Act”) to dismiss or permanently stay the respondent Shaw Satellite’s (“Shaw”) action commenced in the Superior Court against them (the “Action”).

[2] The defendants are the owners and/or operators of three apartment buildings in Toronto. Shaw alleges that the defendants fraudulently obtained its programming and illegally transmitted it to hundreds of tenants in their apartment buildings. Shaw alleges that the defendants obtained the programming by using mainly fictitious names and addresses to obtain a number of Shaw residential subscriber accounts. The accounts and receivers associated with them were then used as part of a satellite master antennae television system to then transmit the programming to the tenants.

[3] In order to obtain the right to receive and review Shaw programming, a subscriber must enter into the Shaw Residential Agreement (the “Agreement”). The Agreement contains a number of terms and conditions including that the receivers be located at the residence listed on the customer’s account, that the right to receive programming is restricted to the customer’s residence and the programming cannot be rebroadcast, reproduced or transmitted except in accordance with the Agreement. The Agreement also contains an arbitration clause which is the subject matter of the dispute before us.

[4] The motion judge dismissed the appellants’ motion on three mutually exclusive grounds.

[5] First, he held that the defendants were not entitled to bring a motion for a stay pursuant to s. 7(1) of the Act given that they had not asserted that they were parties to the arbitration agreement. In so concluding, he held that the competence-competence principle did not apply in the circumstances of the case.

[6] Second, and in the alternative, the motion judge held that if the competence-competence principle did apply, the case fell within an exception to the principle given that the pith and substance of the dispute between the parties was outside the jurisdiction of the arbitrator.

[7] Finally, and in the further alternative, and if the exception to the competence-competence principle did not apply, the motion judge noted that s. 7(5) of the Act applied and refused to grant a partial stay pursuant to that section on the ground that it would create, among other things, a multiplicity of proceedings.

[8] The appellants raise three grounds of appeal:

1. The motion judge erred in finding that the appellants were not entitled to bring a stay motion under s. 7(1) of the Act because they did not assert that they were parties to the arbitration agreement. In so finding, the appellants submit the motion judge misapplied the competence-competence principle;

2. The motion judge erred in holding, in the alternative, that if the competence-competence principle did apply, the case at bar was an exception to the principle given that the pith and substance of the Action was outside the jurisdiction of the arbitrator; and

3. The motion judge further erred in refusing to grant the stay under s. 7(5) of the Act on the basis that it would result in a multiplicity of proceedings and certain defendants were not party to the arbitration agreement.

[9] In our view, the motion judge was correct in concluding, as he did, that the appellants did not meet the onus of establishing that they are entitled to invoke s. 7(1) of the Act. While that conclusion is sufficient to deal with the appeal, we also agree with the motion judge’s alternate finding that s. 7(5) applies and his decision to refuse to grant a partial stay of the Action under s. 7(5). Accordingly, the appeal must be dismissed.

[10] The motion judge concluded, correctly in our view that, on the facts of this case, the appellants’ refusal to agree that they are parties to the arbitration agreement disentitled them to invoke the arbitration agreement under s. 7(1) of the Act. Shaw’s statement of claim alleges significant issues of fraud and illegal activity on the part of the appellants facilitated by the Agreement. The claim alleges that while all appellants were part of the impugned conduct, only a few entered into the Agreement. The appellants have filed no defence to the claim. In the circumstances, we agree with the motion judge that the appellants cannot just rely on the statement of claim. It is incumbent on them to indicate to the court that they are parties to and bound by the Agreement to invoke s. 7(1). To hold otherwise would enable them to take the position before an arbitrator that they are not parties to the Agreement which in our view would be entirely inappropriate.

[11] We are mindful that on the hearing of the motion, the defendant Curt-Michael Pieckenhagen acknowledged to the court that he was attorning to the jurisdiction of the arbitrator. We agree with the motion judge in his supplementary reasons that this attornment comes too late to affect the decision.

[12] In his reasons for decision, the motion judge went on to state that in the event his analysis that s. 7(1) did not apply was incorrect then s. 7(5) of the Act applied. We agree that where a dispute falls within s.7(1), s. 7(5) of the Act is applicable.

[13] In the Action, there are 23 defendants, including six corporations. The statement of claim alleges that eight individual defendants maintained Shaw accounts for the purpose of facilitating their scheme. The evidence before the motion judge more specifically established that there are nine Shaw residential subscriber accounts associated with the activity alleged to be carried on by the defendants. One is in the name of the defendant Curt-Michael Pieckenhagen; one in the name of the defendant Chris Brooks, Curt-Michael’s brother-in-law; and one in the name of the defendant Kurt Pieckenhagen, Curt-Michael’s father. The remaining six are under false names or aliases.

[14] Accordingly, it is clear that while three of the defendants may be subject to the arbitration clause, the remaining 20 would not be. It is also clear that the alleged fraudulent and illegal activity involved all of the defendants.

[15] Section 7(5) of the Act gives the court discretion to grant a partial stay in circumstances where it is reasonable to separate the matters in an action which fall within the scope of the arbitration agreement from those that are clearly outside it. See: Brown v. Murphy (2002), 2002 41652 (ON CA), 59 O.R. (3d) 404 (C.A.); Radewych v. Brookfield Homes (Ontario) Ltd., 2007 ONCA 721, [2007] O.J. No. 4012 (C.A.).

[16] In exercising his discretion, the motion judge refused to grant a partial stay under s. 7(5) of the Act on the basis that it was not reasonable in the circumstances of the case. He noted that a partial stay would result in a multiplicity of proceedings, duplication of resources, inefficiency, increased costs and delay contrary to s. 138 of the Courts of Justice Act. We agree with this finding.

[17] Given the issues in the Action and the numerous parties involved, it was within the motion judge’s discretion to conclude it did not make sense to permit the dispute to proceed to arbitration in respect of three defendants and allow the Action to continue against the other 20. He was entitled to conclude that the issues should be determined for all parties in one forum and that the proper forum in this case is the court.

[18] Accordingly, the appeal is dismissed.

[19] Costs to the respondent fixed in the amount of $30,000 inclusive of disbursements and HST.

“J.C. MacPherson J.A.”

“H.S. LaForme J.A.”

“L.A. Pattillo J. (ad hoc)