COURT OF APPEAL FOR ONTARIO

(ATV Farms), 2014 ONCA 278

DATE: 20140408

DOCKET: C57804

Cronk, Gillese and Strathy JJ.A.

BETWEEN

R & G Draper Farms (Keswick) Ltd.

Appellant

and

1758691 Ontario Inc. c.o.b. ATV Farms

Respondent

Morris Manning, Q.C., for the appellant

J.F. Lalonde, for the respondent

Heard: April 1, 2014

On appeal from the order of Justice W. Matheson of the Superior Court of Justice, dated September 13, 2013.

ENDORSEMENT

I. Introduction

[1] This litigation arose out of disputes concerning the purchase and sale of carrots between two Ontario-based farming concerns. At the relevant times, both parties were members of the Fruit and Vegetable Dispute Resolution Corporation (the “DRC”). They submitted their disputes to the DRC for resolution in accordance with the DRC’s mediation and arbitration rules. By order dated December 20, 2011, the arbitrator issued his award and ordered the appellant, R & G Draper Farms (Keswick) Ltd. (“R & G”), to pay $58,507.42 to the respondent, 1758691 Ontario Inc. c.o.b. as ATV Farms (“ATV”).

[2] R & G applied to the Superior Court of Justice to set aside the arbitral award on jurisdictional and other grounds. By order dated September 13, 2013, the application judge dismissed the application.

[3] R & G appeals. At the conclusion of oral argument on behalf of R & G, we dismissed the appeal, with reasons to follow. These are those reasons.

II. Issues

[4] R & G advanced four grounds of appeal. It argued that the application judge erred: (1) by holding that the Arbitration Act, 1991, S.O. 1991, c. 17 (the “Act”), rather than the International Commercial Arbitration Act, R.S.O. 1990, c. I.9 (the “ICCA”), applied to the arbitration conducted under the DRC process, with the result that R & G’s challenge of the arbitral award was out of time; (2) by failing to extend the applicable 30-day time period provided for under the Act; (3) by holding that R & G had waived ATV’s breach of the DRC rules arising from ATV’s inclusion of confidential mediation documents in the materials it delivered to the arbitrator; and (4) by failing to hold that the arbitrator had no jurisdiction to deal with the disputed pricing for the carrots.

III. Discussion

(1) Application of the Arbitration Act

[5] The appellant accepts that the threshold issue on appeal is whether the application judge erred by concluding that the Act governed the conduct of the arbitration. The issue is important because s. 47 of the Act provides for a period of 30 days within which a party to an arbitration may appeal or seek to set aside or vary the arbitral award. In contrast, the ICAA provides for a three-month time period within which to challenge an arbitral award governed by that statute. There is no dispute that R & G’s application for a declaration setting aside the arbitral award was not issued within the 30-day time period under the Act, although it was issued within the three-month time period set out under the ICAA.

[6] The application judge held that the Act, rather than the ICAA, applied to the arbitration in this case. The core of her reasoning is set out at paras. 43-45 and 48 of her reasons:

[43] There is no question that the parties both have their places of business in Ontario, and have not expressly agreed that the subject-matter of the arbitration relates to more than one country. Nor was the place of arbitration outside Ontario.

[44] Here, the commercial relationship at issue was between two Ontario businesses. Draper Farms sold carrots to ATV Farms to be made into carrot chunks, and bought carrot chunks from ATV Farms. Draper Farms bought the carrot chunks for sale to a California purchaser; however, the California company was the customer of Draper Farms, not ATV Farms. The California customer was not a party to the purchase and sale agreements that were the subject of the Award. Nor did ATV Farms ship directly to the California company; Draper Farms took delivery of the carrot chunks at issue.

[45] While the involvement of a California company forms part of the backdrop to the transactions in dispute in the arbitration, Ontario remains the place where the obligations of the commercial relationship between ATV Farms and Draper Farms were to be performed. Ontario also remains the place with which the subject-matter of the dispute is most closely connected. I therefore conclude that in this case the ICAA does not apply.

[48] Draper Farms also points to the DRC’s own description of its inception, arising from NAFTA, and the international nature of its mandate. There is no doubt that there is an international aspect to the inception and mandate of the DRC. However, the ICAA definition of “international arbitration” does not turn on the reasons for or mandate of the organization administering the arbitration process. It focuses on the location of the place of business of the parties, the location of the actual arbitration, the place where the obligations are performed and the place the subject matter of the arbitration is connected with. Here, all of those locations/places are Ontario.

[7] We agree with the application judge’s conclusion that the Act applies in this case and with her reasoning in support of that conclusion.

[8] By reason of s. 2(1) of the Act, the Act applies to an arbitration conducted under an arbitration agreement unless the application of the Act is excluded by law, or the ICAA applies to the arbitration. In this case, the application of the Act is not excluded by any law and, in our view, the ICAA did not apply to the arbitration. The ICAA is directed at international commercial arbitrations. Under the ICAA, an arbitration is “international” if:

(a) the parties to an arbitration agreement have, at the time of the conclusion of that agreement, their places of business in different countries; or

(b) one of the following places is situated outside the country in which the parties have their places of business:

(i) the place of arbitration if determined in, or pursuant to, the arbitration agreement,

(ii) any place where a substantial part of the obligations of the commercial relationship is to be performed or the place with which the subject-matter of the dispute is most closely connected; or

(iii) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country.

[9] None of these prerequisites is satisfied in this case. To the contrary:

(a) both parties have their place of business in Ontario (Keswick and Bradford);

(b) the carrots were grown by R & G in Ontario;

(c) the carrots were sold by R & G to ATV;

(d) ATV processed the carrots, and resold them to R & G in Ontario;

(e) the dispute was arbitrated in Ontario; and

(f) there is no express agreement between the parties that the subject-matter of the arbitration relates to more than one country.

[10] The arbitration, therefore, was not an “international” arbitration within the meaning of the ICAA. As a result, the ICAA did not apply to the arbitration.

[11] Relying on Freshway Specialty Foods Inc. v. Fruit and Vegetable Dispute Resolution Corp. (2006), 2 O.A.C. 385 (Div. Ct.), R & G argues before this court, as it did before the application judge, that Ontario courts have recognized that the ICAA applies to DRC arbitrations. There are three difficulties with this argument.

[12] First, Freshway is distinguishable from this case. As the application judge observed, Freshway did not involve domestic disputants. Rather, the disputing parties were located in British Columbia and Arizona. Thus, at the time of the arbitration, the parties’ places of business were in different countries. This was sufficient to render the arbitration “international” in nature under the terms of the ICAA, thus triggering the application of that statute. In the case at bar, as we have said, the parties’ places of business are both in Ontario.

[13] Second, there was evidence before the application judge that the DRC rules were drafted with the intent that either the Act or the ICAA could apply to an arbitration between DRC members, depending on the specific circumstances of the relevant dispute. This ensures that where the dispute truly involves an international commercial matter, the ICAA will govern. Conversely, there will be cases where, as here, the heart of the dispute is domestic in nature, involving Ontario-based disputants. In the latter circumstances, the Act will govern.

[14] Finally, s. 2(1) of the Act makes it clear that the application of that statute and the ICAA are mutually exclusive.

[15] We therefore conclude that the application judge did not err in holding that the Act applied to the arbitration at issue in this case. Consequently, the 30-day time limit established by the Act for an appeal of an arbitral award or an application to set aside or vary an arbitral award was operative, and R & G’s application was out of time.

(2) Denial of Extension of Section 47 Time Limit

[16] R & G next contends that if, as we conclude, the Act applied to the arbitration at issue here, the application judge erred by failing to exercise her inherent discretion to extend the 30-day time period applicable under s. 47 of the Act to a challenge of an arbitral award.

[17] The application judge held that she lacked jurisdiction to extend the 30-day time limit under the Act. We agree.

[18] R & G was unable to point to any authority in support of its assertion that the application judge had the authority, in the exercise of her discretion, to extend the 30-day time period set out under s. 47 of the Act.

[19] Nor, in our view, does the Act contemplate a judicial discretion to extend the s. 47 time period. Under s. 37 of the Act, an arbitral award binds the parties to the arbitration unless set aside or varied under s. 45 or 46 of the Act. Further, under s. 50(3) of the Act, an arbitral award becomes final within 30 days unless otherwise set aside or varied. The Act makes no express provision for the extension of the 30-day time period under s. 47. And s. 50(3) is inconsistent with the notion of a residual discretion to extend the 30-day time period that governs an application to set aside or vary an arbitral award.

[20] Finally, the Act does contemplate relaxation of time periods stipulated under the Act, in certain circumstances: see e.g., s. 39 of the Act. However, no such provision exists under the Act in respect of the s. 47 time period. This also tells against the notion of a residual judicial discretion to extend the 30-day time period established under s. 47 of the Act.

[21] In light of these considerations, we conclude that the application judge did not err in declining to extend the 30-day time period established by s. 47 of the Act.

(3) Other Grounds of Appeal

[22] In light of our conclusion that the Act and, hence, s. 47 of the Act, applied to the arbitration in this case, it is unnecessary to address R & G’s other grounds of appeal. R & G’s challenge to the arbitral award, not having been brought within the 30 days provided for under s. 47 of the Act, was time-barred.

IV. Disposition

[23] For these reasons, the appeal is dismissed. ATV is entitled to its costs of the appeal, fixed in the total amount of $7,825, inclusive of disbursements and all applicable taxes.

“E.A. Cronk J.A.”

“E.E. Gillese J.A.”

“G.R. Strathy J.A.”