Court File and Parties

CITATION: Leon v. Dealnet Capital Corporation, 2023 ONSC 3657 DIVISIONAL COURT FILE NO.: 423/21 DATE: 2023-06-16

SUPERIOR COURT OF JUSTICE – ONTARIO DIVISIONAL COURT

RE: John Leon, Appellant AND: Dealnet Capital Corporation, Respondent

BEFORE: Nishikawa J.

COUNSEL: Craig Colraine & Nicholas A. Habets, for the Appellant David N. Vaillancourt, for the Respondent. Gregory Ko & Ruth Wellen, for the Intervenor, Parkdale Community Legal Services

HEARD at Toronto: June 12, 2023 (by videoconference)

ENDORSEMENT

Overview

[1] The Appellant, John Leon, appeals from the order of Associate Justice McAfee dated May 19, 2021 (the “Decision”), staying the Appellant’s action in favour of arbitration, pursuant to s. 7(1) of the Arbitration Act, 1991, S.O. 1991, c. 17.

[2] The Appellant submits that in finding a valid arbitration agreement, the Associate Justice erred in law because she failed to follow the Court of Appeal’s decision in Heller v. Uber Technologies Inc., 2019 ONCA 1 [Heller CA], aff’d on other grounds, 2020 SCC 16. The Appellant takes the position that because the employment agreement between him and the Respondent, Dealnet Capital Corp., contracted out of the Employment Standards Act, 2000, S.O. 2000 c. 41, the agreement, and therefore the arbitration clause, was void.

Background

The Employment Agreement

[3] Mr. Leon is a former employee of Dealnet. He worked for the Respondent between 2014 and 2018. In April 2017, the parties entered a new employment agreement (“Employment Agreement”) which included the following clauses:

1.5 Governing Law

This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario.

This Agreement shall be subject to the Employment Standards Act, 2000 (Ontario), as amended or replace. If the Employee is entitled to any rights or payments under that legislation which are not reference [sic] in this Agreement or which exceed amounts payable under this Agreement, the provisions of that legislation shall supersede the provisions of this Agreement. The failure of any provision of this Agreement to reference or acknowledge the provisions of that legislation shall not invalidate that provision.

8.1 Arbitration

All disputes arising out of or in connection with this contract, or in respect of any legal relationship associated therewith or derived therefrom, will be referred to mediation and, if unsuccessful, finally resolved by arbitration under the statutes of the Province of Ontario.

[4] In April 2018, the Appellant submitted a resignation letter. In May 2019, he commenced an action against the Respondent seeking $52,000 for breach of contract, unjust enrichment, and/or breach of the duty of good faith on the basis of an unpaid performance bonus. The Respondent counterclaimed for $1.5 million alleging, among other things, breaches of fiduciary duty, contract, and trust.

The Decision

[5] In February 2020, the Respondent moved to stay the civil proceeding in favour of arbitration pursuant to s. 7(1) of the Arbitration Act. The Respondent had apparently overlooked the arbitration clause in the Employment Agreement until the parties were producing their affidavits of documents.

[6] In the Decision, the Associate Justice granted the motion. She determined that the Respondent met the criteria for a stay established by the Court of Appeal in Haas v. Gunasekaram, 2016 ONCA 744, because there was an arbitration agreement that applied to the dispute between the parties and there were no grounds on which to refuse to stay the action.

[7] The Associate Justice rejected the Appellant’s submission that the stay should be refused pursuant to s. 7(2)2 of the Arbitration Act. The Appellant had argued that the arbitration clause was invalid because it unlawfully precluded him from making a complaint to the Ministry of Labour under the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”). The Appellant submitted that under Heller CA, an employment agreement that contracted out of the ESA was invalid. The Associate Justice distinguished Heller CA on the basis that the Employment Agreement did not contain a foreign law clause purporting to oust the operation and jurisdiction of the ESA entirely. Instead, the governing law clause expressly recognized the primacy of the ESA, thus preserving the Appellant’s rights under that legislation. The Associate Justice also distinguished Heller CA on the basis that there was no issue of unconscionability before her.

Issues

[8] This appeal raises the following issues:

(a) Does s. 7(6) of the Arbitration Act bar the appeal?

(b) Did the Associate Justice err in finding there was a valid arbitration agreement?

Does Subsection 7(6) of the Arbitration Act Bar the Appeal?

[9] In my view, the Court of Appeal’s decision in Irwin v. Protiviti, 2022 ONCA 533, is dispositive of this appeal. As was the case in Irwin, by virtue of s. 7(6) of the Arbitration Act, which states that “[t]here is no appeal from the court’s decision”, this court lacks jurisdiction over the appeal.

[10] In Irwin, as in this case, the appellant argued that the motion judge erred in staying the action in favour of arbitration because the arbitration clause was invalid for inconsistency with the ESA and Human Rights Code. The Court of Appeal quashed the appeal on the basis that the court did not have jurisdiction over the appeal because, by operation of s. 7(6) of the Arbitration Act, there was no appeal of the motion judge’s stay of the proceeding under s. 7(1).

[11] In Irwin, at para. 11, the Court of Appeal held that “[t]he rule, then, is that questions of jurisdiction are to be arbitrated. A court has discretion to decide otherwise but only where the jurisdictional question is based on a pure question of law, or of mixed fact and law requiring not more than a superficial consideration of evidence.” The Court of Appeal found, at para. 13, that the issue of the arbitration clause’s consistency with the ESA and Human Rights Code were questions of mixed fact and law, in that they could not be decided in the abstract but required an interpretation of the employment agreement.

[12] The Appellant distinguishes Irwin on the basis that in that case, the motion judge deferred the issue of the validity of the arbitration agreement to the arbitrator, while in this case, the Associate Justice found the arbitration agreement to be valid. I find this to be a distinction without a difference that does not impact the application of s. 7(6) of the Arbitration Act. In both cases, the decision to stay the proceeding is made under s. 7(1). Moreover, as was the case in Irwin, the Associate Justice did not find that the arbitration clause was valid but stated only that she was “not satisfied that the Arbitration Clause is invalid” thus warranting a stay under s. 7(2). The decision not to refuse a stay for one of the grounds listed in s. 7(2), including invalidity, is also a decision under s. 7 to which the s. 7(6) appeal bar applies.

[13] The Appellant relies on Heller CA and s. 5(1) of the ESA to argue that the arbitration clause is void ab initio because it ousts the statutory protections of the ESA. As a result, the Associate Justice could not have rendered a decision under s. 7(1) because there is no arbitration agreement, and the s. 7(6) appeal bar does not apply. In Goberdan v. Knights of Columbus, 2023 ONCA 327, the Court of Appeal found that s. 7(6) did not apply where the motion judge concluded that there was no arbitration clause because there was no consideration for the contracts containing them. See also: Toronto Standard Condominium Corporation No. 1628 v. Toronto Standard Condominium Corporation No. 1636, 2020 ONCA 612, where the Court of Appeal held that a decision that an arbitration agreement does not apply is not a decision under s. 7(1) of the Arbitration Act to which the s. 7(6) bar to an appeal applies.

[14] It does not appear that the issue of whether the arbitration clause was void ab initio was raised before the Associate Justice. In any event, the Associate Justice found that unlike the governing law clause in Heller CA, which completely ousted the operation of the ESA, in this case, the Employment Agreement is subject to Ontario law, including the ESA. As a result, the arbitration clause does not preclude the Appellant from making a complaint to the Ministry of Labour. In interpreting the arbitration clause in a manner consistent with the governing law clause, the Associate Justice followed the principles of statutory interpretation. The Associate Justice’s conclusion is a finding of mixed fact and law to which deference is owed. In any event, I see no error in the Associate Justice’s interpretation of the arbitration clause. As a result, the Associate Justice was entitled to stay the proceeding under s. 7(1), and the s. 7(6) bar to an appeal applies.

[15] The Appellant’s submission is further undermined by the fact that Heller was not decided under the Arbitration Act, but under the International Commercial Arbitration Act 2017, S.O. 2017, c. 2, Sch.5. The Supreme Court of Canada noted that had the stay been issued under the Arbitration Act, no appeal to the Court of Appeal would have been available: Uber Technologies Inc. v. Heller, [2020] 2 S.C.R. 118, 2020 SCC 16, at footnote 5.

[16] Finally, I do not accept the Appellant’s submission that the issue of jurisdiction was decided by Kristjanson J. when she dismissed the Respondent’s motion to quash the appeal: Leon v. Dealnet Capital Corp., 2021 ONSC 7192. Kristjanson J. did not decide the issue of jurisdiction but found that the Respondent had not met the high threshold of demonstrating that the appeal was completely devoid of merit. Moreover, Kristjanson J. did not have the benefit of the Court of Appeal’s decision in Irwin when deciding the Respondent’s motion to quash.

Conclusion

[17] Accordingly, the appeal is dismissed for lack of jurisdiction.

[18] Pursuant to the parties’ agreement that the successful party be entitled to $15,000 in costs, all-inclusive, the Respondent, Dealnet is awarded $15,000 in costs of the appeal. No costs are awarded for or against the Intervenor.

“Nishikawa J.”

Date: June 16, 2023