COURT FILE NO.: CV-13-471633

DATE: 20130206

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Ontario First Nations (2008) Limited Partnership, Respondent

AND:

Her Majesty the Queen in Right of Ontario, as represented by the Minister of Aboriginal Affairs, the Minister of Finance and the Attorney General of Ontario, and the Ontario Lottery and Gaming Corporation, Appellants/moving parties

BEFORE: Carole J. Brown J.

COUNSEL:
Neil Finkelstein, Awanish Sinha and Brandon Kain, for the Moving Party, the Ontario Lottery and Gaming Corporation

William MacLarkey and Eric Wagner, for the Moving Party, Her Majesty the Queen in Right of Ontario

James R. Caskey and James D. Virtue, for the Respondent

HEARD: January 22, 2013

ENDORSEMENT

Overview of the Motion

[1] The appellants/moving parties, her Majesty the Queen in Right of Ontario (the "Crown") and the Ontario Lottery and Gaming Corporation ("OLG") bring this motion for a stay of an arbitration proceeding commenced by the claimant/respondent, Ontario First Nations (2008) Limited Partnership ("OFNLP 2008" or the "Claimant") pending final resolution of appeals brought by the Crown and the OLG from decisions of the Arbitration Panel, released December 11, 2012.

[2] The appeals concern (i) the Arbitration Panel's jurisdiction to consider OFNLP 2008's claim regarding the appointment of a nominee to the OLG Board of Directors in light of section 5 of the Ontario Lottery and Gaming Corporation Act, 1999 and the common law Crown Prerogative of appointments, and (ii) the Arbitration Panel's decision to exclude OLG from the arbitration proceedings. The moving parties argue that the appeals by the Crown and OLG involve the very jurisdiction of the Arbitration Panel to grant the relief sought by the Claimant as well is the exclusion of OLG from the arbitration proceedings, which OLG argues is contrary to the rules of natural justice. It argues that it is a necessary party to the proceedings, and that the issues to be determined will involve what constitutes its constating documents.

[3] The moving parties argue that this motion is brought on an urgent basis given that, by way of an interim award released January 11, 2013, the Arbitration Panel ordered the full arbitration on the merits to proceed commencing the week of February 25, 2013, despite the fact that appeals were pending and were scheduled to be heard November 15, 2013. The moving parties argue that given the appeal issues regarding the jurisdiction of the Arbitration Panel to grant the relief sought by OFNLP 2008, if the arbitration were permitted to proceed to a hearing prior to the appeals, the entire arbitration proceeding would be rendered a nullity in the event that the appeals are successful because the panel lacks jurisdiction. They further argue that in the circumstances of successful appeals, the arbitration would also have been conducted without OLG, a necessary party, in violation of its rights to natural justice.

The Background Facts

[4] The Crown in these proceedings is represented by the Minister of Aboriginal Affairs, the Minister of Finance and the Attorney General of Ontario. OLG, which oversees the operation and management of lottery and gaming activities in Ontario, is a non-share capital Crown Corporation established pursuant to the OLG Act. OFNLP 2008 is a limited partnership formed under the laws of Ontario, and consists of 132 First Nations communities throughout Ontario.

[5] On February 19, 2008, the parties entered into a tripartite Agreement ("the Agreement"), which established an arrangement whereby the Province agreed to distribute 1.7% of OLG's province-wide gross revenues to OFNLP 2008. The Agreement also contains a provision unrelated to the revenue-sharing provisions, to which OLG is not bound. Section 2.6 of the Agreement, which is in dispute in these proceedings is as follows:

2.6 OFNLP 2008 shall have the right to have a representative of OFNLP 2008 appointed by the Province as a member of the board of directors of OFNLP 2008 in accordance with and pursuant to the procedures of the Province for making such appointments. Any nominee of OFNLP 2008 shall require any appointee that subsequently ceases to comply with such approved criteria to resign immediately, failing which the Province shall be entitled to terminate such appointee as a member of the board of directors of OLG.

[6] On April 4, 2012, OFNLP 2008 commenced the arbitration proceeding against the Crown and OLG, as parties, alleging breach of section 2.6 for failure to appoint an OFNLP 2008 nominee and seeking an interrogatory injunction to enjoin OLG from proceeding with its Strategic Plan until an appointment was made. At the hearing of the injunction motion on June 14 and 18, 2012, the Crown and OLG argued that the panel had no jurisdiction to consider or grant the relief sought in light of the common law of Crown Prerogative, the Proceedings Against the Crown Act, and section 5 of the OLG Act. The Arbitration Panel dismissed the plaintiffs injunction motion on those jurisdictional grounds on August 22, 2012.

[7] Based on the Panel’s reasons regarding its lack of jurisdiction, OLG moved for an Order dismissing all claims made by OFNLP 2008 on a jurisdictional basis on August 24, 2012. OFNLP 2008 thereafter delivered a Notice of Discontinuance as against OLG, to exclude OLG from participating as a party, while continuing proceedings against the Crown.

[8] The moving parties argue that central to the arbitration proceeding is whether section 2.6 of the Agreement and, dealing with the appointment of an OFNLP 2008 nominee to the board is a justiciable part of OLG's constitution, an issue of direct concern to OLG

[9] The Jurisdiction and Discontinuance motions proceeded on October 2, 2012, with the Arbitration Panel's award released December 11, 2012. The Arbitration Panel determined, with respect to its jurisdiction, that the principle of Crown Prerogative did not prevent them from adjudicating as to whether the Province breached its Agreement to appoint a representative of OFNLP 2008 to the OLG board. With respect to the discontinuance issue, the Panel determined that OLG should be excluded as a party, although the issue of its constating documents and whether section 2.6 of the Agreement forms part of said documents is an issue in the arbitration proceeding.

[10] Thereafter, the moving parties appealed the jurisdiction and discontinuance awards. Despite that fact, the Arbitration Panel issued a Scheduling Order which, absent the granting of the stay, will result in the Arbitration proceeding for one week commencing February 25, 2013.

The Issues

[11] The issue on this motion is whether a stay of the arbitration proceeding should issue, pending the hearing and disposition of the appeals.

The Law and Analysis

[12] Pursuant to Section 134 (2) of the Courts of Justice Act, R. S. O. 1990, c. C 43, the Arbitration Act, sections 45(5) and 50(5), and section 9.2 of the Agreement, an Arbitration Panel award is appealable to this Court. On such an appeal, the Court may stay the enforcement of an award, inter alia, until final disposition of a pending proceeding.

[13] The parties agree that the applicable test for a stay pending appeal under the Arbitration Act is the same as that set out by the Supreme Court of Canada in RJR-MacDonald Inc.v Canada (A. G.), 1994 117 (SCC), [1994] 1S. C. R. 311, paragraphs 43, 49 to 50, 59 and 62. The tripartite test includes (i) a preliminary assessment of the merits of the case to ensure that there is a serious issue to be tried; (ii) a determination of whether the applicant would suffer irreparable harm if the application were refused; and (iii) an assessment as to which of the parties would suffer greater harm from the granting or refusal of the stay pending a decision on the merits. Once the Court is satisfied that the case is neither vexatious or frivolous, the motions judge should proceed to consider the second and third tests, even if of the opinion that the plaintiff is unlikely to succeed at trial. A prolonged examination of the merits is generally neither necessary nor desirable.

[14] I proceed to an assessment of the motion to stay, applying the tripartite test.

Serious Issue to Be Tried

[15] In determining the first branch of the test, a preliminary assessment will be made on the appeal to ensure that there is a serious issue to be determined. The threshold for such determination is low and a prolonged examination of the merits is generally neither necessary nor desirable.

[16] The moving parties argue that there is a serious issue to be tried, based on three issues seminal to the appeals, namely that (i) the subject matter of the claim is not justiciable; (ii) the relief claimed is not available due to the doctrine of Crown Prerogative; (iii) OLG is a necessary and proper party to the arbitration proceedings, and should not be excluded from participating. The moving parties argue that the relief sought in respect of the discretionary appointment is the Prerogative of Cabinet and, therefore, outside the jurisdiction of the Arbitration Panel. They argue that, pursuant to sections 2 (2) and 5 (1) and (2) of the Ontario Lottery and Gaming Corporation Act, 1999, appointments to the OLG and its board of directors is statutorily assigned to the Lieutenant Governor in Council. The appointment of persons as members/directors of the OLG is not managed by the OLGC Act, and remains a Prerogative of the Crown exercised on the advice of the Executive Council. They argue that the Legislation Act, 2006, provides that sections authorizing the appointment of a person by the Lieutenant Governor in Council shall be interpreted in the broadest possible way, and that the power of the Crown to appoint an individual includes doing so for a fixed term or at pleasure, and in the latter case, the appointment may be revoked at any time, for any reason, and without notice.

[17] The moving parties argue that while section 2.6 of the Agreement is relied upon by OFNLP 2008, that section explicitly states that OFNLP 2008 has a right to have a representative appointed to the OLG board "in accordance with and pursuant to the procedures of the Province for making such appointments." They argue that this underscores and preserves the manner in which the Crown exercises its Prerogative to appoint members to the OLG board.

[18] The moving parties argue, based on the legislation and the caselaw cited, including Ontario Black Bear/Ontario Sportsmen and Resource Users Association v Ontario, [2000] O. J. No. 263 (S. C.); Thorne's Hardware Limited v the Queen, 1983 20 (SCC), [1983] 1 S. C. R. 106; Ontario Federation of Anglers & Hunters v Ontario (Ministry of Natural Resources), 2002 41606 (ON CA), [2002] O. J. No. 1445 (C. A.); Black v Canada (Prime Minister), 2001 8537 (ON CA), [2001] O. J. No. 1853 (C. A.); Dee v Canada (Minister of Employment and Immigration), [1987] F. C. J. No. 1158 (F. C. T. D.), that the Arbitration Panel has no jurisdiction to entertain the declaratory relief sought by the Claimant, namely, a declaration that the Crown has an obligation to appoint a particular person to the OLB board, which they argue is at the sole discretion of Cabinet.

[19] The moving parties argue, moreover, that, pursuant to the anti-fettering doctrine, damages and declaratory relief are not available to the Claimant. They argue that a contractual provision, such as section 2.6 of the Agreement that purports to fetter the discretion of the Lieutenant Governor, or a Minister of the Crown, or the legislature, to act according to their legal discretion, will be considered void as against public policy and that the government cannot contract to fetter future executive action, citing Canada v Dominion of Canada Postage Stamp Vending Co., 1930 87 (SCC), [1930] S. C. R. 500 at page 506. They argue that any declaration requiring the Province to appoint a specific person to the OLG board would constitute fettering on the government's decision-making responsibility.

[20] The moving parties further argue that OLG is a necessary and proper party to the arbitration proceedings as the relief requested by the OFNLP 2008 concerns an appointment to the OLG board and involves a determination with respect to OLG's constating documents and whether the disputed section 2.6 of the Agreement comprises part of OLG's constating documents. They argue that as OLG's interests would be affected by any determination of the issues, it is a necessary party and should be permitted to be present and participate in the proceedings.

[21] The moving party argues that the appeals will ultimately decide the issues of (i) the Arbitration Panel's jurisdiction to consider the claim advanced by OFNLP 2008 and (ii) the necessary parties to the arbitration.

[22] The responding party argues that the Arbitration Panel was not being asked to make an order for specific performance or an order that the province do anything that would fetter the government’s decision-making powers or Crown Prerogative. It argues that the Panel is only being asked to make declarations as to contractual rights and breaches thereof, i.e. the appointment of OFNLP 2008 appointee pursuant to the Agreement and that, while convention dictates that the Province will abide by a decision of the Arbitral Panel or the Courts as to declarations of contractual rights, whether the Province will do so in these circumstances is unknown. It further argues that there is no realistic possibility that the jurisdictional issue urged by the moving parties will succeed.

[23] I find, based on the submissions of counsel, the issues involved and the caselaw, that there is are serious questions to be determined on the appeal, including issues of whether the Arbitration Panel has jurisdiction to inquire into and grant relief in respect of the subject appointment, or whether this is the Prerogative of the Cabinet; whether the Arbitration Panel has jurisdiction to make a declaration requiring the Province to appoint a specific person to the OLG board or whether this amounts to an impermissible fettering on the government's decision-making responsibility; and whether OLG is a necessary and proper party to the arbitration proceedings. I find that the first branch of the test has been satisfied. I therefore move to the second branch of the test.

Irreparable Harm

[24] Pursuant to RJR-MacDonald, supra, irreparable harm refers to the nature of the harm suffered rather than its magnitude. It is harm which cannot be quantified in monetary terms or which cannot be cured.

[25] The Crown argues that it will suffer irreparable harm if a stay is not issued pending a determination of the appeals. It argues, based on RJR-MacDonald, supra at paragraph 81 that where a public authority is the applicant in a motion for a stay, the issue of public interest is considered at the second stage of the test, when the issue of irreparable harm to the interest of the government are considered, and again at the third stage of the test, when harm to the applicant is balanced with harm to the respondent, including the public interest. It argues that the making of appointments to the board of the OLG is a matter of Crown Prerogative, and the effect of the decision of the Arbitration Panel would be an unjustified interference with the exercise of Crown Prerogative and would seriously undermine the exercise of that Prerogative.

[26] The cases of RJR-MacDonald, supra at paragraph 71 and 72 and Attorney General of Canada v Fishing Vessel Owners' Association of B.C., 1985 5505 (FCA), [1985] 1 F.C. 791 at page 795 give guidance with respect to application of the tripartite test where a public authority is involved. In considering this issue, I find the following passage in RJR-MacDonald, supra, to be of assistance:

In the case of a public authority, the onus of demonstrating irreparable harm to the public interest is less than that of a private applicant. This is partly a function of the nature of the public authority and partly a function of the action sought to be enjoined. The test will nearly always be satisfied simply upon proof that the authority is charged with the duty of promoting and protecting the public interest and upon some indication that the impugned legislation, regulation or activity was undertaken pursuant to that responsibility. Once these minimal requirements have been met, the Court should in most cases assume that irreparable harm to the public interest would result from the restraint of that action.

The Court should not, as a general rule, attempt to ascertain whether actual harm would result from the restraint sought. To do so would in effect require judicial inquiry into whether the government is governing well, since it implies the possibility that the government action does not have the effect of promoting the public interest and that the restraint of the action would therefore not harm the public interest. The Charter does not give the courts of license to evaluate the effectiveness of government action, but only to restrain it where it encroaches upon fundamental rights.

[27] I have also considered the findings of the Federal Court of Appeal in Attorney General of Canada v Fishing Vessel Owners Association of B.C., supra at page 795, as follows:

When a public authority is prevented from exercising its statutory powers, it can be said, in a case like the present one, that the public interest, of which that authority is Guardian, suffers irreparable harm.

[28] The Crown argues that if a stay is not granted, it may face the prospect of a final determination of the Arbitration Panel granting the declaratory relief requested by the Claimant prior to the appeals on the issues above being heard on the merits. They argue that this is contrary to the public interest and cannot be compensated for by payment of money.

[29] The OLG argues that the moving parties will suffer irreparable harm and incurable prejudice if required to file materials, provide affidavits and argue their positions when the entire proceeding may be a nullity if the appeals are successful and the Panel is found to lack jurisdiction. They further argue that if they are denied the opportunity to be a party in these proceedings, and are denied natural justice, such denial cannot be cured if OLG is ultimately successful on the appeal.

[30] OFNLP 2008 argues that there is no irreparable harm on the part of the moving parties in the circumstances of this matter. It argues that there will be no harm to OLG if the arbitration is allowed to proceed prior to the appeal of the discontinuance decision and the relief sought in the arbitration is not directed at OLG but rather at the Crown. It is their position that there will be no denial of natural justice, as the issue of the OLG constating documents is not before the Arbitration Panel for determination. It argues that it will suffer irreparable harm if it is denied a representative on the OLG board at a time when the gaming activity is being reviewed and restructured.

[31] I find that there will be irreparable harm if the matter does proceed. Based on the facts and submissions of the parties, the Arbitration Panel, in determining the issue of whether a declaration regarding appointment of a specific person should issue, will address the issue of whether section 2.6 of the Agreement the OLG constating documents includes section 2.6 of the subject Agreement, which would affect the OLG as a necessary party.

[32] Further, the issue of the Arbitration Panel's jurisdiction which will be determined on appeal is an issue fundamental to the hearing scheduled to proceed on February 25. A premature decision of the Arbitration Panel pending an appeal on the panel's jurisdiction with respect to the issues in play would, in the circumstances of a successful appeal, result in harm which is contrary to the public interest and which, once done, cannot be quantified in monetary terms or cured. Requiring the parties to proceed to an arbitration hearing with an appeal pending, the results of which could dramatically affect the scope of the hearing, would also result in inefficiencies of time and resources spent by the parties.

[33] I now consider the third branch of the test.

Balance of convenience

[34] It is the position of the Crown that, where a public authority is an applicant in a motion for a stay, as is the case here, the issue of the public interest is to be considered again at the third leg of the tripartite test. It argues that declining to grant a stay could result in the panel severely and impermissibly fettering the exercise of Crown Prerogative, which is prejudicial to the public interest and cannot be compensated for with money. It argues that if the arbitration were permitted to proceed on February 25, 2013, this could result in a declaration against the Crown prior to the jurisdictional issue being determined, which may render the Panel’s disposition or the appeal nugatory. The Crown submits that where a failure to grant a stay will render an appeal moot, the party opposing the stay must show clear prejudice: O'Connor v Nova Scotia, 2001 NSCA 47 at paragraphs 9 and 17; CPC International Inc. v Seaforth Creamery Inc., 1996 539 (ON CA), [1996] O. J. No. 3537 (C. A.) , at paragraph 28; Gaudet v Ontario (Securities Commission), [1990] O. J. No. 69 (Div.Ct.). Further, it would be neither fair nor efficient to require the parties, in such circumstances, to proceed to a hearing while the appeals have not yet been resolved: Perry v Ontario, [1996] O. G. No. 3384 (C. A.) at paragraph 16.

[35] It the position of OLG that the balance of convenience favors it as, otherwise, if the stay is not granted, there will be a failure of natural justice which cannot be cured, while there is no evidence of harm to OFNLP 2008.

[36] OFNLP 2008 argues that there has been inordinate delay in having an OFNLP 2008 nominee appointed to the OLG board and that, in the interim, the OLG and Province were proceeding with implementation of the overhaul of gaming activity in the Province, without OFNLP 2008 representation. They argue, as a result, that the balance of convenience clearly favours them.

[37] The moving parties submit that, where any delay may be occasioned by not proceeding with the arbitration hearing until after the appeal is heard and decided, they undertake it to work with OFNLP 2008 to have the appeals expedited.

[38] While not determinative, I have further considered that it would be neither just nor efficient to require the parties, in such circumstances, to proceed to a hearing pending appeals regarding the jurisdiction of the Arbitration Panel to hear the issues in play.

[39] I find that in all of the circumstances, the balance of convenience favours the moving parties. I have taken into consideration in addition to the arguments of the parties, the broader public interest which must be weighed where a public authority is involved. I find, in the circumstances of this case, that it would be prejudicial to the government and the public interest to permit the Arbitration hearing to proceed prior to a determination, on appeal, of whether the Arbitration Panel has jurisdiction to make the declarations sought.

Conclusion

[40] In conclusion, based on the motion materials filed, the evidence, the submissions of the parties and the caselaw, I find that the moving parties have established all three elements of the tripartite test for a stay in the circumstances of this case. There are serious issues to be determined on appeal going to the heart of the Arbitration Panel’s jurisdiction to determine the issues raised by the Claimant; there is irreparable harm that would be occasioned on the parts of the moving parties were the arbitration hearing to proceed prior to determination of the appeals; and the balance of convenience favours the moving parties. Accordingly, I Order that the arbitration proceeding be stayed pending final determination of the appeals in this matter.

Costs

[41] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.

Carole J. Brown J.

Released: February 6, 2013