SUPERIOR COURT OF JUSTICE – ONTARIO

COMMERCIAL LIST

RE: T Films S.A., Future Films (Three) Limited and Thema Production S.A., Applicants

AND:

Cinemavault Releasing International Inc., Cinemavault.Com Inc., Cinemavault International Inc. and Nicolas Stiliadis, Respondents

BEFORE: D. M. Brown J.

COUNSEL:
R. Cohen, for the Applicants
H. Dorsey, for the Respondents

HEARD: July 8, 2014

REASONS FOR DECISION

I. Motion to stay a court application in favour of a second arbitration under the International Commercial Arbitration Act

[1] T Films S.A. (“T Films”) and Cinemavault Releasing International Inc. (“CRI”) were parties to a Sales Agency Agreement dated February 9, 2004, under which CRI was to distribute a motion picture entitled “Three”. The Sales Agency Agreement contained, in section 15, an arbitration clause which read, in part, as follows:

Any controversy or claim arising out of or in relation to this Agreement or the validity, construction or performance of this Agreement, or the breach thereof, shall be resolved by arbitration before a single arbitrator in accordance with the rules and procedures of AFMA (formerly the American Film Marketing Association)…

[2] By notice of arbitration dated January 10, 2013, T Films and the other two applicants, Future Films (Three) Limited and Thema Production S.A., demanded an arbitration alleging that CRI had failed to remit prescribed distribution fees. The arbitrator, Christopher Pibus, issued a Partial Final Award on April 22, 2013, requiring CRI to pay the applicants damages in the amount of U.S.$332,389.00, together with prejudgment interest. By Final Award dated May 1, 2013, the arbitrator also required CRI to pay, in addition to the damages and prejudgment interest, costs of U.S.$136,376.71.

[3] In May, 2013, the applicants commenced this proceeding against CRI and related entities seeking a variety of relief, including orders recognizing and enforcing the Partial Final Award and Final Award, together with relief under section 248 of the Ontario Business Corporations Act.

[4] The application came before Stinson J. on September 13, 2013. The respondents did not oppose the recognition and enforcement of the Partial Final Award and the Final Award. As a result, Stinson J. granted a judgment under the International Commercial Arbitration Act, R.S.O. 1990, c. I.9, ordering CRI to pay to the applicants the Canadian dollar equivalent of U.S. $495,594.71. The balance of the application was transferred to the Commercial List.

[5] On September 16, 2013, I set January 14, 2014 for the hearing of the remaining relief in the notice of application, together with the respondents’ proposed motion for security for costs. In the result, on December 9, 2013, the January 14 hearing date was vacated and the parties were directed to re-attend to set a new date after completing cross-examinations.

[6] On February 7, 2014 the hearing was rescheduled for April 4, 2014. On that date the court ordered the application to be adjourned pending an arbitration determining the trust issue in respect of funds received by CRI asserted by the applicants in the proceeding. But a few days later, the court ultimately directed that the application was to be heard on July 8. That April 8, 2014 endorsement noted that the respondent would bring a motion for a stay of the application on jurisdictional grounds at the commencement of the July 8 hearing, and the arbitration contemplated by the court’s April 4 order was suspended pending the determination of the respondents’ motion for a stay.

[7] The respondents’ notice of motion sought a stay of the application pending the applicants proceeding with an arbitration to determine if CRI was a trustee for the benefit of the applicants under the Sales Agency Agreement and, if it was, whether there had been a breach of trust by CRI. As well, the respondents sought a stay of the applicants’ oppression claim.

[8] At the hearing respondent’s counsel made it clear that should the dispute be referred to a second arbitration hearing, the respondents would be taking the position that the arbitrator who made the Final Award was functus and that the appointment of a new arbitrator would required.

[9] For the reasons set out below, I dismiss the motion to stay.

II. Analysis

[10] The parties agreed that the International Commercial Arbitration Act applied. Section 8 of the ICAA states that where, pursuant to Article 8 of the Model Law, a court refers the parties to arbitration, the proceedings of the court are stayed with respect to the matters to which the arbitration relates. Section 8(1) of the Model Law states:

A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

[11] As disclosed in paragraph 153 of their Factum, the applicants are seeking: (i) a declaration that the damages found owing pursuant to the Partial Final Award and the recognition Judgment of this Court are impressed with a trust; (ii) a declaration that the respondents, Cinemavault International Inc. and Cinemavault.com Inc., and their principal, Stiliadis, are liable to the applicants for breach of fiduciary duties or for the knowing receipt of funds impressed with the trust; and, (iii) a declaration that Cinemavault International Inc. and Cinemavault.com Inc. were the equitable assignees of the Sale Agency Agreement making them jointly and severally liable for the Final Award and the Judgment. Finally, the applicants seek an order under OBCA s. 248 that Stiliadis, Cinemavault International Inc. and Cinemavault.com Inc. are jointly and severally liable to compensate the applicants for the amounts referenced in the Final Award and the Judgment.

[12] It is certainly arguable that the first item of declaratory relief sought by the applicants in this Court proceeding raises an issue which could fall within the ambit of the arbitration clause in the Sales Agency Agreement as constituting “any controversy or claim arising out of or in relation to this Agreement” or to the “validity, construction or performance of this Agreement, or the breach thereof…” Nevertheless, in the particular circumstances of this case, I conclude that the moving parties are not entitled to a stay of this application.

[13] First, the evidence disclosed that CRI, which was the counterparty to the Sales Agency Agreement, is dormant and has not conducted business for several years. Indeed, the applicants contend that Stiliadis – the principal of the corporate respondents - transferred the business of CRI to related entities in order to avoid paying the Judgment. As a result, this motion to stay really is advanced by the related entities, none of which were parties to the Sales Agency Agreement which contained the arbitration clause. Article 8(1) of the Model Law contemplates that a stay request may be made by a party to an arbitration agreement. None of the related respondents/moving parties were party to the arbitration agreement. Therefore, they do not have the standing to invoke Article 8(1) of the Model Law.

[14] Second, Article 8(1) of the Model Law requires a party who requests that a matter be referred to arbitration to make the request "not later than when submitting his first statement on the substance of the dispute”. Last September the respondents filed a responding application record which contained an affidavit sworn by Stiliadis on September 9, 2013. In his affidavit on behalf of himself and the corporate respondents, Stiliadis did not oppose this application on the basis that its subject-matter should be referred to arbitration nor did he seek to stay the proceeding. Instead, Stiliadis adduced evidence going to the merits of the issues in dispute on the application, and he responded to the applicants’ allegations of breach of trust. As well, Stiliadis provided evidence in support of a motion by the respondents seeking security for costs in the application. By so doing, the respondents attorned to the jurisdiction of this Court, and they did not avail themselves of whatever rights they might have enjoyed under Article 8(1) of the Model Law. In fact, it was not until April of this year that the respondents indicated that they wished to bring a motion to stay, by which time several cross-examinations of Stiliadis had taken place in this proceeding.

[15] By way of summary, since the request for a stay essentially is being made by persons who were not parties to the arbitration agreement and because none of the respondents made their request for a stay no “later than when submitting his first statement on the substance of the dispute”, the respondents have failed to satisfy the conditions for a stay set out in Article 8 of the Model Law.

[16] The applicants submitted that additional reasons existed to justify refusing the requested stay of the application. The applicants argued by analogy to the discretionary factors enumerated in section 7(2) of the Arbitration Act, 1991, S.O. 1991, c. 17. To put that submission in context, the International Commercial Arbitration Act does not contain a list of circumstances under which the court may refuse to stay a court proceeding as extensive as that found in section 7(2) of the Arbitration Act, 1991. Article 8(1) of the Model Law requires a court, if certain conditions are met, to refer parties to arbitration “unless it finds that the agreement is null and void, inoperative or incapable of being performed”.

[17] Given my finding that the moving parties had failed to satisfy the requirements for a stay contained in Article 8(1) of the Model Law, I see no need, in the circumstances of this case, to deal with the issue of what residual discretion, if any, the court enjoys to refuse to grant a stay of a court proceeding other than on the grounds set out in Article 8(1) of the Model Law.

[18] For those reasons, I dismiss the motion to stay.

[19] The applicants seek to have their requests for relief heard and adjudicated on the written record already filed with the Court in accordance with timetables set out in several judicial endorsements. The respondents submitted that a trial of issues was required for a proper adjudication of the applicants’ request for relief. That is a matter which can be argued before the judge who hears the application.

[20] I would observe that the claims advanced by the applicants in this proceeding are factually complex, as attested by the applicants’ comprehensive 79-page Factum. Extensive cross-examinations were conducted of Stiliadis. From my review of their Factum, it is apparent that the applicants are relying extensively on admissions which they say they secured on those cross-examinations. Given that factual complexity, more than one day must be set aside for the hearing of the application. Consequently, I direct the parties to obtain by week’s end dates for a two-day hearing of this application with such hearing to be held no later than the end of October, 2014. I understand that there is available time on the Commercial List to accommodate a hearing before the end of October, and given the amount of time it has taken for the application to proceed this far, I think it important that the matter be heard before the end of October.

[21] The evidentiary record for that hearing is fixed and limited to the evidence already filed. No further evidence may be filed, nor may any further motion be brought prior to the hearing of the application. The October hearing date is peremptory to the respondents. The costs of this motion to stay are reserved to the judge who will hear the application.

D. M. Brown J.

Date: July 9, 2014