SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 14-49267
DATE: 2014-12-12
RE: Paul Wurth Inc., Plaintiff
A N D:
Anmar Mechanical and Electrical Contractors Ltd. and MAG Engineering & Constructors International Ltd., Defendants
BEFORE: The Honourable Mr. Justice C.S. Glithero
COUNSEL:
D.A. Schmuck, for the Plaintiff, Applicant
H.J. Marin, for the Defendant, Respondent
HEARD: December 9, 2014
E N D O R S E M E N T
[1] The plaintiff brings this motion for an order requiring the respondents to participate in binding arbitration of a commercial dispute between the parties, for an order appointing an arbitrator, and an order staying this action pending the outcome of the arbitration.
[2] The plaintiff is a company providing engineering services and site technology, particularly in the metal industries. The defendants Anmar Mechanical and Electrical Contractors Ltd. (“Anmar”) and MAG Engineering & Constructors International Ltd. (“MAG”) are both Ontario companies. They have some common management personnel and the two companies have separate offices but in the same building.
[3] In December of 2012, Anmar entered into a contract with an Italian company, ILVA, to build a facility in Italy for a price in excess of $10,000,000.00 CDN. Anmar in turn entered into a contract with MAG under which MAG agreed to construct the facility.
[4] In February 2013, MAG entered into a contract with the plaintiff under which the plaintiff would provide various services to MAG in respect of the project in Italy.
[5] The plaintiff claims to have been paid some of the monies owing to it under its contract with MAG, but claims that it is owed almost $1,000,000.00 plus taxes.
[6] The agreement between the plaintiff and MAG clearly states that they are the only parties to the agreement. Nowhere is Anmar mentioned in the contract or in the exhibits which form a part of it. Exhibit 4 to the agreement has an arbitration clause by which the plaintiff and MAG agree that any dispute “arising out of or connected in any way with these terms and conditions, including the failure of the parties hereto to reach an agreement hereunder, shall be resolved through arbitration...”
[7] On July 10, 2014, counsel for the plaintiff sent a letter to both Anmar and MAG threatening to commence the arbitration process unless payment was received. On August 15, 2014, counsel for the plaintiff sent a letter to Anmar and MAG proposing the names of three persons who had agreed to act as arbitrator. By letter dated August 18, 2014, the president of MAG wrote counsel for the plaintiff pointing out that the plaintiff’s contract was with MAG and that the plaintiff had no contractual relationship with Anmar.
[8] The plaintiff issued the statement of claim in the within action on September 17, 2014, naming both Anmar and MAG as defendants and alleged the services were provided by the plaintiff to both, and alleged that MAG was acting as an agent, a partner, or a joint venturer with Anmar. The statement of claim seeks the same relief against both defendants. It pleads that the defendants were requested to proceed to arbitration but refused. A statement of defence for both defendants was delivered and pleaded that Anmar was not a party to the agreement with the plaintiff and denies that MAG acted as Anmar’s agent and denies any joint venture between the two. A reply was delivered by the plaintiff, so pleadings are complete. The plaintiff forwarded a discovery plan to the defendants. Then this motion was brought.
[9] Section 7(1) of the Arbitration Act, 1991, S.O. 1991, Chapter 17 provides that “If a party to an arbitration agreement commences a proceeding in respect of a matter to be submitted to arbitration under the agreement, the court in which the proceeding is commenced shall, on the motion of another party to the arbitration agreement, stay the proceeding.” In Penn-Co Construction Canada (2003) Ltd. v. Constance Lake First Nation, [2007] O.J. No. 3940 Pierce J. held that the plain wording of the above section precludes the party who commenced the court proceeding from moving for a stay of that proceeding. She held that such applications are limited to an opposing party rather than the one who commenced the action, noting that the intention of the section was to protect the defending party from the expense of having to both litigate and arbitrate the same issues. She refused the plaintiff’s motion for mandatory order compelling arbitration.
[10] Aside from the statutory interpretation as indicated at paragraph 25, she also noted at paragraph 31 that the plaintiff in that case had sued several parties who were not parties to a contract with the plaintiff and hence had disputes with the plaintiff that were not subject to the arbitration clause. She rejected the plaintiff’s request that it be allowed to proceed with forced arbitration against the defendant while the claims against non-contractual parties would be stayed until the arbitration was complete, holding that such defendants should not be so prejudiced and reasoned at paragraph 39 and 40 that to permit both arbitration and the action to proceed would simply lead to a multiplicity of proceedings and an unreasonable separation of common issues.
[11] That decision was upheld on appeal at 2008 ONCA 768. On appeal, apparently the appellant there conceded that the Arbitration Act did not allow it to move under Section 7, but sought the same relief under Sections 101 and 106 of the Courts of Justice Act. The Court of Appeal upheld the exercise of the motion judge’s discretion having regard to amongst other things the fact that non-contractual parties had been named in the action, and that proceeding with arbitration of some claims and yet staying the claims against others would result in a duplication of effort, cost and inconvenience, and give rise to the risk of inconsistent results.
[12] In Tricin Electrical Ltd. v. York Region District School Board, [2009] O.J. No. 1858 the same type of motion was refused. Factors taken into account in that decision included the fact that pleadings had been fully exchanged in the action and the action involved issues beyond those subject to the arbitration provision.
[13] The plaintiff’s contract with MAG is explicitly between the two and does not involve Anmar. Accordingly, Anmar in my opinion cannot be required to participate in arbitration of the plaintiff’s claim and any arbitrator would have no jurisdiction over Anmar.
[14] Other courts have previously dealt with the type of alternative relief sought by the plaintiff here, namely an order that the arbitration proceed as against MAG and that the action as against Anmar be stayed while the arbitration is completed. In Griffin v. Dell Canada Inc., 2010 ONCA 29, [2010] O.J. No. 177 the Court of Appeal at paragraph 49 cited several authorities and approved of the following summary of the law on this point:
The courts have held that where one of the parties to the action is not subject to an arbitration clause, and the claim involving the non-party to the arbitration clause and the claim sought to be submitted to arbitration both contain closely related facts and issues in dispute, a partial stay is not reasonable. The court should instead exercise its discretion to deny the stay of proceedings and allow the entire matter to proceed in one forum.
[13] Section 7(2) 4 lists “undue delay” as a factor that a court may use in refusing to stay proceedings so as to permit arbitration to proceed (albeit as noted, the section contemplates the motion being brought by the party who did not commence the action). Here the pleadings have been completed and a draft discovery plan delivered, and clearly the plaintiff was aware of the arbitration clause, having threatened to utilize it before bringing the action. That distinguishes the facts in this case from those in Serratore v. 1634394 Ontario Ltd., [2009] O.J. No. 5200 at paragraphs 13-14.
[14] The plaintiff relies on the cases of Legacy Leather International Inc. v. Ward, 2006 CarswellOnt 7348 as authority in favour of staying an action in favour of an arbitration proceeding. But as I read that case the parties to the action being stayed were parties to the contract containing the arbitration provision. That is accordingly a different situation. There delay in seeking arbitration was excused on the basis of evidence that the plaintiff was originally unaware of the arbitration clause but acted quickly on learning of it. Here the plaintiff clearly was aware of the arbitration clause from the outset and sought to utilize it.
[15] Additionally the plaintiff refers to Amec E & C Services Ltd. v. Nova Chemicals (Canada) Ltd., 2003 CarswellOnt 2481 where a stay of the action was granted so that arbitration could proceed. But there both parties to the litigation were also parties to the contract containing the arbitration provision. Accordingly I think that case to be of no assistance in the facts of this case.
[16] For these reasons, I have concluded that the plaintiff has defined the dispute widely, by bringing the action, so as to include parties and issues beyond those of the reach of the arbitration agreement. As was decided in Penn-Co Construction and upheld by the Court of Appeal, it is desirable that all aspects of the dispute with all those said to be involved are best resolved under “the umbrella of a single proceeding.” In my opinion the plaintiff fails on the basis of its reliance on s. 7 (2), and in the circumstances here I think it inappropriate to exercise my discretion under s. 101 and s. 106 of the Courts of Justice Act in the plaintiff’s favour.
[17] For these reasons, the motion is dismissed.
[18] If the parties are unable to agree on the issue of costs, written submissions may be made which are not to exceed five pages in length in addition to bills of costs and any relevant authorities. The written submissions of the defendants should be delivered within 30 days of the release of these reasons, and those of the plaintiff within 21 days thereafter. In the event that no submissions are received within these time limits, or any extensions sought and granted, the issues of costs will be deemed to have been settled between the parties and no order will be made. The submissions should be forwarded to my attention at Judge’s Chambers, 7h Floor, Court House, 85 Frederick Street, Kitchener, Ontario N2H 0A7.
GLITHERO, J.
DATED at Kitchener, this December, 2014
COURT FILE NO.: 14-49267
DATE: 2014-12-
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Paul Wurth Inc., Plaintiff
A N D:
Anmar Mechanical and Electrical Contractors Ltd. and MAG Engineering & Constructors International Ltd., Defendants
BEFORE: The Honourable Mr. Justice C.S. Glithero
COUNSEL: D.A. Schmuck, for the Plaintiff, Applicant
H.J. Marin, for the Defendants, Respondents
ENDORSEMENT
CSG:co