SUPERIOR COURT OF JUSTICE - ONTARIO
COURT FILE NO.: 14-61201
DATE: 2015/09/16
RE: Central Station Security Services Inc., Applicant
AND
Avenue Security Centre Inc., James Saikaley, Micheline Saikaley and Avenue Lock and Security Ltd., Respondents
BEFORE: Madam Justice Sylvia Corthorn
COUNSEL: Dave Morin-Pelletier, for the Applicant
Christopher S. Spiteri, for the Respondents
HEARD: July 24, 2015
ENDORSEMENT
[1] This application on behalf of Central Station Security Services Inc. is for the enforcement of a 2013 arbitration award in the amount of $71,905 (inclusive of costs). The application is made pursuant to section 50(1) of the Arbitration Act, S.O. 1991, c. 17.
[2] The only parties to the arbitration were Central Station Security Services Inc. (“Central”) and Avenue Security Centre Inc. (“Avenue”). Subsequent to the arbitrator releasing his decision, the principals of Central learned that Avenue was dissolved in 1999. Central seeks to enforce the arbitration award only as against the individual respondents, James Saikaley and Micheline Saikaley, on the basis of their respective roles in and representations with respect to Avenue. Central is not seeking to enforce the arbitration award as against Avenue.
[3] It is agreed by the applicant and the individual respondents that the fourth-named respondent, Avenue Lock & Security Ltd., does not exist. The applicant is not pursuing the application as against that respondent.
[4] The responding application record indicates that Mr. Spiteri represents all four respondents. Given that the relief sought on the application is restricted to enforcement of the application as against the individual respondents and the status of Avenue (i.e. dissolved in 1999), reference hereinafter to “the respondents” means the individual respondents only.
[5] It is the position of the respondents that: a) the Court’s jurisdiction is limited to enforcement of the arbitration award as against Avenue only; and b) enforcement of the arbitration award as against the individual respondents must be pursued by way of an action.
[6] On the return of the application, counsel agreed that the position taken by the respondents gives rise to a preliminary issue to be determined: Does this Court have the power on this application to enforce the arbitration award against the individual respondents? If so, then the balance of the application is to be returned before me at a later date. If not, then to what relief, if any, is the applicant entitled at this time?
Decision on Preliminary Issue
[7] The applicant is not entitled to an order for enforcement of the arbitration award against the individual respondents. The applicant’s claim for enforcement of the arbitration award against the individual respondents is to be treated as an action in respect of that issue. The application is to be disposed of by the trial judge. Directions with respect to how the action is to proceed are set out in the order at the conclusion of this endorsement.
Background Information
[8] Central and Avenue historically did business with one another in the field of alarm systems, security, and monitoring. A dispute arose between them. An action was commenced by Central in 2006 in which Avenue was named as a defendant. The dispute was settled and the action was dismissed. The terms of the settlement are set out in an agreement executed on September 22, 2006 (“the Agreement”). The parties to the Agreement are identified as Central and Avenue. The Agreement was executed by individuals who each identify themselves as having “authority to bind the Corporation” on whose behalf they signed the document.
[9] In 2010, following the sale of alarm accounts by Avenue to a third party business, Central alleged that Avenue had committed historical breaches of the Agreement (failure to transfer all alarm accounts). In accordance with the terms of the Agreement, the dispute was referred for arbitration. The arbitrator released his decisions (substantive and costs) in the fall of 2013 – awarding Central damages in the amount of $61,735, costs of $9,000, and $1,170 for HST on costs.
[10] The term of the Agreement upon which the applicant relies in support of its primary position on this application is paragraph 25. That paragraph provides as follows:
In the event that there is any dispute with respect to this agreement that dispute shall be referred to a single arbitrator. The parties hereby agree that the single arbitrator, in the event he is available, will be Ian Stauffer. Any arbitration shall be governed by the Arbitrations Act of Ontario. The parties agree that the award and determination of the dispute by the arbitrator shall be binding upon the parties and their respective heirs, executors, administrators and assigns.
The primary position of the applicant is that one or both of James Saikaley and Micheline Saikaley are the “administrators” or the “assigns” of Avenue within the meaning of paragraph 25 of the Agreement. The other grounds upon which the applicant relies are discussed below.
[11] The evidence filed on the application consists of affidavits sworn by principals of Central – David Smetana and Thomas Smetana; an affidavit sworn by Athena Basta, an associate lawyer with counsel of record for the respondents (“the Basta affidavit”); the transcript of the cross-examination of Ms. Basta; and answers to undertakings given at the cross-examination of David Smetana. The transcript(s) of the cross-examination of David Smetana and Thomas Smetana (the latter, if conducted) were not filed on the application. There is no evidence on this application from either of James Saikaley and Micheline Saikaley.
Evidence and Findings
[12] The quality of the affidavit materials on this application is less than satisfactory. There is minimal evidence for consideration from the affidavit materials. The Smetana affidavits contain argument and unsupported conjecture. The Basta affidavit is, in almost its entirety, inappropriate for an application.
[13] The problems with the Basta affidavit begin with the introductory paragraph. In that paragraph, Ms. Basta includes the typical statement that for matters “based upon information received from others, I have indicated the source of this information and verily believe it to be true.” Paragraphs 2 through 9, 11, 12, and 14 as well as the final sentence of paragraph 13 of the Basta affidavit make reference to the actions, conduct, and beliefs of one or both of James Saikaley, and Micheline Saikaley; the “bona fides” with which the principals of Central and Avenue entered into the Agreement; and the “good faith” of the parties in entering into the Agreement. Nowhere in her affidavit does Ms. Basta provide the source of the information set out in the above-mentioned paragraphs.
[14] On cross-examination, Ms. Basta acknowledged that the sources of the information for portions of her affidavit were James Saikaley and Micheline Saikaley. Ms. Basta admitted that the information was obtained during conversations which she had with the respondents in preparation for and participation in the arbitration. The conversations took place in 2012 and possibly in 2011 – at least three years prior to the date on which Ms. Basta swore her affidavit. Ms. Basta also admitted that she had “limited involvement” with the file when it was in the arbitration stage.
[15] Ms. Basta was not asked on cross-examination as to the source of the information upon which she based her statements as to the bona fides, beliefs, and good faith of the principals of Central.
[16] A number of paragraphs in the affidavit can at most be Ms. Basta’s belief on the particular subject matter addressed. Yet, Ms. Basta does not identify any portion of her affidavit as her ‘belief’ or set out the grounds upon which she bases her ‘belief’.
[17] Ms. Basta’s evidence on cross-examination was that she was not aware of the existence of the 2012 Will Say statements of James Saikaley and Micheline Saikaley until June 3, 2015 (the day prior to the date on which she was cross-examined). The Will Say statements are attached as exhibits to the first affidavit of Thomas Smetana and are discussed below.
[18] The Basta affidavit is flagrant in its failure to satisfy the requirements of rule 39.01(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. That rule provides, “[a]n affidavit for use on an application may contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit.”
[19] Not only does Ms. Basta fail to identify the source of the information for the vast majority of the contents of her affidavit, but the evidence which she purports to provide on the basis of ‘information and belief’ deals with contentious facts. Paragraphs 7 and 8 are egregious in that manner:
Avenue, Central, and their principals entered into a bona fide commercial relationship as the September 2006 Agreement was concluded by the parties in good faith.
Mr. Saikaley, and the principals of Central, Dave Smetana, Tom Smetana and Gerry Savage, were ad idem in their bona fide belief that Avenue and Central were active and operable corporations. Only acting under this bona fide belief did Avenue, Central, and the parties’ principals conclude the September 2006 Agreement.
[20] There is no evidence as to when any one or more of the parties or their counsel (who were also counsel on the arbitration) learned that Avenue was dissolved in June 1999. In their affidavit materials each of the Smetanas makes reference to the 1999 dissolution of Avenue. Referring to paragraph 25 of the Agreement, each of the Smetanas say, “Seeing that Avenue Security was dissolved on or about June 28, 1999, it was imperative for Central that any award and/or determination by the arbitrator be binding upon the parties and their respective heirs, executors, administrators, and assign [sic].” [Emphasis added]
[21] Each of the second Smetana affidavits were filed solely for the purpose of ‘correcting’ (as described by the Smetanas) that sentence to read as follows, “[i]t was imperative for Central that any award and/or determination by the arbitrator be binding upon the parties and their respective heirs, executors, administrators, and assign [sic].”
[22] Although each of Messrs. Smetana removed the reference in their affidavit to the 1999 dissolution of Avenue, there is no evidence before the Court as to when either one of them became aware of the dissolution.
[23] Evidence of the dissolution of Avenue in 1999 is in the form of a Government of Canada, Industry Canada document titled “Corporate Profile” attached as an exhibit to the first affidavit of David Smetana. The document indicates that James Saikaley was the sole director of Avenue Security Center Inc. The document appears to have been signed by James Saikaley, although there is no evidence before me to that effect. Evidence as to the state of knowledge of each of the respondents with respect to the dissolution of Avenue in 1999 is entirely lacking.
[24] The name of the corporation in the Corporate Profile is Avenue Security Center Inc. (i.e. not Avenue Security Centre Inc. as named in the Agreement, the title of proceeding in the arbitration, and the title of proceeding in this application). In their factum the respondents raise the issue that the proper name of Avenue includes “Center” and not “Centre”. No submissions were made before me as to the significance, if any, which the incorrect spelling of the corporation’s name may have in the outcome of the application for enforcement of the arbitration award.
[25] With respect to the role which each of James Saikaley and Micheline Saikaley played or may have played over time in Avenue, there is a mixture of argument and conjecture on the part of Messrs. Smetana and Ms. Basta:
• In paragraph 4 of his first affidavit, David Smetana says that the respondents “were at all material times the Director, President and controlling minds of Avenue”. Mr. Smetana does not identify that statement as his belief, although belief it must be, or any grounds for his belief in that regard.
• Attached as exhibits to the first affidavit of Thomas Smetana are Will Say statements which it is said were produced in 2012 by counsel for Avenue in the context of the arbitration process. The Will Say statements are in the names of each of James Saikaley and Micheline Saikaley. Neither statement is signed. In his statement, the former identifies himself as a “principal of Avenue Security Centre Inc.” and someone who has been involved in the security business for 41 years. In her statement, the latter says, “I am the Vice-President of Avenue Security Centre Inc.”. She also says that she has been involved in the day-to-day operations of Avenue since 2005 (i.e. six years after the dissolution of the company).
• In her affidavit, Ms. Basta describes James Saikaley as “the principal” of Avenue in the past tense and Micheline Saikaley as a “managerial employee” of Avenue in the past tense. Micheline Saikaley is also described as having begun to “assist her father in the operation of Avenue” in 2005.
[26] On the basis of information and belief, as acknowledged on cross-examination, Ms. Basta’s evidence with respect to Avenue and the arbitration is that, “Mr. Saikaley participated in the Arbitration in good faith on behalf of Avenue” with assistance from his daughter, Micheline. Ms. Basta suggests on at least two occasions (once in her affidavit and once during cross-examination) that Micheline Saikaley’s involvement in the operation of Avenue and the arbitration was at times based on her father’s lack of proficiency in English.
[27] The minimal uncontradicted evidence on the application is as follows:
• David Smetana was, as of 2014 and 2015 when his affidavits were sworn, the director and President of Central.
• Thomas Smetana was, as of 2014 and 2015 when his affidavits were sworn, a principal of Central.
• The dispute resolution mechanism agreed upon by Central and Avenue is paragraph 25 of the Agreement.
• The only parties to the arbitration were Central and Avenue.
• The arbitration award in favour of Central and against Avenue is in the amount of $71,905 inclusive of costs.
• Central has not received any payment from Avenue in satisfaction of the arbitration award.
• Avenue was dissolved in June 1999.
Positions of the Parties
The Respondents’ Position
[28] The respondents submit that the jurisdiction of this Court is restricted to enforcement of the arbitration award as against Avenue. The limitation of the Court’s jurisdiction is said by the respondents to arise from: a) Section 6 of the Arbitration Act 1991, S.O. 1991, c. 17 (“the Act”); and b) sub-rule 14.05(3) of the Rules of Civil Procedure, R.R.O. 1990, O. Reg 194.
a) The Arbitration Act
[29] The powers of the Court to ‘intervene’ in arbitration proceedings are limited by section 6 of the Act to the following powers:
To assist in the conducting of arbitrations.
To ensure that arbitrations are conducted in accordance with arbitration agreements.
To prevent unequal or unfair treatment of parties to arbitration agreements.
To enforce awards.
[30] The respondents do not dispute that the applicant is entitled to pursue enforcement of the arbitration award as against Avenue. However, as noted above, the relief requested by the applicant does not include enforcement of the award against Avenue.
[31] With regard to sub-section 6(4) of the Act, the respondents say that the applicant is not entitled to pursue enforcement of the arbitration award against them specifically because they were not parties to the arbitration. Enforcement of the arbitration award as against anyone other than the named corporation, Avenue, requires an interpretation of the arbitration award, investigation of facts, and consideration of the law. As a result, the matter does not fall within the scope of “enforcement” as its meaning is strictly intended in sub-section 6(4) of the Act.
b) Rules of Civil Procedure
[32] The respondents say that for enforcement of the arbitration award as against them to proceed by way of an application, the subject-matter of the proceeding must fall within the scope of one of the types of claims enumerated in sub-rule 14.05(a) to (h). Specifically the respondents say that the only type of claim enumerated and into which this matter might fall is that in sub-rule 14.05(h): “any matter where it is unlikely that there will be any material facts in dispute”. The respondents’ position is that there are material facts in dispute, as a result of which this matter may not proceed by way of application and must proceed by way of an action in which James Saikaley and Micheline Saikaley are named as defendants.
The Applicant’s Position
[33] The applicant relies on the combination of section 50(1) of the Act and rule 14.05(2) of the Rules of Civil Procedure. The former provides, “[a] person who is entitled to enforcement of an award made in Ontario or elsewhere in Canada may make an application to the court to that effect.” The applicant’s position is that section 50(1) is the statutory ‘authority’ required by sub-rule 14.05(2). That sub-rule provides, “[a] proceeding may be commenced by an application to the Superior Court of Justice or to a judge of that court, if a statute so authorizes.”
[34] The applicant relies on four grounds in support of its request for enforcement of the arbitration award against the respondents:
The ‘enurement clause’ (paragraph 25) of the Agreement is worded sufficiently broadly to include the respondents in their respective capacities as principals of Avenue.
The respondents should not, in the circumstances, be permitted to hide behind the corporate veil of Avenue.
The respondents are to be held personally liable for the arbitration award, otherwise the applicant would be “flagrantly prejudiced” in its enforcement of the arbitration award.
The oppression remedy pursuant to the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (hereinafter, “the CBCA”). In his submissions, counsel for the applicant acknowledged that: a) the oppression remedy is not identified in the notice of application; and b) the applicant’s factum does not include any authority or argument in support of entitlement to an oppression remedy.
Analysis
Arbitration – The Powers of the Court
[35] Section 6 of the Act is preceded by the title, “Court intervention limited”. The limited jurisdiction of this Court to intervene in the arbitral process was summarized by Sharpe, J.A. in Inforica Inc. v. CGI Information Systems and Management Consultants, 2009 ONCA 642; 97 O.R. (3d) 161. The appeal concerned the jurisdiction of an arbitrator to make an order for security for costs and whether an application to set aside such an order lies to the Superior Court. Sharpe, J.A. determined that it was within the scope of the arbitrator’s authority to make the order, as it was a procedural order related to the conduct of the arbitration. Sharpe, J.A. also held that this Court did not have jurisdiction to hear an application to set aside the order for security for costs.
[36] Addressing the limited jurisdiction of the Court to intervene in the arbitral process, at paragraph 14 of his decision Sharpe, J.A. said:
It is clear from the structure and purpose of the Act in general, and from the wording of s. 6 in particular, that judicial intervention in the arbitral process is to be strictly limited to those situations contemplated by the Act. This is in keeping with the modern approach that sees arbitration as an autonomous, self-contained, self-sufficient process pursuant to which the parties agree to have their disputes resolved by an arbitrator, not the courts. As Inforica states in its factum, “arbitral proceedings are presumptively immune from judicial review and oversight.” The Act encourages parties to resort to arbitration, “require[s] them to hold to that course once they have agreed to do so”, and “entrenches the primacy of arbitration over judicial proceedings … by directing the court, generally, not to intervene”: Ontario Hydro v. Denison Mines Ltd., [1992] O.J. No. 2948 (Gen. Div.), Blair J.
[37] The respondents cite the 2007 decision of Justice Thorburn of this Court in Haratsis v. Haratsis (2007), 155 A.C.W.S. (3d) 59 (Ont. S.C.J.) as authority for the lack of jurisdiction of the Court to “reasonably interpret” Arbitrator Stauffer’s decision. The respondents rely, in particular, on the following passage of Justice Thorburn’s decision: “This court may not interpret but may only enforce the clear decision of the arbitrator. If there is any ambiguity in the arbitrator’s decision, the Court should not treat a request for enforcement as an opportunity to substitute its own assessment.”
[38] In the matter before me, the applicant is not suggesting that there is any ambiguity in the arbitrator’s decision. As a result, the decision in Haratsis v. Haratsis is not of assistance.
[39] The applicant asks the Court to consider the corporate status of Avenue, the conduct of individuals associated with Avenue (as principal, director, or otherwise), and enforcement of the arbitral award against those individuals. The relief which the applicant is seeking does not arise from statutory authority.
[40] For the reasons set out above, I agree with the respondents that:
a) The relief sought is something other than strict enforcement of the arbitrator’s award pursuant to sections 6 and 50(1) of the Act;
b) The applicant is not entitled to rely on sub-rule 14.05(2) of the Rules of Civil Procedure as the basis for proceeding by way of application;
c) For the matter to proceed by way of application, the subject-matter must fall within one of the types of claims enumerated in sub-rule 14.05(3) of the Rules of Civil Procedure; and
d) The only type of claim which may be relevant is found in sub-rule 14.05(3)(h) – “any matter where it is unlikely that there will be any material facts in dispute”.
Material Facts – Likely or Unlikely to be in Dispute?
[41] There is a lack of evidence on this application as a whole and a lack of evidence specific to each of the four grounds relied on by the applicant and summarized above (“the Grounds”). I am therefore required to determine in an evidentiary vacuum.
[42] To determine whether the applicant is entitled to enforce the arbitration award against the respondents requires the Court to make findings with respect to a number of complex and potentially mixed questions of fact and law. Those questions include, amongst others:
• Does paragraph 25 of the Agreement (the ‘enurement clause’) stipulate that the parties to the Agreement intended that the Agreement be binding on the respondents as the “administrators” or “assigns” of Avenue? (See Brown v. Belleville (City), 2013 ONCA 148; 114 O.R. (3d) 561 (C.A.).)
• Do the circumstances of this case support a conclusion that it is “exceptional” and one which warrants going behind Avenue to impose personal liability on the respondents? (See 642947 Ontario Ltd. v. Fleischer (2001), 2001 8623 (ON CA), 56 O.R. (3d) 417 (C.A.) at paras. 67 and 68.)
• With respect to the alleged oppression, is the “effect” of the conduct of one or both of the respondents prejudicial to or in unfair disregard of the applicant? When answering that question, three factors are to be considered:
▪ Protection of the underlying expectation of Central in its arrangement with Avenue;
▪ The extent to which the acts of one or both of the respondents were unforeseeable or acts from which Central could have protected itself; and
▪ The resultant detriment, if any, to Central.
(See T. Films S.A. Future Films (Three) Ltd. v. Cinemavault Releasing International Inc., 2015 ONSC 6608; 249 A.C.W.S. (3d) 331 at paras. 25 and 26.)
[43] The applicant did not, in written or oral argument, address the significance to any of the Grounds of the fact that Avenue was dissolved in 1999. Given the dissolution, is there even a corporate veil to be pierced? Or, will this matter be determined on the basis of the conduct of the individual respondents entirely independent of any involvement they had historically with Avenue (i.e. to the date of dissolution)?
[44] The oppression remedy ‘ground’ was advanced by the applicant without reference to the relevant provisions of the CBCA or to case law authority on the point. Assuming the applicant continues to rely on that ground, the applicable sections of the CBCA will lead to the requirement for determination of complex issues of fact and law. Other sections of the CBCA – such as those related to dissolution and revival of a corporation – may also be relevant and require determination of complex issues of fact and law.
[45] The factual and legal issues to be determined in this matter are such that it is probable, if not highly likely, that there will be material facts in dispute. I therefore find that this application does not fall within the scope of sub-rule 14.05(3)(h) of the Rules of Civil Procedure.
Order
[46] In summary, I order as follows:
The applicant’s claim for enforcement of the arbitration award of Arbitrator Stauffer dated September 16, 2013 and the costs award of Arbitrator Stauffer dated November 15, 2013 is to proceed by way of action.
This application is to be disposed of by the trial judge.
The action is to proceed as follows:
a) The applicant shall deliver a statement of claim within 30 days of the date of this order;
b) The respondents shall have 30 days from the date of service of the statement of claim within which to deliver their respective statements of defence;
c) The applicant shall deliver a reply, if any, within the time permitted by the Rules of Civil Procedure; and
d) The balance of the action shall proceed in accordance with the Rules of Civil Procedure.
Costs
[47] In the event that the parties are unable to agree upon costs, the parties shall deliver submissions with respect to costs:
a) Limited to a maximum of three-pages;
b) No later than 10 business days following the date of release of this Endorsement; and
c) In compliance with Rule 4 of the Rules of Civil Procedure.
DATE: September 16, 2015
Justice S. Corthorn
COURT FILE NO.: 14-61201
DATE: 2015/09/16
ONTARIO
SUPERIOR COURT OF JUSTICE
RE: Central Station Security Services Inc., Applicant
AND
Avenue Security Centre Inc., James Saikaley, Micheline Saikaley and Avenue Lock and Security Ltd., Respondents
COUNSEL: Dave Morin-Pelletier, for the Applicant
Christopher S. Spiteri, for the Respondents
ENDORSEMENT
Justice S. Corthorn
Released: September 16, 2015