Covanta v. Barton-Malow et al., 2016 ONSC 2044
CITATION: Covanta v. Barton-Malow et al., 2016 ONSC 2044 COURT FILE NO.: CV-15-537030 DATE: 20160331
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
COVANTA DURHAM YORK RENEWABLE ENERGY PARTNERSHIP Applicant
– and –
BARTON-MALOW CANADA, INC. AND KENAIDAN CONTRACTING LTD. O/A COURTICE POWER PARTNERS, LEXSAN ELECTRICAL INC., and W.S. NICHOLLS CONTRACTION, INC. Respondents
COUNSEL: Julie Parla and Meghan Bridges, for the Applicant Anthony Scane, for the Respondents, Barton-Malow Canada, Inc and Kenaidan Contracting Ltd. o/a Courtice Power Partners Howard Wise and Dan Block, for the Respondent, Lexsan Electrical Inc. Andrew Gurlesky and Edward Lynde, for the Respondent, W.S. Nicholls Construction Inc.
HEARD: March 21, 2016
REASONS FOR DECISION
DIAMOND J.:
Overview
[1] In or around 2010, the Regional Municipality of Durham and the Regional Municipality of York (collectively, the "Regions") were jointly intent upon building an energy-from-waste facility in Clarington, Ontario (the "facility").
[2] On November 25, 2010, the Regions entered into an agreement with the Applicant, Covanta Durham York Renewable Energy Partnership ("Covanta"). Pursuant to that agreement, Covanta was to oversee, design, build and operate the facility.
[3] A term of that agreement required Covanta to ensure that any material subcontractor which Covanta retained would agree to participate as a party in potential arbitrations between the Regions and Covanta if notified to do so by either the Regions or Covanta.
[4] Covanta subsequently retained the respondent, Barton-Malow Canada, Inc. and Kenaidan Contracting Ltd. o/a Courtice Power Partners ("CPP") as a material subcontractor to perform construction services for the facility. As required by the agreement between the Regions and Covanta, the agreement between Covanta and CPP ("the Main Agreement") provided that CPP was to participate as a party to any arbitration between the Regions and Covanta if notified by either party.
[5] The Main Agreement also provided that Covanta and CPP submit to final and binding arbitration of any dispute which could not be first resolved through negotiations between them.
[6] CPP, in turn, entered into agreements with various trades for the performance of certain specific services required to build the facility (the "Subcontract Agreement"). Two of those subcontractors were the respondents Lexsan Electrical Inc. ("Lexsan") and W.S. Nicholls Construction Inc. ("Nicholls"), who each signed virtually identical Subcontract Agreements with CPP. The Subcontract Agreement also contained an arbitration clause mandating CPP and its subcontractors to submit any disputes to arbitration.
[7] On April 1, 2015, CPP issued a Notice of Arbitration to Covanta in accordance with the provisions of the Main Agreement. In or around June 2015, an arbitrator was selected and appointed by Covanta and CPP.
[8] On July 21, 2015, CPP brought a motion before the arbitrator seeking an order joining Lexsan and Nicholls as parties to the arbitration. Both Lexsan and Nicholls took the position that they should be added as parties to the arbitration.
[9] By rulings dated August 24 and 27, 2015, the arbitrator granted the motion and ordered that Lexsan and Nicholls be added as parties to the arbitration between Covanta and CPP.
[10] In accordance with the provisions of the Main Agreement, Covanta served a plea that the arbitrator had exceeded the scope of his jurisdiction in granting CPP's motion. The arbitrator issued a further ruling dismissing Covanta's plea.
[11] Covanta now brings this application seeking an order setting aside the arbitrator's decision to add Lexsan and Nicholls as parties to the arbitration.
Key Provisions in the Various Agreements
[12] For the purpose of determining Covanta's application, it is necessary to review various key clauses in both the Main Agreement and the Subcontract Agreement.
[13] To begin, both the Main Agreement and the Subcontract Agreement provided that all parties to each agreement were governed by the Simplified Arbitration Rules of the ADR Institute Canada Inc. which adopt the UNCITRAL Arbitration Rules and the Model Law on International Commercial Arbitration. There is no dispute that the Model Law on International Commercial Arbitration is enforceable in Ontario.
The Main Agreement
[14] The following is a summary of the key clauses dealing with the submission to arbitration contained in Article 11 of the Main Agreement:
Clause Summary
11.5.1 Neither Covanta nor CPP shall institute legal proceedings to enforce their rights arising out of the Main Agreement, or to recover damages for breach or repudiation of the Main Agreement, except as provided in Article 11 of the Main Agreement.
11.5.2 Either Covanta or CPP may make a claim (a written demand proposing specific relief or a remedy to an issue or dispute arising out of the Main Agreement) and shall submit a Notice of Claim together with supporting documentation in accordance with the notice provisions in the Main Agreement.
11.5.3 Upon receipt of a Notice of Claim, both Covanta and CPP shall attempt in good faith to settle the claim by mutual discussions within 30 days of being provided such notice.
11.5.4 If the claim is not resolved by mutual discussions or further negotiations within 15 additional days, either Covanta or CPP may by notice to the other party refer the claim to arbitration which shall be the sole and exclusive remedy for the resolution of the claim. However, nothing in the Main Agreement will prohibit CPP or its subcontractors from pursuing their rights as provided in the Construction Lien Act in any forum and pursuant to any process permitting thereunder.
11.5.13 While the relevant resolution of any claim is pending, all performance of obligations required under the Main Agreement shall continue.
11.5.14 Notwithstanding the foregoing provisions, CPP shall participate as a full party in (a) any arbitration between Covanta and the Regions if so notified by either party, and (b) any arbitration under the contract between Covanta and its design and engineering firm which may arise as a result of CPP's work, if notified by Covanta and provided that any such arbitration with the design and engineering firm is conducted under ADR Rules.
[15] The Main Agreement defines "party" or "parties" as Covanta and CPP (or one of them as the context requires).
[16] The Main Agreement also has a section entitled "Subcontractors". The following clauses are relevant to this application:
Clause Summary
2.9.1 Using prudent, competent and experienced degree in skill, CPP shall not be permitted to subcontract the whole of the work but may subcontract portions thereof provided it maintains control over the work. CPP shall remain solely responsible and liable for any portion of the work so subcontracted, and no privity of contract shall be created between Covanta or the Regions (on one hand) and any subcontractor or supplier to CPP (on the other hand).
2.9.2 CPP shall notify Covanta of any claim or suit made or commenced by any subcontractor or supplier against CPP, Covanta or the Regions. CPP shall protect, defend and indemnify Covanta and the Regions against any and all losses, claims, damages or and/or liability relating to any such claims made by a subcontractor or supplier.
2.9.3. CPP shall ensure that any subcontracts or purchase orders are assignable to Covanta and incorporate the warranties, guarantees and remedies for default as set forth in the Main Agreement. Upon Covanta's request, CPP shall review with Covanta the progress and performance of each subcontract and supplier.
2.9.4 CPP shall submit all major subcontracts, vendors and suppliers for review and approval by Covanta, and Covanta's reviews and approvals shall be made as promptly as possible. Such reviews and approvals by Covanta of subcontracts, vendors or suppliers shall and will not create any privity of contract or contractual relationship between Covanta and any subcontractors, vendor or supplier.
The Subcontract Agreement
[17] It is the respondents' position that the submission to arbitration contained in the Main Agreement was "dropped down" into the Subcontract Agreement as required by clause 2.9.3 of the Main Agreement. While I will have more to say about this argument hereinafter, for the purpose of addressing it I believe it necessary to set out the exact submission to arbitration included in the Subcontract Agreement (the "Prime Contract" is the Main Agreement):
"The terms and conditions of the Prime Contract so far as they are applicable to this Subcontract Agreement, shall be binding upon the Contractor and the Subcontractor as if the word "Owner" appearing therein had read "Contractor" and the word "Contractor" had read "Subcontractor", and, without limiting the generality of the foregoing, the parties expressly agree that all Prime Contract obligations relating to indemnities, insurance, bonding, delays and liquidated damages shall be expressed terms of this Subcontract. The Subcontractor specifically acknowledges that it has been provided an opportunity to review the general and special conditions of the Prime Contract, including all Reference Documents. The Subcontractor specifically acknowledges that in the event of a dispute, the Subcontractor shall follow such requirements and procedures set out in the Prime Contract as the Contractor may be required to follow in order to obtain the participation of the Owner, if necessary, for due and proper resolution of the dispute.
It is agreed that all terms and conditions relating to resolution of disputes as between Contractor and Owner in the Prime Contract are expressly incorporated into this Subcontract Agreement, and the Subcontractor hereby expressly consents, at the request of the Contractor, to become a party to any mediation or arbitration commenced pursuant to the Prime Contract, whether commenced by the Owner, Contractor or some other party performing work in respect of the Project, or such mediation or arbitration involves, directly or indirectly, any matter within the Scope of Work."
[18] Clause 2.7 of the Subcontract Agreement provides that in the event Covanta or CPP delays or interferes with the subcontractor's performance, the subcontractor may present a claim for an extension of time but shall not be entitled to any resulting increased compensation or damages except to the extent that the Main Agreement entitles CPP to compensation from Covanta for such delays or extension. The subcontractor expressly waives and releases any other rights to damages or additional compensation relating to delays.
[19] Clause 9.6 of the Subcontractor Agreement provides that in the event Covanta rejects, in whole or in part, any claim made by CPP for an increase in the Main Agreement contract price, or the schedule to substantially perform the obligations under the Main Agreement, the subcontractor's right to any increase for compensation or an extension of the schedule may be rejected by CPP.
The Right to Joinder of Parties in the Arbitration
[20] CPP's motion to join Lexsan and Nicholls as parties to the arbitration was brought before the arbitrator pursuant to Article 17(5) of the UNCITRAL Arbitration Rules. Article 17(5) provides:
"The arbitral tribunal may, at the request of any party, allow one or more third persons to be joined in the arbitration as a party provided such person is a party to the arbitration agreement, unless the arbitral tribunal finds, after giving all parties, including the person or persons to be joined, the opportunity to be heard, that joinder should not be permitted because of prejudice to any of those parties. The arbitral tribunal may make a single award or several awards in respect of all parties so involved in the arbitration."
[21] Accordingly, when considering a joinder request, an arbitrator must first be satisfied that the person(s) sought to be added to the arbitration is a party to the agreement under which the arbitration itself was invoked. As stated by Gary B. Born in his text International Commercial Arbitration, 2nd ed. (The Netherlands: Kluwer Law International, 2014):
"This provision allows the arbitral tribunal (rather than a national court or an arbitral institution) to permit the joinder of additional parties into a pending arbitration. Moreover, Article 17(5) limits joinder to situations involving a third person that is a party to the arbitration agreement under which the arbitration is proceeding. The UNCITRAL Working Group considered a party who had agreed to arbitrate under the Rules to have impliedly considered to the potential for joinder. Thus, joinder under Article 17(5) will not be allowed where there are multiple contracts between multiple parties involved in a dispute."
The Arbitrator's Decision
[22] The arbitrator released his decision via two emails dated August 24 and 27, 2015. The first email enclosed a "check list" with responses to various inquiries (both procedural and substantive), and that list included a section entitled "Motion CPP to add/join WSN and Lexsan to arbitration".
[23] In granting CPP's motion, the arbitrator identified Article 17(5) of the UNCITRAL Model Law (incorrectly noted as Article 27(5) in his decision) and found, inter alia, that in order to ensure that a "reasoned award to be given", he was mandated to hear "all evidence including the change orders which are the cause of the various lien actions and were part of CPP's claim statement."
[24] The arbitrator then stated that "given that such a joinder will better permit the Tribunal to give a better reasoned award, the motion to join WSN and Lexsan is permitted".
[25] The arbitrator then went on to cut and paste an extract from a draft version of the Main Agreement. This clause, which did not find its way into the final, executed Main Agreement, stated as follows:
11.5.14 Notwithstanding the foregoing provisions of this Section 11.5, Contractor shall participate as a full party in any arbitration under Section 28 of the Project Agreement if so notified by either Covanta or the Client. If a matter that is a Claim hereunder is also the subject of a Dispute (as defined in the Project Agreement) under the Project Agreement, the Dispute shall first be dealt with under the dispute resolution procedures under the Project Agreement, which shall be binding on the parties hereto. If there are any remaining unresolved aspects of such matter that is a Claim hereunder, such unresolved aspects of the Claim are to be resolved pursuant to the foregoing provision of this Section 11.5.
[26] It is unclear as to whether and how the inclusion of this draft clause played any role in the arbitrator's decision making process.
[27] The arbitrator then released his follow up email on August 27 2015 which sought to clarify his original decision. After once again citing Article 17(5), the arbitrator stated as follows:
"Believe the wording "any party (emphasis added)" does not restrict the authority to Covanta or the Client as per the original Project Agreement between Covanta and the Region(s). Only relevance from that agreement is requirement from Region that Covanta ensure its contracts with subsequent contractors engaged by itself to carry out the "work" contain (sic) in the dispute resolution clause. This the Tribunal was advised was done by CPP and not disputed by Covanta. This clause the Tribunal believes makes "joinder" at the request of CPP reasonable.
In terms of UNCITRAL "any party" in this case refers to Covanta and CPP as this is the contract that is the subject of the Notice of Commencement of Arbitration filed with ADR Institute dated April 9, 2015.
The Tribunal in permitting the joinder has not exceeded its jurisdiction. Further WSN and Lexsan's participation will assist the Tribunal in providing a reasoned award particularly with the CORs which are part of the CPP's claim and also the subject of the liens and will not prejudice Covanta nor CPP, WSN or Lexsan.
The Tribunal was advised that counsel(s) would ensure liens will be stayed until Tribunal has opportunity to give reasoned award as the Tribunal's award(s) will form basis of any monies owing to claimants."
[28] As stated above, in response to these rulings Covanta served a plea that the arbitrator had exceeded the scope of his jurisdiction in granting CPP's motion. This was a step which Covanta was required to do under the arbitration process if Covanta took issue with such a ruling. By further decision dated September 8, 2015, the arbitrator ruled that he had not exceeded his jurisdiction, relied once again on Article 17(5), and concluded that the use of the word "person" in Article 17(5) referred to a party to the arbitration agreement. Specifically, the arbitrator stated as follows:
"Surely you agree that CPP is a party to the Commencement of Arbitration Agreement and can reasonably make such a request for joinder?
It follows from there that the tribunal can grant a joinder provided there is no prejudice to any party. Permitting those third persons (who have agreed to be joined) to join will give the Tribunal better information to base its reasoned award and will not prejudice any of the parties."
[29] Although I will have more to say about the arbitrator's decision hereinafter, it does not appear that he based his decision upon an express finding that Lexsan and/or Nicholls were parties to the arbitration agreement (i.e. contained in the Main Agreement).
Post-Decision Events
[30] As required by the provisions of the Main Agreement, the parties to the arbitration (which now includes Lexsan and Nicholls pursuant to the arbitrator's decision) have substantially followed the arbitrator's joint scheduling order and discovery plan governing the interim steps within the arbitration. Pleadings have been exchanged, documentation has been produced and experts have been retained.
[31] The respondents note that Covanta has not moved for any interim stay of the arbitrator's decision pending the return of this application.
[32] The hearing is scheduled to commence on August 29, 2016 and last until December 8, 2016. Expert reports and affidavits are to be served and filed in accordance with an agreed upon schedule in advance of the hearing.
Issue #1 Does this Court have jurisdiction to hear Covanta's application?
[33] As held by the Court of Appeal for Ontario Inforica Inc. v. C.G.I Information Systems and Management Consultants Inc. 2009 ONCA 642, "a significant feature of the modern approach limiting access to the courts to review decisions of arbitrators is that there are no appeals from procedural or interlocutory orders."
[34] The respondents submit that the arbitrator's decision was procedural and interlocutory in nature, and should thus not be subject to any review by this Court. In support of their submission, the respondents rely upon the decision of Justice Wilton-Siegel in 1210558 Ontario Inc. et al. v. 1464255 Ontario Limited et al. 2011 ONSC 5810, and specifically the following passage:
"As I understand Inforica, a ruling of an arbitrator can fall into one of two general categories: (1) rulings that are concerned with the arbitrator's jurisdiction; and (2) rulings that are not concerned with the arbitrator's jurisdiction, which include, but are not limited to, rulings of a procedural or an interlocutory nature. As stated in para. 16 of Inforica, 'the words jurisdiction to conduct the arbitration' in s.17(1) connote jurisdiction over the entire substance or subject matter of the case, not jurisdiction to make interlocutory or procedural orders that do not determine the merits of the dispute and that are made along the way to final resolution of the issues."
[35] The respondents point to analogous motions brought in this Court under Rule 5.03 of the Rules of Civil Procedure. Such motions adding parties to existing legal proceedings result in interlocutory orders. In Inforica, the Court of Appeal for Ontario applied a similar analogy in concluding that an arbitrator's decision granting security for costs was procedural and interlocutory. The respondents submit that the same logic should apply in the case before me.
[36] I disagree. As discussed hereinafter, Article 17(5) mandated the arbitrator to first determine whether the persons sought to be added (Lexsan and Nicholls) were parties to the arbitration agreement. If Lexsan and Nicholls were not parties to the arbitration agreement, then the arbitrator clearly lacked jurisdiction to add them as parties to the arbitration.
[37] I agree with Covanta that any arbitration exists solely because of the will of the parties to enter into an arbitration agreement. An arbitral tribunal possesses jurisdiction to decide disputes between parties due to the common intention of those parties who agree to be bound by the arbitral process.
[38] As evidenced by the provisions of Article 17(5) itself, only persons who have subscribed to the arbitral process can be added as parties to the arbitration. A decision whether or not a person ought to be added as a party to an arbitration is thus a jurisdictional decision.
[39] Under sections.17(1) and 17(8) of the Arbitration Act, 1991 S.O. 1991 C. 17, an arbitrator may rule on his/her own jurisdiction to conduct the arbitration, and may also rule on any objections with respect to the existence or validity of the arbitration agreement itself. Such a decision may thereafter be subject to review by the Court pursuant to an application commenced within 30 days of the receipt of the decision.
[40] In Ontario Medical Association v. Willis Canada Inc. et al. 2013 ONCA 745, the Court of Appeal for Ontario upheld the decision of Justice Newbould wherein he stayed a civil action on the basis that there was an arguable case that the plaintiff was governed by an arbitration clause, even though the plaintiff's position was that it was not a party to the agreement containing the arbitration clause.
[41] Justice Newbould deferred the issue of jurisdiction back to the arbitrator. In dismissing the appeal, the Court of Appeal for Ontario stated:
"It is also significant to observe that granting a stay and referring the issue of jurisdiction to the arbitrator in the first instance does not eliminate the possibility of a judicial review. The Arbitration Act, 1991, s. 17(8) provides for a review of a preliminary ruling on jurisdiction and s. 46 provides that an award may be set aside if it strays beyond what is covered by the arbitration agreement."
[42] Accordingly, the issue of whether the plaintiff was subject to the arbitration agreement was one of jurisdiction and subject to potential judicial review. I see no real difference between that analysis and the case before me.
[43] I therefore find that the arbitrator's decision was jurisdictional in nature, and as such Covanta's application is properly before the Court
Issue #2 What is the Standard of Review?
[44] The parties agree that in the event I found the arbitrator's ruling to be jurisdictional in nature, then the appropriate standard of review is that of correctness.
Issue #3 Did the Arbitrator exceed his jurisdiction in joining Lexsan and Nicholls as parties to the Arbitration?
[45] To begin, it does not appear that the arbitrator took the proper considerations into account in deciding to add Lexsan and Nicholls as parties to the arbitration. For reasons expressed above, Article 17(5) mandated the arbitrator to be first satisfied of a condition precedent, namely that the person(s) sought to be joined in the arbitration are parties to the arbitration agreement itself.
[46] The reasons of the arbitrator (including his ruling in response to Covanta's plea of excess of his jurisdiction) do not provide any analysis of whether Lexsan and/or Nicholls were parties to the arbitration agreement between Covanta and CPP. Whatever discretion the arbitrator may have believed he could exercise to reap the potential benefits of adding Lexsan or Nicholls as parties to the arbitration, that discretion could only have been exercised upon an initial finding that Lexsan and Nicholls were both parties to the Arbitration Agreement.
[47] Even though the arbitrator did not properly consider the provision of Article 17(5), the respondents nevertheless submit that he arrived at the correct result as both Lexsan and Nicholls were parties to the arbitration agreement by reason of the doctrine of incorporation by reference. While the provisions of the Main Agreement explicitly state that there is no express privity of contract between Covanta and Lexsan or Nicholls, the respondents nevertheless submit that the provisions of Article 11.5.4 of the Main Agreement mandate Lexsan and Nicholls' agreement to participate as parties in any arbitration between Covanta and CPP. The respondents' argument is summarized as follows (emphasis in bold):
- Clause 11.5.4 of the Main Agreement describes the potential arbitration between Covanta and CPP as the "sole and exclusive remedy" for the resolutions of claims;
- Clause 2.9.3 of the Main Agreement mandates CPP to ensure that its Subcontract Agreements (a) are assignable to Covanta and (b) incorporate the "warranties, guarantees and remedies for default" as set forth in the Main Agreement.
- As Covanta and CPP describe arbitration as a remedy, the inclusion of arbitration clauses in the Subcontract Agreements was mandated by Clause 2.9.3 requiring all remedies for default (i.e. including arbitration) to be incorporated therein.
[48] The respondents therefore submit that both Covanta and CPP intended that all of CPP's Subcontract Agreements include by reference the arbitration clauses in the Main Agreement, and rely upon the dual use of the word "remedy" in both Clauses 2.9.3 and 11.5.4.
[49] For the following reasons, I reject the respondents' argument.
[50] In Sunny Corner Enterprises Inc. v. Dustex Corp. (2011) 2011 NSSC 172, 84 D.L.R. (4th) 131 (N.S.S.C.), a case relied upon by the respondents, Chief Justice Kennedy held that a subcontract may only incorporate an arbitral provision of a main contract if the subcontract does so expressly, as any such incorporation must be specific.
[51] The respondents' attempts to use "building blocks" in an effort to marry up the term "remedy" with "remedies for default" are unsubstantiated. There are provisions in the Main Agreement which go to great lengths to avoid any privity of contract between Covanta and CPP's subcontractors. Accordingly, any clause which purported to incorporate the arbitral agreement into those Subcontract Agreements would have to be far more specific than the terms of Clause 2.9.3.
[52] In my view, the purpose of Clause 2.9.3 is to require CPP to "cut and paste" the Main Agreement's warranties, guarantees and remedies for default into the Subcontract Agreement so that if and when Covanta exercises any of those rights under the Main Agreement, CPP may in turn implement a consistent position against its own subcontractor(s). This achieves the true intention of the Main Agreement, namely to create consistency without privity through a parallel contractual regime rather than one joint contractual regime.
[53] In addition, the arbitration clauses contained in the Subcontract Agreement are different than those contained in the Main Agreement. If the arbitration clause in the Main Agreement is to be incorporated by reference in the Subcontract Agreement, it must be essentially mirrored in both agreements. Unlike the Main Agreement, the Subcontract Agreement secures the consent of Lexsan and Nicholls to be parties to any arbitration commenced pursuant to the Main Agreement "at the request of CPP". In other words, while the Main Agreement mandates Covanta or CPP to participate in an arbitration once the arbitral process is invoked, Lexsan or Nicholls are only mandated to participate if CPP so chooses.
[54] The respondents submit that Clause 2.9.3 of the Main Agreement required CPP to "drop down" the arbitration clause into the Subcontract Agreement. Rather than simply incorporate the specific arbitration clauses between Covanta and CPP, the Subcontract Agreement goes beyond that and created a different arbitral regime.
[55] Finally, the purported "dropped down" arbitration clause is internally inconsistent with the rest of the Subcontract Agreement. Clause 2.7 of the Subcontract Agreement provides that CPP is to present claims on behalf of Lexsan and/or Nicholls to Covanta. Indeed, the scope of CPP's claim in the arbitration includes the lien claims of both Lexsan and Nicholls. In dealing with another subcontractor known as Coco Paving Inc. ("Coco", who has also commenced lien proceedings in the Ontario Superior Court of Justice), CPP has recently served a motion record seeking a stay of Coco's lien proceedings pending the disposition of the arbitration (as the scope of CPP's claim also includes the amounts sought by Coco). While that motion has yet to be heard, the grounds listed by CPP in support of its motion include the following:
"Coco Paving is subject to the dispute resolution terms set out in the agreement between CPP and Covanta and is required to permit CPP to advance the claims CPP believes are due and proper against Covanta, and therefore Coco Paving is obliged to allow the Arbitration to proceed."
[56] In the Coco lien proceeding, CPP takes the position that Coco is obliged to allow the determination of CPP's claim in the arbitration. CPP's argument in support of its motion, which relies upon the terms of the Subcontract Agreement, appears irreconcilable with the positions CPP has taken in response to Covanta's application.
[57] In argument, CPP attempted to explain its two positions by arguing that unlike Lexsan and Nicholls, CPP never requested that Coco become a party to the arbitration between Covanta and CPP. In my view, this is a distinction without a difference as none of Lexsan, Nicholls or Coco are parties to the arbitration agreement for the reasons set out herein.
[58] Accordingly, I find that the arbitrator exceeded his jurisdiction in joining Lexsan and Nicholls as parties to the arbitration, and set aside the arbitrator's ruling thereby restoring the parties to the arbitration to be Covanta and CPP only.
Issue #4 Does the risk of multiplicity of proceedings favour the dismissal of Covanta's application?
[59] As an additional (and arguably alternative) argument, the respondents submit that by setting aside the arbitrator's ruling, there will now be a risk of inconsistent findings between the arbitration and the various lien proceedings. Relying upon section 138 of the Courts of Justice Act, R.S.O. 1990 c. C.43, the respondents argue that since multiplicity of proceedings are to be avoided wherever and whenever possible, Lexsan and Nicholls should remain parties to the arbitration.
[60] To the extent CPP supports such an argument, CPP's position is once again irreconcilable with its pending motion to stay Coco's lien proceeding.
[61] Obviously, both Covanta and CPP are free to call Coco's representatives as witnesses in the arbitration should they choose to do so. While there may ultimately be potentially inconsistent findings should the arbitration and the lien proceedings (if not stayed) both proceed, in my view this is the exact result for which all parties contracted. I rely upon the comments of Justice Chapnik in her decision of Dynatec Mining Ltd. v. PCL Civil Constructors (Canada) Inc. [1996] O.J. No. 29 (Gen. Div.) wherein she stated as follows:
"Frankly, as a policy matter, I would have preferred to reach the opposite conclusion. It is always an advantage, particularly in respect of complex commercial dealings, for the parties to design their own dispute resolution mechanisms. The alternative dispute resolution procedure has recently gained wide spread acceptance, primarily in the commercial context where arbitrators with special skills and expertise readily understand the issues and can operate in a timely and efficient manner. Admittedly, the arbitration process is often less expensive and time consuming than are court proceedings.
However, it is neither my role nor within my jurisdiction to impose my own solutions upon the parties; but, rather, to interpret their own intentions apparent at the time of the execution of the contract document. I do not agree with the submission of Ms. Roth that because the matter involves significant legal issues, a court forum is more appropriate; nor is the possibility of inconsistent findings, a compelling argument. Since there appear to be outstanding matters involving the owner as well as the contractor, it would seem reasonable that the matters be consolidated at some point; and the preferred forum for disputes between the general contractor and the owner has been established."
[62] Potentially inconsistent findings at some point in the future amount to no more than speculation. As held by Justice Chapnik, I do not find this to be a compelling argument in support of a request to undo the terms of the agreements negotiated and entered into by the parties.
[63] As such, the purported risk of multiplicity proceedings does not warrant the arbitrator's ruling to be confirmed.
Costs
[64] At the conclusion of the hearing, all parties submitted Bills of Costs. The costs sought by each of the respective respondents totaled approximately $30,000.00 - $35,000.00. Covanta's partial indemnity costs totaled nearly $88,000.00, although it requested costs of the application, if successful, in the amount of $65,000.00 all-inclusive.
[65] The fixing of costs is not simply a mechanical exercise, and I must consider the reasonable expectations of both the successful and unsuccessful parties in determining a fair and just result. This balancing exercise includes a consideration of the compensation of the successful party with a goal of fostering access to justice.
[66] I have little doubt that Covanta was required to incur some additional hours in both pursing the application itself, and responding to three sets of respondents. In the circumstances of this case, I award Covanta its costs of the application in the all-inclusive amount of $50,000.00 payable jointly and severally by all respondents.
Diamond J.
Released: March 31, 2016
CITATION: Covanta v. Barton-Malow et al., 2016 ONSC 2044 COURT FILE NO.: CV-15-537030 DATE: 20160331
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
COVANTA DURHAM YORK RENEWABLE ENERGY PARTNERSHIP Applicant
– and –
BARTON-MARLOW CANADA, INC. AND KENAIDAN CONTRACTING LTD. O/A COURTICE POWER PARTNERS, LEXSAN ELECTRICAL INC., and W.S. NICHOLLS CONSTRUCTION INC. Respondents
REASONS FOR DECISION
Diamond J.
Released: March 31, 2016```